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Buy a house and travel RTW for 1 year to 18 months?

jetlagged

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  • Added on: May 10th, 2011
just a brief background on myself since this is my first post.

I live in the U.S. I'm currently 28 years old, turning 29 this fall. i graduated from college 5 years ago, i've been working at the same job since then, and during that span i've only been to 2 countries, 1 of which i did solo and planned on my own. Both trips lasted on average 2 weeks, but despite the short time i spent, it was really memorable. i know i want to travel the world for 1 year at the minimum, 18 months at the maximum. Simply put, i want to see the world before i decide to work for the next 30 years of my life. I want to put my plans and motion into place just before I turn 30. so I got more than a year to plan this out.

i live with my folks, so i don't really have to pay a lot as a result, and managed to save up nearly 70 percent of what I’ve been making during that span. my friends are not really supportive of me traveling the world, they say stuff like, "why are you going to quit your job in this bad economic times, you probably won't get a job when you return." another thing they tell me is "you're really dumb and stupid for not buying a house at this time when they are so affordable." i know what people might say, if your friends say that stuff to you, they ain't really your friends. Even my parents aren't supportive of my dream to check out and travel the world.

Yes I feel like at times my peers have already surpassed me. They are married, have kids, and they own a house.. Even people younger than me have something to show for their accomplishments. I’m happy for them. But for me, I have nothing really to show. I've been working for a goal that I can travel the world for 1 year to 18 months. I have the income to actually do it now, but haven't planned anything yet. this is just something I have to do before I am content with working for the next 30 years.

here's the situation or questions I have.

Should I buy a house now, save money for the next 14 months, then quit my job, and travel the world for a year? Is that reasonable? I was thinking of renting it out when I’m gone traveling the world.

Or is it better to travel the world w/o any financial obligations like paying mortgage and etc that comes with owning a home?

I know it’s the perfect time to buy a home, and the prices in my area especially in California are ridiculously affordable now. and there is no guarantee i can get a job right away when i come back from my round the world travel.

Well, I can probably just go house hunting and look for that perfect home and see if there’s one I like in a good neighborhood, and at an affordable price.

If I can get this cleared up out of the way, I can finally start planning my world travel. The question above is just eating me up and I’m not sure how to go about it.

2wanderers

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  • Added on: May 10th, 2011
jetlagged wrote:Should I buy a house now, save money for the next 14 months, then quit my job, and travel the world for a year? Is that reasonable? I was thinking of renting it out when I’m gone traveling the world.
There's complications to renting out a house. Finding tenants with the advance knowledge that they're getting the boot in x months can be difficult. You'll also have to pay a rental agent. That said, another BNAer (Nancy) used rental income to finance a 3 year family trip. However, they owned their property free and clear, and also had enough cash in the bank to buy 3 more properties after prices came crashing down.

The biggest question on "buy before or after" is whether you really want to return to your current home. If you do, then buying now may be a good option. But if you're in an area where the job market is unusually tough, or if you're not that thrilled with your home town, it's best to stay property-free so you can decide where to settle later.

Certainly from an employment perspective, not owning a home allows you to be open to chase the best opportunity anywhere in the world.
Or is it better to travel the world w/o any financial obligations like paying mortgage and etc that comes with owning a home?

It is easier. But it can be more expensive. My wife and I missed out on a huge step up in real estate prices, so having no home obligations probably added $100k to the cost of our trip, and delayed moving from a condo into a house by 5 or more years.

If I had a crystal ball, I would have arranged the trip financing differently. (Of course, if I had a crystal ball I would have bought puts on Bear Stearns, and be retired on a beach somewhere by now.) But I have no regrets, traveling long term was one of the best experiences of my life. As my wages have risen, I've increasingly seen the extra costs as just a bump in the road, so I'm not too bothered by the money side of things these days.
I know it’s the perfect time to buy a home, and the prices in my area especially in California are ridiculously affordable now. and there is no guarantee i can get a job right away when i come back from my round the world travel.

Don't feel you have to buy a house, just because it's what other people are doing. Make sure it's the right decision for you. Buying will certainly delay your trip, but it's also possible that it may scuttle it. The extra costs of home ownership might throw off your savings plans so that you can't leave in 14 months like you planned. Then you meet someone and before you know it, your dreams of traveling are on the back burner and your commitments make it nearly impossible to realize them.

halfnine

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  • Added on: May 10th, 2011
2wanderers wrote:Certainly from an employment perspective, not owning a home allows you to be open to chase the best opportunity anywhere in the world.


