Decision Making in Engineering & Technology Management
Hierarchical Decision Model, Real estate investment -- Oregon -- Portland -- Decision making, Investments -- Evaluation, House buying -- Oregon -- Portland -- Financial aspects
The purpose of this study is to develop a decision model for profitable investment in a single family home with the objective of maximizing the return on investment of the property over a 5-year period.
The scope of the potential investment properties for which the model is valid for has been limited to the SE Portland area within a price range between $100,000 and $750,000. The assumptions of this analysis include that the home investor was pre-approved for financing within the given price range, financing could be obtained at equivalent rates for each investment property evaluated, and the investor would be required to live in the property for a period of five years without performing remodeling to the house or property.
A hierarchical decision model was used to evaluate critical features that home investors should consider for property evaluation. The critical features included in this analysis were defined by home investment experts, providing valuable insight to potential first time or inexperienced home buyers.
It is important to note that current tax legislation requires a home owner must live in a property for a period of two out of the five years leading up to sale of a property to avoid capital gains taxes for any potential profit associated with the property. By developing a decision model for a 5-year investment scenario, a useful tool for a large proportion of potential home investors can be offered to prospective home investors.
The basic premise of this investigation is both complicated and unique in that it models the home investment strategy for a “casual” home investor, prompting the evaluation of not only the financial aspects of a home for an investor, but also requiring the evaluation of the “comfort” features that the home investor must evaluate as a resident of the property themselves.
The end result of this analysis is a decision model that can be applied to any number or style of metropolitan homes in order to evaluate optimal home investment strategies.
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Combs, Trevor; Nguyen, Tam; Shott, Tom; Trippel, Matthew; and Wolfangel, Nadja, "Determination of Optimal Home Investment Properties Using Hierarchical Decision Modeling" (2010). Engineering and Technology Management Student Projects. 1040.