Helen Oliveri

NEW YORK (Money) -- Question: I bought a home and qualified for the $8,000 first-time homebuyer tax credit. I'm still a bit confused, though, about the payback rules. Can you explain them? --Jessica G., Houston, Texas

Answer: Sure. But first I'd like to remind anyone who's considering taking advantage of the first-time homebuyer tax credit of up to $8,000 that was part of this year's stimulus package that time is running out.

Specifically, unless Congress extends the deadline -- which I certainly wouldn't count on -- you must complete the purchase of the home by November 30th. That may sound like a good ways off. But when you consider that it can easily take two months to get through the entire home-buying process -- find a house, make an accepted offer, pull together the money and documentation you'll need for a mortgage, appraisal, title insurance and closing -- anyone who hasn't already begun will have to move quickly to squeeze under the November 30th wire.

That deadline aside, there are a few other criteria you'll also have to meet before you can snag the tax credit.

To begin with, the home you're buying must be your principal residence. And while $8,000 is the figure usually thrown around when talking about the credit, it's actually equal to 10% of the purchase up to a maximum of $8,000.

You've also got to qualify as a first-time homebuyer. Clearly, you meet that hurdle if you or your spouse has never owned a home before. But you may still be eligible even if you're not buying a home for the first time. Why? Because for the purposes of this program, you're also considered a first-time buyer as long as you or your spouse hasn't owned a principal residence within three years. Notice I said principal residence. Owning a vacation home or rental property doesn't disqualify you.

Then there are the income eligibility rules. To get the full credit, your modified adjusted gross income can't exceed $75,000 if you're single or $150,000 if you're married. You can claim a partial credit, however, as long as your income doesn't exceed $95,000 if you're single or $170,000 if you're married.

Now, let's get back to your query about payback rules. If you indeed qualified for the $8,000 first-time homebuyer credit for homes bought from January 1 through November 30, 2009, then you don't have to worry about paying it back, provided you continue using the house as your principal residence for at least 36 months after buying. Sell it or stop using it as your principal residence within 36 months, however, and you'll have to repay the entire amount of the credit as additional tax when you file your next tax return (although there are a few exceptions).

But the fact that you're concerned about paying it back makes me wonder whether you have actually taken a different first-time homebuyer tax credit.

Before passing the $8,000 credit in the stimulus package this year, Congress had already enacted a $7,500 first-time homebuyer credit last year as part of the Housing and Economic Recovery Act of 2008. This $7,500 credit, which was designed to apply to houses bought by qualifying first-time buyers between April 9, 2008 and July 1, 2009, is actually an interest-free loan that must be repaid.

So if that's the credit you actually got, then you must pay it back over 15 years through an additional tax starting with your 2010 tax return (although here too there are exceptions).

So the first thing you need to do is find out which tax credit you actually received. If you bought your house in 2008, then you got the $7,500 tax credit, and you will have to repay it. Sorry, but you can't get the $8,000 credit if you bought in 2008.

You could, however, be part of what is likely a small group of first timers who bought their home early in 2009 before Congress enacted the $8,000 credit and who took the $7,500 credit. Someone might have done that because he filed his 2008 taxes before the $8,000 became available in 2009 or because he just didn't know about the larger credit or perhaps just mistakenly believed that once he filed for the smaller credit he no longer could get the larger one.

But if you, or any other qualifying first-time buyer, bought a home in 2009 and received the $7,500 credit instead of the $8,000 one for whatever reason, you're not stuck with the smaller amount. You can file an amended return for 2008, claim the $8,000 credit and get the extra $500.

That's right, even though the $8,000 credit applies to a 2009 purchase, the IRS actually allows you to claim it on your 2008 taxes. Which, by the way, is also an important point for any first-timer who already bought this year or plans to buy before the Nov. 30 deadline to keep in mind. Once you complete the purchase, you don't have to wait until you file your 2009 taxes next year to get your $8,000 credit. You can get it sooner by filing an amended 2008 return.

So to sum up, whether or not you'll have to repay the credit depends on which credit you got and how long you live in the home.

As for anyone else who needs a house, has the financial wherewithal to buy one and is thinking about taking advantage of the $8,000 first-time homebuyer credit as a way to get it, you'd better get a move on.

W. Updegrave

You may have seen the headlines last week about the Federal Reserve continuing its policy of keeping interest rates low to stimulate the economy. But you might have missed a major byproduct of that move that's certain to have a direct impact on home real estate: Thirty-year fixed mortgage rates slipped below the five percent mark for the first time in nearly half a year, dipping to 4.9 percent.

Fifteen year fixed rates are just 4.4 percent.

Now, there's nothing more stimulating for home buyers than mortgage money at rates that are about as low as they go. And sure enough, applications for new mortgages jumped by nearly 6 percent last week, according to the Mortgage Bankers Association.

