Buying vacant residential lot as investment is a gamble

I'm thinking of buying an investment property. I'm getting an opportunity to buy land in a residential area. My friends bought the adjacent land at $250,000 one year ago. Now I'm able to get a similar piece of land at a much reduced cost of $150,000. Is it a good idea to buy land in this area for future profits when I don't plan to build a house there anytime soon?A. Vacant land is a tricky investment for amateurs. It produces no income, ties up your cash and costs money to hold. Even experts get fooled trying to predict the future course of development. Just because your friends' property has lost value is no reason for you to jump in.Q. What about a situation where one person is a first-time homebuyer and one is not? If they bought the house in September 2009, would they be eligible for the $8,000 tax credit?A. For the first-time buyer tax credit, neither the purchaser nor spouse can have owned a principal residence in the preceding three years.I bought my current home in April 2009. I was in my previous home for more than five years, and my accountant says I am not entitled to the tax credit because I bought before November 2009. Am I entitled to this credit? If so, where can I find the IRS rules to give my accountant?A. The repeat-buyer tax credit applies only to purchases made after the law went into effect on Nov. 6, 2009.How do we establish the basis value of a home for tax purposes?In June 1999, my in-laws signed their house over to my wife. The deed indicated that she purchased the house for the sum of $1. Both her parents continued to live in the house until their deaths. My wife's father died in 1999 and her mother died on May 3, 2009. We have since sold the house and the closing occurred on June 11, 2009. Now it is time to deal with our 2009 income tax. What is the house's basis value for tax purposes?A. When your wife took the house as a gift, she also took over her parents' cost basis. That might be pretty low.But if the parents continued to live in the house and treat it as their own (Who paid the taxes? What is the address on the death certificates?), she may be able to claim it was really an inheritance, valued as of the time of death. That could yield a higher cost basis, for which I'd suggest a local broker's written opinion of value. Or, as you sold the house within six months of the death, you may be able to use your sale price.At this point, you should definitely consult an attorney, preferably one who specializes in tax matters or a CPA or enrolled agent.Can you explain what a short sale is?A. A short sale may solve problems for homeowners who can no longer meet their mortgage payments or who need to sell, but who owe more on the mortgage than the house is now worth. Sometimes the lender will agree to take whatever they can get selling on the open market and mark the debt settled. That allows the sale to go through. It hurts the seller's credit record, but not as much as a foreclosure would.A short sale is possible only if the lender agrees ahead of time. Usually, the homeowners have to prove they have no other assets that could be tapped to solve the problem. The lender reserves the right to approve or turn down a proposed sale. And - rarely - the seller is later hit with a judgment for the remaining unpaid debt.We are trying to purchase a home with a VA or FHA loan. Because we have been renting two houses in different states, we are having problems proving residency in one. We are planning to reside there permanently and will no longer be renting, but our mortgage broker said this will not work for either of these two loans. What are other loan options that do not require a huge down payment? We are about ready to just give up.A. I don't see the problem. There must be something more involved. Past residency shouldn't affect your ability to borrow for your own home. Try discussing the situation directly with a lending institution or with a different mortgage broker.bull; Edith Lank will respond to questions sent to her at 240 Hemingway Drive, Rochester, N.Y. 14620 (please include a stamped return envelope), or readers may e-mail her at ehlank@aol.com.2010, Creators Syndicate Inc.