Number 1 reason not to buy a home until later. Unless, of course, you are absolutely dead set that this is a one-off trip, you're not going to meet your spouse on the road (I did), and you're definitely coming back and living/working in the same locale.

vagabondette74

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  • Added on: May 10th, 2011
I vote don't buy. Your trip will change you. When (if) you come back, you may want a completely different lifestyle in a completely different location. Don't tie yourself to an area before you've experienced anything else.

The first time I traveled overseas I left from Phoenix and 14 months later I returned to DC. Had I purchased a home in Phoenix before I left, I'd have had a LOT less options. 5 years later I realized I wanted to travel full time and, still houseless, doing it was relatively easy because I had nothing tying me down.
Traveling through Mexico and Central America starting in January '09. Hit me up if you want to meet!

Mama-to-many

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  • Added on: May 10th, 2011
where exactly do you live? (OK you may not want to give a city/town - but is it an area that is dying or are there future prospects there? - even if the prospects are not for you, but for someone who might need to rent a place)
how much $$ do you have? Saving 70% for five years could be quite a bit - so you might be able to do house AND trip.
where do you want to travel?
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busman7

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  • Added on: May 11th, 2011
After a year+ of travel, you will change. Best not to have anything tying you to a specific area (or country)!
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"I started out alone to seek adventures. You don't really have to seek them - that is nothing but a phrase - they come to you." Mark Twain

Bideshi

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  • Added on: May 11th, 2011
I agree with the general consensus here - there's no way to predict where you'll really WANT to be when you're done traveling. Best not to have a house holding you back.

Plus, between taxes, unforeseen repairs, general maintenance costs, insurance.... well, you might be spending more money on your house while you're traveling than on traveling, and you'd always have it on your mind, too. And if you need another reason, there are a number of articles in many publications similar to this: http://www.examiner.com/real-estate-news-in-national/predicted-home-price-double-dip-arrives-price-bottom-delayed-until-2012. It's not like housing prices are going to rebound back to pre-crisis levels within a year or two. You'll do just fine if you wait until you get back. Bideshi says so. :shock:

Don't worry about your peers. This is important. By the time they're in their mid-30's they'll look at your life full of travels and freedom and wish they could switch places. I say that from experience. Don't get fooled into thinking they are "ahead" of you. I'm coming up on MY mid-30's now and I'm just starting to work out what I'm going to do for a career, as I'm astonishingly unqualified for anything... but I've been out in the world for 5 1/2 years, did two RTW trips, visited 62 countries, and met my fiance. Nobody back at "home" saddled with a career and mortgage thinks they made the better choice, I can tell you that!

Get out there and have a great trip. You'll never regret it!

Cpullen

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  • Added on: May 11th, 2011
Ok. So I'm going to disagree with the others and give you another point of view. First, like everyone else here I think travel is very important. I am a 44 year old woman who lives in the Los Angeles area and is getting ready to take my family (kids are teenagers) on a 9 month RTW trip. Unlike many of our friends, my husband and I did whatever it took to get into the Los Angeles housing market when we were young. Now we have the freedom to travel and make life choices based on what we want to do (even in this down real estate market). Our wealth came not from our jobs but from the increase in value in the properties we purchased. Our friends, who didn't think buying a house was important, still don't have one. They live paycheck to paycheck, are still paying rent (20 years later) and are bitter. The advice I give to all young people is that buying a home in the Los Angeles area is the most important thing they can do in their twenties. The second most important thing they can do is buy a second one for rental.

I like the buy a home, save for a bit longer, and then rent it out while you travel option. We rented ours with no problem. Then you have other people creating your equity while you travel the world. You are obviously money savvy since you saved most of your salary. The world will still be there in 14 months, but odds are the house will have gone up significantly and you will come home broke. Real estate in Los Angeles is like a savings account with an unbelievable interest rate. ESPECIALLY when you buy this low.

Best of luck to you!

greenbored

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  • Added on: May 11th, 2011
Cpullen wrote:Unlike many of our friends, my husband and I did whatever it took to get into the Los Angeles housing market when we were young.


Unlike many of our friends, my wife and I did whatever it took to go RTW while we're young.

Mama-to-many

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  • Added on: May 11th, 2011
greenbored wrote:
Cpullen wrote:Unlike many of our friends, my husband and I did whatever it took to get into the Los Angeles housing market when we were young.


Unlike many of our friends, my wife and I did whatever it took to go RTW while we're young.



We did both;-)...well, not a house in LA, but in Auckland. A house all the same.
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halfnine

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  • Added on: May 12th, 2011
Cpullen wrote:Our friends, who didn't think buying a house was important, still don't have one. They live paycheck to paycheck, are still paying rent (20 years later) and are bitter.


That has more to do with poor choices with money than with owning a home. Renting and investing the difference with a diversified portfolio over the long run outperforms real estate in most cases and has significantly less risk. The important point is investing the difference. Unfortunately, many people do spend this money instead of investing it.

