Want to Invest in Real Estate?

Tired of the stock market? Now may be the time to invest in real estate. But financial experts caution against pulling out of stocks and investing lock, stock and barrel in real estate. It's no way to make a quick buck. But real estate can help you diversify your finances.

Rental property represents a totally different kind of investment. It's easy to buy or liquidate stocks with a quick call. But selling or purchasing a home can take months. And it can be expensive. The most viable rental home has three to four bedrooms and two baths. Such homes typically sell for $150,000 and up in the major metropolitan areas.

Experts say to invest for the long-term, with the idea that you'll own for 20 years or more. If you want liquid assets, maintain stocks and bonds. But the cash flow, appreciation, and tax benefits of rental property can be substantial, so long as your rent is sufficient to cover the mortgage and provide additional cash flow. That's quite possible with interest rates staying reasonable. The other advantage is you get to control the asset, more so than a mutual fund. Purchasing the right home in the right neighborhood could yield substantial returns over your initial investment.

How do you identify the best single family rental home? Follow these ten basic principles.

1 - Choose a community that promises future growth.

2 - Choose a home in a moderate price range.

3 - Invest enough money up front to achieve positive cash flow.

4 - Never purchase property on a busy street.

5 - Get an independent home inspection, roof inspection and termite inspection.

6 - Buy a standard tract home or moderately customized home on a standard lot.

7 - Research the community to assess its overall economic future.

8 - Choose a three to four bedroom home.

9 - Pick a home with a garage, that's a true garage, not a converted one.

10 - Avoid handyman specials or anything that requires more than cosmetic repairs.

Sources used to create this article include the Sacramento Bee and Al Durst of AND Real Estate Services.