Although real estate has always been a key wealth driver for sophisticated investors, today, a broader range of investors can access the sector.

Many investors have a comfort level with real estate because it is easy to understand. They can touch it and feel it, and, "They're not making any more land," as the adage goes.

Despite distress in the real estate market, there are investment opportunities through private-equity funds and other real estate investments. The opportunities require investments of $250,000 to several million dollars.

Investors should consider several factors when evaluating a real estate investment:

• Experience. Firms that manage real estate investment funds should be experienced, and their portfolios should be diversified. They should have a deep bench of team members who have managed through many real estate cycles, and have the capital strength and reputation to meet investor objectives.

Investors should look for fund managers who are well-versed in their local markets. Real estate is still very much a local game.

When tapping into a new market, move slowly and leverage joint-venture partners who know those markets and can bring expertise as well as deals to the table.

• Relationships. A real estate investment firm should have proven and strong relationships with acquisition and development partners who have access to deal flow, provide market expertise and can find off-market deals. There are a significant number of buyers in the market, so a network of partners — brokers, lenders and developers who may have early access to those deals — is key.

Furthermore, many real estate investment managers are having a hard time finding financing due to the credit crunch. They are undercapitalized and overleveraged.

Lending relationships are critical. Firms need to cultivate relationships with a core group of strong U.S. and international lenders who remain active in the market. These banking relationships allow firms to close deals that competitors might not be able to complete.

• Structure. It is wise to look for a vertically integrated strategic firm with a full range of development, investment and asset management expertise and capabilities. Such a structure fosters the ability to be nimble and jump on acquisitions as well as development opportunities.

In addition, a firm that stays close to its assets will be able to manage and maintain its properties, enhancing returns while managing risks at the property level.

• Diversification. Investors should also look for a real estate investment firm with a diversified investment strategy to ensure that the portfolio is diversified across geography, property type and strategy to protect against volatility and to enhance returns.

Markets are different in each region and change frequently. For example, the high demand for apartments in the Southeast is in contrast to the high demand for office space in the mid-Atlantic region. In addition, market cycles can rapidly change in different locations. What was once a profitable industrial market can quickly become a lucrative residential marketplace.

An investment manager who has expertise across many property types can quickly adjust to the opportunity set in the market and continue to perform across market cycles.

• Capitalization. In this environment, being a smart investor involves being both an opportunistic and defensive buyer. That can mean investments in underperforming or distressed assets.

Also, look for defensive strategies with properties that provide medium-term stability and cash flow to hedge against economic distress. The investment strategy and opportunity is executed through a consistent investment process. Managers should be able to define and articulate their investment strategy, and explain how they are executing it in the current cycle.

• Tangible assets. There are investment products that provide exposure to real estate, but each reacts differently to changes in the economy. Private vehicles that provide investors with a direct investment in bricks-and-mortar properties can provide a hedge against inflation, solid income and long-term appreciation with manageable risk.

Public vehicles can also provide strong returns, but their shares can be highly correlated to the markets and experience price fluctuations based on the supply and demand of their shares.