I think you have a screw loose with your contractor comments
DEAR BRUCE: I read your column in which you wrote that a contractor should not need to charge 50 percent or so in advance of doing the work. You think such a contractor would be “under capitalized.” Sounds good, but unfortunately around here that’s the custom and it would be very difficult, if not impossible, to find a contractor that did not operate this way. — J.P., Urbana, Ill.
DEAR J.P.: That column generated a ton of mail, primarily disagreeing with me. I’ve been accused of being un-American, anti-capitalistic, etc. However, despite all the criticism, my point of view has not changed. I don’t want someone working with my money.
When I do work for others, I am capitalized well enough to put the money out. If there’s a question that the person contracting the work may default, then I have no problem placing a deposit with my attorney to be held in an escrow account. That way the contractor cannot take a hike with my funds. In every business enterprise there’s always a chance of being hustled. I view my job in this column is to keep my readers from going down that bad street.
DEAR BRUCE: My husband and I bought a cabin in Minnesota 18 years ago as a retirement property. Since we bought it, it has increased in value. If we sell, how are we affected tax-wise? We still own a small home in Illinois, which is considered our primary residence. We are retired and are not sure how much longer we can maintain two properties. — L.E., via e-mail
DEAR L.E.: If you have been renting this property out over the years, the likelihood is that you have been depreciating it. In 18 years, it has likely been depreciated to a zero base. If that’s the case, you would owe 15 percent or less capital gains on whatever the property is worth. If it has not been depreciated, your cost plus capital improvements would be the base.
This is obviously a matter for your accountant to deal with. Count your blessings if it has appreciated, since the current reduced 15 percent maximum capital gains is a pretty good deal. How long that will remain in affect, particularly if an administration change takes place, is another matter.
DEAR BRUCE: My wife and I are getting ready to close on our first home that we had built. Our Realtor told us that we do not need to hire an outside inspector to inspect the home, since it is newly constructed and the city inspector has to inspect it anyway. Should we still have an outside person do an inspection?
Also, as this is our first house, we know nothing about house insurance. Are there certain things we should be looking for in a policy? How do we go about selecting an insurance company? — J.T., Fond du Lac, Wis.
DEAR J.T.: What your real estate agent has told you, in my opinion, is a huge amount of bologna. It is true that the city will have to inspect the building. However, I wouldn’t want to bet my fortune that the city inspector knew precisely what he or she was doing. There is almost no likelihood that if an error was made you’d have redress against such an inspector.
As you’re investing tens, if not hundreds of thousands of dollars, it would seem to me that a few hundred bucks on a home inspection would be well spent. As to insurance, make sure you have a decent agency. You’ll be looking for a homeowner’s policy and I would get the home insured for the replacement value, not actual cash value policy on the home and its contents. A used sofa isn’t worth much, but if it burns you will have to replace it with a new one. Replacement value would allow for that.