I  recommend one tried and true strategy:
Sequential investing: Most traditional real estate investment books teach this method. From my own experience, and from people I learned from, this strategy has a very good chance of success.

Many younger people who came relatively late to the DC area probably have missed the boom in the last 5-6 years. Don’t worry, you can still start investing in real estate slowly. Sequential investment may take 15-20 years. Let me tell you a story from my good neighbor Mr. Tranh:

When Mr. Tran first moved into Germantown (80s), it has nothing. Quality of life is not much to be proud of. Germantown back then was solidly despised as blue colar town. Those folks in Bethesda definitely won’t say anything good about this place. Even today, there are many blue colar neighborhoods in Germantown, mostly townhouses. By mid 90s, Germantown has transformed itself into more suburban and less rural, more white-colar people moved in. Price has started to rocket. Even at that time, a bigger luxious new SFH already cost nearly 400K. Mr. Tran could not afford the upgrade to 400K, so he moved to Frederick (back then a small town, but not a suburb of DC). To him, the quality of life is not perceived reduced because GM was not much better anyway. Well, I don’t exactly know why he moved to Frederick. The bottom line is, by sequentially moving to new houses and renting out old houses, he has been able to accumulate a good holding of houses. By not selling these houses, he created a chance for these houses to work over time.

We proposed 3 factors to project Bay area’s future:
1) Great job
2) Land shortage
3) Lack of speculator

In my opinion, point 1) right now is less of an advantage. Since 911, Bay area has been losing jobs. Although Bay remain as a favorable place for job creation and VC investment, due to the high operating cost such as rent, human capital cost and higher taxes, this advantage is peaking out. However, 2 and 3 are absolutely true and will remain the major factors to maintain a mid term (5-10 year) above-inflation price appreciation.

Mr. A bought a 20-unit apartment 25 years ago for $200000. He borrowed $160000 and invested $40000 in the down payment. The mortgage payment was fixed for a 25 year term and consisted of about $14000 per year, payable in monthly installments of $1166.67. Over the term of the loan (25 years) he has paid $370480 in payments, around $210480 of which was interest, the balance was principal.

The first year of his ownership Mr. A pocketed about $6000 in cash flow after making all payments for operation and debt. This was about 15% annual return on his $40000 investment.

Bottom can usually be spotted with a total lack of bullish messages on any BBS or blogs or on Media. Talking about investing in real estate will be mocked at by friends and in parties. If all you hear in a social gathering are concerns of company layoffs…, stock brokers are suggesting asset re-allocation to mostly bond funds, then most probably, the bottom is hit.

However, peak is harder to spot. I don’t have a complete methodology to spot that yet. However, usually when everybody, even novices are shouting about investing in real estate, that probably mean a top.