Indefinite Period of Travel - What to do with $400k? [Home]

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milkandrelish
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Indefinite Period of Travel - What to do with $400k? [Home]

Post by milkandrelish »

At the end of the year, I'm quitting my job and booking a 1-way ticket overseas. I'm going to try to freelance and make some money while traveling to make this as sustainable as possible for a long period of time (probably to Chiang Mai or Australia first). I want to live frugally, but be comfortable while I'm traveling.

My main concern right now is what to do with a home that I own. I have about $400k in equity in a home in Los Angeles that I rent out for $4k/month. The mortgage is $2.5k/month and there seems to always be something to fix. Average costs have been about $800/month (I don't expect that this would continue, as this includes a complete AC and ducting install and retiling of the bathroom that was peeling).

What would you guys do with the home? Sell and invest the money? Sell and do something else with the money? Rent it out and hope for the best? Maybe try setting up AirBNB?

Any thoughts would be much appreciated!
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JDCarpenter
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Re: Indefinite Period of Travel - What to do with $400k?

Post by JDCarpenter »

Do you have relatives with handyman skills close to the house? Ongoing relationship with a trusted third party handyman? Average costs of $800 a month indicates to me a fair number of recurring tasks.

Do you intend to return to the LA area and possibly live in the house?

What percentage of your assets does 400K represent?

Ignoring the critical missing information, my [Un]SWAG is that if "indefinite" means, "probably more than 5 years," it would be far safer to sell. If it means, "probably more like 5 months to a year," maybe a different answer.
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BW1985
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Re: Indefinite Period of Travel - What to do with $400k?

Post by BW1985 »

Who's going to rent it for you while your overseas? What if the renter stops paying? Rental property is challenging enough when you live in the same town I can't imagine half way around the world.
Chase the good life my whole life long, look back on my life and my life gone...where did I go wrong?
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Meg77
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Re: Indefinite Period of Travel - What to do with $400k?

Post by Meg77 »

It may be worth hiring a property manager to deal with for you so you can keep it and continue building equity via mortgage repayment (and maybe appreciation) while you are not working and presumably not building wealth otherwise. I'd only do that if you plan to hold it for the long term and/or move back into it at some point though. Otherwise selling now during a good RE market and minimizing the risk of having to deal with tenant drama from abroad is probably a good idea.

As for what to do with the money that would depend largely on details we don't know (your age, your income, your current assets/net worth, your debts if applicable, how long you plan to be traveling/retired, whether you'll be employable when you return, etc.).
"An investment in knowledge pays the best interest." - Benjamin Franklin
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milkandrelish
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Re: Indefinite Period of Travel - What to do with $400k?

Post by milkandrelish »

JDCarpenter wrote:Do you have relatives with handyman skills close to the house? Ongoing relationship with a trusted third party handyman? Average costs of $800 a month indicates to me a fair number of recurring tasks.

Do you intend to return to the LA area and possibly live in the house?

What percentage of your assets does 400K represent?

Ignoring the critical missing information, my [Un]SWAG is that if "indefinite" means, "probably more than 5 years," it would be far safer to sell. If it means, "probably more like 5 months to a year," maybe a different answer.
I do have an on-going relationship with a handyman who is very fair and can also property manage. There are a lot of not just recurring tasks, but new slightly bigger problems that pop up every few months. It's an old house whose infrastructure needs some love.

The $400k represents about 90% of my assets. I have about $40k in liquid cash in addition.

Unfortunately, I don't know what indefinite means but I don't expect to be making anywhere near the amount of money I am now in the next 5-10 years.

Thank you for your input!
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milkandrelish
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Re: Indefinite Period of Travel - What to do with $400k?

Post by milkandrelish »

Meg77 wrote:It may be worth hiring a property manager to deal with for you so you can keep it and continue building equity via mortgage repayment (and maybe appreciation) while you are not working and presumably not building wealth otherwise. I'd only do that if you plan to hold it for the long term and/or move back into it at some point though. Otherwise selling now during a good RE market and minimizing the risk of having to deal with tenant drama from abroad is probably a good idea.

As for what to do with the money that would depend largely on details we don't know (your age, your income, your current assets/net worth, your debts if applicable, how long you plan to be traveling/retired, whether you'll be employable when you return, etc.).

