Thousand Oaks, California real estate agent Steven Buchsbaum is a self-described "Jersey" boy, who has crisscrossed the country in pursuit of wealth. A financial planner and stock broker with an MBA (double majored in finance and banking) from the University of San Francisco, Buchsbaum is tired of the volatility of the DOW and the NASDAQ and is looking at making a living in what he calls an overlooked asset class - real estate.

And he's not alone. California real estate licensing is in a log-jam, as others clamor toward the real estate gold rush. "I'm licensed now, but it took six weeks longer than I thought," said Buchsbaum who is already working on his broker's license. But he has one advantage that many new agents don't have - a background in investments.

"Real estate is an investment with some tremendous tax advantages," explains Buchsbaum. "My whole practice was building stock and mutual fund portfolios for middle-income and high net-worth individuals. Real estate was an asset category that I never really paid much attention to until the recent volatility of the stock market. I started losing money in the stock market and my friend was making money in real estate. I should have opened my eyes! Like most of my clients, I was overinvested in stocks and underinvested in real estate."

That friend was Gary Ericson, Jr., owner-broker of a discount realty firm. A basketball chum of Buchsbaum's, Ericson convinced the stockbroker to give real estate and his brokerage, co-owned with his father, a try.

A good fit

Real estate is a wealth creator, realized Buchsbaum, but just like the stock market, it takes a lot of knowledge to make money. To prepare, he quit his job at Radio Wall Street, and started boning up on real estate books and visiting real estate Web sites, including Realty Times, every day. He also drives around the town to look at properties to get a feel for the market. "There is more to it than I imagined," he marvels. "People have the impression that it is easy to make money in the stock market, and the same myth exists in real estate. But, real estate is a professional business, and it is one of the last entrepreneurial professions left. I like the freedom, and if you work hard, you can make a great living."

Buchsbaum believes that discount brokerage is the way the industry is going to go. "Real estate is a little bit behind the stock brokerage community in terms of using the Internet," says Buchsbaum, "but I believe that it will have the same impact in real estate that it did in the stock brokerage community. I think you'll be dealing with a more educated real estate buyer than in the past, so you have to assume that they are prepared and they will be looking for guidance. They can find vast amounts of information on the Internet, so your job will be to help them make decisions.People are paying you and like buying stocks, buying a home is an emotional decision. If people are overwhelmed with choices they can't make decisions. If you can steer their emotions in the right way, you can find the home of their dreams or sell their home for the proper market price."

He sees the overall professionalism of the real estate industry rising as a result. "I think it will weed out the part-timers in real estate because you can't provide that kind of knowledge and assistance unless you are doing this full-time," forecasts Buchsbaum.

Getting clients

To get customers, Buchsbaum plans to start with his sphere of influence - former investment clients. "I am used to talking to people about money, and I'm computer literate," says Buchsbaum. "E-mail is second nature to me, and to my clients. I built my financial planning business by emphasizing education, and I plan to take the same approach in real estate that knowledge is empowerment."

One thing the see-sawing stock market has taught him is that capitalism has no heart. "If you overpay whether it is for a stock or a home, you will get hurt," says Buchsbaum. "I want to teach my clients to look at a house as part of a financial plan. Real estate should be a percentage of your asset allocation."

He plans to advise clients of four key considerations when buying real estate:

1. Be careful of buying too much house and taking second mortgages. "Buyers should be careful of leverage because real estate is borrowed money," instructs Buchsbaum. "We are in a more volatile economic environment, and you have to plan for the downside as well as upside. There is a big difference in a mortgage for $1,500 and one for $3,000.
2. Consider job security, including job mobility when buying a home. "We might be in recession and the job security you think you have might not be there. That's why mobility is important. Are you living in an area where if one or both of you can get a job if one of you loses a job for some reason?
3. Use the tax code to your advantage. "You can sell your home in two years and not pay capital gains in most cases. Where else can you get that kind of tax break?"
4. If you are single or divorced, look to become a first-time homebuyer. The tax code doesn't favor renting, so if you buy, chances are it won't be in the neighborhood of your dreams on one income, but if real estate continues to go up 6 percent a year, in a decade you'll double your money.

He also sees opportunity in getting his clients to invest in second homes. Up to 13 percent of all home sales are for second homes, notes Buchsbaum.

But his greatest opportunities will be on the Net, says Buchsbaum. "The Net is the great equalizer. The MLS monopoly on information is dead, and there are a lot of companies that post houses for sale on the Web now. It may not be accurate but it gives consumers a ball park figure. That is one thing is that I don't want to do to my clients is get them to overreach. If they can afford 150,000, don't put them in a 200,000 house because people don't plan and they don't plan for disaster. I'm going to teach them, "You are a balance sheet. Start collecting assets and minimize your liabilities."

"I may be new to the field, but I understand very well that if you overreach yourself, you are history."

Published: March 6, 2001

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