DEAR BOB: I am buying a new condominium in Waikiki, Hawaii, that will cost more than $1 million. It is being built by a reputable company. Should I pay all cash or should I finance a portion of the purchase price? I’m thinking why pay interest if I don’t have to. –Ronald H.

DEAR RONALD: Paying 100 percent cash for any residence is very risky, especially when you are buying in a vacation area where market values tend to fluctuate wildly.

Purchase Bob Bruss reports online.

No matter how wealthy you are, I hate to see you tie up a large amount of cash in one asset, which might be very difficult to sell if you need cash or it turns out to be a bad condo. Instead, I suggest you obtain a mortgage for 50 to 80 percent of the purchase price.


DEAR BOB: My dad inherited a two-family duplex from his parents’ estate, and title was in his name only. He passed away in August 2006. The duplex was left to my mom. She is 81 and wants to sell it to one of the renters. I presume she needs an attorney to change the title into her name. How would she find out about the stepped-up basis at the time of my dad’s death? How does the $250,000/$500,000 home-sale exemption enter into this? –Sharlene E.

DEAR SHARLENE: Presuming your mother is your late father’s heir for the house, she needs to clear the title of your late father’s name and put it into her name alone. Then she can sell the duplex and deliver marketable title to the buyer.

Her new stepped-up basis is the August 2006 market value when your father died. A professional appraiser should be able to determine this valuation for her at a cost of a few hundred dollars.

Your mother does not qualify for the Internal Revenue Code 121 principal-residence-sale tax exemption up to $250,000 because she has not owned and occupied the property for at least 24 of the last 60 months before its sale. However, thanks to the stepped-up basis, her capital gain probably won’t be large, and her capital gain tax will be minimal. For details, she should consult her tax adviser.


DEAR BOB: I just learned of self-directed IRAs (individual retirement accounts), which can invest in real estate. What are your thoughts on investing IRA money for the purchase of a condo? –Elizabeth P.

DEAR ELIZABETH: You can use IRA money to acquire only investment real estate, not your personal residence. If you think the rental condo will appreciate in market value, then it might be a good investment for your IRA.

The new Robert Bruss special report, “Pros and Cons of Living Trusts to Avoid Conservatorship, Probate Costs, and Delays for Heirs,” is now available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at Questions for this column are welcome at either address.

(For more information on Bob Bruss publications, visit his
Real Estate Center

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