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Real Estate Mailbag

By Robert J. Bruss
Saturday, March 12, 2005; Page F17

Q DEAR BOB: I am enrolled in a real estate fundamentals class and intend to take the sales license exam next month. My primary desire is to become a real estate investor. Do you think I should obtain a real estate sales license? -- Siri B.

ADEAR SIRI: No. The only reason to obtain a real estate sales license is if you want to earn sales commissions for representing realty sellers and buyers as a full-time sales agent.

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If you want to become a real estate investor and you think having a sales license will save you part of the sales commission, that is incorrect. The reality is that listing agents who control bargain-priced listings will be reluctant to deal with you. You will be the last person they call when they have an investment property bargain.

As a licensed real estate broker for 38 years, I have rarely used my licensed status to claim part of the sales commission. I make this fact clear to listing agents, who know when they tell me about a great investment property I won't ask for part of the sales commission.

The only time I bought investment properties and asked for all or part of the sales commission occurred when buying foreclosure properties from the lenders. They are usually so happy to get rid of a distress property they are glad to pay me part of the commission, which I always took in the form of a reduced purchase price.

DEAR BOB: My brother and I own a rental house. Can we elect not to take the allowed depreciation on our income tax returns to avoid the 25 percent recapture tax when we eventually sell? -- Floyd D.

DEAR FLOYD: No. If you don't claim allowable depreciation on your rental house, when you eventually sell that rental house the sale will be treated as if you had claimed the depreciation deduction. If the depreciation deduction doesn't save you any income tax dollars, it is "suspended" for future use against the capital gain profit when you eventually sell. Consult a tax adviser for details.

DEAR BOB: I recently read a magazine article about interest-only mortgages. It concluded such home loans are a bad deal for homeowners who plan to stay in their residences for many years. Do you agree? -- John R.

DEAR JOHN: Not necessarily. The two big advantages of interest-only mortgages are low monthly payment and the payment is fully tax deductible as interest.

But the disadvantages of interest-only mortgages are no equity is built because the mortgage principal is not reduced each month and after a few years the borrower will incur higher payments when principal reduction must begin.

Interest-only mortgages vary from two to 10 years before principal payments begin. If you expect to stay in your home just a few years, an interest-only mortgage keeps your monthly payments as low as possible.

However, longer-term homeowners may want to consider a fully amortized home loan instead.

DEAR BOB: We are considering buying a house that is ideal for our family of one 2 year and a baby on the way. The price is affordable. But it has just one little drawback. It backs up to the playground of an elementary school. All that will separate us from hundreds of noisy kids is a chain-link fence. Our buyer's agent recommends against buying. However, because of the shortage of listings in the desirable community where we want to buy, this house is about all we can afford. Should we buy a house next to a school? -- Carl V.

DEAR CARL: Your e-mail brings back memories of a bargain-priced house I almost bought. It was adjacent to an elementary school. The seller accepted my purchase offer, but I couldn't find a mortgage lender willing to make a loan because the house was next to a school.

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