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Investing in real estate has plenty of benefits. A steady flow of extra income, relatively low volatility and the appreciation in the value of properties are factors that make real estate a good investment.

But, there are also some downsides. Real estate can be a poor investment if buyers lack the time, experience or capital to get started. Plus, investors can’t buy and sell a property as easily as other financial assets, such as stocks.

What Is Real Estate Investing?

Real estate investing is when an investor purchases a property with the intent of making a return. Real estate investors can take either a passive or active approach. 

Passive real estate investing is when an investor chooses to be a landlord, using the property as a rental unit. Active real estate investing, on the other hand, refers to “home-flipping” where the investor aims to buy and sell quickly for a gain in periods of high economic demand.


In both cases, it can be profitable. The two ways of earning money from real estate are through:

  1. Income from rental agreements
  2. Return on invested capital through price appreciation

Common real estate investment transactions are for residential properties, commercial properties and condominiums. Wealthy real estate investors will sometimes purchase several units located together all at once.