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On money

By HELEN HUNTLEY, Times Staff Writer

© St. Petersburg Times, published October 27, 2002

Q. With the way real- estate prices have been going up lately, wouldn't buying rental real estate be a good alternative to the stock market for retirement savings?

Q. With the way real- estate prices have been going up lately, wouldn't buying rental real estate be a good alternative to the stock market for retirement savings?

A. It certainly could be, if you pick the right property at the right price and you are prepared to handle the details of property management.

You aren't the first person to think of this. Marvin Rose, who compiles sales statistics on new homes in the Tampa Bay area for his Rose Residential Reports, said investor buying is part of the reason housing prices have appreciated so strongly.

"In the middle of the market, we're seeing an increasing amount of investor purchases, especially townhomes and lower priced condominiums that have rental income potential," he said.

In the Tampa Bay area, appreciation in new home prices has been strongest in Pinellas County because so few new homes are being built.

Before you take the plunge, do your homework. The better you know the local market, the better your chance of making a smart purchase.

Keep in mind that real estate investing has its own set of drawbacks, just like any other type of investing, including a lack of liquidity and the risk that the rents you collect will not cover all your expenses.

Don't put all your retirement savings into real estate or any other single type of investment. You should continue be diversified and keep some assets more readily accessible in case you need the money.

If you decide that buying individual properties is not your cup of tea, you can invest in real estate through Real Estate Investment Trusts, or REITs, which trade like stocks.

Q. My late wife and I jointly owned mutual funds on which we incurred capital losses that were claimed on a joint return. We could only claim $3,000 in losses against our ordinary income and carried the balance forward. Can I continue to use those losses on the return I file as a single person? Is there a time limit on how long these can be carried forward?

A. Unfortunately, you cannot claim the full loss on your single return. That's the answer I got from Wayne N. "Skipp" Fraser of Fraser, Culbreth & Co., CPAs in St. Petersburg, who researched your question for me. Here is his conclusion:

"Although the "gut feeling' was that the surviving spouse should be entitled to utilize the entire amount of the loss carryover, the IRS feels otherwise and says that he would be limited to only half of it."

If you were not able to use up your wife's share of the losses on her final return, you lost the benefit of the excess losses. However, you can continue to use and carry over any excess from your half of the losses. There is no time limit for doing so.

"This is an example of the complexity of our income tax laws," Fraser said.

Note to new college graduates

If you graduated from college in May or June, time is running out to take advantage of a special deal for consolidation of student loans. Borrowers who are still in the six-month grace period following graduation can lock in an interest rate as low as 3.5 percent.

Those who have been out of school longer also should consider consolidation if they haven't already done so. With rates at historic lows, it makes sense to trade variable-rate loans for those with fixed rates. Many lenders also offer extra rate reduction incentives if you sign up to make payments through automatic debit of your bank account or if you make your payments on time.

Be careful about extending the term of your loan. Although that is one way to reduce the size of your payments, you could still be paying off your college debts when it comes time to start paying your children's college expenses.

Start your search for information about consolidation with your current lender.

Online Money Map

Don't know how to get in touch with that mutual fund you heard about? Check out the mutual fund directory at About.com (mutualfunds.about.com). If you find the fund listed, a click will take you to its Web site.

-- Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We'll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers' names will not be published. Send questions to Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.

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