Dealing With Real Estate

What is the best balance between putting your money in mutual funds vs. real estate?

QUESTION: Kerry asks how much she and her husband should invest in their retirement account vs. how much they would invest in real estate.

ANSWER: It depends on how much you love real estate investment. I love real estate and buying investment property and don’t mind the hassle that goes with it. But you have to deal with renters and have a good temperament with them. Put 15% of your retirement into mutual fund and fund the kids’ college and get the house paid off, then talk about this. Then you just ask yourself what you want more money invested in. Mutual funds have a lot less risk.

I don’t think you should be all in one or the other. I think you can settle on a percentage that you both like, and then you’ll be all right. But remember, you have to be able to lay your hands on some cash. If you are more than 75% involved in real estate and 25% in mutual funds, you become too non-liquid and that scares me. Talk about which you like and find a good balance between the two.

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