Should you sell your house to travel Australia
If you are thinking about doing a lap around this big, beautiful country and have a house of your own, there’s a big decision that needs to be made. Should you sell your house to travel?
In this post, I want to cover as many considerations as I know of, in as much detail as possible to help you think about your own situation, and to make a decision that you’ll be happy with long term.
We left around Australia for ‘a year or two’ (but have recently decided we’ll head back shortly), back in September 2022, and made the decision to keep our home and to rent it out. We absolutely considered selling it, and decided not to. Our decision does not have to be the same as yours, and you might have plenty of good reasons to sell your home.
So, if you are thinking about whether you should sell or not, consider the below. When I say consider, that’s exactly what I mean. This is not financial advice, nor am I telling you what to do; think about it, and make the best decision you can for your circumstances.
What do you want to achieve?
I’ve met a lot of people who just get sick of mundane life and decide to sell up, and hit the road regardless of what that costs, or how it will affect them in the future. You only live once, right? Yes, that is very true, but there is zero chance we’d be making a decision of this level without thinking every single scenario through, and trying to do what is best overall.
Lapping the country is truly unbelievable, and for many people there is nothing that comes close, but if it ruins your financial wellbeing for the next 3 decades, is that something you are OK with?
I always like to think about things in terms of your take home, hourly rate. If you are going to purchase a $50,000 vehicle (or travel for a year), how many hours do you have to work in order to pay for it?
This is not your actual hourly rate either; its the amount you take home, after tax. If you’re doing $40 an hour, you might only walk away with $28 in the hand after tax, and that’s about 45 weeks of work, at 40 hours a week.
Will you be able to get back into the property market?
The Australian property market is a fickle thing, and it has a huge number of complexities that makes predicting what is going to happen next extremely challenging. Property will either go up, down or sideways, and you should consider what that means for you, in each scenario.
If you keep your home, and it goes up in value, that’s awesome. You’ll arrive back to a property that has made you some extra money, and all is well.
If it goes down in value, then essentially the opposite of the above has happened, and you’ll regret not selling it at the higher price (of course, with 20/20 hindsight!).
If it goes sideways, and does nothing for the period you are away, then you’ll arrive back in the same situation as you left, which should leave you feeling neither up or down. Of course, there are costs in keeping a property, so think about that too.
However, if you do sell the property, and any of the above scenario’s occur, how will you feel? If you miss out on a 20% growth over 2 years, or your property loses 20% over the same two years, will you be OK with that?
Stamp duty is extremely expensive, and its not a direct transition back into property if you are selling and re-buying in the same area, so have a good think about it.
It is incredibly easy to get priced out of the market if you travel for a year or more, and we’ve seen that happen recently in Perth where some suburbs have gone up 40% in just 12 months!
Are you happy renting your property out?
A lot of people hate the idea of renting their home out to other people, and there’s nothing wrong with that. Not everyone has the same care factor as you do, and you wouldn’t be the first person to get tenants in who leave the property in a state that you are far from happy with.
On top of accepting whether to rent your property out or not, you need to be prepared to deal with tenants directly through a private rental agreement, or a rental company. Things will break in your house, and need replacing, and you will have to make decisions whilst on the road for how they are repaired, and who is used to do it.
The newer the property the less issues you should have, but it doesn’t always work that way.
Do you intend on relocating or upgrading or downgrading?
A lot of people who do the lap of Australia sell up, with the idea of buying somewhere else when they are done travelling. If this is something you are considering, then it can make a lot of sense to sell your house as there is zero chance that you’ll be coming back.
This has to work for your scenario though. Don’t expect to sell up in Perth and buy in Sydney a year later without taking out a big loan!
What will you do with your ‘stuff’?
If you sell your house, or you rent it out, what is going to happen to your furniture, electronics, family heirlooms, clothes, toys, tools and everything else that one accumulates over the years? This doesn’t just disappear, and storing stuff is not overly cheap anymore.
There’s insurance issues with renting a property out that has some of your gear on it, and that makes life even more challenging.
What will you walk away with if you do sell your house?
It costs money to sell a house, and what you walk away with is determined by the property price, minus your loans, and minus the selling costs. In some cases, you might find that selling your home leaves you with less money than you had access to in the past, and that is a really important factor for travelling Australia.
Things will go wrong, and you want to have an emergency fund that you can draw on if you blow a turbo up, or you destroy a differential, or if your caravan needs emergency repairs done to it.
How easy will it be to get another loan?
Home loans are getting harder and harder to take out, and if your situation has changed dramatically since you took a loan out, or it is going to change when you travel Australia it can be really hard to get anything at all when you return.
What will you do with any profits?
Some people walk away with a significant sum of money from selling their home. If you are in this situation, what are you going to do with the profits? Is it needed to buy a setup to travel around Australia, that you’ll sell when you return home?
If you leave it in a bank account, you’ll get a small amount of interest on it (make sure you at least get this), but you’ll also pay tax on the interest it makes.
If you invest it, is it easy to draw out when you need it, and how secure are the investments?
Inflation is a very real thing today, and money in the bank is losing value every single day, so think carefully about what you do with it.
What did we do, and do we regret it?
Selling our house never really crossed our minds that seriously. We knew Perth was overdue for a good run, and missing out on those gains was too much of a risk for us. We were very close to selling all of our furniture and big gear, and storing the rest to rent out property out.
Instead, it all came together when some family agreed to rent the property out at a reduced rate, with a heap of our stuff stored there in a bedroom that wasn’t going to be used.
Since then, the Perth property market has gone ballistic, and we’ve seen substantial capital growth on our property, and the rental demand has gone crazy too.
We’ve since decided we’ll sell the house when we return, and try and move to a larger block, so it should all work out well (except for the huge demand on houses when we’re buying!).
What should you do?
In the end, whether you sell, rent or leave your home vacant, its a choice you have to be comfortable with. There’s no right or wrong answer here, but run the scenario’s, think about how you’d feel in each and then make a choice that you are comfortable with.
