If you are a younger person who wants to get ahead financially, things might look pretty gloomy. The stock market is scary, and lots of uncertainty exists in the national and Alaska economy. But you can still start to build a substantial nest egg with small investment properties.

Real estate has advantages over other investments. First, you are dealing in real property, not just pieces of paper. While the market might go down, the property is not going to go away. Real estate appreciates with inflation. You can finance the purchase, which provides leverage. And the tenant pays for it. Unlike a bond investment where you get your principal and interest back, in real estate you get the property too.

The disadvantage is that real estate requires management and is illiquid, or much harder to sell than a stock or bond. So for a small property, you have to accept management responsibilities as part of the price of getting ahead. You also have to plan your finances, because you cannot quickly turn the property into cash.

Investing when you're young gives you the advantage of time that older people don't have. Time gives your investment more time to grow and recover from mistakes. Time also allows you opportunities to take advantage of market cycles.

I know investors who bought properties in the boom days of the 1980s and held on through the bust of the late '80s and subsequent market recovery. They kept the property rented, paid off the mortgage and now the property is a big part of their retirement income. These investments worked because they started young and had time.

There is an old expression: "Buy your straw hats in winter." Straw hats went out of fashion a long time ago, but the sentiment is as true as ever. Buy when no one else wants to.

Real estate goes through cycles from tight markets with limited supply, higher lease rates and higher prices to softer markets with more abundant supply and lower rates and prices. The tight market condition fosters development that increases supply, which invariable leads to oversupply and a soft market. Over time as the underlying economy grows, the oversupply is absorbed and the market tightens with higher prices and lease rates. This cycle takes about seven to 10 years.

We have recently been through a major real estate bubble and bust nationally. Prices rose well beyond reality and have now come back down. In Anchorage and Alaska we can thank local lenders for not making subprime mortgages. We learned our lesson with our bust of the '80s and knew better, so avoided the worst of the most recent bubble and subsequent bust.

While not a bust like in the Lower 48, our market is off some. With the market off and interest rates low, now is a good time to get started with a small real estate investment. I recommend you look at a single-family house or, at most, not more than a four-unit apartment building. Plan on holding it at least 10 years. You might sell and reinvest sooner, but taking a long-term perspective is more prudent.

Put down enough cash up front to give you a margin of safety if rental rates fall or a vacancy lasts longer than you expect. Do not take equity from your home to get the down payment. Your home is your primary real estate investment; keep it separate from all others. If you don't have the cash today, save and buy when you do have the money. Saving is a good habit to develop anyway.

You might team up with others in a small investment group and pool your resources. Be sure you have a good partnership agreement and be careful with whom you partner. You want business partners; being friends is not a qualification.

The property does not have to be the greatest deal that ever came along. It just has to be OK: a good building in a decent neighborhood where most anyone would like to live. The price you pay has to be supported by market rents.

Use a broker who is a specialist in the small investment market and not just someone you know who is an agent. The broker should know the market rent, available financing, and properties and neighborhoods that are in highest demand for rent.

Do your homework and study the market. Look at houses for rent and read the for-rent ads. It won't take you long to understand the market. Be conservative and avoid unnecessary risk. And act. At some point you have to quit looking and make the leap.

This is not a get-rich-quick program. But over time with prudent investing, which is really just common sense, and the willingness to do the extra work required, your small real estate investment can pay off in a big way down the road.