DH and I can't decide on whether to use our "extra" money to put as a down payment on a piece of investment property or to use the money to pay for the installation of a heat pump/air condition unit for our house?? The property we are looking at is listed for $79k. It's an older brick home that we plan on spending about $10k to renovate and then either rent it or sell it (whichever comes first). I have always wanted to get into real estate investment and have been looking for something, almost daily, over the past few years. We'd offer $60k on it and go no more than $65k.

OR, we can pony up around $8k to install AC in our house. We currently live in the mountains where it only gets really hot about 2 months out of the year. We've lived in our house for 4 years now and haven't really thought about installing a whole house unit until this year. Since the tax credit will be expiring this Dec, we thought we'd look into it now. We currently have two window units for the bedrooms and that works out nicely for sleeping in comfort. But, the main living spaces do get pretty hot when it gets over 85 degrees outside.

So, we have to decide if:

(1) We take this chance to jump into the real estate investment arena (the recession hasn't really hit our area at all in terms of dropping real estate prices). If we get that house for $60k, we'd put 20% down or $12k. It would take about $10k to fix it up which puts our total investment in at about $22k. The mortgage would be approx. $350 per month and we could easily rent the place out for $700 per month bringing us a gross profit of $350 per month. Or, we could try to sell it for around the $110k price which is lower than the prices of the neighborhood bringing us a profit, before fees, of $28k.

OR (2) we can take $8k and invest it in our own home to install AC. We currently use gas forced air (propane) and the yearly cost of propane for us is about $1k. I'm told the cost for heating the house with a heat pump will save us tremendously in heating costs over the course of the year. And, there is that little thing of comfort during the hot months with the AC available. We had our house for sale for 2 years and just took it off the market with absolutely zero offers. So, we can enjoy the heat/AC now and it would be an additional selling point when we do put it back on the market next year.

I know the common sense approach is probably to go with option 2 and get the AC unit but my gut keeps telling me to not let this investment property go... I want to definitely start small and not get in over my head with real estate investing and this particular property will allow me to do just that.

Thoughts?