Money Fix: Pros and cons of real estate investments

In a recent Gallup Poll, Americans said real estate was the best option for long-term investments. But is it?

THE PROS. "Where else can you buy something that's worth $400,000, only use $80,000 of your own cash and pay off the balance over 30 years at 4.5 percent interest? I don't know any investment that can do that," says Steven Domber of Berkshire Hathaway HomeServices Hudson Valley Properties, a real estate brokerage in Poughkeepsie.

THE CONS. "Real estate creates millionaires, but also bankruptcies," warns Avani Ramnani, a certified financial planner with Francis Financial in Manhattan.

While the Standard & Poor's 500 index increased by 106 percent in the last five years, average housing values in the metro area are lower than they were in May 2009, says Robert Campbell, associate professor of real estate finance at Hofstra University.

Unlike stocks, property takes time to sell -- and what if you must sell during a price slump?

FORGET FIXER-UPPERS. Forget fixer-uppers unless you're a contractor. Realize that beyond the mortgage, there are monthly expenses, like high insurance rates, fees for a property manager, maintenance, property taxes, and tenants to deal with, reminds Pej Barlavi, CEO of Barlavi Realty in Manhattan.

Real estate shouldn't be your "ticket" to retirement. "It's akin to taking a concentrated position in one stock," says Elle Kaplan, CEO of Lexion Capital Management in Manhattan.

A BETTER IDEA. Invest indirectly. Says Campbell, "Purchase shares in an apartment real estate investment trust, or in real estate management companies."