Smart Moves

Fred Meyer, a veteran real estate broker, helps homebuyers find property in the vicinity of Harvard University, a high-cost area where it's tough for many purchasers to locate a property they can afford. But through the years, he says numerous clients have landed exceptional deals on houses occupied by tenants.

"Houses that are rented are hard to show and can't be staged to bring out their best the way owner-occupied properties can. That means there's less competition among buyers, which can sometimes translate to a below-market price," Meyer says.

Though some rented houses are true "fixer uppers," others are simply messy and need only surface upgrades, like interior painting or in-depth carpet cleaning.

Those rare buyers who can envision the potential of a house with merely superficial problems are often richly rewarded on price, according to Meyer.

Meyer recommends that homebuyers with affordability challenges open their minds to the possibility of purchasing a rental property that needs a limited amount of work.

"If you're handy, this could be a very good buy for you," he says.

Still, he allows that some buyers are so wary of living in a house that's served as a rental that they won't even bother to visit the place, let alone to consider buying it.

"In fact, some people are so insistent on owning an untouched house that they'll only buy a brand-new home," Meyer says.

Dorcas Helfant, a realty company broker-owner, says that in many areas there are now an abundance of renter-occupied houses on the market. These include many that are owned by individuals who'd been waiting for the rebound in property values before trying to sell.

"Lots of people really dislike being a landlord, especially if they've moved far away and are trying to manage their rental remotely. Because they're often very anxious to sell and free themselves of this headache, they're willing to negotiate seriously on price," says Helfant, a former president of the National Association of Realtors (www.realtor.org).

Here are a few pointers for homebuyers considering a renter-occupied house:

-- Plan your visit to the place when the tenants are absent.

With some exceptions, those living in a house that's rented are unhappy that their landlord plans to sell.

"Some renters are extremely angry that they must uproot. To get back at their landlord -- and try to sabotage a potential sale -- they'll leave the house in a very messy condition and make comments designed to drive away buyers," says Sid Davis, a real estate broker and author of "A Survival Guide for Buying a Home."

In addition, some tenants exaggerate small issues and may even claim a house has problems that don't exist.

He advises homebuyers to try to schedule visits to a rental property when the tenants are absent. That way they can more effectively scrutinize the place. They'll be more at ease, for example, opening closet doors and kitchen cabinets.

-- Make sure you obtain an in-depth home inspection.

Some rental properties are overseen by professional management firms. Even so, such homes rarely get the same level of continuous scrutiny as those occupied by their owners, who typically feel a pride of ownership. That's why Davis says it's critical to make any bid conditional on a satisfactory home inspection.

"Every property needs a home inspection, but this is especially so if tenants have been living there," Davis says.

To locate a good home inspector, he recommends you ask your real estate agent for the names of at least 10 candidates. Then interview three by phone before choosing the one you judge the most competent.

"It's a very bad idea to select any inspector who's in the home-improvement business. This represents a major conflict of interest, especially if the inspector tries to persuade you to also hire him for repairs," Davis says.

What if the inspection reveals only a few very minor problems? Then the rental property could qualify as a true find that could sell under its market value for the sole reason that tenants have lived there.

-- Obtain cost estimates for necessary repair projects.

Davis, who once owned six rental houses, learned from experience that tenants often fail to tell their landlord about problems unless they become serious.

"The people living in the house could be aware that the dishwasher has been malfunctioning for months. But the landlord will never hear about the problem until a home inspector determines that the dishwasher leaks and must be replaced, along with the flooring underneath," he says.

Davis says a potential buyer of a rental property -- or any home for that matter -- needs to know how much the necessary repairs will cost. To find this out, he recommends you consider getting a home inspection prior to making your bid. Then be sure these expenses are factored into the price you negotiate.

-- Seek out a "diamond in the rough" among renter-occupied properties.

"Because of the stigma attached to rented houses, you can sometimes get a terrific deal because the pool of willing purchasers is relatively small. All you have to do is think past the stigma," Davis says.

"You can't judge a book by its cover, and this holds true in real estate as well as life in general. If you're that rare person who can see beyond the unmade beds and dirty dishes left in the kitchen sink, you could be a real winner," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

The Great Recession was supposed to make Americans less materialist. But researchers who track consumer behavior say there's no data to show that spending habits have changed.

