Real Estate Rehab: Renovating Historic Properties

FOR SOME ASPIRING HOMEOWNERS, phrases like "as is" or "fixer-upper" sound as ominous as "termite infestation" or "nuclear power plant views." Still, there are many nesters itching to rehab a Queen Anne on the Hill or a Federal rowhouse in Old Town, creaky floors, tiny closets and decrepit bathrooms be damned. Ingrid Abramovitch's book, "Restoring a House in the City" ($40, Artisan), stakes a claim that older homes can be livable and lovely. We chatted with her about the book, which chronicles hot properties from D.C. to Brooklyn.

» EXPRESS: What's the siren call of owning an older home?
» ABRAMOVITCH: People recognize that they just don't build houses like these anymore. These places were made by hand, by craftsmen who used exquisite materials, like first-growth wood paneling. They're gorgeous. It's so short-sighted when people remove things like that due to current fashion.

» EXPRESS: How can you update an old house without destroying its soul?
» ABRAMOVITCH: It's a question everyone who undertakes a restoration needs to ask. But I don't think there's a cardinal sin when restoring a house, except thinking that older houses are museum pieces and that they can't be relevant to modern life.

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Savings Splurge: Local Experts on Federal Tax Credits

THOSE ASPIRING TO own real estate who didn't think they'd make the deadline for a tax credit now have eight thousand more reasons to buy: On Nov. 6, the government extended the $8,000 tax credit for first-time homebuyers for another six months. Instead of expiring on Nov. 30, buyers now have until April 30, 2010 to sign a contract for a home.

In addition, the Worker, Homeownership and Business Assistance Act of 2009 authorized a tax credit of up to $6,500 for existing homeowners trading in for new digs. Both credits are aimed at getting people who would have bought a place in the next few years to hurry it up a little. The government's hoping that driving up home sales will help shore up the economy.

We checked in with three people you'll be seeing a lot of if you decide to take advantage of these deals — a Realtor, a mortgage expert and an accountant — to find out how you can maximize your financial savings if you decide to buy.

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Get Smart About Real Estate: Eric Tyson

NOBODY LIKES TO be called a dummy. But the authors of "Home Buying for Dummies" would probably be the first to tell you it's better to admit when you're a little clueless about the real estate market than to later be saddled with debt because you bought a place you couldn't really afford.

"No one is born knowing how to buy a home," write Eric Tyson and Ray Brown, the co-authors of "Home Buying" ($22, Wiley), which was released in its fourth edition this spring. They encourage buyers — especially first-timers — to take a holistic approach to shopping for a new pad. Consider how buying real estate will impact every aspect of your life, from your weekly latte budget to your commute to work, the authors advise.

In light of the recent changes in the home-buying market, such as tightened rules for lenders and falling home values, a cautious approach seems particularly smart. But Tyson says he and Brown have been preaching patience all along.

"We're proud of the fact that since the first edition of the book, we've counseled people to save a decent down payment amount and not take on risky mortgages and loans," says Tyson, whose Web site, Erictyson.com, covers financial and housing news. "You've got to look at your overall personal financial situation, and get that in order first."

We asked Tyson to share more of his must-know tips for newbies.

» EXPRESS: Everyone's saying it's not as easy to buy a home today as it was in the past. Can you explain why?
» TYSON: There's certainly more of a supply of homes to choose from today. When people talk about the difficulty, they're referring to the financing end of it. If you don't have a high credit score and you don't have enough money saved for a down payment, you are going to have a tougher time finding affordable financing.
But people need to keep in perspective that despite the fact that real estate in most parts of country has declined in value by a fair amount, real estate is still a good long-term investment — that has not changed. Because prices have come down and interest rates are so low, housing is the most affordable it's been in a long time.

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Deal or No Deal? Low Interest Rates Lure Newbies

CHARIS BOSWELL AND STANLEY CLAYTON almost didn't find their dream house because foreclosures were getting in the way. The 23-year-old and her 25-year-old husband saw two foreclosed homes in such bad shape that they nearly stopped looking at any bank-owned homes during their search.

"Oh, my God," Boswell laughs. "They were so bad!" She says the basement in one house built in 2005 was completely moldy with water puddles all over the floor. The one that really rocked her had been intentionally damaged by the previous owners. "The closet doors were completely off, the walls were torn, and in the foyer, they broke some of the wood off throughout the entrance. As far as foreclosures, I didn't want to look at any more of them," she says.

The couple and their three children — 5-year-old Jada, 3-year-old Isaiah and 11-month-old Caleb — had outgrown their Alexandria, Va., rental apartment and figured now was a good time to buy. "Our rent was going up to $1,800 [a month], and we wanted to put that toward a house that we'll own one day instead of throwing it away."

They're not alone. Plenty of first-time home-buyers are being enticed by the current market, with an enormous selection of houses offered at bargain-basement rates by banks anxious to dump them. In fact, foreclosures account for a huge chunk of the housing inventory.

"Based on what I've seen, foreclosures are the market," says Clint Burnham, an agent with Exit Advantage Realty in Fairfax, Va. "It's difficult right now to find a house that's not in some sort of foreclosure."

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Take Time To Recalculate: Borrowing Money

» DOUBLE DOWN: Expect to break the piggy bank open — wide open. "You usually need a minimum of 15 percent down for an investment property, and, ideally, for good pricing, it should be 20 percent," says Will Gaines, senior loan officer with Access National Mortgage in Reston, Va. "To get your very most competitive pricing, you really need to have 30 percent to put down."

» DOUBLE TROUBLE: Don't blame the banks for tighter restrictions. "The private mortgage insurers got burned so, so bad in the past few years, and they're reluctant to provide insurance," warns Katie Wethman of Long & Foster. She says they're especially wary of insuring rental properties because "if a borrower falls on hard times, they're more likely to skip a payment on an investment property than one they live in." That said, she advises borrowers to come up with a big chunk of cold, hard cash to sweeten the deal; the less credit you need, the more likely you are to get the loan you want.

» DOUBLE UP: Count on your friends. "I see more younger people going in together to buy investment properties," Gaines says. "That way, they can share the down payment and spread out the risk if they're without a renter for a period of time." Be sure to have a game plan for buying each other out in case one of you is ready to cry "Uncle!" before the other.

Other People's Property: The New Landlords

SO, YOU OWN a home and think the market is ripe for you to buy another property and rent it out. After all, there are more homes on the market than banks have failures, prices are dirt-cheap and interest rates historically low. To sum it up: You need less money for a down payment, and the rates mean a lower monthly expense. You've always heard that real estate is a wise investment. What's not to like?

It depends on who you ask. Helen Schubert Krause is the marketing director for Dominion Title Corporation in Great Falls, Va. She's also a first-time landlord, having just rented out her own house after moving into her new husband's digs. The 27-year-old says that, so far, it's been a good experience, albeit foreign.

"It was strange the first few times I drove by it. It's still my house, but I don't live there anymore," she says. "I thought about selling but decided to wait until the market turns around. Or maybe I'll just hang on to it longer," she adds.

Schubert Krause was forced to decide whether to sell or rent. But what if you're considering buying a second property as a rental income? Is buying a foreclosure as an investment now different than it was, say, five years ago?

"Absolutely," responds Bill Burnett, the regional vice president of the VA Association of Mortgage Brokers and the president of Homestead Mortgage in Lorton, Va. "There were far, far fewer foreclosures occurring then, and it was an active market, so they were quickly absorbed into the housing inventory. Prices didn't need to be dramatically decreased, because the market was on fire."

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