CONTINUING CASE in Real Estate and Other Investment Alternatives Investing in Rea Whew! Time realla triplets. It seemed really does hy: Jamie Lee thought as she unpacked from her third weekend in a row visiting colleges with med like just yesterday that Jamie Lee and Ross brought the line newborns home from the hospital, and now they ejust yesterday that Jamie Leeshe unpacked from her third ng to send the three off to college. preparing to so So much to consider imestment strategic financial choices The triplets are lean it is still a two-hour card Should we invest in a sma consider. In-state universities or community college for the first few years? Either way, years of saving and strategies helped Jamie Lee and Ross get the triplets ready for college although they still do want to make the wises bipes. After all, putting three through school is still a maior undertaking, even for the most well-preparco lets are leaning toward the State University, which will help with tution and to the out-of-state schools, althoug hour car drive from home. This translates into room and board times three for the next four years, d we invest in a small house or condominium for the triplets to live in during their college years?" Jamie Lee wonderca hobby of watching all of the home shows on television, such as Home Rene Nation and Flip This Flop, which made the of a fixer-upper an attractive thought and a possible investment opportunity in the long run. Lee and Ross decide to make an appointment with their investment counselor. Jay Hall, and real estate broker, Annie alloran to discuss their options, as they were unfamiliar with real estate investment opportunities. purchase of a fixer-un Income: Jamie Lee: $45.000 gross income ($31,500 net income after taxes) Ross: $135.000 gross income ($97,200 net income after taxes) Current Financial Situation Assets (Jamie Lee and Ross combined): Checking account: $5,000 Savings account: $47,000 Emergency fund savings account: $40,000 House: $475,000 IRA balance: $85.000 Life insurance cash value: $125,000 Investments (stocks, bonds): $700,000 Car: $14,500 (Jamie Lee) and $18,000 (Ross) Monthly Expenses: Mortgage: $1,225 Property taxes: $500 Homeowner's insurance: $300 IRA contribution: $300 Utilities: $250 Food: $600 Gas/maintenance: $275 Entertainment: $300 Life insurance: $375 Liabilities (Jamie Lee and Ross combined): Mortgage balance: $47.000 Credit card balance: $0 Car loans: $0 615 Questions 1. Compare direct investment and indirect investment real estate classifications. If Jamie Lee and Ross purchase a small house or condominium for the triplets to stay in during their college years, which type of investment classification would they fall under? 2. Mr. Hall discusses the financial liabilities that Jamie Lee and Ross would undertake with the triplets living in a college dorm room that are on top of the usual tuition and book expenses. Assume that the triplets' rent for the dorm room is $7,500 per student/per year, based on a double occupancy and a shared bathroom. What is the total amount that Jamie Lee and Ross would owe for the entire four years for the three to stay in the dorms? 3. If Jamie Lee and Ross decide to purchase a small house for the triplets to live in for the four years they are in college, what are some of the financial benefits for Jamie and Ross? 4. Jamie Lee and Ross understand that purchasing the second home for the triplets to use during the college years is not all about saving money by avoiding paying the dorm rent. What are some of the liabilities that Jamie Lee and Ross can expect that are directly connected to owning the second home, that might make them second-guess the purchase
