While I Travel, Do I Sell my House, or Rent it Out? (Reader Questions Answered)
By theprofessionalhobo ~ January 25th, 2010. Filed under: Australia, Reader Questions Answered.
I get a lot of emails from readers with very pertinent – and often similar – questions. And if lots of people are asking a similar question, there are probably lots more who are thinking it!
Each post in this series will feature a reader’s question (with their permission of course!) and my answer to it. Sometimes the answers aren’t cut and dry; but then again neither is life. I hope you gain some insight and maybe even learn a few things from these Reader Questions Answered.
Do I Sell my House, or Rent it Out?
Reader Question:
My partner and I are hoping to do our own RTW trip this year. I’ve been backpacking through Europe on my own and back then it was just a matter of leaving a rented apartment.
This time around, there is a house involved. As someone with a financial background, I’m hoping you could offer us insight on whether it’s best to sell the house or rent.
Obviously, selling would allow us to have more spending money (after setting some aside for when we return) and leave us feeling a bit more freed up to take on whatever opportunities come our way. But knowing we have a piece of property to come home to is a comforting feeling.
Are there any significant financial backlashes to selling?
Thanks for any insight!
-Maria DG
Answer:
Congratulations on your upcoming departure, and thanks for contacting me!
There is no straight answer to your question – unfortunately. Here are some things to consider:
Renting the House Out
How do you feel about renting the house out while you’re gone? You’ll need to either hire a property management company or get friends/family to manage the tenants for you. (For example: if tenants leave or there are repairs, you don’t want to be getting overseas phone calls…you need somebody on the ground to take care of these things as they arise).
You also want to be comfortable about the place being rented while you’re abroad…for some people it would be too stressful having somebody else living in their house. If you can see your way to doing it though, it’s a very wise strategy, since you will have an appreciating asset to come home to; one that has also been generating a passive income for you while you travel.
Speaking of passive income, if the house is fully paid off, the rent money can be used to cover off property taxes and other home-ownership expenses, and the rest can pad your travels. If you still owe money on your mortgage, then the rent money can be used to continue to pay it off, no sweat.
Selling the House
What is the current real estate market doing in your neighbourhood and surroundings? If you can sell the house for a gain over what you bought it at, it may be worthwhile to do so and solidify your gains. (Don’t forget to factor in the tax consequences – if any – of doing so, depending on where you live). Yes, you will miss out on any future gains in value by selling, but if you know your market you’ll know whether the projected gains will be worthwhile for you.
If you sell the house, think about how much money you want available for your return. You may want to buy another house….and furnish it, etc…..if so, then beware of spending too much (if any) of the house proceeds on your travels. Stash away the amount you want to keep for your return in a separate account or investment so you won’t be temped to spend it on impulse abroad.
I personally chose to sell the lot to keep my options open on the road, and I’m happy I did it this way, since our travels are open-ended. But it all boils down to you, where you live, how long you plan to be away, and what “security” means to you.
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January 28th, 2010 at 2:28 am
My wife and I are going to rent out our house next month. Selling doesn’t make sense in Japan because interest rates are so low and tenants are very reliable. I think we would be biased towards selling in North America though.
January 28th, 2010 at 8:30 am
@John – You bring up a great point: not only do local real estate (and rental) markets matter, but so does your greater location in the world! Thanks for the insight into Japan’s market. Enjoy your travels!
January 29th, 2010 at 5:40 am
IMHO, it depends upon where you are “in life”, as well as geographically. Being retired and having a suburban place, as well as a city place (Chicago), one of which is paid for but one mortgaged, I often angst over the fact that I am not using either of them during my winters in warm climates. But I cringe at the thought of someone living in my suburban spot, which is more “home” than my city in-town, so I wouldn’t rent it out. I am very easy on living spaces (an excellent travel renter!) and would spazz out over a scratch or dent left by renters. And I want to keep my city place, not only because I love the city, but also as it seems to be good for home exchanges. (Not to mention housing values haven’t recovered yet in my areas, so it’s not a good time to sell, unless you are turning around and buying another “good deal” at the same time.)
Further, when I travel, it is going to be for a somewhat defined time period….like three to six months….because I have a son and grandchildren I wouldn’t want to be away from longer than that. If I’m abroad, it gets expensive to fly back for visits.
So for a traveller in the “same place” as I, it makes more sense to hang onto the living quarters (whether you rent them or not).
I have a neighbor “watching” my suburban place, trusted people to go in and handle any emergencies (God forbid), and landscape maintenance and snow removal included in my association fee, so that’s no worry. My city condo is a no-brainer in that I lock the door and leave. It’s a 24/7 doorman-secured building and my neighbors and management know I am gone, so keep an eye out.
Maybe this helps someone in a similar position to me think through his/her travel.
January 29th, 2010 at 8:33 am
@Barbara – Awesome! You so clearly outline your situation and the reasons….and you have quite obviously make the proper set of choices according to your comfort level and the current market. You also identify that you wouldn’t make a good absentee landlord for the suburban home, and so you don’t rent it out – good personal observation and action! (Personally, I would have trouble letting go of the stress of being an absentee landlord – it’s an idiosyncrasy of mine, so I hear you). (And I too, make a great travel renter)!!!!
February 1st, 2010 at 10:56 pm
Yes, very interesting and informative! As a traveler even the simplest things others take for granted can seem a mystery to us!
February 2nd, 2010 at 9:53 am
@Tirupathi – Thanks! I think it’s all about perspective and environment.
