Real estate as an investment is actually a broad subject. The phrase 'investing' means to allocate capital in hopes of a future return. Allocating capital to real estate can bring a decent return to investors in numerous ways. Here are a few examples.

Vacation Rental

Purchasing a home for vacation rental purposes has benefits and drawbacks. Here's a quick list:

Pros

• Substantially more income per night than a long-term rental
• Take advantage of 14-day rule
• Home can be used on non-rented nights
• Easy to stop rental status and change to primary residence or sell

Cons

• Maintenance
• Lack of steady income
• Seasonal income
• Risk of theft or vandalism
• Must be located in an area known to draw vacationers

Vacation rentals are flexible options for income. Homeowners can take advantage of the 14-day tax rule. Income from the first 14 rental days each year can be collected tax-free.

Long-Term Rental

A long-term rental provides a steady income for the homeowner. Often the lease requires a deposit to cover any damages done by the tenant. And it is possible to cover the cost of the mortgage with income from the tenant.

Tax Benefits

Real estate can pay not only by bringing in income, but by creating wealth through equity gains and by reducing the owners tax burden. Numerous tax benefits such as the mortgage interest deduction, 14-day rule, 1031 exchange and credits for energy efficiency increase the attractiveness of home ownership.

For more information on real estate investing visit www.realestatejournal.com or www.bankrate.com.