How to Use Real Estate to Fund Your Travel Dreams

Use Real Estate to Fund Travel Dreams

Are you dreaming of traveling the world by funding these trips through real estate? Luckily, this aspiration isn’t far-fetched.

Real estate investments are known to provide a steady stream of income that’s also high enough to support your wanderlust.

Another great thing is that you can use different methods such as house hacking, flipping properties, and short-term rentals.

If done right, you can create a strong portfolio that’s enough to provide travel funds for exploring the continents.

To make this dream more attainable, this guide will show you how to use real estate to fund your travel dreams.

Read on as we will also share tips on managing debt responsibly and using it to make more money.

Use Real Estate Income as a Revenue Stream

What real estate method is best for those looking to get enough money to travel the world?

This section will explore our top pics starting from home equity up to using arbritrage from short-term rentals.

Leveraging Home Equity

If you already own a home, then cashing out on your home equity can be a way to finance your travels. But what is home equity?

This is basically a portion of your property that you truly own and you can get a specific amount by subtracting your remaining mortgage from your property’s current market value.

Top tap into your home equity to fund your travels, and you can consider taking a home equity loan.

This means you can borrow a lump sum of money from your bank using your home as collateral, and you will repay the loan and interest over a set time.

You can also use the Home Equity Line of Credit (HELOC) as it allows you to draw money on your home’s value, and then repay on the amount you used.

This method is more flexible and can be used to cover specific travel expenses without biting off more than you can chew. 

✅Pros and Cons

While there are benefits to this method, there’s also a negative side worth exploring.

Basically, you get access to a large amount of money at a lower interest than traditional loans, which can be instrumental in covering specific costs.

However, investors need to be aware of the risks such as losing the property if you fail to repay the loan on time. 

House Hacking

House hacking is another genius way to generate rental income from your primary residence to sponsor your travels.

It means using parts of your house to earn rental income, which means renting out extra rooms or converting some spaces like the garage into a rentable unit.

This strategy is made easier to execute on such platforms like Airbnb where you can list your space for short-term lease and generate rental income.

The benefit of this method is that you can make money with your home without risking ownership of the property by taking a loan.

Some people even use this method to cover their mortgage, and based on the potential income, it will be more than enough to cover your travel expenses.

Note that you don’t need to use spaces like a spare bedroom as places like the garage or basement are more than enough as long as you convert them to functional spaces.

✅Pros and Cons

House hacking is an excellent way to fund your trips since it generates income without needing a loan or risking your house. However, it does mean you have to share your living space with someone else, which increases responsibilities, especially for maintenance.

There are also zoning laws and regulations that limit how much modification you can make to your home and how much you can rent out. Consult with a professional before proceeding with your modification ideas. 

Lastly, making a place more functional requires a significant investment, which can delay your travel plans.

Recover your investment first before starting to save up for your travel plans.

Flipping Properties for Maximum ROI

Flipping properties simply means purchasing homes at a lower price, renovating them, and selling them at a higher price for profit.

This is a common real estate strategy and is a way to maximize returns on the property you purchase.

For this strategy to work, you have to know how to spot undervalued properties in good locations. Also note that these properties should mainly require cosmetic cost, not structural, as the latter will cost you way more than most can afford.

Once you have identified the property, the next step is to renovate the home by focusing on improvements that will significantly improve its value.

These areas can include the kitchen and bathrooms as they often offer the best return on your investment.

The next step is marketing, providing professional photos and detailed descriptions to attract buyers and sell the asset quickly and at a higher price.

✅Pros and Cons

Although you stand the chance to make a lot of money when flipping properties, there are some risks you need to consider.

These are why careful planning and diligent execution are necessary to minimize the risk and maximize the returns when you flip a property.

Factors like market fluctuations, unforeseen renovation costs, and other delays can make it difficult to cash out quickly.

Utilize Short-Term Rental Arbitrage

Short-term rental arbitrage involves having a long-term property and then leaving it on a short-term basis. This is quite popular on platforms like Airbnb, which many have used to generate extra income on the side.

For this method to work, it’s important to identify high-demand properties. These properties are in ideal locations that are near the city center and popular landmarks.

This is because short-term rentals have greater demand when located in a tourist area, which attracts tourists and business people. 

Once you have secured this property, the next phase is marketing. Ensure to research about your local regulations to know the restrictions on short-term rentals before promoting your property online.

List the property on sites like Airbnb and other short-term rental websites and use high-quality photos and detailed descriptions that will make your property stand out among the competition.

✅Pros and Cons

With short-term rental arbitrage, you have the opportunity to make a lot of money but it comes with some risks. Factors like tourist market fluctuations and seasonal changes mean your income will be unpredictable.

You also need to manage your property frequently, which is one of the biggest issues with short-term rentals; they require a lot of maintenance.

To save time, some owners need to hire a property manager to manage the maintenance needs of the property. 

Bonus: Tips for Managing Debt Responsibly Before Traveling

Before traveling, you will probably accumulate some debt, especially if you use methods like house flipping or hacking.

So how do you manage it before you neatly pack your travel bags? The first step is to assess your financial situation.

This means checking where it needs attention and can be fixed quickly. So before traveling, try paying down high-interest debt to avoid becoming overwhelmed on your trip.

Leaving unsettled payments can quickly snowball into massive bills that leave you regretting taking the trip in the first place.

Also consider creating a dedicated travel fund, which will be a separate account intended for travel expenses.

This will force you to budget your money and prepare, rather than “going with the flow”, which can quickly get expensive.

To make your travel funds effective, Bay Property Management Group Boston suggests creating a travel fund from your rental income instead of getting a portion from your maintenance fund.

Conclusion

It’s possible to use real estate to fund your dream vacation; what matters is your strategy. You can consider home equity, house hacking, flipping properties, and utilizing short-term arbitrage to generate a relatively reliable income.

Just make sure to be aware of the risks of your chosen method and plan ahead to minimize the effect on your travel funds.