But people in the habit of shopping as a "pick-me-up" can put at risk financial goals that are extremely important to their long-term happiness, according to Howell. Indeed, bad spending habits can jeopardize the goal at the top of the priority list for many families: saving enough for a home in a safe neighborhood with good schools for their kids.

But the good news for those prone to emotional spending is that research shows they can alter their behavior if they focus on a couple of simple steps.

"Every time you're about to make a purchase, ask yourself out loud why you're buying that item. Then you'll be much more aware of your emotional drivers, which can help you avoid mistakes," Howell says.

Another effective measure to curb impulse purchases is to carry a little pocket notebook and write down everything you spend.

"By always noting where your money goes, you can turn an emotional spending process into a cognitive process. That gives you more control of your behavior," Howell says.

Here are a few other pointers for those trying to save for a home:

-- Give up the habit of shopping for entertainment.

Gerri Detweiler, a consumer advocate and personal finance author, says that even though research shows people derive more happiness from experiences -- like visiting friends or going to a park -- they continue to pursue shopping on the belief that it's more personally rewarding.

"One way to put an end to random, unfocused shopping is to create a list of alternate activities you'd also enjoy," Detweiler says.

What alternatives might you consider? She says most people do well with social activities. For example, you might have a few friends over for a simple and inexpensive lunch plus a movie in your living room. Or you could join an outdoor club that schedules low-cost weekend outings.

-- Monitor your accounts on a regular basis.

Many people use debit cards rather than paying with cash or checks. But they fail to track their debits, which means they're only vaguely aware of their account balance at any given time. This leaves them susceptible to the embarrassment of blocked purchases or overdraft fees.

To avoid such potentially costly scenarios, Detweiler urges you to monitor your checking account activity on a regular basis.

"The best idea is to do this every day. If not every day, do it at least weekly at the minimum.

In addition, she says people who use credit cards often should track these accounts regularly, a practice she calls "Money Management 101."

-- Seek free help with budgeting.

Most financial planners aren't set up to do budget counseling for middle-income people on a tight budget. Rather, they're oriented to helping those who've already accumulated considerable financial assets.

But, as Detweiler notes, there's free help available for those struggling to limit spending, pay off debt and save for a down payment to buy a property.

"Most people don't realize they can access really good budget assistance at no charge, as well as free educational seminars on home buying," she says.

Would-be homebuyers can locate free counseling services in their area through the website of the U.S. Department of Housing and Urban Development (www.hud.gov). Once on the site, search for "HUD approved housing counseling agencies." Or call HUD's toll-free counseling locator: 800-569-4287.

-- Reduce your expenditures for "fine dining."

Overspending of any sort can reduce your chances of attaining your savings goal. But Detweiler says one of the toughest financial habits to break involves eating out.

"Restaurant tabs are enormous budget busters for lots of folks," Detweiler says.

Your savings plan won't crash just because you buy an occasional meal. But it's a different story for those who eat out several times a month at fancy restaurants that serve fine wines, exquisite entrees and delectable desserts.

-- Cast your buying plans in advance of shopping.

In the past -- before the baby boom generation -- many Americans used the "envelope system" to manage their spending. Each time they were paid, they'd tuck away dollars in specified envelopes for such necessities as food, rent, utilities and clothing. They'd also regularly allocate money for savings.

This envelope system was an effective money-saving strategy because it helped ensure that the essentials were covered and that savings accounts were fed. In addition, it increased the odds that money would be available for important big-ticket items -- such as the purchase of a replacement car -- without going into debt.

Nowadays, few people use the envelope system. But you can be equally effective in reaching your savings goals through automatic withdrawals from your paycheck to your savings account on a weekly or biweekly basis, Detweiler says.

"Given the high cost of living, advance planning is absolutely critical for families trying to buy a first home or make a move-up purchase," she says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

Michael Crowley lives in a handsome Victorian with nearly 6,000 square feet of living space. He and his attorney wife bought the 107-year-old domicile for its charm, glorious interior moldings and shiny oak floors. Plus the spacious house has proven perfect for entertaining.

