Buying a house is the ultimate settling step, and making it a home is a never-ending process. But what happens when you decide to ditch everything and explore the world? It’s not only a matter of the financially reasonable decision, but what you can handle emotionally too. Real estate is expensive, but so is a year-long trip around Australia. Selling your house would fund your travels, but what would you come back to? And if you’re leaving your job, the process of looking for a rental, a job, and surviving off of your last dollars is not a fun way to end the Big Lap.
Does this sound like we’re in favour of renting? Actually, renting can secure a good monthly income to fund your travels, but it can be insufficient too. And being an absent landlord comes with additional expenses. So what’s the best decision? Let’s dive into the pros and cons to find what suits your lifestyle best. We’ve asked fellow Big Lappers to share their experience as well, so you can gain a better perspective!
Renting Out Your House While Travelling
Buying your first house is a milestone many work hard to achieve, and selling it is hard from an emotional point of view. Renting it out while you explore Australia is much easier to cope with emotionally. You get to keep your home and have a steady monthly income. Does it come with troubles attached? Let’s find out.
Steady Income on the Road
The average rent around Australia varies; however, the national median for 2021 is $477 per week. Renting out a house in Canberra will generate an income of $630 a week, while a rental in Adelaide costs $430 per week. Rent prices have increased tremendously in the last year, ensuring you a good income down the road.
Keeping Your Home and Memories
Leaving for your Big Lap is exciting and overwhelming. You’re happy to explore every part of Australia, but leaving the place you spent some of the best years with no option to come back to it is hard. Maybe your kids were born there, and you built some of the most significant memories. So by renting it, you get to keep your home and come back to it if you ever get tired of adventuring.
Potential Storage Space
We generate a lot of clutter, so what are you going to do with all your stuff? Renting out your house leaves you with the opportunity to store all your things in a designated space and keep your furniture in most cases. One less worry!
Keeping your Mailing Address
Mail is one of the troubles when you set off on your Big Lap. Some rental agreements allow you to keep your mailing at the same address, cutting you the trouble of informing everyone of your new mailing address.
Pay Off Your Mortgage Sooner
If your house is not paid off completely, you can pay your loan each month by renting it out. Not having the mortgage payment burden while on the road will leave you enough money to spend on activities and necessities. However, your bank will most likely require you to switch from an owner-occupier loan to an investment loan when renting. Make sure you check this before you make any decisions about renting or selling your home while you travel.
Low Rental Demand
Before deciding on renting out your house, do a little market research. Your area might have low demand for rentals which drives the renting price down. Low demand means you’d spend significant time looking for tenants and move your Big Lap start date as a result.
Letting Strangers Take Care of Your Home
Selling is hard, but leaving your home in the hands of unknown people also isn’t easy. You might end up with responsible tenants that look after your house like it’s their own. In other cases, you can end up with nightmare tenants that are far from good house-sitters.
Remote Property Management
Managing your rental from afar is not a simple task. Real estate investments come with a risk, and travelling full-time increases that risk. You’ll most likely need to hire a property manager, which will cost you a significant portion of your rental income. In addition, you can answer calls from your tenants, but you’re not able to visit them and address the issue in person.
Can tenants burn your house down? In theory, yes, in reality, it doesn’t happen that often. But what they can do is be late on rent. If you rely on that money to cover your travelling expenses, it can be a challenging situation. It can cost you over $3,000 to evict unruly tenants, which is a burden when you’re travelling full- time.
Be aware that any rental-related income you receive from the property is taxable if you fully own your house. If you haven’t paid off the loan, you’ve switched to a business loan and miss the opportunity to claim tax deductions on the home loan interest.
Selling Your House
If you’re not as emotionally attached to your house, selling might look like a good idea. Getting a lump sum to start your travels, buying a new home on four wheels, and spending unlimited time on the road sure sounds good. But is ditching your safety net a smart decision? We have the details below.
Limited Personal Debt
There’s no better feeling in the world than being debt-free, and selling your house means just that. You’ll pay off your home loan, and won’t need to stress about having enough to cover your mortgage each month.
