Are you preparing for long term travel or the trip of a lifetime? One of the first questions that comes up is “what do I do with my house?” If you are renting a home, then you can just plan to start your travels when your lease is up. However, homeowners must decide whether to keep their house and rent it out, sell it, or do a home swap.
Selling your home
Selling your home is a great option for someone who wants to travel indefinitely without an end date in mind. It’s also great for someone who wants or needs to use the cash from selling their home and belongings in order to afford travel. This option gives you considerable flexibility and freedom. You don’t have to worry about upkeep, renters, and management of the property while you are away.
The downside is you may have to rent a storage unit if you have items to store while you are away. This can add significantly to your monthly expenses. It also doesn’t give you anywhere to return to when you are done traveling. How do you feel about not having a home safety net to fall back on?
Want to do the math and see if selling your home makes sense? Talk to a local realtor about the price your house could reasonably sell for. Will it provide enough money for your travel goals plus a little extra savings to get you resituated once your travel is complete?
Renting your home (long term or short term)
Long term rental:
This option is an excellent one if you have the ability to rent out your house for more than your current mortgage plus expenses. You can check the math on this by looking at market rents in your neighborhood and get an idea of what your house would rent for. You also want to factor in monthly expenses such as:
- Mortgage, property taxes, HOA fees, and homeowners’ insurance (utilities would usually be paid for by the tenant).
Also think about the monthly cost to store your stuff (assuming you will rent your house unfurnished) while you are away and the expense for a property manager.
With long term leases you may be able to get away with not having a property manager. Self-managing means you could be getting maintenance calls at any time during your travels. Property managers often charge between 10-30% of the monthly rent to manage the property. They are expensive but can save you a lot of hassle when you are traveling in remote locations and have minimal access to phone and internet.
Here is an easy equation to see if this makes sense for you:
Estimated yearly rent – yearly expenses (mortgage/HOA fees/taxes/insurance/storage unit/property management fees) – 10% reserve fund = Net income
Once you see the net income amount, you can determine what type of travel this yearly income will allow you to have. Remember to always stash away about 10% of your net income per month for any large repairs that may be needed. For newer homes you could get away with less. It’s helpful to look at your home and determine the estimated life left on your big-ticket items (roof, HVAC, kitchen appliances, carpets, etc.).
Short term rental:
Short term rentals in popular areas will usually generate more gross income per month than long term. However, you may also see an increase in expenses. People will break your stuff and generate more wear and tear on the house. These rentals will require you to have a local person managing the property. This person will make sure guests have a smooth check in and check out. They also need to check that the home is getting cleaned and regular maintenance. Management fees for short term rentals will generally be higher. I have seen anywhere from 12-40 percent!
Regulations
Some cities and neighborhoods have rules about short term rentals and some areas do not allow them at all. Check with your city or county to see what the rules are and how hard it would be to meet these requirements.
If it is allowed in your area, then the next step is to check the demand. Research overnight rental websites (AirBNB, VRBO, Vacasa, etc) to look at the demand for your area. You can see how many properties are listed in your area and how often these properties are rented. If you are not located near a big city or popular tourist attractions, there may not be enough demand to make this a viable option. I always recommend speaking with a few local property managers or realtors. They can help you generate a realistic income estimate.
Once you have established:
- You are allowed to have an overnight rental
- There is adequate demand in your area.
- You can begin the process of setting up your home as an overnight rental. This will mean boxing up excess clutter and personal items. You also must stage your home with nice bedding and decor. Expect to see some extra costs as you initially set up your home.
Here is a quick equation to see if this option makes financial sense:
Estimated yearly rent (you should call and speak to a few local management companies to get this number) – yearly expenses (mortgage/HOA fees, taxes, insurance, property management) – 10% reserve fund – initial set-up costs = Net income
Home swap
Home swaps allow you to stay in another home for free in exchange for allowing someone to use your home. There are several websites where you can create a profile and list your house as well as search for locations you would like to visit. Home Exchange is a popular site, as well as Love Home Swap.
There are some major limitations with this option. You are limited geographically by where the home swaps are located so you may not have as many options for accommodations where you want to go. You also need to find someone who wants to stay in your home. Some websites allow you to pay for night stays if the other person doesn’t want to stay in your house. It may also be difficult to find someone who’s travel dates match up exactly with yours. The upside is that if you can find a swap, you can save a lot of money on accommodation. We have never done a home swap ourselves, but we have friends who had a positive experience with it.
Our plan
For our travel year we are probably going to be doing short term rentals with our home. Our county allows overnight rentals with some specific rules and requirement. It also has a decent amount of demand so we are hoping it will pay the mortgage (and more) while we are away. Our house is new construction and we designed it with the ability to do short term rentals in mind. The builder maximized the number of bedrooms. We have found that the greater the bedroom count, the greater the demand for short term rentals. The house will have a game room, hot tub and pool. We will be using someone local to manage the property while we are away so any repairs and maintenance items can be dealt with in person, and with expediency.
That is our plan for our home during our trip around the world! We will continue to share relevant articles about how to plan for this type of trip. We can’t wait to share these travel experiences with you.
Good luck as you are planning your next adventure!
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