In talking to people curious about our life it is common for them to say they wish they could do something similar. There are a few reasons people typically provide for why they cannot. One of them is…
“It's fine for you but I have a mortgage.”
Well guess what? So do we.
You see, not all long term travelers are twenty three years old with nothing to their name beyond the clothes on their back. Some of us have worked a few years before heading overseas and managed to accumulate some stuff that does not fit in a backpack. In particular, some of us saved up a deposit, signed on the dotted line, taken out a mortgage and bought a place to call our own.
What are you going to do with your apartment or house when you want to travel the world and go overseas on an open ended world adventure? It is a fair question. Fortunately a mortgage and possession of a piece of real estate is not the insurmountable “well I guess I just have to stay here” deal breaker that many seem to assume.
Broadly speaking, there are three options:
1) Just leave it sit there because you hate money
You can totally use your place as a glorified storage locker. This has the advantage that you don't need to move any furniture or pack anything. Just lock the door and leave.
This does have the disadvantage that you are likely to pay a small fortune to provide a place to store your Ikea furniture and a wardrobe full of clothes that you wear so rarely that you can leave them behind when you decide to go traveling for an extended period.
This option can be tempting because it is so easy. Just pack your bag, lock the door behind you, everything will be waiting when you get back. Financially however, it is a disaster.
2) Sell Your Home
Particularly if your property is worth significantly more than you owe, you can remove this headache and put some money in your pocket. No ongoing obligations is a definite plus. Selling is not hassle free but once its done you never need to think about this again.
You can then put the proceeds of the sale into something that doesn't get leaky faucets, broken windows or damaged flooring like index funds, shares or a term deposit. This is assuming that you aren't underwater (where your mortgage is worth more than the property). If you are, you have my sympathy.
Selling is a fairly straight forward process. Talk to a few agents, pick one and they will steer you through the process.
3) Rent Out Your Apartment Or House
If you have been wondering how to earn money while traveling, this can get you started. You get some money coming in however you remain responsible for the property. If the water heater stops working, if the roof is damaged in a storm or anything else, you will have to deal with it.
Even if it is not you personally who needs to book a plumber to install the new hot water system it will inevitably be you who has to pay for it. Owning a property means the possibility of expenses cropping up over time and needing to be paid pretty much right now.
So, do nothing, sell or rent. Of these three options, which is the right one for you?
If I haven't made it clear already, just leaving your place sit empty while you are away for the long haul is not a great idea. You get all the bills associated with owning a property, zero income, no one is around to keep your home safe while it sits empty and all so you can store a bunch of belongings of dubious value.
Selling makes sense if the monthly costs (mortgage, taxes and whatever else) are significantly more than what you could get in rent. This will depend heavily on your general financial situation but you may want to be rid of a property that is going to cost you money month after month.
From a purely financial perspective it may well be the case that you are better off selling and putting the proceeds into other investments. Proceed with caution of course but it is entirely possible that shares etc could offer a far better return over the long term, especially once you factor in maintenance, property taxes, property management fees etc.
Renting it out becomes more attractive as the rent approaches or exceeds the monthly costs. Even if the rent you will receive actually exceeds the costs you may still want to sell to remove the ongoing obligations that come with owning something and to put a chunk of money in the bank. On the other hand if the rent covers the bills by a decent margin you can hold onto the property and maybe see some capital appreciation while you travel the world.
If you have negligible experience with other investment types you may also want to simply hold onto your property and have it rented out. Having a big chunk of money drop into your bank account and then having no idea what to do with it is a recipe for disaster.
Selling Vs renting is a bit of a line call that depends on your individual situation, your own preferences and your experience level with other types of investments.
For us, renting out our apartment has been the decision that we are most comfortable with. We previously made some good decisions and spent long days working at our jobs before coming home and spending the evenings painting walls, pulling up flooring and assembling kitchen cabinets. As a result we are in the fortunate position of having the rent on our current apartment more than covering the mortgage and other bills. We could sell but for the time being we are content to hold onto our place.
That isn't to say that we would not have been financially better off had we sold and invested the proceeds, because we very likely would have been. That is only with the benefit of hindsight of course and we remain comfortable with the decision we made (although we can also change our mind at any point).
Hopefully that has helped to clarify some ways to turn your home from an obstacle into an asset that can actually assist you in your travels.
How to rent out a house or apartment
Assuming you decide to rent out your place here is some advice about renting specifically.
Do not be tempted to leave any of your personal stuff anywhere in the property. Get it empty apart from maybe the fridge or anything else specifically included in the rental contract. Get rid of as much of your stuff as possible then, ideally, find somewhere you can store what little remains for free. We culled our belongings until they fit in the corner of a very kind family member's shed (thank you!!).
This is a great opportunity to cull your belongings. It is emotionally difficult but you feel so much better having parted with yet another thing. Chances are most of it can be replaced by a quick trip to Ikea or similar. I can remember agonizing over getting rid of things and now I can't even remember what those things were.
If you do rent your apartment or house out, hire a property manager. Don't be tempted to accept a friend or family member as a tenant and then to deal with them directly. Yes, you save on agent's commission but you get a bunch of potential headaches in exchange.
You want a purely business relationship and having an agent between you and the tenant helps establish that. You don't want any personal relationships complicating things. Don't do anyone a favour and let them stay at your place. Don't let anyone try and do you a favour by looking after your place. That warm fuzzy stuff is not as reliable as contracts in the long term.
If your tenant moves out a property manager will find a new tenant. If you are renting directly to someone you know and they move out, you are left with an empty place somewhere far far away. At the point it is awfully difficult to find either a new tenant or a property manager to find a tenant for you.
Find someone who manages rental properties for a living and sign on the dotted line before you leave the country.
Be prepared for some wear and tear on the property. Walls get bumped, spills happen, wood floors get scratched etc. It can be shocking to you simply because you leave and come back to see years of accumulated wear and tear all at once. If you had been living there yourself you would have seen it slowly accumulate so you wouldn't even notice the gradual decline from pristine to… less pristine.
As a side note, do not wear stilettos on wooden floors. Just don't. Wear and tear is one thing but if I can follow your tracks in the floor like a hunter following footprints in the snow I am not going to be happy. Take off your floor ruiners at the door, they are terrible for your feet anyway.
Most likely your property manager will work within an agency that also does sales. Ask them if they will let you out of the property management contract if you want them to sell your property. Their verbal agreement isn't worth the paper it's printed on, so to speak, but I have never heard of an agency being unwilling to cancel a property management contract to secure a sales contract. This means you can choose to sell while you are away if you really want to.
It is not ideal to sell with a tenant in the property as they won't dress it up as nicely as you would, preparing a house for sale is a big job after all, but it is possible to sell with the property tenanted. Some investors may even prefer to buy currently tenanted properties.
And in conclusion…
We are certainly not claiming to be all knowing property expert type people. We have however accumulated some experience, made some mistakes and spent quite a bit of time discussing this topic. Hopefully this rambling will help you decide what to do.
More importantly, hopefully I have made it clear that owning your own home does not have to stand in your way if you want to travel the world.