Second Homes 

Condominiums and second homes have held their value as a real estate investment despite economic downturns and problems with some associations.  In fact, condos have appreciated more in the past few years than when they first came on the scene in the late 1970s and early 1980s, experts say.

While there are lots of reports about homeowners association disputes and construction-defect problems, the industry has worked hard to turn its image around.  Elected volunteers who serve on association boards are better trained at handling complex budget and legal issues, for example, while many boards go to great lengths to avoid the kind of protracted and expensive litigation that has hurt resale value in the past.

Meanwhile, changing demographics are making condominiums more attractive real estate investments for single home buyers, empty nesters and first-time buyers in expensive markets.          

You can buy a vacation home today for real estate investment purposes as well as for enjoyment. And yes, there are tax benefits.

Some people buy a vacation home to use as a permanent retirement home later, which allows them to get ahead on their payments.  Another benefit is that the interest and property taxes on a vacation home are tax-deductible.

Some real estate experts predict that real estate investment homes will appreciate in value due to rising demand from the aging Baby Boomer generation.  You also can depreciate the investment property if you live in the house fewer than 14 days a year, or 10 percent of the number of rented days - whichever is greater.

You also need to consider whether you can afford to carry two mortgages, pay for the extra utilities and maintenance costs, and how this real estate investment fits into your total personal finance picture.