The Ten Percent Solution

 

"I just want the kids to be aware there are risks."

"That's fine, but—"

"Hold on, hold on. Let me finish. The other problem with real estate is that it has a very high PITA factor. Finding tenants, fixing toilets at two in the morning, mowing lawns ... it's a lot of work. Some people thrive on that stuff. They're great with their hands and real estate provides them with a profitable way to enjoy their hobby. But if you're not that type of person, beware."

"The only thing I've fixed in my life is my cat," Tom kibitzed.

Jimmy and Clyde loved that one.

"So, I gather you're endorsing the fund route?" By now, my sister was on the edge of her seat.

"Initially, yes. In your early years of saving ten percent, I think the funds are a better way to go. You're busy starting your careers, raising families, buying homes, and all that. Real estate takes a lot of time. Also, the funds make more sense from a diversification standpoint, in that you'll probably own your own homes soon, so you'll already have some real estate.

"Besides, many people in their twenties, thirties, and early forties aren't in good enough financial shape to qualify for a down-payment loan, anyway—unless, of course, they borrow it privately or have a co-signer.

"What I did, and what I think you should do, is buy mutual funds with the ten percent for several years. When I had built up a good nest egg, I added some real estate. Forgive the pun, but you don't want all your eggs in one basket. Plus, because I had a nest egg, I knew that if interest rates rose or real-estate prices dropped, I wouldn't be forced to sell. I had the luxury of being able to be patient. Patience