I spend a lot of time thinking about how to apply my financial background (18 years as an independent financial advisor) to the choices we all must make about real estate.

I'm talking about choices like renting vs owning, investing in real estate, upsizing, downsizing, reverse mortgages (these are one of the most overlooked and misunderstood financial tools out there), refinancing, owning a 2nd home, etc.

I regularly offer continuing education courses to real estate agents about finance and real estate, and when it comes to investing in real estate, an odd thing surfaces quite often that I think is worth elaborating on.

I'm convinced that real estate investing provides better returns, on average, than other common investment options. It's hard to come to any other conclusion when you account for all the different ways in which it is accretive to personal wealth, such as appreciation, income, leverage (when used), and tax benefits.

When you quantify that and calculate the returns (not exactly easy to do), they are usually pretty impressive.

The odd thing that happens when I share this topic with real estate agents is that it's tempting to interpret what I'm saying as "investing in real estate is BETTER than investing in other things", and this is an oversimplification of what I’m getting at.

Real estate investing isn't for everyone. And it is not proper to compare it to investing in mutual funds or ETF's or the like.

Here's the thing, investing in real estate is more like purchasing a franchise. It's like owning a small business. It's not passive. You could hire a property manager to help, but it's like hiring a manager for your small business - it does help simplify and scale, but it doesn't mean you can turn your back.

On the other hand, while owning a traditional portfolio (I'm generally a fan of the low fee index-style models) is passive, you also have no control over how those businesses are run. The only control you have is whether to own it or not.

Although real estate isn't passive, in return you have more control (and responsibility), which isn't what everyone is after. But if you're willing to learn the ropes, it's incredibly rewarding.