QUICK VIEW:
Is it possible to have a permanent real estate position while travelling longterm? This article explores real estate options for those of us choosing a longterm travel lifestyle.
At Hacking the Road, we are dedicated to finding ways to help people live a Better Life ... on the Road! We are full-time travelers and experience seekers, and we want to share our journey with you. We believe that travel opens hearts and minds, and makes the world a better place. Join us as we explore each new destination.
Real Estate Hacks While You Travel!
Please consult your Financial Advisor for all financial decisions hypothesized in this blog. We are NOT qualified Financial Advisors. The plans developed simply represent an approximation of the strategies we developed for our own full-time travel needs. Hacking the Road does not warrant or guarantee success.
This blog continues our series of travel hacks showing you how to better fund your life on the road.
Whether you own a permanent home while traveling full-time is a perennial question. This blog works through several creative strategies that make your decisions a lot easier.
Our chosen longterm travel model includes a permanent real estate position. However, it was important that this decision not tie up a large percentage of our liquid funds. For most of us, this is your biggest single investment.
This blog will share our thinking as we designed the perfect Goldilocks balance; keeping a permanent base while preserving the liquidity and flexibility of our discretionary funds as we traveled the world.
For those looking for a more comprehensive longterm travel strategy you may want to start with out 5-Years-To-Go Plan. Read on if you are only struggling with the real estate quandary. For more budget discipline strategies check out our Budget 101 blog.
Framing Your Real Estate Strategy: Basic Choices?
Financial circumstances will constrain and determine your real estate strategy once you decide on a life of longterm travel.
Your decisions on the following strategies are important here:
Your chosen strategy largely depends on the following factors:
Owning a permanent home is not an imperative for longterm travel, but it does have several advantages over a rental strategy:
A rental strategy has its own obvious pros and cons. The decision to rent comes with the ultimate flexibility, but also brings with it inherent longterm instability.
Our decision to maintain a permanent home while traveling longterm was influenced by the many benefits outlined above.
The Goldilocks Balancing Act!
The Goldilocks balance between liquidity and tied-up assets was important to us.
Our total assets were below what most people would consider a safe retirement level. This meant we had to seriously consider the trade-offs of tying up funds in a permanent real estate holding:
On a purely financial basis, the real estate ownership decision came down to whether the property could generate sufficient revenue to close the gap between the longterm realty appreciation rate and the longterm S&P return.
The other major constraining factor was determining the minimum liquidity we would need for our longterm travel plans. These liquid discretionary funds needed to be sufficient to support a longterm mid-tier lifestyle on the road.
Our model calculations projected that we could not spend more than 25 - 30% of our asset base on a permanent home. That would be a sizable number for us!
We were limited to homes in the $105,000 - $145,000 range. That was a little scary at first! What kind of a dive could we afford?
Most of the inventory in our range didn't fit the bill. Our searches routinely came up with undeveloped lots, trailer parks, apartments, condos, and undesirable single family homes.
The Impossible Wish List
To complicate things further, our real estate investment would need to satisfy the following pre-requisites:
Impossible? They're Out There!
That sounds like a tall order! But, with a lot of research, and a whole lot of luck, we stumbled on a couple of perfect solutions for our dilemma.
Branson, Missouri
We found the first viable option in Branson, Missouri, for $120,000 (2021 prices). This condo satisfied all of our requirements.
Here's a quick run-down of the numbers--based on our research (2021)--assume cash purchase:
Branson 2-BR Condo | Annual Budget |
|---|---|
Property Taxes | $ 1,000 |
Cable & WiFi | $ 1,200 |
Water & Electric | $ 1,900 |
HOA & Fees (Insurance) | $ 5,000 |
Management Commission & Fees | $ 5,700 |
Total Condo Expenses | $14,800 |
Total Condo Revenues | $19,000 |
Condo Profit | $ 4,200 |
We still needed to cover the gap between our anticipated 3% property appreciation (longterm annual) and the return on investment we would have made had we invested the $120,000 in the market (6%).
On a base of $120,000, our gap is only $3,600 ($7,200 anticipated investment return (6%) - $3,600 from property appreciation).
The above $4,200 profit was more than enough to cover the gap!
Myrtle Beach, South Carolina
Our other candidate was a smaller, fully furnished, 640 sq ft, 1-bedroom, condo in Myrtle Beach, South Carolina, at $130,000 (2021 prices).
Although smaller, the beach front condo was on the 14th floor, with 2 angled ocean view balconies--and tons of amenities.
The HOA shocked us at first, but we felt much better once we realized the HOA included cable, WiFi, electricity, water, linens, and trash. The condo easily satisfied all of our requirements.
