Investing in real estate is not much different than investing in stock or bond markets.

You want to buy at the cheapest price, keep your yearly costs as low as possible, and hold for long periods of time (beyond 10 years). Do not listen to people who feed your greed. Avoid the sales pitch that tells you how you can get rich with no money down. As we have stated multiple times, avoid speculating. Learn more about home ownership here: http://jlcollinsnh.com/2013/05/29/why-your-house-is-a-terrible-investment/

A personal home is a poor investment at best and a nightmare at worst. 

Far too many people focus on their return on investment before costs. That is a mistake. When you factor in actual costs (interest on your loan, property taxes, insurance, maintenance, upgrades, etc.), those costs can easily add up to 10% per year based on the value of the home ($200,000 home would cost you approximately $20,000 per year). Let’s see what this expert has to say on the subject:

“A home is not a good financial investment and never was. But a home can certainly be a fine investment for your family’s happiness… ” Charles Ellis, Winning the Loser’s Game

Do not let the appreciation and tax benefits cloud your judgment on buying a personal home.

Once you honestly address the costs incurred with home ownership, you must accept the reality that it is a consumption item that will cost you money over time, not make you money. Buy a home to live in and raise a family, not as an investment. Invest your money elsewhere in index funds and publicly held REITS. Learn more here: https://www.youtube.com/watch?v=YL10H_EcB-E  and here:  https://www.youtube.com/watch?v=QA2TBiIsdT0

Do not let the tax deduction drive you to buy a home. 

The tax deduction on a personal home is exaggerated, especially for low to moderate income folks who buy a small to medium size home. The standard deduction for a couple filing jointly in 2015 is $12,600 ($6,300 for a single person). You will get this whether you rent or buy. The only tax benefit you receive is what itemized deductions (interest on the loan and property taxes) fall above that amount and even then, you only receive a portion of that back based on your marginal federal and state tax rate. Do not buy a home because of the tax deduction!

When investing in real estate, focus your efforts on income producing, publicly traded assets. 

This would include single family homes that bring in rent and commercial property (REITS) that produce dividends. Steer clear of private REITS (brokers sell these and then lock up your money) and any properties that provide negative cash flow (your monthly/yearly costs exceed your monthly/yearly income). When considering REITS, take a good look at the Vanguard REIT index fund here: https://personal.vanguard.com/us/funds/snapshot?FundId=5123&FundIntExt=INT. Yearly costs for admiral shares are .12%.

You can expect something around 10% per year in returns on real estate investments (includes the tax benefits).

Is this an exact number? No. Location, initial costs, and current environment conditions will play important roles in your actual return before costs. That 10% includes appreciation and rental income (rental property) or dividend income (REITs). That 10% total return sounds good, but remember, it’s what you end up with after costs that matters.

Will you fix the problems that occur on your property or will you pay someone else to do it? Will you manage them or will you pay someone to do it? These are important questions that you must answer before buying real estate. Your yearly costs could come in at around 10% or so, which is similar to a personal home. Focus on reducing those costs below your yearly appreciation and rent or dividend income if you want to make money off your properties after costs.

Owning Real estate is challenging and not for everyone.

Before you buy any real estate, educate yourself fully on the matter. Do not jump in before running the numbers. Run the numbers here: http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html. This will cause some people to avoid buying real estate. That is perfectly okay and for many, it would be the right decision. The mantra does not change: Become the wise and efficient investor as you account for all upfront, ongoing, and closing costs (to include taxes) along the way.