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All right, let’s see. The equity markets are still wild and experiencing hundred-point swings in a single day, the dollar is still in the tank, and the credit markets probably have another hundred billion in write-downs before they get back to some sort of normal pattern.

I guess we should talk more about alternative investments. In the world of alternative investments, one that many fear is … cue scary music … real estate.

OK, stop plugging your ears and acting as if you are having a heart attack. If you talk to the right people, many are making money in real estate and have been through the recent downturn. We just have to find the right people to work with. But to fully understand real estate, we have to explore the markets and why we are where we are today.

In my opinion, the reason many real estate developers, builders and investors find themselves in trouble today is pretty simple: greed. The market went up because of greed and crashed for the same reason. When people began making huge profits as the market ran up, others rushed in to grab some easy money. Some of them made a profit, others jumped in, and so on. A key to successful investing is restraint. Some professional real estate developers, investors and builders paced themselves in the past and today are enjoying the fruits of their restraint.

So how does the average investor get in with these successful real estate investors? You need to ask your financial adviser to keep an eye out for opportunities. Your adviser may have a variety of real estate suggestions or only have access to some real estate investment trusts (REITs). I have not had much luck with REITs.

My preference is to do the necessary research and work with specialized boutique real estate firms with a long enough history to have seen run-ups and downturns. Smaller or individual real estate investment firms have the ability to be more selective with their investments and are typically more careful. By small, I am referring to groups that may range from doing a few million dollars a year in projects to those doing a couple hundred million. I also insist that the principals have some skin in the game, not just the investors and the lenders.

For example, one group I work with specializes in exclusive high-end developments; they currently have projects going in Hawaii and St. Thomas. The firm has been active in this segment for 20 years and has a great track record. They do not venture out of their expertise and are not chasing a hot market expecting to “flip” a property. This typical investment cycle is four years, they pay interest to their investors monthly, and the investors share in the appreciation of the development when it is sold.

Alternative investments come in a variety of shapes and sizes, and real estate should be a portion of any investment portfolio. Remember the key terms when dealing in real estate or any other investment: professional, specialized, careful, track record and trust.

Be careful, be smart and stop squirming. Real estate is a great way to diversify your portfolio and enhance performance in any economy.

Daniel Ochylski represents commodities trading, private equity and real estate firms. To reach him, send an e-mail to dano@growthfp.com.