Here's a quick run-down of the numbers--based on our research (2021)--assume cash purchase:
Myrtle Beach 1-BR Condo | Annual Budget |
|---|---|
Property Taxes | $ 1,400 |
Cable & WiFi | $ 0 |
Water & Electric | $ 0 |
HOA & Fees (Insurance) | $ 9,500 |
Management Commission & Fees | $10,600 |
Total Condo Expenses | $21,500 |
Total Condo Revenues | $24,600 |
Condo Profit | $ 3,100 |
For comparison purposes, here are the numbers:
On a base of $130,000, our gap is only $3,900 ($7,800 anticipated investment return - $3,900 from property appreciation).
The above $3,100 profit was just $800 short of covering the gap ($3,900). Not bad, we're willing to take a small hit like this!
It's Decision Time, Goldilocks!
Even though the Branson condo performed slightly better in the above analysis, we chose the smaller Myrtle Beach Condo.
The numbers were close, but the South Carolina beach front condo won us over with the amenities, proximity to the ocean, and the amazing local BBQ!
Before we made our offer on the Myrtle Beach condo, we tested our finances against several possible travel scenarios:
Let's take a look at how each of these scenarios performed when tested:
Longterm Travel Scenario One Stress Test
Scenario One Assumptions
Scenario One Budget
Scenario 1: No Travel | Annual Budget Detail |
|---|---|
General Budget Total Need | $29,000 |
Rent While Traveling | $ 0 |
HOA & Related Expenses | $13,000 |
Property Mgmt Fees | $ 900 |
Total Expenses | $42,900 |
Condo Revenue | $ 0 |
Investment Returns @ 6% | $24,000 |
Remote Work Income Needed | $18,900 |
The Scenario One shortfall of $18,900 represents less than a 4.8% drawdown against our invested funds.
Worst case, we'd easily cover that amount with Remote Work or consulting. Scenario One passed our test with flying colors!
Longterm Travel Scenario Two Stress Test
Scenario Two Assumptions
Scenario Two Budget
Scenario 2: Travel 5 Months | Annual Budget Detail |
|---|---|
General Budget Total Need | $33,000 |
Rent While Traveling | $ 6,000 |
HOA & Related Expenses | $13,000 |
Property Mgmt Fees | $ 8,000 |
Total Expenses | $60,000 |
Condo Revenue | $18,000 |
Investment Returns @ 6% | $24,000 |
Remote Work Income Needed | $18,000 |
The Scenario Two shortfall of $18,000 represents a 4.5% drawdown against our invested funds.
Worst case, we'd easily cover that amount with Remote Work or consulting. Scenario Two passed our test as well!
Longterm Travel Scenario Three Stress Test
Scenario Three Assumptions
Scenario Three Budget
Scenario 3: Travel 10 Months | Annual Budget Detail |
|---|---|
General Budget Total Need | $33,000 |
Rent While Traveling | $14,400 |
HOA & Related Expenses | $13,000 |
Property Mgmt Fees | $11,000 |
Total Expenses | $71,400 |
Condo Revenue | $24,000 |
Investment Returns @ 6% | $24,000 |
Remote Work Income Needed | $23,400 |
The Scenario Three shortfall of $23,400 represents less than a 5.9% drawdown against our invested funds.
Worst case, we'd easily cover that amount with Remote Work or consulting. Scenario Three passed our stress test, no problem!
You Can Do This!
Given the successes of the three Scenario Stress Tests and our original pre-requisites, we felt really comfortable taking the risk of purchasing the Myrtle Beach condo.
More than two years after this important purchase, we are glad to report that revenues and expenses have performed about as expected--no big surprises.
Having given this a lot of thought, we have chosen a version of the Scenario Three for our travel strategy.
We usually aim to stay at our condo for 10 weeks during the November - January low-season. In this way, we maximize annual condo revenue and still get to enjoy our home!
The intent of this Blog is to provide a framework for analyzing your own financial scenarios. You may have very different levels of funding and lifestyle requirements. Simply adjust the above scenarios to fit your realities.
For example, ff you have funding higher or lower than the base $530,000 we used in this analysis:
A Few Final Thoughts
This model only explored two high-demand destinations--Branson and Myrtle Beach. States like Florida, Texas, and Georgia have similar reasonably-priced condo opportunities.
A high-demand location is key to guaranteeing the required rental revenue you will need to sustain a longterm travel strategy.
For those of you not interested in traveling, you might simply want to downsize your larger primary residence and exchange it for a smaller condo in Myrtle Beach or Branson.
It's time to live the Better Life you always dreamed you would live!
A smaller home in a great location could change everything for the better. Some of the equity from your larger home can be used to pay off your remaining debt so you can really enjoy your new amazing location!
We look forward to seeing you out there...
Follow Us!