Funding Your Whole Big Lap
When asked about how much the Big Lap costs, Lappers commonly share the dollar per kilometre rate. If you drive approximately 40,000km on your Lap, you’d need around $40,000. This is, of course, a median that varies according to your travel style. Keeping in mind the house prices, you’d have enough to fund your travels without touching your other savings or investments.
No Worries or Expenses Regarding Your Property
Once you sell the house, you no longer have to worry about property management, no additional taxes, bills, or other hidden homeowner expenses. You’re a nomad now and free to stay wherever you want and pay per night.
No Place to Come Home to
Leaving the nest and exploring the world is fantastic, but you’d want to settle eventually. Unfortunately, not having a house means you’d have to rent for a while and go through the process of looking for places and applying for loans all over again.
No Steady Income
A lump sum is easier to spend than a monthly income; there’s no reason to mention that. When you have the money from selling your house, it’s easier to indulge and buy a more expensive caravan, stay at paid camps more often, and pick more costly activities. Sadly, money comes to an end, and you might end up in an unfortunate situation and dig into your other savings.
No Storage and Mailing Address
We can spend an eternity explaining how material things are unimportant, but not everyone adopts a minimalistic lifestyle. If you have loads of things you need to store, you’d need good logistics and ample storage space. Be aware that storage spaces range from $250 to $500 a month. When it comes to mail, you’d have to look for creative solutions, like redirect your mail to a relative’s address.
Missing Out on Potential Capital Growth
Even though experts tend to claim they can predict the real estate market, the truth is unpredictable things happen. Look at 2020, and the impact Covid-19 had on real estate prices. If you managed to buy a house before setting off on your Big Lap a year or two later, the same place could cost much more.
Renting Out vs. Selling – The Real Money Talk
Setting emotions aside, which decision will benefit you more financially?
In the end, it all comes down to the rental demand in your area and how much the monthly rent can cover. If you live in a popular suburb, you can benefit from great rent each month, creating steady passive income.
But if you have to dip into your pocket to manage your rental and travel expenses, that’s not a good deal. Making a house ready for tenants also comes with a cost. On the bright side, if you stayed at your home for over two years, you could rent it out for up to three years before selling it, without any capital gain tax.
Selling your house can lead to missing out on capital growth. This year only, prices of homes around Australia are 4 to 12 per cent higher and are expected to go up to 23% until December 2023. To sell a house, you may have to do some serious renovations for it to sell at a higher price, but you don’t have to invest as much if you’re renting it out.
However, if you have no plans of coming home to the same place, and your house is estimated at a good value, selling it can be smart, as the real estate bubble is destined to burst in a couple of years.
What Real Life Big Lappers Did
We’ve asked Big Lappers what they decided to do with their homes and why. Here are a couple of responses we received that may help you with this challenging decision.
“We decided to rent as it gave us the freedom to travel with rent income coming in to support bill expenses… for example food and fuel. Plus, once we got into the property market, it’s harder to get back in with tougher clauses made by the bank, i.e. 20% deposit. Plus property prices have gone up which means it’s more expensive to buy a house, you need more deposit saved up. At least with renting the house, the chances of the property going up in price are there. Plus, you can redraw from it if you have an emergency. It’s an awesome topic that needs to be thought about as for some, if they do sell their house, they may never be able to get a property that they want as prices will continue to keep going up. And while the interest rate is low, it seems that people would benefit from keeping their homes rather than selling – as you would have to buy a more expensive house, and on a higher interest rate, as it is guaranteed to go up one day.”
“For us, we decided to rent. It just made sense because of the fact we are making a profit each week that covers some of our travel costs but also, it continues to pay our mortgage off. It also gives us a sense of security to know that if anything goes badly wrong, we have somewhere to call our own and live. Being in a rooftop tent, it isn’t quite as much of a replacement for home as a caravan is. We don’t intend on going back to our house anytime in the foreseeable future but it’s nice to have a little nest egg notion.”
These Big Lappers Even Created Their Own Videos/ Blogs
It seems this is a popular topic amongst Big Lappers! These Big Lappers have gone into great depth to address this topic and share their personal experiences across multiple Big Lap social media forums. Here’s what they had to say:
Read Next: 96 Things To Know About Your Big Lap