To understand what real estate investing is, we must first understand what real estate is: Real estate has been defined as land (or immovable property) along with anything permanently affixed to the land such as buildings.

As such, real estate investing then can be defined as the act of using money to purchase real estate for the sole purpose of holding or leasing it for income.

The Benefits

1. Leverage -- In contrast to stock investments, which usually require ample equity from the investor, it is possible to borrow against a rental property and thereby leverage it heavily. That is, with a real estate investment, you can use other people's money to magnify your rate of return and control a much larger investment otherwise not possible.

2. Tax Shelter -- Real estate investing provides tax benefits such as depreciation that the investor can use to reduce annual or income taxes.

3. Cash Flow - Rental property can produce a steady stream of cash flows. This is the amount of revenue from rents and other income less operating expenses and debt service (loan payment), and is in fact, what real estate investing is all about.

4. Appreciation - Real estate has not been labeled "the best hedge against inflation" for good reason: Real estate appreciates over time. Even in our current economy, where real estate values have fallen, the fault can be attributed more to the abuse of the concept rather than as a contradiction to it.

5. Non-Monetary Returns - Making an investment in real estate also provides benefits that can't easily be measured in dollars and cents such as pride of ownership, the security that you control ownership, and portfolio diversification which.

The Downside

Real estate investing does require capital, there are risks, and rental property can be management-intensive. But bear in mind that the car you drive required capital, it involves some risk, and it certainly requires management. The difference is that a car is not a source of wealth. Enough said.

Okay, let's conclude this way: Real estate investing is the business involving the acquisition of real estate for the purpose of generating income, making a profit, and acquiring wealth. It is not without risk, yet when done correctly, provides numerous benefits.