Ideally I would love to hold on to the house and reap the benefits on a steady income (primary) and appreciation (secondary). That said, appreciation is uncertain, the market is strong in LA right now, and I'm worried more big repairs will pop up!

--

To answer your second point about my details - I know very little about trying to make as much interest as possible (and being able to withdraw it for expenses). I'm 27, I'll have minimal income over the next few years unless freelancing really takes off, right now my net worth is about $450k and if I sell the house I'll have no debts.

I think I'll be employable when I return, but I don't expect to jump into the same industry, as I don't enjoy it.
avalpert
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Re: Indefinite Period of Travel - What to do with $400k?

Post by avalpert »

Sell the house and invest it in your portfolio. You will have fewer worries, more liquidity and probably end up with higher returns on the investment.

The last thing you need when you are hitting the road indefinitely is complexity sitting in Los Angeles.
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JDCarpenter
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Re: Indefinite Period of Travel - What to do with $400k?

Post by JDCarpenter »

avalpert wrote:Sell the house and invest it in your portfolio. You will have fewer worries, more liquidity and probably end up with higher returns on the investment.

The last thing you need when you are hitting the road indefinitely is complexity sitting in Los Angeles.
+1, especially with that equity constituting 90% of OP's assets at age 27 (which is a pretty impressive level of accumulation, BTW!)
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sfnerd
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Re: Indefinite Period of Travel - What to do with $400k?

Post by sfnerd »

I agree. Handling the complexity of renters when you're a world away is NOT fun. I did it for a long time. I was lucky (usually very good renters; the area was perfect for renting), and even then I occasionally had some really bad weeks throughout the years where I was trying to troubleshoot problems while on vacation or a work trip. Nothing like waking up and talking to a tenant when it's 4AM your time and you're only half sober from being out with colleagues until 1AM.

Buy some index funds and forget about them until you return from your long travels. Keep enough cash for a huge emergency and 6+ months of expenses in an accessible account (or two, preferably, like C360 and Ally, in case one stops working while you're abroad). Enjoy!
halfnine
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Re: Indefinite Period of Travel - What to do with $400k?

Post by halfnine »

At 90% of your NW definitely sell the house.

Freelancers are a dime a dozen in Chiang Mai. It's the right place to be to find your tribe, get advice, make connections.

I am not sure how far you've researched Australia. Unless you are from a country where you can get a working holiday visa, you are going to be out of luck with staying more than a few months.
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Meg77
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Re: Indefinite Period of Travel - What to do with $400k?

Post by Meg77 »

milkandrelish wrote:
Meg77 wrote:It may be worth hiring a property manager to deal with for you so you can keep it and continue building equity via mortgage repayment (and maybe appreciation) while you are not working and presumably not building wealth otherwise. I'd only do that if you plan to hold it for the long term and/or move back into it at some point though. Otherwise selling now during a good RE market and minimizing the risk of having to deal with tenant drama from abroad is probably a good idea.

As for what to do with the money that would depend largely on details we don't know (your age, your income, your current assets/net worth, your debts if applicable, how long you plan to be traveling/retired, whether you'll be employable when you return, etc.).

Ideally I would love to hold on to the house and reap the benefits on a steady income (primary) and appreciation (secondary). That said, appreciation is uncertain, the market is strong in LA right now, and I'm worried more big repairs will pop up!

--

To answer your second point about my details - I know very little about trying to make as much interest as possible (and being able to withdraw it for expenses). I'm 27, I'll have minimal income over the next few years unless freelancing really takes off, right now my net worth is about $450k and if I sell the house I'll have no debts.

I think I'll be employable when I return, but I don't expect to jump into the same industry, as I don't enjoy it.
I was going to say I think I'd keep it if I were you. You can hire a property manager for 10% of rents and still clear over $1000 after the mortgage is paid which should more than cover ongoing vacancies and repairs. You'd probably have a few hundred bucks a month of income as well which can go a long way in a cheap foreign country. The stock market is near all time highs too so dumping your whole net worth into stocks may not work out in the short/mid term either.