Applications to buy homes using FHA financing soared to the highest share in the history of the Mortgage Bankers' index - which goes back to 1990.

Meanwhile, existing home sale closings took a breather from the rapid increases of the past several months, according to the National Association of Realtors. Sales in August declined by 2.7 percent, but remained 3.4 percent higher than they were in August of 2008, said Lawrence Yun, chief economist for the Realtors.

He attributed the slightly lower rate of closed sales in part to clogs in the system -- more contracts being written, but longer wait times to go to closing, leading to a higher rate of fallouts.

In other key developments:

The index of leading economic indicators, which is produced by the Conference Board and forecasts economic activity three to six months down the road, was up again last month -- by six tenths of a percent.

That was the fifth straight month of higher readings for the index, and would have been higher had unemployment not held it back, according to analysts.

Home prices continued their slow gains, according to the Federal Housing Finance Agency. Its home price index, which is based on Fannie Mae and Freddie Mac transactions, found prices up by three tenths of a point nationwide in the latest survey month.

That coincides with most private price indexes, which have found that we're past bottom and headed back up in most parts of the country.

Finally, the private mortgage insurance industry, which virtually eliminated low-downpayment financing opportunities in many markets during the past year by declaring them "declining" or "distressed," has begun reversing course.

Genworth Mortgage Insurance Company last week removed 63 of its 68 previous designations of "declining markets." That should open up non-FHA cash-out refinancings and low-downpayment home purchase mortgages to thousands of people who'd been squeezed out under the old rules.

K. Harney

What type of investment real estate has been holding up best in tough economic times?

Everybody's heard of the problems in commercial and retail - but how about multifamily apartments?

You just might be surprised.

According to National Association of Realtors research economist George Ratiu, while almost every type of commercial or income property has had a rough going in the past two years, "the (rental) apartment sector continues to maintain a stronger performance compared with other sectors."

Those include office buildings, which have seen widespread property value declines -- and retail real estate, which has been particularly hard hit as consumers penny-pinched during the recession and stayed away in droves.

Multifamily, on the other hand, has done better holding value, keeping units filled and rent rolls stable or growing. During the second and third quarters of this year, demand for rental apartments as measured by net absorption, increased by more than 89,000 units nationwide.

Rental building owners have done particularly well in keeping vacancies low, with rates in some major metropolitan markets in the five percent range.

For example, apartment buildings in Pittsburgh, where the excesses of the real estate boom years never produced speculative overbuilding, had just a 3.5 percent average vacancy rate during the third quarter just ended, according to Ratiu.

In northern New Jersey, vacancies were four point three percent. In San Diego and Philadelphia, 5.1 percent. In Washington D.C., San Jose and Albuquerque vacancies averaged 5.5 percent.

Of course, not all apartment markets are doing that well: In Tucson and Phoenix, vacancies are expected to hit or exceed 11 and 12 percent, respectively.

The national vacancy rate stands at about 7.4 percent -- well below where it was in previous recessions and remarkable in view of an unemployment rate just under 10 percent.

Other evaluations of the relative performance of multifamlly investments have come to similar conclusions. The National Council of Real Estate Investment Fiduciaries, which has no ties to any particular segment of the industry, reported earlier this year that multifamily investment returns exceeded all others during the 10-year period it studied.

Similarly, a report from Boston-based Torto Wheaton Research for the National Multi Housing Council, found that over the past 20 years, apartment building investments have averaged returns of ten point one percent compared with nine and a quarter percent for industrial real estate and seven point eight percent for office buildings.

Bottom line: There is no risk-free real estate investment. But apartments perform well even in bad times, so they're worth a look.

K. Harney

Becoming a landlord is often met with objections from the inexperienced. They see the difficulties and troubles that can unfold and maybe they’ve even heard horror stories from former landlords. But due to the current market conditions, some homeowners are becoming accidental landlords and that’s causing them to look for simplified avenues to navigate the process.

Fortunately, the demand is being met by a company that is helping to turn the old process of mailing paper rental checks into electronic checks using the Internet.

A new site called PayYourRent.com aims to ease the process, eliminate the headaches for landlords, property managers, and tenants, and help facilitate rents payments. "What we do is we set up a merchant account that will send funds directly from the tenant’s account right into the owner’s account. It’s all completely electronic. The owner will receive an email that the payment has been made and the money will be deposited into the account," says Kevin Eberly, CEO of PayYourRent.com.

"It really takes a lot of the frustration away for the homeowners who want to rent their homes but don’t know anything about property management," says Eberly.

It also simplifies and provides a track record of repair work as well. "We provide a portal and Web site for the owner and tenant to submit maintenance requests, rental applications, online monthly recurring payments, and even connect all the tenant’s utilities -- all on one Web site," says Eberly.