Cpullen wrote:The advice I give to all young people is that buying a home in the Los Angeles area is the most important thing they can do in their twenties.


LMAO

Cpullen wrote:The second most important thing they can do is buy a second one for rental.


Rental property is a great way to diversify provided one already has established a well diversified portfolio. See risk above.

Cpullen wrote:Real estate in Los Angeles is like a savings account with an unbelievable interest rate


Except you can't lose the principle in a savings account.

Cpullen wrote:The world will still be there in 14 months, but odds are the house will have gone up significantly and you will come home broke


What is going to drive the market up? And why are we coming back broke?

You are obviously money savvy since you saved most of your salary


Which is why you wouldn't need to buy a home to have "forced" savings. Odds are you'd be better off with a diversified portfolio. The short of it is there are a lot of personal reasons for home ownership but as an investment isn't one of them.

Although, it has a few minor flaws, the best calculator to use for property in America to look at one's own circumstances:

http://www.nytimes.com/interactive/busi ... lator.html

vagabondette74

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  • Added on: May 12th, 2011
I agree, anyone who thinks that owning a home is an investment these days is stuck in a mentality that was only valid decades ago. Buying a house only makes sense if you need someplace to live and you KNOW you will be there for a couple decades. Otherwise, other investments are a much better option and for someone who is young and will likely move several times before they settle down, owning a house is more akin to a millstone than a help.
Traveling through Mexico and Central America starting in January '09. Hit me up if you want to meet!

Kate and Dan

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  • Added on: May 12th, 2011
vagabondette74 wrote:Buying a house only makes sense if you need someplace to live and you KNOW you will be there for a couple decades.


Actually, buying starts to make sense after committing to stay in a place for about five years. That's not to say I agree with you in principle — but I think that this statement is too broad to apply to all countries and regions. For example, if my wife and I had not bought our house four years ago, we'd have pretty much been priced out of the city in which we've chosen to live. Aside from the blip in 2008, real estate prices have gone up ~10% yoy. If anything, buying a house four years ago has provided us with more options — not less. Given our situation, we certainly don't see it as a millstone.

halfnine wrote:Renting and investing the difference with a diversified portfolio over the long run outperforms real estate in most cases and has significantly less risk.


It's easy to toss around reasons it's always better to be a homeowner (mortgage-interest deduction for those in the US) or it's always better to be a renter (no property taxes, etc).

I think that the more complicated truth is that at certain times it makes more sense to be one or the other.
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greenbored

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  • Added on: May 12th, 2011
from what i've learned in the couple years i've been planning our RTW is that there are always reasons NOT to go on your trip. shoot, we leave in about 10 days and still have moments of "are we doing the right thing?"

i work in finance and understand the value of building equity by owning a home. we're about your age and in the same situation...a lot of our friends are having kids and buying houses. but for my wife and i, taking this trip while we're young and have little responsibilities is a once in a lifetime opportunity. maybe we could buy a house, then another, then have some kids and then go on a big trip when we're a little more financially stable in 15-20 years...but for us all those additional responsibilities would give us more reasons not to take one.

Mama-to-many

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  • Added on: May 12th, 2011
greenbored wrote: but for my wife and i, taking this trip while we're young and have little responsibilities is a once in a lifetime opportunity. maybe we could buy a house, then another, then have some kids and then go on a big trip when we're a little more financially stable in 15-20 years...but for us all those additional responsibilities would give us more reasons not to take one.


It needn't be a once-in-alifetime opportunity.
My hubby and I travelled for the first three years of our marriage (that is to say, we moved from New Zealand to Poland via a slightly roundabout route and then stayed there for a couple of years) We lived hand to mouth and had just enough money left over to send letters home.
That was age 20-22. Then we returned home, hoping that we might be able to have kids some time (a few misscarriages were starting to make us wonder), and definitely wanting to study, having now discovered what we wanted to do with our lives. (We had already begun degrees, but finished with more direction and husband went on after completing an engineering degree to do a masters in applied linguistics! Current job combines the two interests)
As it turned out, having babies ended up being something we were good at ;) Eight of them in under twelve years. This did not make us give up thoughts of travelling - in fact, we were determined that they should not grow up only knowing kiwi suburbia. Hence fifteen months on the road recently, a constant interest in others overseas (the kids are currently working on a project from home for Big Brother Mouse in Laos where we volunteered for a time)....and we're dreaming up the next adventure. Having a house has made it possible for us to travel with a large family - we could not hitchhike now like we used to, and while we were happy eating next-to-nothing but cabbage in barely-post-communist Poland, we feel responsibility to feed our kids healthily as much of the time as possible!

Don't let house and kids stop you!
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