February 3rd, 2010 at 8:58 am
Thanks for explaining both sides. That’s good to know that I can have my place rented while I’m away.
Katie
February 4th, 2010 at 3:37 am
if hypothetically we would have own a house before our rtw we would have probably keep it and rent it out, unless we would still paying the mortgage in which case, in my opinion, would be better to sell it to have no worry while traveling. i think it’s nice to know you have a place to come back and don’t have to worry about one more thing once you will eventually back, you know.. maybe a job or setting up your life. if you change plan and decide to live somewhere else, you could always sell it later on.
February 4th, 2010 at 11:31 am
@Katie – Thanks!
@Marta – I think it all boils down to personal comfort. Some people don’t mind having a mortgage while traveling either, since the rent should technically cover the mortgage payments and you have are continuing to build equity. Then again, if that tenant leaves, you still have a mortgage to pay, and might have to cut your travels short. Thanks for your input!
February 9th, 2010 at 10:09 pm
I think it’s nice to know you have a place to come back and don’t have to worry about one more thing you can help me out where i can go some nice place.
February 10th, 2010 at 10:39 am
@Tony – That peace of mind of having a place to come back to can indeed be worth its weight in gold.
February 10th, 2010 at 7:45 pm
This was a bit of a struggle for us too since our travel lifestyle is open-ended as well. (Originally we were suppose to be gone for 6-months and now, 6 months later it seems like we’ll be here for 2 years at least. After that, who knows. As I’m sure you know, the longer you are away the easier it is to be away!)
We chose to rent, which I think was the best thing because it does give us peace of mind that if the S%$# hits the fan we’ll have a place to go back to. Plus, our house is really unique (a yurt) so finding something that we love so much like that again would be impossible.
We were very careful about the whole thing, not advertising it publicly, getting personal recommendations etc. We felt very good about out final choice for rentee and left our house (and our cats!) with him full of optimism. Well, now, 6 months later he has paid only 2.5 months rent and the issue is ongoing. So this has turned into a real mess and in some ways I wish we had done some things differently, but at the same time I am happy we still have the house to back to when/if we decide to return.
February 11th, 2010 at 3:49 am
What’s a “yurt”?!
February 11th, 2010 at 8:47 am
@Becky – You bring up an interesting point in that your home – the yurt – is a very special place that you feel may not be replaceable. In your shoes, I may have made a similar decision. Too bad though, that your tenant hasn’t been as terrific as you thought he would be. Do you have somebody back home to mind the place and keep your tenant in line?
@Barbara – Yurts are awesome! They are round one-room dwellings. I lived in a yurt in Hawaii for a while: http://theprofessionalhobo.com/2007/11/where-we-live/
…and I loved it! There’s something very unique and satisfying about circular living.
February 11th, 2010 at 8:18 pm
Our yurt is wooden, not concrete and it actually has sloping walls as well. Basically, it looks like a wooden spaceship from the 50′s. (There is method behind the madness of the sloping walls. It is so you can have a small footprint, yet a larger, more open living space.) I tell people that don’t know what a yurt is that it is basically a wooden, round cabin.
It doesn’t hurt that the yurt is on 6 beautiful acres in rural New Hampshire in a town we love a lot. So yeah, I do feel like we made the right decision in keeping it, but this whole rental problem is really a thorn in our side. We do have friends that are our “foot soldiers” and have looked into tenant law. We actually have all the papers drawn up for eviction we are just giving him a little bit more time to hopefully come up with the money so we don’t get stuck with it. He doesn’t seem like he is screwing us intentionally, it’s just the bad economy and bad timing on our part!
February 22nd, 2010 at 7:11 am
The decision to keep your house or not will have so many answers depending on where you live, where you are in life and your best guess as to your future intentions.
When I decided to try living mobiley – I did it initially as a trial phase. I went ahead and put my house on the market anyway, but with the real estate crash in our area – it didn’t sell. I was able to afford traveling and keeping up with my mortgage payments. As it was on the market, and I knew I’d be back in about 6 months.. renting it didn’t see like a viable option.
When I came back from the trial phase, I was determined to shed myself of anything unneeded. So I put focus on selling the house – because even if I were to want to be stationary in the future, I’d want to be somewhere different.
Due to the dismal housing market, I ended up cashing in some savings to sell the house at a loss. While painful, it was so worth it. I looked at it this way – the rental market in our area wouldn’t have gotten me a tenant to fully pay my expense of keeping the house, plus add extra stress of having to have the property managed, dealing with tenants, etc. I knew the market wouldn’t return anytime soon either (and indeed, it’s gotten worse since). So I looked at what it would cost to keep the house say.. 2 or 3 more years. And that was my threshold for what I will willing to pay to get rid of my house, so I could be free of it.
I don’t regret the decision one bit. But I was also fortunate enough to have ample savings to bite that bullet. So my solution may not be in the cards for anyone also trying to figure out how to fund traveling.
February 22nd, 2010 at 12:49 pm
@Cherie – Thanks for sharing, and your situation just goes to show that individual circumstances are what prevails. I’m glad you got rid of your house, and also attributed a financial value to the stress of keeping it while traveling. It takes a toll, whether or not we’re willing to admit it. Your logic in selling to avoid the larger financial risk of renting out in this case was well thought out and sound – though never the way we would want it to go down. Good for you for taking it in stride!
October 24th, 2010 at 6:05 pm
I would try selling on the internet. Try http://www.realvacancys.com. This website seems like you would have luck getting some potential buyers. Good luck on your sell.