Eberly says that some landlords who don’t have much experience may feel that some of the tasks of being a landlord are "out of their comfort zone" or simply too time consuming and that’s where he says his site can come to the rescue. The site helps tenants to make necessary changes quickly and easily online, alleviating the landlord from having to handle a constant stream of questions from tenants. "It’s one Web site where tenants can go to set up their water, power, gas, phone, cable, Internet, renter’s insurance, change of address form—everything is right there on one Web site and it compares prices from the local and the national brand for their area. And it has a best price guarantee," says Eberly.

Another benefit is the roommate split-payment option. "The original tenant who registers on the site has the ability to add a roommate. So that roommate can go in with a secure username and password and submit payments toward the same property.

What about repairs? Eberly says the site is a great way to track exactly what needs to be done and what repairs have already been completed. The tenant logs in and submits a repair. An email is sent to the property owner or the person who the property owner has designated to receive it. A confirmation email is sent to the tenant. The site provides access 24/7 so that pending repair requests can be viewed by the property owner. Once the property owner marks the repair as completed it is removed from the property owner’s page on the site but PayYourRent.com keeps a back-log of all the previous maintenance requests so that in the event of litigation and the property owner wants proof that the repair was completed, a back-log is available.

Eberly says the company is constantly improving the site based on feedback from those using it. "The idea is to make it a one-stop shop for property managers, owners, and tenants." A monthly service fee of $15 to use the Web site portal applies if you have fewer than 10 units registered with the company as well as a check service charge of $3.95 per check.

P. Chongchua

It could be a good time to invest in real estate, given the abundance of foreclosures and other distressed properties with reduced prices.

It could also be a bad time to invest in real estate, if you don't know what you are doing.

There's the rub.

"It's a good time to invest, but it is difficult. Now when you go out to invest you are competing with a dozen offers. The investors are back," says Chuck Cryder, the broker for Century 21 A Property Shoppe in Salinas, CA.

Just like buying a home to live in, taking the real estate investment plunge requires taking stock of your financial goals, planning and lifestyle before taking the plunge.

Pretty much like buying any property.

If you've got the time, the money and the lifestyle that lends itself to managing a real estate investment, you are just about half way there.

However, both halves are pretty big halves.

The National Real Estate Investors Association says you've still got a lot of work to do.

Here's how much.

• Buy your own home first. The general rule of thumb is that buying your own home will not only put a roof over your head, but also background you in the full experience of buying and owning property -- financials, market conditions, maintenance and real estate professionals you'll need along the way.

What's more, your first home could later become your first investment property, a property in a market with which you are familiar.

"You could maintain your current residence as a rental and move up into a larger home or better location yourself. This keeps the basis on your original property intact, but gives you an opportunity to move should your life dictate," says Kim DiBenedetto, president of the Monterey County Association of Realtors in Monterey, CA.

There is one exception to the buy-your-own-home-first rule says Cryder.

"If you live with Mom or the cost of your rental housing is low, stay there and purchase investment properties first. If you can rent way below market value, I wouldn't disturb that," said Cryder, who has been an investor since 1968, when he purchased his first property.

However, in today's market, an existing stake in a home can have a down side.

"You will be required to put more money down, most likely a minimum of 25 percent and also have several months in reserves. If you are upgrading from your current residence, your lender will require a minimum of 20 percent equity in your current residence before they will loan to you for another property," said DiBenedetto, also an agent with Coldwell Banker Del Monte Realty in Carmel.

• Go back to school. Turn to the Internet, reputable books, successful investment groups, college and university level courses, even your state's real estate license program. You don't have to actually get a license, but you can become just as educated as a licensed agent. Individual real estate investors, salespeople and others who you've met on the way to investing are also valuable educational resources.

• Get professional help. The same way you find any competent, trustworthy and honest professional is the same way to look for a mentor, investment partner with prior knowledge or investment group. Seek referrals from friends, family, professionals with whom you already conduct business, co-workers and others you trust who've had a satisfactory, successful real estate investing experience.

"Now, more than ever, you need the experience of a competent realtor and lender to guide you through the process," said DiBenedetto.

• Learn your investment market. One market's bubble could be one investor's boom and another investor's bust. A home in one market could give you vacation rental income in a half year sufficient to cover the cost of principal, interest, taxes, insurance, home owner association dues, upkeep and other costs, but still not appreciate. Another home in another market may not bring you sufficient rent in a year's time to cover the cost of owning the property, but might appreciate more than enough to make up for your carrying costs over the long term.

The variables are endless and you'll need to measure your capacity for risk against market conditions.

• Finally, while some experts say you'll also need to develop an exit strategy in terms of unloading properties when they are no longer viable investments, Cryder says if you buy right and stick it out over the loan haul you won't need an exist strategy.

"When you've got the goose that lays the golden egg, be satisfied with the golden egg," he says.

B. Perkins