Lil Miller-Fox's individual retirement account has three bedrooms, two baths and a two-car garage.

Better yet, the rental house in a gated community in Sebastian, Fla., not far from the Atlantic isn't run by an advisor that charges exorbitant monthly fees. Rather, Miller-Fox makes all the decisions, and she doesn't have to pay anyone to execute them.

Her IRA is called a "checkbook IRA," an investment vehicle created nearly 20 years ago in a landmark court ruling that essentially said, it's your money, so you can run the show -- as long as you follow the rules.

Let's step back a moment: Not many people even know you can invest your retirement savings in real estate. But under Section 408 of the Internal Revenue Code, as long as you don't benefit directly, you are allowed to put some or even all the funds you set aside in a tax-sheltered IRA into real estate.

They're called self-directed IRAs because you can move your funds around. But until a 1996 court case, every step you wanted to make had to be carried out through a costly custodian. You could not take direct control. Every time you wanted to mow the grass or pay the bills, you had to pay a trustee to do it.

In the 1996 case of Swanson v. Commissioner, the tax court gave its blessing to a new type of self-directed IRA structure -- the checkbook IRA -- that is much simpler than investing through a regular custodial account.

Under the checkbook format, the IRA is set up as a self-directed account that's capitalized by funds rolled over from your current retirement account. Then, a limited liability company is created in which your new IRA purchases all the membership units. Now, your money is held in an LLC and you are ready to invest at your discretion.

That's what appealed to Miller-Fox. She's a self-proclaimed "real estate nut" who operates PrivateCommunities.com, a website that compiles information about many of the country's master-planned properites.

"I love real estate," she says. "I feel much more comfortable investing in tangible real estate than stock and bonds and that sort of thing. And this puts me absolutely in full control."

Under the rules, savvy real estate investors like Miller-Fox can buy, sell and manage domestic, foreign, commercial, residential and rental properties using money invested in their tax-deferred retirement account. The funds are held in a normal business account, and as the account's manager, you can sign contracts and write checks on the account, just like any other business.

The speed at which you can move opens up a slew of investment opportunities, such as snapping up foreclosures or tax liens -- or even a house that has just come on the market in a prime spot near the ocean or in the mountains. And, says Miller-Fox, "it's a great way for people to finance their retirement homes long before they are ready to use them."

There still are restrictions, of course. You can't use the property as your own residence or vacation home, and that applies not only to you but also to anyone in your family. And you can't take money out of your IRA account until you are 59 1/2 without incurring a big tax bite, just like if you took money out of a regular IRA.

Otherwise, rental income is tax-deferred because it is held in a tax-deferred IRA. And there is no capital gains tax when you sell an IRA-owned property.

A few other ground rules:

-- You can sell a house and purchase another one, and you can buy more than one property at a time. But any property purchased by your IRA is owned by your IRA, not you individually.

-- You can invest in raw land, real estate contracts or the trust deeds that back mortgages. And if you don't have enough money to invest or your own, you can pool your resources with others in the same boat.

-- Any money used to buy a property with your IRA has to come directly from your IRA, not you personally, and you can't be reimbursed by your IRA. This includes earnest money and closing costs, say Lorraine and Richard Walls, a couple from Midlothian, Va. who use their retirement accounts to buy investment properties in southwest Florida.

-- Similarly, costs associated with remodeling and carrying real estate need to be paid directly from your account. And any income from your properties has to flow back to your IRA.

-- You cannot do business with family members, including spouses, parents, children, grandparents, grandchildren and great-grandchildren.

There are still fees, too. There's a charge to set up the LLC, and you still must have a custodian. But you don't have to pay the custodian to execute each and every move you want to make, or to collect the rent and pay the bills. Consequently, the fees are far less than investing in real estate via a typical self-directed IRA.

How much less? Charges vary, but according to Guidant Financial, a self-directed IRA custodial firm based in Bellevue, Wash., you can save thousands in traditional transaction and asset-based fees by acting as your own IRA broker/custodian.

Be patient. Hang in there. Keep trying.

In one form or another, that's the advice some real estate experts give buyers in dealing with this overheated housing market.

Yes, it is a good time to buy in terms of house prices and mortgage rates. If you find a good house at a good price and a loan at a good rate, go for it.

But the inventory of available homes for sale is extremely low, for any number of reasons.

In many markets, regular buyers are competing with investors who are willing to pay cash to turn properties into rentals. At the same time, some home builders are "metering" or constraining sales to take advantage of rising prices. That's one reason the inventory of new homes is at a 30-year low.

Even the number of distressed properties has shrunk because lenders are slow at processing foreclosures. And on top of all this, the expected rush of pent-up sellers who were thought to be waiting, waiting, waiting to put their places on the market has never materialized.

Yes, this is, indeed, a seller's market and the typical buyer is at a disadvantage. Some are being rushed to make decisions, which can quickly lead to remorse over paying too much for a house. Or the place may not be in as good of condition as expected.

Hence the admonition: Take your time.

"It is important to stay patient," advises Svenia Gudell, senior economist at Zillow.

And don't get "over-invested" or obsessed with just one house, "because a lot of times," Gudell said, "you'll get involved in a bidding war. It gets so crazy that (some buyers) end up at a price they aren't comfortable with."

Six months to a year from now, as the market shakes out, the inventory of unsold homes should improve markedly. Investors probably will have left the market at that point. Financing may be a little more expensive, but it should be somewhat easier to qualify. And appraisals may not be the deal-breakers they are now.

