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One retirement and investment strategy pursued by many people these days is real estate. With the meteoric rise in property values experienced by much of the U.S. in the last few years, it's easy to see why. Even now, as many areas of the country have experienced a little cooling or outright decline in the real estate market, building your retirement and investing using real estate remains a hot topic among investors and home owners alike.

There a several real estate strategies one can use to be driving, rather than walking, during their retirement years. There are, as with any form of investing, pros and cons to all of them. Weather you're driving the same car you've had for years, or can afford to be hitting the country club in that new E350 turbo diesel, is up to how well you execute one, or all of these strategies. Here are some of those investing strategies and how they stack up.

1- Buy and hold – As with equities, you can simply buy property and hold it as it appreciates. If you've chosen wisely you can be very successful using this strategy. One of the key determinants of your success here is, as they're fond of saying in the real estate industry, location, location, location. Choose a property in an area that ends up experiencing rapid growth and development, and you'll do quite well. Pick some properties in an area that's stagnant for years, and chances are your investment will be also.

You can hedge against this, and substantially boost your chances of success, by buying revenue producing property and using the monies generated to offset any expenses. If you've done well, you can generate enough revenue to have positive cash flow. If you've achieved that, you can continue to amass additional properties and repeat the process.

The pros to the buy and hold strategy are:

1. Large potential upside – There is real potential for properties to experience substantial appreciation.

2. Fairly low risk – If you hold on to the property long enough, there is almost no chance you'll not make money in the long term, if you did your due diligence when you were selecting your property/ies.

The cons to the buy and hold approach are:

1. Low liquidity – With most real estate you can't just sell it overnight. If you need money, it's not just like logging on to your brokerage account and selling some stock.

2. Potential for unforeseen problems - There is a chance that future legislation, building code issues, or other events will have a negative impact on the value of the property.

3. Management issues – If you choose tenant occupied properties, you have to incur management expenses, either by hiring a property management firm or managing the property yourself. It's not fun to deal with problem tenants or get out of bed at 2:00am to respond to a tenant emergency.
   

2- Flipping properties – As an alternative to the buy and hold strategy, you can do what's termed 'flipping' properties. This is a strategy of buying a property below market value, or at market value in a quickly appreciating market, and quickly reselling the property for a profit. Some investors purchase properties that are in need of some improvement and gain what's termed 'sweat equity' by making the necessary improvements to increase the value of the property. If you can make the improvements yourself, or you own a contracting company, you can make a profit on the improvements when you sell.

The pros to the property flipping strategy are:

1. No property management issues – Since you aren't renting out the property, you'll have no management problems to worry about. Some people really don't find the whole climbing out of bed at 2:00am thing very attractive, and choose to avoid it altogether.

2. Potential for quick profit -. You can get a fairly good return on your investment if you've chosen your property, and your market well.

The cons to the property flipping approach to investing are:

1. Higher risk – Since you're not intending on holding on to the property for a length of time, you can be badly stung if the market takes a temporary turn for the worse. Just ask those South Beach condo flippers what that feels like.

2. Potential necessity for property improvements - You may have to do substantial work on the property to make it pay. Unless you're comfortable doing this yourself or contracting it out, it may be the wrong choice for you. Keep in mind that many remodel projects can turn sour when unforeseen problems develop. Even the best contractors can't predict everything that will arise during a remodel project.

3 - Real Estate Investment Trusts – Similar to a mutual fund, these are publicly traded corporations that invest in real estate. At least 75% of the holdings must, by law, be in real estate. These are fairly new, and are available in several countries in addition to the U.S. You simply buy shares in the company on an exchange as with any other stock. In the U.S., according to federal law, REITs must distribute 90% of their income back to shareholders every year in the form of dividends. There are substantial regulatory hurdles a REIT must go through in order to enjoy the tax exempt (REITs pay no federal corporate income taxes) status which REITs are afforded. For those of you in the UK, you'll be able to jump in to the whole REIT thing beginning January 1, 2007.

The pros to investing in a REIT:

1. High liquidity – You can just call your broker, or log into your online brokerage account to buy or sell.

2. No management issues – You're not on the hook for any property management problems, you're simply a shareholder.

3. Substantial dividend income – Because REITs are required by law to distribut income in the form of dividends, you're assured that, if the company is profitable, you'll get a dividend check.

4. Low Volatility. REITS are generally not as volatile as stocks.
   

The cons to REIT investing are:

1. Performance - They can easily under perform the stock market in general. REITs have a history of not performing as well as the stock market. Most REITs have a Moody's grade of 'Low Investment'.

2. Higher dividend tax rate - The tax rate on most REIT dividends does not qualify for the new, low 15% federal tax rate on dividends, as do other dividends. This is due to the other tax advantages enjoyed by REITs.
   

With most forms of real estate investing, as with other investments, you must really do your homework in order to achieve the best results. The main things to watch out for, no matter what type of real estate you're buying are overpaying for the property, legislative and legal issues, and jumping in too fast if you're a beginner. Good Luck.