In my last post, What House Should We Buy? A Decision That Could Wreak Havoc In Our Lives, I explained the background of our 2012 decision question. My husband and I ended up purchasing a duplex in a town where I had just accepted a new job. Since we lived 90 minutes away (and would not be moving), we planned to rent out one apartment and keep the other side to use to limit my long commute.
I also shared that I doubt we would have ever bought this house if we used a better decision-making process. This post will explain what that process should have looked like.
When I got my teaching schedule for the year, it included a night class followed by an early morning class the next day. With the lengthy commute, it made no sense to drive home late and back again early the next morning each week. We can now identify this as the Trigger Event. I needed a place to stay one night a week.
We started thinking about buying an investment property to meet this need. The properties were very reasonably priced ($70,000-85,000 range) and I assumed I would be working at this job for 10 years until I could retire. Buying an investment property made total sense to us based on our experience as long-term landlords.
We did not manage the “Trigger Event” very well because of our biases related to owning rental properties. We discussed a few other options, but looked for all the “right” reasons to buy and avoided reasons not to… We should have recognized this event and slowed down. This was clearly a time to use a written decision-making process for deeper analysis.
“What house should we buy” is also a very narrow question. Using the words “house” and “buy” limited the options we considered right from the beginning. A broader decision question would have been – “Where should I sleep when I have a late night class?”
We also never wrote down our goals which would have clearly highlighted what was most important to us. The list would have included (in ranked order):
- A Safe Situation (Extremely Important – EI)
- Minimize Cost (Extremely Important – EI)
- A Private Bedroom/Bathroom (Very Important – VI)
- Close to the College (Very Important – VI)
- Ability to Cook (Important – I)
- Limit Packing/Unpacking (Somewhat Important – SI).
About a month before I started the new job, we purchased the house and found tenants for the other apartment. We were “ultra” ready but had we waited a month or two, we would have had more options to consider.
We had discussed my commuting home those nights and we also looked at nearby hotel options. Renting an apartment seemed much too expensive, so we dismissed that idea. We also didn’t consider the possibility of sharing an apartment with someone. And after the semester started, I found out that I could have rented an empty room at the college. I also had a colleague offer me a spare room/bathroom in her house.
These are all options that we did not consider seriously enough because we didn’t slow down, reflect, and use a written decision-making process.
I created a Results Table of what “could have been” now that we re-considered the decision question, our goals, and the available options. If you read The Extended Job Contract – The Final Steps, I Turned Down the Full-time Job, and reviewed the results, I created one table with words, one with numbers, and a combined chart. I am going to use the combined chart again here. The words will likely make sense to you, but use the following to interpret the numbers:
Key for Goals
4= Extremely Important
3= Very Important
1= Somewhat Important
Key for Results
4= Highly Likely
2= Somewhat Likely
*Multiply the goal “score” in the vertical column by the results “score” in each box. (I have shown the product of this multiplication in parentheses in each box). Then add up the total for the column. Higher scores are likely the better options to answer your decision question based on the keys used here. (For any of you who read my “Turn Down the Job post” before I revised it, the scaling seems to be more accurate looking at the highest score and using this ranking. I will update as I use the quantitative method more.)
In reviewing the results table, there weren’t any rows that had all of the same results. If that was the case, you would eliminate that row because it wouldn’t help you narrow the options.
The next step determined if any option was unlikely to meet the two “extremely important (EI) objectives”. There are two options that are “unlikely” for one of the EI objectives, but not both in this decision. You would only eliminate an option if it was unlikely to meet both (all) of your EI objectives. No options are removed at this point.
I compared the first two options (buy duplex and stay in hotel) to see if one “beat out” the other. They “tie” in terms of total numbers and there isn’t a clear “winner” in terms of the “word” results either. It would be important to keep both options in at this point.
I then compared buying the duplex with renting a small apartment and this also resulted in numerical totals that were very close. The distance to the college was the only result that was slightly different. Again, I would still consider both options. One result is not enough to eliminate an option without further reflection.
In comparing buying the duplex with sharing an apartment there was a 12 point difference in the total numerical results. Overall, buying the duplex fits more goals than sharing the apartment. Sharing the apartment can be eliminated now. Commuting from home could also be eliminated when compared to buying the duplex because of the distance from the college and the safety concerns of the late night/early morning commute each week.
Buying the duplex and getting a room at the college were also very close in numerical score. When comparing the word results, they were again too similar to eliminate either option.
But when comparing buying the duplex with staying at a colleague’s house, the results were exactly the same other than minimizing cost. Buying the duplex cost a significant amount of money (upfront) with the hopes of finding tenants and getting long term returns. Staying at a colleague’s house would have been a very small expense each month compared to the duplex closing costs.
Then why didn’t we choose staying at the colleague’s house over buying the duplex? We didn’t wait long enough for me to start working and even meet colleagues before we bought the house. This would have been an option if we slowed down and used a written decision-making process.
At this point, the results table seems to show (both with numerical totals and with qualitative descriptions) that staying at a colleague’s house would have been the “best” decision. It would still be very important to compare each of the remaining columns (other than the share/commute options that were eliminated earlier) with each other because of the similarity of results. This will help ensure that trade-offs are considered for each option.
The duplex purchase resulted in a large trade-off in terms of minimizing the costs associated with taking this new job. Had we taken more time to consider all of the options, we would have had a better sense of other possible trade-offs.
Getting a room at the college may not have resulted in a private bathroom, but it may have been worth being right on campus on the late nights. Staying in a hotel may have been a hassle in terms of lugging my things around each week, but dealing with difficult tenants may be a much bigger hassle!
Has this decision wreaked havoc in our lives? Not at all – as of yet… But we understand that could change at any point. As long distance landlords, we rely on our tenants to do the right thing and fulfill the obligations of their lease while maintaining our property. We also know that when their lease ends, we will have more decisions to make. Should we rent it out again? Will we manage the property? Or should we sell? That will be an important time for a new (and written!) decision analysis.
The purchase of this duplex could have created serious financial consequences for us. As we move forward, we hope to recognize and manage trigger events in a more effective way. We also want to broaden our decision questions and reflect on biases and blindspots that may influence the decisions we are trying to make. We’ll share what happens with this property when the lease ends in the spring of 2017… Until then, we hope our story helps you think about making smarter decisions!
Have you ever rushed to make an important life decision only to find out a short “pause” would have opened up a number of creative options?
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