Smart Moves

They were a married couple of attorneys fresh out of law school. They'd landed a pair of well-paid positions in a prestigious downtown law firm. Still in their early 30s, both were driven by professional ambition. Having a family could wait.

Though skillful in law, they were novices at buying real estate. So they called Tom Early, a broker in their area. The couple told him they wanted to buy in the city, a short walk away from their work, in a building "with all the amenities."

Soon they zeroed in on a 1,200-square foot unit with three bedrooms and an upscale kitchen with taupe granite countertops and high-end appliances. The high rise also had an indoor swimming pool and gym, underground parking and 24-hour concierge service. Though the condo wasn't discounted, the couple was willing to pay what it cost for a seamless lifestyle that let them concentrate on work.

"When they have to sell that apartment someday, they probably won't make a killing. But meanwhile, they'll enjoy incredibly convenient and comfortable living," says Early, a former president of the National Association of Exclusive Buyer Agents (www.naeba.org).

As this true story illustrates, some buyers place a premium on lifestyle over potential appreciation. And as a general rule (with major exceptions such as prime New York City and San Francisco markets) urban condo-apartments usually gain value more slowly than do detached, single family houses.

"The issue is that for most city condos, the market is relatively limited compared with the market for family-style houses. Many more people are looking for the classic house with a yard where they can plant flowers and let the dog play," Early says.

As he notes, there are also other potential drawbacks to ownership of a city condo located within a high-rise building. One factor that's hard to predict is whether your neighbors will be likeable or noisy and intrusive.

Despite the possible downsides, an increasing number of young professionals who work in city settings are attracted to a downtown lifestyle, according to Mark Nash, a real estate expert and author of "1001 Tips for Buying and Selling a Home."

"They want to live where the action is," Nash says.

Early says that although the choice of city living is typically a lifestyle decision, the buyers of urban condos should keep resale firmly in mind.

Also, he says it's important to choose a condo building that would let you rent out your unit, should that prove necessary.

"Maybe in a few years, you'll be offered a job in another city and will have to move sooner than expected. In that case you might need to rent out your unit for a period to cover your mortgage payments until you sell," Early says.

Here are a few pointers for city condo buyers:

-- Lean toward a newer building if available.

Some who buy in a city market are drawn to the character and elegance of older buildings. But Early warns that high rises more than 10 years old can be prone to costly maintenance issues.

"Suppose the elevators stop working properly or the air conditioning system fails. In that case, you could be hit with a special assessment above and beyond your regular monthly condo fees," he says.

Another plus for newer buildings is that they typically have more amenities, including fancier gyms, and state-of-the-art security systems.

Nevertheless, Early often recommends against buying in a brand-new condo building.

"You have to be cautious about a large building where the developer may continue to sell units for a lengthy period. That means if you suddenly have to sell, you'll face tough competition from your builder," he says.

-- Investigate any potential property before committing.

Due to the importance of buying with resale in mind, Nash says city condo buyers should do extensive "due diligence" on any urban building they're considering.

As a first step, Nash says you'll want to understand how a condo is situated in a neighborhood.

"Go on a block-by-block property tour. Look at the surroundings of each building and what's available there, including grocery stores and dry cleaners," Nash says.

Once you've identified the best building in your price range, it's time to compare available units within that structure, giving extra points to apartments that have been upgraded.

"Don't overlook subtle differences among units. Which side of the building is the best? Are there any corner units available? Also, track down the best floor plan," Nash says.

-- Strike up conversations with residents of a building you're considering.

Every condo building has its own internal culture, which is heavily influenced by members of its owner-controlled board, as well as the management company the board hires to run the place on a day-to-day basis.

To learn more about the building's culture and whether it would suit you, Nash suggests you talk to people who already live there.

"Let your real estate agent know you want to chat with the residents of any building you like. Make arrangements to sit in the lobby for an hour or two. Then politely strike up conversations with residents entering or exiting the building," Nash says.

-- Make sure the complex you choose has ample parking.

Maybe you're like many young city condo buyers who are attracted to a city lifestyle that doesn't require you to own a car. Even so, as Nash says, you'll probably want to choose a building that reserves at least one parking spot per unit.

Granted, without a car, you may still be able to get to a downtown workplace on foot or with public transportation. But the odds are that many of your friends and relatives will still be car-dependent. In addition, your unit will likely hold its value better if it comes with a parking space.

"These days, a remarkable number of young buyers --including many in the millennial generation -- live in the city, even though their jobs are in the suburbs. So parking is still very important," Nash says.

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

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.)