But fast-forward a few years, and the couple -- whose son is soon heading to college -- is planning to trade their three-level property for a single-level one. Why? Because climbing the home's three flights of stairs is becoming increasing taxing.

"I'm only 47 years old. But ... I have bad knees and a bad back. There have been times I had to practically crawl upstairs to get to the master bedroom. If I'm really hurting, I sleep in a recliner on the first floor," Crowley says.

As the broker-owner of a real estate firm that caters to homebuyers, he sees both the pros and cons of vertical and horizontal houses. Because of the rising cost of land, he says you typically get more house for the money when you buy vertical because the home's footprint is smaller. But he recommends a single-level house for most buyers over 50 who may someday have trouble tackling stairs.

He commends his mother, now 78, who had the foresight in 1974 to buy a 1,500-square-foot single-level property where she could live indefinitely in comfort. Indeed, she still lives there and has no plans to move.

"Like me, mom has a bad back and bad knees. But with a rancher, she never has to use stairs and can walk out onto her garden without any problem. She doesn't need to downsize to an apartment, which she'd hate to do," Crowley says.

Though Crowley sees the pluses of one-level living, particularly for older people, he also sees positives for the buyers of a multi-story home, including the privacy of sleeping upstairs.

Mark Nash, a real estate expert and author of "1001 Tips for Buying and Selling a Home," says buyers with mixed feelings about housing styles should visit at least two vertical properties, along with two horizontal ones.

Here are a few pointers for buyers deciding between vertical and horizontal:

-- Look forward to your future housing needs.

No matter your age, it's tough to foresee your housing requirements going forward, though Nash says that doing so to the best of your ability is important. He recommends you look ahead at least three to five years, especially if you are in your retirement years, during which injuries and illnesses can happen suddenly.

He says that couples with young children should think about how their kids' needs will evolve. Those for whom affordability is a major concern may wish to opt for a two-story house with extra bedroom space for their growing offspring.

-- Consider the possibility of future appreciation for one-level homes.

With the oldest baby boomers already in their late 60s, demand is rapidly increasing for single-floor living among pre-retirees and retirees. As a result, Nash says ownership of a one-level house should prove a good investment over time, so long as it's located in a desirable neighborhood.

"Particularly in communities where ranch houses are scarce, this could be a good bet. As time goes on, there will be more senior homebuyers who need one-story living as their knees give out," Nash says.

Nevertheless, he contends that some boomers still prefer to own a spacious two-story house with enough upstairs bedrooms to accommodate family members who stay overnight.

"In their retirement, some folks are practically 'professional grandparents.' They'd hate living in a small, one-level house or condo if it had limited space for their kids and grandkids," Nash says.

-- Factor in the advantages of a second-floor "hideaway."

An increasing number of people now telecommute or run a small business out of their home. And many such home-based workers relish a quiet space where they can retreat when they need to concentrate.

Crowley says that in most cases, a two-story house is better suited to home-based work than a single-level property. That's because upstairs rooms are usually better separated from the noise and congestion that often surrounds a first-floor entryway.

Likewise, many homeowners enjoy the tranquility of an upstairs bedroom.

-- Avoid any property that would need a first-floor addition.

Are you drawn to ownership of a traditional, two-story place, but want certainty that the property you buy will still serve your needs as you grow older? If so, should you consider buying a vertical house with the intention of building on a first-floor master suite?

"Absolutely not," Nash says. "Getting an addition put on is a pricey proposition that can take six months or longer and cost far more than anticipated."

Unfortunately, one-level houses aren't to be found in every community. However, if you're convinced that such a property is your best option, Nash encourages you to consider comparable nearby neighborhoods where one-level properties are more readily available.

"But never forget that location should be the top priority on your selection list," Nash says.

-- Don't seek to replicate your parents' lifestyle.

Were you raised in a family that's always lived in two-story traditional houses? Then you may be emotionally programmed to seek this type of housing, even though a one-level place would be better suited to your lifestyle.

In that case, Nash urges you to step away from your comfort zone to at least visit a few ranch-style houses.

"Eventually, someone in the family has to break with tradition. Choosing the optimal place to live isn't about getting a clone of your parents' place. It's about being happy with what's right for you," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)