Boundary issues call for property survey

The farmland has changed hands several times in the past two decades, and no one has ever discussed the boundary. The fence dates back to the original larger parcel, and it has been here a lot longer than we have.

What should we do and how do we protect ourselves? This has not only upset us but two other neighbors as well. – D.S., via e-mail

Dear D.S.: This situation is not uncommon. In many cases, it turns out that property has been subdivided with something less than precision. I once bought a piece of property that was supposed to be plus or minus 30 acres. After the survey, it turned out to be 26.5 acres.

Your solution, which may make you unhappy, is a survey. Nobody has complained about the property lines for all these years, but they still exist. There could be an adverse possession situation here, but why would you want to get into that if you can avoid it? Have a master survey done. Then you will know who owns what and where fence lines are supposed to be. I suspect that’s what has happened here; your neighbor had it surveyed and discovered the fence is not where it should be.

Multifamily rentals may hold more value

Dear Bruce: I am starting to invest in real estate. I’m looking at duplexes, triplexes, etc. What percentage of the purchase price should I receive from rentals? Is there a formula that can give me some kind of a guideline? – C.F., via e-mail

Dear C.F.: At the very least, the rent should equal 1 percent per month of the value of the property. This is not written in stone, but 1.3 percent to 1.5 percent a month income, is preferable. You are a whole lot more likely to find this kind of return on a multifamily home than on a single-family unit. That said, there are other variables such as taxes and what the landlord provides in the way of utilities, heat, etc., which must be factored in. Is this a neighborhood where property values are going up, down or remaining constant? All of these and other considerations must be taken into account before you can determine whether you have a viable investment.

Consider equity, age in reverse mortgages

Dear Bruce: My husband and I are retired with an annual combined income of $31,500. We own our home, which I inherited from my dad after he died three years ago. He was a very frugal person, so in his later years he didn’t put much money into the house, only what was necessary. The house is 89 years old, and I am now noticing all these things that need to be taken care of in the home.

I have money – $34,000 – from my 401(k), which I rolled over to an individual retirement account. We also have $14,000 in savings. Except for emergencies, I don’t want to use any of this. My husband is 74 years old, and his health seems to be deteriorating. I am 67 years old, and my health is good. I have heard of reverse mortgages, but it gets so confusing about what to do, especially at our ages. We wouldn’t want to do something we would regret later. Retirement homes are pretty expensive, especially in our income bracket. Please, Bruce, can you help us out? –G.W., via e-mail

Dear G.W.: You neglected to provide one important detail: how much the house is worth. The amount of the reverse mortgage is established by the average value of homes in your area. Reverse mortgages are not a bad idea. A reverse mortgage can be a useful tool, allowing you to use monies that otherwise would be locked up in the house, and you won’t be obligated to repay them during your lifetime. You would have life rights to live there and, even if you exhaust the amount of money loaned, as long as you pay the taxes and insurance, you can stay in your home. The lender doesn’t get any money until you and your husband have died.

That’s the good news. The bad news: At age 67, you could have a 25-year life expectancy. As a consequence, the amount of money that can be borrowed on a reverse mortgage will be diminished. Without establishing the amount of equity there is in your home and what your needs are, it’s difficult to say whether this is a good move for you.

If possible, let new owners do repairs

Dear Bruce: Our home is 30 years old, and we are in the process of getting it ready to sell. Before selling, would it be wise to do some repair work? There are some minor problems, but some of the windows also need to be repaired or replaced. Before selling, is it to our advantage to replace these or let the new owners make the repairs? – S.P., via e-mail

Dear S.P.: In general, the wisest thing would be to allow the new owners to replace them; however, depending on the shape of these windows, the potential lender may not approve a mortgage because of the condition of the building. If things are that far along, it’s entirely likely you’ll be obliged to make the repairs and incorporate the cost into the sales price. You might want to get an estimate on how much it will cost to fix them. This will not only give you an idea of price but it will also tell you how much in disrepair they are.

Rightful owners should deal with taxes

Dear Bruce: Someone recently brought to my attention a lien on a home in Ohio, where I lived from 1991 to 1993. I never owned the home. The lien stemmed from a misunderstanding by the state of Ohio that I owed back taxes for the period of time I resided there. I explained I was a member of the armed forces (I am retired from the U.S. Air Force), and a resident of California not subject to paying Ohio taxes. I finally convinced them, and they sent me a letter absolving me of the responsibility to pay back taxes.

But they left this lien on the house, which damages my otherwise perfect credit report. How can I fix this? I can send a copy of the letter from the state of Ohio, but I don’t know where to send it. – R.S., Las Vegas

Dear R.S.: It seems to me the folks who should be sweating right now are the people who own that property in Ohio. If there is a lien, they would have to resolve the matter in order to sell the house. If you’re saying that somewhere on your credit report it mentions “past lien,” you’re going to have to work with the credit-reporting agency, which is an extraordinarily frustrating proposition. You will need to challenge the inaccurate information in writing, and the agency has an obligation to go back and have that date reaffirmed. If, in fact, it is reaffirmed, this gets a lot dicier. Please get back to me. Hopefully, given your documentation, which you will also provide to the credit-reporting agency, the information will either go away or be acknowledged as an error.

Consider renting until schooling ends

Dear Bruce: I inherited some money, and I am considering buying a $100,000 house to live in as an investment. I’m in graduate school in Charlotte, N.C., and I will be living here for four years, maybe more.

I feel it would be a good investment. I am also considering putting the money in certificates of deposit and using the interest for rent. Any advice? – D.H., via e-mail

Dear D.H.: I have no problem with purchasing a home as a place to live and as an improvement to your standard of living, but the idea of putting money into a home as an “investment” can lead to some serious problems. You mentioned you will be living in North Carolina for four years. During that time, you certainly should be able to overcome the costs to purchase. The other variable is the responsibility – the additional expense of maintenance, etc. While in grad school, you might wish to focus more narrowly on your studies; given that, I think you should at least consider renting.

High interest offer signals high risk

Dear Bruce: I hope you can help me. We just sold our house, on which we owed nothing. We have $300,000 in our savings from that sale. We built a new home for $425,000 with a 30-year loan, 5 percent down and 6.5 percent interest. Our other house did not sell before we got the new house loan. A family member who is into investing money in real estate, all oceanfront property, wants to borrow the $300,000 for several years and give us an annual interest rate of 12 percent, which would pay our monthly mortgage bill. I was going to put that money toward the new loan to bring the mortgage and the payment down. I’m confused. – E.R., via e-mail

Dear E.R.: Anytime someone in today’s world is willing to pay 12 percent, you’ve got to consider this a rather shaky investment. Nobody who has good credit and good security pays 12 percent – nobody. If you feel the property could be foreclosed and you would have the stomach for foreclosing on a relative, maybe. On balance, a good rule of thumb is, when in doubt, don’t do it.

Bruce Williams is a national radio talk show host and syndicated columnist. He can be reached at bruce@brucewilliams.com.[[In-content Ad]]