If you own your home and you’re about to travel for an extended period of time, you have a big decision to make.
Many long-term travelers recommend that you sell your house before traveling so you’ll have fewer things to worry about on the road. That’s one good, reasonable option.
But like everything else in personal finance, there’s no such thing as a one-size-fits-all solution. I had to sell my apartment before traveling, but it wasn’t a clear-cut decision at all.
If you find yourself in this situation, here are some things to consider.
Sell your house and travel the world
Pros:
- Peace of mind
You won’t have to worry about mortgage payments, other fees or repair issues. - Extra cash
If you bought well, you’ll get a big chunk of cash that you can use to help fund your travels or to invest elsewhere (maybe something low maintenance like a portfolio of dividend-paying stocks or index funds).
Cons:
- Monetary loss
If the market is down, you could lose money on the transaction. - Timing and paperwork
You’ll have to either wait for the house to sell before traveling or sell it while you’re away.
I’ve done long-distance property closings and they’re usually pretty straightforward, but it can be nerve-wrecking if you’ve never done it before. The closing attorney should be able to tell you what to do. You may need to find a lawyer or a notary public at your destination to witness you signing the documents — this could be extra tricky in non-English-speaking countries. - Replacement
Do you have plans to come back and live in the same area? If yes, consider how you will re-establish yourself there. Will you want to own again right away or will you be happy just renting, at least for a while immediately after your return? (Thanks to Anjanette Lugo on Twitter for reminding me of this point.)
Rent out your house and travel the world
Pros:
- Passive income
You’ll earn an income as you travel. Real estate can be a great source of passive income. In my blog post How 5 Location-Independent Bloggers Afford to Travel, I featured a couple who actually lives and travels on their rent income.
There are quite a few things to consider if you want to rent out your home, but this is one huge potential upside. Depending on how much you earn in rent, you may be able to travel forever without having to work at all on the road. - Homeownership
If you plan on coming home after spending a certain amount of time traveling, you’ll have a place to come home to. For example, if you’re going on a year-long round-the-world trip, you can rent out the house for 1 year, get rent while you’re away and come home at the end of the trip.
Depending on your arrangement with the tenant, you could even keep many of your things in the house — this removes the need to rent or borrow storage space.
Cons:
- Building rules
If you live in a building, there could be a limit on the maximum number of units that can be rented out. If it’s already at the limit, you may have to get on a waiting list before getting permission to rent out your apartment. This was the case with my apartment and one of the reasons why I sold it. - Financial obligations
You’ll have to pay your mortgage, property tax, insurance and any building fees as you travel, so calculate whether the rent will cover all these expenses. Don’t forget to take into account repairs and maintenance costs, as well as vacancy. - Tenant management
You’ll have to find someone to take care of the property for you, preferably an experienced property manager who comes highly recommended by other landlords. Dealing with a bad property manager can be a nightmare. - Taxes
The taxman now considers this property a rental, which could mean higher property tax and higher capital gains tax when you sell. - Emotional ties
This is your home. Will you be okay with a stranger living there, using your stuff and changing things up?
Keep your house without renting it out and travel the world
Note: this doesn’t seem very logical to me, but we don’t always make decisions based on logic, especially when it comes to sentimental things like a home.
Pros:
- Homeownership
You’ll have somewhere to come home to, even if your trip ends earlier than planned. - No tenants
You won’t have to worry about what strangers do in your home.
Cons:
- Financial obligations
You’ll still have to pay all your bills. Without rent income to help, this could get overwhelming. But if you’re financially capable of covering all home-related expenses even as you travel, why not? Automate the payments for as many bills as possible in case you end up somewhere without Internet access. - Repairs and maintenance
You’ll have to assign someone to drop by the house regularly to check that everything is okay. You don’t want to leave a leak unrepaired for too long. - Security issues
An empty home can become a target for vandalism and robbery.
Image: Images Money (CC BY 2.0 License).
I love the comment about the “investment hat”. I wore mine the whole time I was looking to buy a house and I think it’s the main reason I’ve been able to keep it while living overseas for three years. If I’d made different decisions at the beginning, I might have had to sell it, or not buy it in the first place if I wanted to travel.