For now, the housing sages say, leave the market to local and Wall Street-backed investors, who are driving prices up in many places because they are willing to pay more than list price.

It may seem counter-intuitive, but that may actually help buyers in the longer term, according to Rick Sharga, executive vice president at Auction.com.

While investors are accelerating the housing recovery, Sharga pointed out that appraisals generally trail rising values, a fact borrowers discover when the valuation on the property they intend to purchase comes in too low.

At the same time, cash buyers are resetting property values every time they buy a house. And as comparable property values reset, borrowers will be able to obtain a higher-value loan on subsequent sales. "It will make it easier for them to compete," Sharga said of patient purchasers.

Once prices reach a point where it doesn't make sense for the big investors, they will move on to other markets. But "they are not causing a bubble," the longtime mortgage industry executive added. "The (higher) prices are sticking after they leave the market."

In the midst of this strange market, buyers need to be patient for one more reason: It is going to take some time for the inventory of homes for sale to reach more normal levels. Lawrence Yun, chief economist at National Association of Realtors, said it may take two years before that happens.

Currently, according to many sales indices, prices are rising at an annual rate of 10 percent or so. But next year, Yun expects sales and prices to moderate.

"It will be less hectic," the economist ventured, noting that buyers should not be hurried into undertaking such a large financial transaction as buying a house.

"This time next year, there will still be a shortage in inventory but not the degree of tightness we have been experiencing. It will provide consumers with additional time to make that decision," he offered.

That doesn't mean you should stop looking. If you are not turned off by the current state of things, Joan Patterson of Keller Williams Realty in Rancho Cucamonga, Calif., is one of many realty pros who suggest that you need to be persistent. "Be ready, willing and available to look at homes" as soon as they hit the market, she says.

Noting that it has become the norm for buyers to make several offers on different properties before one is accepted, Steve Bachman of RE/MAX Gateway in Chantilly, Va., agrees. "Buyer patience combined with a willingness to act decisively when the right home becomes available is critical in today's challenging market," he says.

Lastly, there's this reminder from Don Kanare of RE/MAX Premier Properties in Reno, Nev.: From time to time, a peach of a listing comes on the market -- perhaps due to a divorce, death or job change.

"Every year, buyers who are patient and monitor the market will find a certain amount of new listings in each price range that are superb values," Kanare says. "Being patient and waiting for the rare gem to come on the market is only half the battle. Equally critical is being decisive."

Thinking about refinancing? A second lien may be a factor in whether or not you can.

If you've taken out a second lien on your home, it is subordinate to your primary mortgage and must be dealt with. It can't be ignored, and it doesn't matter whether it's a home equity line of credit, a home equity installment loan or any other kind of loan.

"You have one of two options" when dealing with subordinate financing on your house, says Scott Stein, president of Xetus, a technology company that helps mortgage originators manage second liens. "You either need to pay off that second, or you need to get the lien-holder of that second to agree to remain in a subordinate position to the new first."

Back in the days when home values were "always" going up, borrowers would use the cash they received on top of their new first mortgage to pay off the second.

"It was no big deal," says Stein. But since the housing crash, "people haven't had nearly (enough) equity in their homes to do that. ... So they have, more and more, chosen the path of going to the second lender and getting him to agree to remain" in the second position.

Getting the second lender to agree can be tricky, though, Stein warns.

"At some financial institutions, the answer has been, 'No, we won't do subordinations.' They won't approve a request," he says.

Others "will not decline, nor will they approve you. Or they might say they will approve, but reduce the line amount."

If second-lien holders are willing to consider maintaining the second's subordination with a new first mortgage holder, they will be looking at the risk of being in a secondary position if you should fail to make your payments. That means if you default, the second lender won't receive any money until the first lender is paid in full.

And recently, says Stein, that's something that banks have "taken a much closer look at."

One factor is whether you are taking any cash out of the deal, a situation lenders now look at with reluctance. Another is the loan-to-value ratio of not just your new first mortgage, but of the new first and the second taken together.

Stein says the best bet for refinancers is to have cash on hand or in reserve. "The more you can bring to the table on the refinance, the better your ratios are going to look," he says.

Some borrowers, either honestly or dishonestly, do not think to mention the fact that they have a second lien when they try to refinance. But it will not be overlooked, because the second lender almost always takes a hard look at your credit record, liabilities and the title to or liens on the property.

"It's always best to mention it upfront," Stein says. "It's going to come up."

It is not your responsibility to contact the second-lien holder when you start the refinance process. That's the primary lender's job. But it is to your advantage to understand the process and the thinking involved.

While banks may be cautious when it comes to changes that could affect their risk, they also often have an interest in retaining current customers. That could work to your benefit, particularly now that there has been a run-up in mortgage rates and new loans are in shorter supply.

Some banks are so concerned about this they have been using systems like Xetus, which processes second-lien subordination requests. The program looks for second liens and identifies the owner or lender. If the primary lender also holds the second, the system alerts the bank's call center to contact the borrower in an effort to retain the loan.

Banks "are more likely to approve subordination if they hold the first lien," according to Stein. But if not, they may offer you a sweeter deal on a new first mortgage in order to keep your business.

Don't expect your bank to take the first step, though. If you want to make sure you will be offered the best terms possible, you should be proactive.

Banks today are "after wallet share," Stein says. "So it never hurts to check multiple sources for loans. It's so easy to do that online for potentially a significant amount of savings over the life of the loan."