Investing in real estate has it's place. But only within a certain framework.

What most people think when it comes to investing in real estate is flipping houses. Buying rentals and instant riches.

Some people do in fact make money owning rentals and flipping properties but instant it is not.
It's a long-term wealth building method like any other. Except the risks can be much higher.
Theres no long-term investment of any sort that can't lose money.
I suppose my bias is coming through again.
But theres a reason. And it's a good one.
Making significant money in real estate IS HARD!

Lets put the most important part up front.
In an online video a few years ago financial guru Clark Howard addressed a realistic view of real estate as an investment.
He (Howard) cites a fifty-year analysis conducted by Borrows about Stocks VS real estate as investments over that five decade span.
Stocks win and by a wide margin.
All stocks combined went up, over those fifty years an average of 12%.
Real estate in the exact same span? 5.5%.
Don't get it wrong there are indeed opportunities but for most of us they are sporadic at best.
There are indeed times when real estate is a wise financial move.
We'll talk about these specific opportunities in a bit but first you better be fully aware of all the negatives involved.

Real estate simply doesn't offer you the long term results stocks do.
Stocks have averaged more than twice the return over the last fifty years.
Theres no reason to believe that will change anytime soon. If ever.

Real estate is not liquid. 
At all. 
Stocks, Including those held in Index funds are liquid.
Should an emergency arise where you temporarily need a large sum of cash you had better have a significant amount in your emergency fund if your tied up in real estate.
You can't just sell a property over the weekend if you're experiencing an emergency.
But stocks?
 If an emergency arises you can go online and generally have the money wired to your bank within 24hrs.

Being a landlord can be a headache.
That's putting it more than just a little mildly.
You have to fix anything that requires fixing and it's always coming out of your pocket.
And multiple issues will always happen all at the same time.
Sometimes tenants won't pay. 
Sometimes they will but are habitually late.
Sometimes you'll be able to work out matters to everyone's satisfaction. 
Sometimes you have to go to court.

Here BCS will give you the best piece of free advice you will ever will get if you do become a landlord.
Get a good property manager.
 And an experienced one at that.
You can expect to pay 10% for an experienced reputable manager.
In truth expect to save more than that.
 This is solid gold BCS advice here. 
And talking from personal experience.

Flipping Houses:
Flipping houses has been all the rage for twenty years now. It shows.
It's not like it is on TV. Not anymore.

As of this writing its amongst the most challenging times to enter the flippers market. 
And why is that?
More competition every day.
 Never less.
 Generally rising prices AND a slowing of home sales. Higher interest rates. 
The rising cost in fixing up the homes for re-sell. 
Also theres just more of a general unwillingness on the part of homeowners to undersell as oppressed to spending the money to fix their homes up.
Creating yet more competition for skilled labor. Worse still, the inexperienced or especially unlucky investor may, if enough things go sideways find themselves hundreds of thousands in debt.
So do you feel lucky?

Your much more reliant on the actions of others in real estate investing.
You need realtors who will help you when you need help.
 You better be ready for calls from other realtors (not just yours) with the deal of a lifetime.  Your tenants need to pay. Your property manager decides to start acting independent of your wishes because they felt it is "in your interest" to do so.
Can you trust this person to make good decisions on your part.
Sometimes you have to go to court and no matter how in the right you are things might still not go your way, If you do have to hire someone to repair something will they be there for you? Might they even rip you off? 
Your always and never in real estate alone.

You can't "buy the dips" in real estate.
If the stock marker does go down it's nothing less than an opportunity to go online with your brokerage and purchase more shares of stocks, and at a lower price.
Real estate is its special set of circumstances when things temporarily drip downward.
For one, when things go south it's exactly the WORSE TIME to sell.
 Your tenants will decide to test you for discount on future rental agreements. 
They (the tenants) have every right to use bad news for you as a possible advantage for them.
Another rarely discussed but vital matter. 

When real estate markets go through moments of upheaval banks have a habit of calling in loans earlier rather than anticipated.
 It happens for a variety of reasons and more often than you might think.
Of course when real estate does go down theres the chance to buy another marked-down property. Of course its one thing to buy more stocks when the price is lower but it's a completely different matter buying physical property with all the expenses that come with it when things aren't looking well. 
And more often than not thats going to be the same time opportunities arise.

Despite all this theres circumstances where real estate, whether as a flip or as a potential rental can make a lot of sense.
For instance, if become aware of a potential property that hasn't hit the market yet it could be an opportunity to purchase the property at a predetermined price.
You could even negotiate a steep discount.

Don't forget the number one rule of buying a flip.
You make money on the buy not the sell.
These opportunities don't come up very often and even when they do many aren't worth considering.
Of course, they don't have to happen very often to make it more than worth your while.
Remember. 
A flip that doesn't sell is becomes a rental.

Here's a safer and much more realistic example.
Pay off your current mortgage and when you move to your newer house and rent out your old home.

Theres several reasons that make this the best path into real estate investing.
Its a paid off property so in the case of tenants who don't pay your not stuck with two mortgages.
Your property manager (again get a good one) will deal with tenant issues. Since your familiar with the property you know what's likely and unlikely to need attention.
There should be a much lower chance of unwelcome surprises.
It's much less intimidating than buying a property you have no experience with and aren't sure what to expect.
The above method serves as the safest and least threatening avenue to gain some experience dipping your toes into real estate investing.
Nothing else in real estate investing comes as safely as mortgage free rental.
This may be somewhat controversial for some but to my way of thinking it's an absolute never break for any reason rule.

And the rule?
Never under any reason ever buy a real estate investment unless your BUYING IT OUTRIGHT. 
That means absolutely NO MORTGAGE.
 PERIOD.
It's a Dave Ramsey rule and it's a BCS rule. It's not an occasional or situational rule.
Its an absolute you don't break this ever it doesn't matter how great a deal is rule.
And it's a never break rule for at least two good reasons.

First:
You never want to risk the possibility of carrying two mortgages.
 Ever.

Second: 
Consider it a test of sorts.
Honestly if your not disciplined enough to make sure your rental or that flip isn't a just another mortgage your likely not disciplined enough to juggle real estate investing as a whole anyway.
Not to mention the interest on your loan makes your razor thin margin that much thinner.

Any real estate investment you make, a flip, a rental or anything else MUST BE mortgage free.
The one upside to this is an all cash offer is so much more appealing to the seller your likely going to pay less of a result anyway. 
Sometimes much less!

Some people just like real estate. That doesn't mean these some people will ever make money at it.
Some will make a good deal of money. 
Some will make some money. 
A few will lose money, perhaps a considerable amount.

What all this means is this.
Far too often we start feeling stuck in a rut when it comes to our personal wealth building process.
It's taking too long and the sacrifices are too great.
If this sounds like you its time to re-examine your finances and your progress it's making.
It's up to you to find the basis for this thinking. Maybe it is time to lighten up.
That shouldn't make investing in real estate more appealing.
It shouldn't. But sometimes it feels like a get rich faster than it's going now.
But rarely does this turn out to be the case.

For the vast majority of us it's stock funds, most notable index funds that serve us best over the long term.
Don't forget to buy the dips.