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Perhaps the most fundamental of ownership investments, real estate has made many people wealthy. Not only does real estate produce consistently good rates of return (averaging around 8 to 9 percent per year) over long investment periods, but you can also purchase it with borrowed money. This leverage helps enhance your rate of return when real estate prices are rising.

As with other ownership investments, the value of real estate depends on the health and performance of the economy, as well as on the specifics of the property that you own:

 If the local economy grows and more jobs are being produced at higher wages, real estate should do well.

 If companies in the community are laying off people and excess housing is sitting vacant because of previous overbuilding, rents and property values are likely to fall.

For investors who have time, patience, and capital, real estate can make sense as part of an investment portfolio — check out Real Estate Investing For Dummies (Wiley), which I coauthored with Robert Griswold. If you don’t want the headaches that come with purchasing and maintaining a real estate property, you can buy mutual funds and exchange-traded funds that invest in real estate properties and related companies (see Chapter 14).