"Tough Decision"

“Tough Decision”                                                                                      Assignment 1.1

Define the decision clearly

-          A decision that I am trying to make is “should I buy an investment property”?  There is a well kept home coming available and I know that I can get it at a really cheap affordable price.  It would be through a short sale, so the process would be long and drawn out but good things come to those who wait.  My wife and I have talked about it and keep coming up with the same conclusion…”WE ARE SCARED”!      

Consider all the possible choices

-          This assignment couldn’t have come a better time.  I’m going to use it as a perfect opportunity to help us make the decision.  The two choices I have:

o    Not buy the investment property

o    Buy the investment property   

-          Are there any other choices I have?  I could buy the property with a silent partner, but we don’t want to go into business with anyone else.  We could sale the house we live in and move into the property, but having an investment property is the objective, not a primary residence.  Besides, selling our current house is not an option.  I’ll save that for a different “tough decision” scenario.  So I believe I have come to the conclusion that to buy or not to buy are the only two choices.       

Gather all relevant information and evaluate the pros and cons of each possible choice

-          Some of the information we need to gather is loan information on investment property, tax information, ammonization charts on loan amount, insurance costs and the final deal with the devil…do we need a realtor? 

-          I will use a table for our pros and cons since it puts everything into an easy to view format.  The two choices that I have are actually the bizarro world from each other, so I will use them as a pro and con.  After I get my thoughts into a table, I will print it up and draw a line through each one until I come up with my decision. 

Buy the Investment Property	Not Buy the Investment Property
Long term investment	Housing market not stable
Yearly profits could contribute to primary residence mortgage	Only one mortgage if relocated
Can rent for 30% over mortgage payment and still be below rental market	Savings not depleted
90% Guarantee occupancy based off market research	No worry of having to find tenant
Purchase price below market value	Safe if economy gets worse
Could make mortgage payment if not occupied by tenant	Quality of life stays the same, no additional stressors
Could self manage the property
Serve as a backup to primary residence should economy get worse
15 year payoff oppose to 30 year payoff
Home in excellent condition, no repairs needed
Move in ready

Select the choice that seems to best meet the needs of the situation

-          The choice that was made is not to buy the investment property.  Being in the military I don’t know if I’m going to be relocated.  There is no guarantee that I will be in Las Vegas for the next four years.  If we were to buy the property and end up relocating, that would stick us with three house payments.  Two in Las Vegas and one in whatever city we ended up relocating too.  This would be too great of a stress on the whole family because our quality of life would end up suffering.

Implement a plan of action and then monitor the results, making necessary adjustments

-          Even though we are not going to buy the investment property, we are going to implement a plan of action and make necessary adjustments to our current situation.  Based off of the market research on rental properties, there are opportunities to rent our primary residence at our current mortgage payment and move into a smaller residence.  The smaller residence would be 40% less than what we pay for our current mortgage.  This allows us to put the extra money towards the principle of our mortgage, enabling us to pay off the loan approximately 12 years sooner.  Making this decision also gives us the flexibility to relocate without the worry of rushing to find a tenant within the time constraints before our relocation.  Being able to choose our new tenant over being forced to get a tenant is a huge difference. 

The direction that this critical exercise started actually went in a total different direction.  What I thought was going to be a “buy or not buy” decision has turned into a possible life changing decision.  The fact that I’m in the zone to be relocated was not on my radar.  Critical thinking has brought up a viable options for my wife and I.