On the other hand if you only have $20K or less in reserves currently, I think I'd simplify your life and sell. Give yourself $X ($50K?) to spend on this adventure, set another $50K aside for emergencies and as a "life reboot" fund for when you return, and invest the rest. If/when the adventure fund bottoms out, it's time to get another job.
"An investment in knowledge pays the best interest." - Benjamin Franklin
alaskantraveler
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Re: Indefinite Period of Travel - What to do with $400k?

Post by alaskantraveler »

I will throw my 2 cents in. My wife and I did something similar. We saved up, rented our condos out, and traveled the world for 3 years. Unlike you, we did not have $400k in equity in the properties. We had a handyman lined up, and there were a few times being a landlord overseas was a PITA.

In your case, you have to estimate what your return on investment is with the house. If you own the house for 5 more years, what is your return on your $400k in equity. You are concerned that there may be some large repairs in the near future. How much will this decrease your return.

If I were in your shoes, I would probably sell the house, take the equity and invest, and never look back.
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milkandrelish
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Re: Indefinite Period of Travel - What to do with $400k?

Post by milkandrelish »

Thanks guys, I appreciate all the advice. It sounds like selling it the way to go and this is what my gut is telling me as well. Still, open to additional opinions and thoughts.

Also, thank you for the specifics on WHERE to invest this money. When the time comes, I'm going to look in-depth into options for how to invest that money and how much to pull out for this adventure.
sfnerd
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Re: Indefinite Period of Travel - What to do with $400k?

Post by sfnerd »

milkandrelish wrote:Thanks guys, I appreciate all the advice. It sounds like selling it the way to go and this is what my gut is telling me as well. Still, open to additional opinions and thoughts.

Also, thank you for the specifics on WHERE to invest this money. When the time comes, I'm going to look in-depth into options for how to invest that money and how much to pull out for this adventure.
Do you need income from this portfolio while you travel?

If not, I think a simple 3-fund portfolio would probably work pretty well. Personally I'd be heavy on equities due to your relatively young age.
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Re: Indefinite Period of Travel - What to do with $400k?

Post by supernova72 »

My 2 cents on where to go visit: Have friends doing the Thailand thing. One full-time, one 6 months a year. I've been there twice and maybe you have too. A beer is $2. AU will be a very different experience cost wise (higher of course). If you are a single male it can be overwhelming the attention a western male gets. Everything you read is true + some. Pattaya is an adult playground.

I stayed in Chang Mai and my 'nice' hotel (A/C, breakfast, nice staff, gym) was $29 a night. No kidding.
halfnine
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Re: Indefinite Period of Travel - What to do with $400k?

Post by halfnine »

You'll also have to decide whether you want to continue to be considered a tax resident of California. If you don't you will likely need to sell the house AND relocate to another income tax free state. Typically this would involve transferring your drivers license and financial accounts. You'll probably want to move your address as well to one of the many mail forwarding services available.
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milkandrelish
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Re: Indefinite Period of Travel - What to do with $400k?

Post by milkandrelish »

sfnerd wrote:
milkandrelish wrote:Thanks guys, I appreciate all the advice. It sounds like selling it the way to go and this is what my gut is telling me as well. Still, open to additional opinions and thoughts.

Also, thank you for the specifics on WHERE to invest this money. When the time comes, I'm going to look in-depth into options for how to invest that money and how much to pull out for this adventure.
Do you need income from this portfolio while you travel?

If not, I think a simple 3-fund portfolio would probably work pretty well. Personally I'd be heavy on equities due to your relatively young age.
I do want income from this. I am thinking about re-investing in some turn key rental properties in cheaper markets. Doing research right now, but certainly open to other options!
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milkandrelish
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Re: Indefinite Period of Travel - What to do with $400k?

Post by milkandrelish »

supernova72 wrote:My 2 cents on where to go visit: Have friends doing the Thailand thing. One full-time, one 6 months a year. I've been there twice and maybe you have too. A beer is $2. AU will be a very different experience cost wise (higher of course). If you are a single male it can be overwhelming the attention a western male gets. Everything you read is true + some. Pattaya is an adult playground.

I stayed in Chang Mai and my 'nice' hotel (A/C, breakfast, nice staff, gym) was $29 a night. No kidding.
Thanks for this! I'm really excited to start this journey. Will do more research about specifics when I have figured out how to generate some passive income!
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