Real estate investing encompasses literally thousands of different types of deals, each with their own unique structures. It's therefore very difficult to generalize about the business, as investors enter the field with an infinite number of goals and strategies. But one thing is clear: with a bit of research, some ingenuity, and common sense, it's fairly easy to make money in real estate.

For decades, the stock market was the first place investors turned to make the most of their dollars. Putting money into individual stocks was believed to be the smartest move. As long as the trend toward long-term growth continued, one could expect a fairly steady and reliable appreciation as well as own a piece of corporate America. So what happened?

The Rise of Real Estate Investing

In the late '80s and early '90s, many stocks became overvalued, partly because so many ordinary investors had leapt aboard. Suddenly, individuals seeking to maximize their profits had to turn elsewhere to get the rates of return the stock market once promised. Real estate investing enjoyed a sudden boom, thanks to a huge influx of capital from average Joes looking to stretch their investment dollars even more.

So just why is real estate investing such an attractive option? There are lots of reasons, ranging from the tangibility of the asset itself to the tax benefits it provides. But one of the biggest appeals of real estate investing is that it offers long-term appreciation along with protection. From tax-deductible interest payments to short-term depreciation, real estate offers perks that shield owners from heavy tax burdens and even help transform losses into gains.

More Benefits of Investing in Real Estate

Financial gurus often talk about good debt and bad debt. To the novice investor, all debt sounds bad, for it implies a sense of deficiency or delinquency. But holding a "note" or mortgage is considered a form of good debt since ultimately you're working toward ownership of an asset. This is done by building equity, the difference between the real value of a piece of land and the amount of the note.

One of the great draws of real estate investing is that you can let other people pay your debts for you. Whether you're investing in single-family homes, condos, apartment buildings, or even businesses, your tenants or lessees are your biggest allies in "amortizing" your debt, or paying off the principal loan. For this reason, you must maintain a positive working relationship with your tenants, or at least hire someone to do this for you. Thus, real estate investing does not take place in a bubble; it requires strong interpersonal skills and management ability in the real world.

Make Money with Real Estate Investing

Real estate investors enjoy dozens of strategies for making money, from the "flip," in which a property is bought only to be re-sold at a higher price, to the self-explanatory "buy-and-hold" technique. That said, there's no single formula that's a proven winner for everyone. Some people have 60-80 hours a week to pump into real estate, while others will find themselves with three or four precious hours each month.

There's an old adage in real estate that, barring any new seismic activity, they're not making more of it. As with any finite resource, real estate is seldom a "bad" investment, though things can go awry. There are ill-conceived business deals, natural disasters, and market volatility, just to name a few of the hazards with which you might contend. But in the long run, it's possible to see returns that the stock market, bonds, CDs, and mutual funds simply cannot match.