Real estate is often peddled as a get-rich-quick investment—and that lures some people in, and it turns some others off.

The truth about real estate is that, like stocks and bonds, it can be a solid investment as long as you do your research and have clear expectations. I've owned residential and commercial rental properties for years, and I've sold properties as well. I'm often asked for advice on the subject, including my thoughts on real estate's pros and cons.

Let's start with the pros. One attractive aspect of real estate investing is that it's leveragable: Banks will lend you money at good rates and high loan-to-value percentages against real estate. And that means you can get a lot of exposure with relatively little up-front cash.

You could finance $400,000 or a $500,000 property, for example. That's something you can't do with stocks: In the latter case, a lender might only allow you $150,000 on $100,000 of stocks.

The takeaway is that real estate's leverage nature dramatically increases its potential for both risk and reward as an investment. For example, a 10% return on that $500,000 property is $50,000 (minus borrowing costs). But if you have a negative return on your real estate investment, that's amplified by the leverage.

Investment real estate also involves two major tax advantages: the ability to deduct all expenses and to depreciate the asset. The result is that the taxable income winds up being lower than the actual income.

What about the cons? One drawback is real estate's illiquidity. You'll always be able to sell your shares of a blue-chip stock instantly. But many a real estate investor has been caught in a declining market, leveraged up to their eyeballs and unable to find a buyer for a property whose repair costs are adding up. Worse, your loan might be due; you're unable to refinance because your loan is underwater, and you can't find a buyer to take the property off your hands.

Owning rental real estate can be a large commitment of your time and energy. I don't buy a property unless I can gross more than 12% or 14%, and earn a net profit hopefully above 6% or 7%. Plan on doing a lot of the minor repairs yourself in order to keep expenses down and maximize your profit.

A few words of advice potential real-estate investors. First, always make sure to have an "out." For the reasons explained above, you want to be able to sell a property when necessary. So before buying, think about how to ensure there will likely be a market for your property. For example, I decided to buy a house in the Nashville area that is near high-rise condominiums with limited parking. In that case, I'm betting that the folks in those condos will eventually want to move up into a more comfortable situation that is nearby. They are some of the potential buyers for my property.

I'd also recommend that you make sure any house you buy to renovate and resell has plenty of easy "comps." It might sound enticing to fix up a big, old house and find an appreciative buyer. But in practice, it's often difficult to sell such a property, because there's little basis for determining a fair price. Better to buy a house that's surrounded by plenty of others that are similar to it.

It's also a good practice to seek out properties that seem likely to rise in value because of an outside, driving event or trend. Examples might be a home in a so-so area that is set to improve because the city or town is planning to invest in the area. When municipalities build sports and entertainment arenas, for instance, blighted property that's held down home prices is often removed in the process. Or maybe the neighborhood is heading into a good cycle, where homeowners are tearing down old houses and building new ones.

One final point about real estate: Don't put all your eggs in this basket. Smart investors diversify across different asset classes in order to hedge the risk of any one of them crashing. And remember that real estate, because of the loan leverage, is a high-stakes game. It can make or break you, and takes a lot of patience.

Please don't hesitate to get in touch if you'd like to discuss real estate or other types of investments.