As a single female homeowner it has been challenging at times, but definitely worth it. So many people ask me about how I manage it so I’m sure the advice in your post will help a lot of others.
Thanks, Megan! It’s really true that you make your money when you buy, not when you sell. :D
Always a big, annoying decision!
I have both rented out our house and sold a previous home to travel. Unfortunately, making an income from property here in the big cities of Australia is hard, so it made the decision more complicated. I sold my apartment because otherwise I could have only afforded 6 months away instead of 12 (as the rent would only cover half the mortgage let alone all the other costs).
More recently, we rented our house out as long term we wanted it as an investment. geeze it makes it tough to travel though as it really sucks away at our savings. We are hoping it will start breaking even in the next couple of years so it will be less of a concern. Fingers crossed!
I know prices are higher in Australia. I used to read the real estate magazine when I was living in Australia and it seems like you have to invest in the smaller towns to get good cash flow there. If rent rates go up, that would be a big help for you!
We hate making this decision too. Takes up so much time and resources! We’re now renting for the foreseeable future. We love homeownership, but we’ll wait for the right time.
My friends are planning a long-term travel through Asia and they asked me about the possibilities, I’m glad that I found a practical summary like this. I was recommending them to rent their house what is the most rational choice due to the current market situation. I see that the article shows it as a good step as well, but the sentence “depending on how much you earn in rent, you may be able to travel forever without having to work at all on the road” just caught my attention. Is that really possible? I mean, is there anyone who is living this way?
Hi Jay, many permanent nomads are young, spontaneous types, so I admit it’s not common. Building passive income takes a lot of time, effort and planning after all. Regardless, it’s very possible to do.
I know one blogging family that relies on rental income to travel — I featured them in this blog post: https://www.nomadwallet.com/afford-travel-5-location-independent-bloggers/
Here’s another blogger who plans to use passive income to travel: http://affordanything.com
In real life, I know one property investor who has a large portfolio of rentals and took off to travel for 2 years. He’s too much of a workaholic to retire altogether, but he could do it if he wants to.
If you have a few rentals that are managed by good property managers, you can communicate by emails / phone with them and sign documents digitally. Practically nothing really requires you to be there in person these days.
We are just about to embark on our travels aspiring to be become location independent.
For our flat we’ve decided to rent it out (London has a good rental market atm) but remains to be seen if this will work out!
Great post!
All the best with the rental! I hope it helps you cover your housing expenses and fund your travels.
Great post, all very important thoughts to consider when travelling. We have two investment properties at home, and our rental return doesn’t cover the mortgage repayments. We have a little bit of savings, but we need to work on the road to both fund our travels and pay the mortgages. It’s going to be tough, but we don’t have much superannuation so they are our retirement nest eggs and we weren’t willing to give them up. Fingers crossed we can keep up with repayments and travel!
It’s not uncommon for investors to have rentals like the ones you have. It’ll pay off if market values or rental rates go up in your area. All the best with your travels, Chris!
Great post! We went through all the same questions before deciding to sell our house. One thing to think also about is IF your home will make a good rental property…sometimes putting on your “investment hat” in looking at your own house is tougher. We have a bunch of rental property (yeah! passive income!), but our primary house, while it was a great house for us, wasn’t an ideal rental — it had a pool, wasn’t in a “rental” neighborhood, etc., so it ended up being sold.
I love what you said about putting on the “investment hat” when looking at your home. It is a lot different, isn’t it? That’s why even though I believe real estate to be a great investment, I totally disagree with the people who say that your home is supposed to be your biggest investment. A home is about what you love, whereas an investment property is about the numbers.
This is something I’ve been thinking about a lot lately, as my fiance and I are looking at going on an extended trip in maybe 2016 or 2017. We have a house that we do already rent out part of to a family member and I think that when we do go on our trip, we’ll rent the house out. It makes more sense to us.
I hope this post helped you in some way. All you need is a reliable property manager and you’re set. :)