When it comes to being a digital nomad, everyone talks about passive income – from products, from royalties, or from businesses that you’ve systemised so other people can run them.
You never hear about passive income from property investing (or “real estate”, if you insist). And with good reason: it requires a load of money and a lot of research to get started, the rules are totally different from country to country, and it seems fundamentally incompatible with a life of travel.
It’s not particularly helpful for most people, so we’ve not written much about our own investments. But as we keep being asked about it…why would a digital nomad want to own a bunch of houses?
Property as passive income
There are plenty of digital nomads who don’ t have a passive income: they make their money by providing services for clients while moving around the world with their laptop. Our main business, in fact, is totally dependent on our own time and efforts.
But having a passive component is great. It means we’re not starting from zero every month, and we can be much more picky about the projects we take on – keeping time aside to work on our own projects.
We didn’t have ideas for products, or the experience to set up a business that could be run by someone else. But we did have savings, and it made sense to put those savings to work.
In fact, we started a few years before we even knew the digital nomad lifestyle existed. We had one investment property, then we rented out our own home when we left. And while in Thailand, we just bought another one.
Rather than buying shares, wine, gold or anything else, property was the perfect investment for us:
- Property interests us. This is a big one. Because we love it, we’re more likely to do our research and keep on learning.
- It naturally creates a reliable monthly income, which is what we need to boost the income we create from our business.
- The intrinsic value is relatively stable. Property prices in the UK will fluctuate, but won’t suddenly drop 50% like a company’s shares could.
- The rental yield is also relatively stable. Demand is strong, and rents move in line with wages so they’re unlikely to plummet.
- You can use leverage (in the form of mortgages) to magnify the returns.
It’s not going to be right for everyone, but it was right for us. And weirdly, it fits in surprisingly well with a location independent lifestyle.
How can you do it from anywhere?
Owning property doesn’t seem like something you can do from anywhere in the world. Most people invest near where they live, and there are definite advantages to doing that, but it’s totally possible to own a house without popping round every time a sink gets blocked.
So how did we do it, and how could you do the same?
Have some cash in the bank
There are always “no money down” techniques floating around, but we’ve always bought with decent-sized deposits. And although we’ve never earned megabucks with our careers, we were able to save up enough because we hate shopping and really aren’t that into “stuff”. (We agree with Ramit Sethi that giving up small things – like a daily Starbucks habit – won’t really save that much money, but things like the “odd” £200 dress or £1,000 widescreen telly really do.)
Start with the end in mind
Even before we knew the location independent lifestyle existed, we knew we didn’t want to be too hands-on with our investments. That meant we were able to pick a strategy whereby things pretty much run themselves.
We could have made higher returns by going down a different route that involved more day-to-day work, but we made a deliberate choice to be lazy and forego some profits as a result.
Research like crazy
Before doing anything, I spent probably hundreds of hours learning everything I could about different ways of investing in property – reading books, browsing forums, and asking advice from people who specialised in relevant areas.
Then once we’d settled on an approach, the research for specific deals could be done from anywhere. I did the bulk of the research for our most recent property while living in upstate New York – then we viewed it in London, and it completed while we were in Thailand.
Build a strong network
As with all types of business, building a network before you need it makes everything so much easier. And of course, a lot of networking can be done purely online.
Because of the network I’d built, for our recent purchase I was able to set up Skype calls with a few people who’d done exactly what we wanted to do. I’d also built relationships with agents, a mortgage broker, a solicitor and some advisers, so everything was in place for when we found a good deal.
Then, when we were back in the UK, all that was left was to do some viewings. Once we’d found a perfect place and had an offer accepted, the team was in place to take care of everything else.
(Alternatively, you could pay a company to invest for you and have a totally “armchair” investment. That can be the best course of action, but to avoid being ripped off you should make sure you really know your stuff first.)
The internet solves everything
While we’ve been away we’ve had broken showers, a malfunctioning light switch, a fridge on the blink, tenants leaving, and the council kicking off about parking permits.
Things will go wrong, but we’re yet to encounter anything that can’t be sorted over Skype or Mybuilder.com. Again we’re eating into our profits by paying other people to go and fix things, but we’re so useless at DIY we’d do that even if we lived next door.
Sound good? Bear this in mind…
- You need to be comfortable with risk. At any time, a million things could go wrong without any warning – and while we like to think we’ve planned for everything, one day we could be completely tripped up.
- Research is everything, which is why it helps to find the learning enjoyable. Property’s my hobby as well as an investment, and I’d not recommend it if you’re plain not interested.
- There’s no such thing as truly hands-off. Just delegating and staying on top of paperwork takes time. And when something goes wrong, it’s normally without warning and you have to react to it right away – wherever you are, and whatever your plans are.
- Details matter. You’re dealing with people’s homes, so there are rightly a ton of regulations and laws. I know tenancy law inside out, meaning even if I’ve delegated something I can tell if it’s being done properly.
Do you have somewhere back home that you rent out? Or have you picked something else to invest in? Let us know in the comments!