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Printing money with a real estate brokerage license

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How do most people start investing in real estate? They save money, they borrow from friends and family, and they risk taking credit. Or they try sophisticated techniques like no money down deals, which even the experienced real estate investor may find difficult to succeed with.

People new to investing who start with friends and families' money without experience do not see rewards for their time and efforts until their first buy sells for a profit later. Or they may try to bird dog, which is finding and tying a property, often with their own money, then trying to flip it to another investor. This, technically, could require a real estate license anyway -- particularly if not done correctly -- and if the investor doesn't buy the property, you are stuck.

If you had a real estate license, you could enjoy the following benefits:

Lock the property, not your money. Instead of using your money to make a down payment and lock the property, use your license and lock the property by getting a listing on it. In this way, you can tie up any number of properties and will not be limited by the amount of funds at your disposal. You can use the listings to sell to anyone who may be suited for that investment. Also, your listings are generally for six to 12 months -- that means you have six to 12 months to sell the property and are not pushed to sell for undue consideration.

Gain wisdom, not knowledge. You may have read dozens of books about investing in real estate. You may have even attended a couple of courses, and now think you are ready to part with your precious money. Think again. Just as you wouldn't run off to Las Vegas and marry someone after a few e-mail exchanges, you shouldn't invest in real estate without some live experience.

If you have a real estate brokerage license, you will typically work through five to 30 deals a year. You will gain practical and live experience of the mechanics of negotiating and the purchase of a property. You will have access to Multiple Listing Services (MLS) and will also start building relationships with other real estate brokers and agents. The only aspect you will not be directly exposed to is the actual operations and management of the property. But you can gain insight in that, too, just by talking with your buyers. Not only do you build relationships, you also gain valuable insight without paying for it through your own mistakes.

Build a network of assets, instead of buying a chain of properties. If you have a real estate license you can gain access to innumerable people. You can start developing and maintaining relationships with them. If you nurture these relationships, each of these contacts can become invaluable assets. Some will bring leads of properties, others of buyers. Some will help you save money, while others will allow you to make money. All these assets can be created without any significant monetary investment. On the other hand, building a chain of properties requires a significant amount of funds to be invested. While we may wish otherwise, that's often not possible.

Learn from the masters, but maintain more accurate information than they do. With your real estate license you will have the opportunity to work with and learn from the most sophisticated investors. These are the best type of people to work with, as they know exactly what they want. You will learn to look for what they have learned to look for. However, you will be the one calling sellers and buyers every day, and you will be helping others make deals. Thus, you will have a better handle on the price and other metrics of the properties in which you specialize than the investors do, even if they are full-time real estate investors. You will gain the best of both worlds.

Follow your interests, not your burdens. It is common knowledge that a person will do something much better if they have a passion for it. Similarly, with a real estate license, you can select and start working in any niche that interests you. If you feel retail is right for you, then work on brokering retail property. If you feel multifamily is the way to go, then go ahead. Start talking to appropriate buyers and sellers and understand the advantages and disadvantages of working in that segment. You will also be introduced to other specialists who work in your niche, so you will come across appraisers, contractors, lawyers and a wide assortment of other professionals who are knowledgeable about your niche. These are people who can immediately work with you when you decide to invest in your own properties.

On the other hand, suppose when you started out in real estate on your own, you bought an industrial property. Suppose you quickly find that the industrial segment isn't for you -- now you must go through the process of disposing of that property and again finding another property in another segment you wish to work in. This not only makes you lose time, but may also cause you to lose interest, and eventually, lose opportunities. And, after all, it is better to lose a commission than to lose your credit.

Choose how far you want to go, not how far you can go. Real estate is such a vast market that irrespective of the niche you decide to work in, the opportunities are many and deep. If you are persistent and systematic, you will certainly build wealth beyond your expectations. Of course, it is important that you set specific goals, and these may be set in terms of an annual amount of positive cash flow -- say $100,000 -- or in the value of wealth built at the end of a period -- for example, $30 million in assets.

Get started when you want; don't wait to build resources. If you are trying to enter the real estate business, you will need to build a certain amount of capital before you can get started. If you take the real estate brokerage route, there is nothing you need to wait for.

What -- you're still here reading? Shouldn't you be at the Department of Real Estate?

Gabhart is CEO of Gabhart Investments Inc., the president of the San Diego Commercial Realtors Association and a board member of the CCIM San Diego Chapter. He is also a member of the Policy Advisory Board at the University of San Diego Burnham-Moores Center for Real Estate.

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