You’ve probably heard your parents or grandparents say, “real estate is your best investment.” For many years, real estate has been considered a path to building generational wealth. But is real estate still a good investment? According to experts, the answer is “yes.” While times have certainly changed, and the current economic climate is uncertain, the benefits of investing in real estate remain numerous. Of course, it’s not a “get rich quick” scheme and it does come with some risks. This can be an especially complex decision for first-time buyers. Let’s take a closer look.

Potential Benefits (and Risks) of Investing in Real Estate

Whether you’re buying a home to live in or as a rental property, the success of your investment depends on many factors, including where you buy, how much you invest, the current market, the condition of the property, and your own financial situation. With the right strategy, investing in real estate can offer:

• Cash flow: Owning a rental property can generate a consistent monthly income after expenses like mortgage and maintenance are covered.
• Appreciation: From 1967 to 2024, the average annual home appreciation in the U.S. has been 27%. Of course, this is just an average: some areas and homes have risen in value much more, while others have seen less appreciation. Again, there are many factors that impact home values. Lately, home prices have risen a bit more slowly. According to data from April 2025, the U.S. housing market saw a median home price of $437,864, which reflects a price increase of 1.3%. However, home prices have increased by more than 1,600% since 1950, demonstrating a strong historic upward trend.
• Reliability against inflation: Over the years, real estate has proven to be a reliable hedge again inflation, beating it by a small margin each year.
• Equity: Homeowners build equity over time as they pay down their mortgage and the property increases in value. This equity can be used to purchase a more valuable piece of real estate or used to finance other things.
• Tax advantages: Homeownership offers some tax deductions on mortgage interest and property taxes.

Of course, there are some potential risks or downsides to real estate as an investment, including:

• High costs: Purchasing real estate requires a down payment, which can be significant, as well as expenses for maintenance, repairs, possible improvements, and property taxes. If you’re renting a house, you may also need to hire a property manager.
• Time and attention: Whether living in a home or renting a house, owning property requires a significant time commitment. Maintaining a home or flipping a house requires a “hands-on” approach.
• Lack of liquidity: Real estate is not as easily converted into cash as other investments like stocks. In fact, the process can take months.

Tips for First Time Real Estate Investors

While investing in real estate is still a proven way to build long-term wealth, it requires research and planning. Real estate and financial experts agree that the following strategies will increase your success:

• Buy and hold: Real estate typically does not appreciate quickly. A good strategy for beginners is to purchase a property in a stable market and be prepared to keep it for at least 3-5 years, whether you are living in the house or renting it out. It takes time to build equity.
• Fix and flip: Savvy first-time investors who do their homework can often find an underpriced property that needs some “love.” If you’re willing to put in the time and money to fix it up, you can often make a profit. This requires a solid understanding of the local market and what renovations will cost!
• House hacking: This involves buying a multi-unit property (up to four units) and living in one unit while renting out the others. The rental income can cover a large portion of your mortgage, and you can often get a loan with a lower down payment.
• Research, research, research: To minimize risk, and improve your chances of making a good investment, you must take the time to analyze the local market, consider the financials, conduct inspections and appraisals, perform a title search, and get advice from experts. It can be very helpful to read books and blogs from experienced real estate investors and talk to others who have been successful.
• Build a team: Investing in real estate requires a team approach. You’d be wise to work with an experienced real estate agent who knows the local market and has some knowledge about investment properties. They can also help you with negotiations. If you’re buying a fixer-upper, you may want to consult with a general contractor who can give you an accurate estimate of renovation costs and could help manage the work. It’s also advisable to hire a real estate attorney who can assist with legal documents, tax planning, and liability issues.

Investing in real estate is still a great way to build long-term wealth, but it does require a long-term commitment, planning, and a sound strategy. If you’re considering becoming a real estate investor, take a look at this guide from Harvard University for more information. And of course, take the time to talk to a trusted real estate agent who can provide the guidance you need to make a good investment.