Property Ownership - should digital nomads buy properties?

Question

I have been a digital nomad for the last couple of years. I have always worked in tech and now run a couple of profitable online businesses that give me a reliable income and allow me to fund a nomadic lifestyle.
I recently exited one of my businesses and I am considering to invest the income from the sale in properties, mainly for 2 reasons:
a) I don’t want to keep wasting my money in renting apartments across the cities I stay
b) I believe in properties as investment and I want to diversify my investment portfolio (mainly stocks)
After years of constant wander from one place to another, now I am the type of digital nomad who sticks to few locations: I mainly rotate across 4 places each year (San Francisco, Medellin, Berlin, Bali). Buying a house in each of those location would be difficult and too expensive. Therefore, I was wondering if there was any sort of service that combines an investment opportunity with the ability to access different properties around the world (even if just for a limited time per year) ?
Imagine living in 4 cities per year and having a house in each place that you can exclusively use for 3 months and at the same time having your investment growing (this depending on the market, of course). Wouldn’t that be great? I believe it could be done via a property fund selling you a share and giving you access to some of their properties for a limited timeframe each year.
Has anyone heard of anything like that?
Thanks!

levelsio · Accepted Answer

Buying properties seems a good idea in the popular mindset, but there might be better investments.
Some numbers show US/EU properties over 30 years only return 3% per year after all the costs and taxes, vs. index funds (like Vanguard, MSCI) that do 7-9% per year over the same time. Those also don’t need management.
So it might be “romantic” to buy property. But it can be a lot of headaches, hidden costs, taxes, when you can also just put it in a fund and sit back!
My exception here would be if you have the ability to buy in an emerging market, unfortunately most of those limit owning property/land for exactly those reasons.

sparrow_23 · Answer

Hi guys,
Just following up here for an update: since when I started this thread 6 months ago, we kept looking for a solution to the problem and together with a couple of fellow nomads we came up with this beta version (more alpha version really) of something we think could work:
www.nomadwise.co
Would love if you could take a look at it and share any sort of feedback 
Safe travels!

levelsio · Answer

heyhannahbailey:

At this point, I’ve been getting rather sick of throwing my money away.

“Rent is throwing money away” is a common misconception and completely false http://affordanything.com/2015/11/24/is-renting-better-than-buying-should-i-rent-or-buy/

Key takeaway: Housing keeps pace with inflation. And when it does produce real gains, it often underperforms the overall U.S. broad market.

Like I wrote above:

Numbers show US/EU properties over 30 years only return 3% per year after all the costs and taxes, vs. index funds (like Vanguard, MSCI) that track markets (like S&P500) that do 7-9% per year over the same time. Those also don’t need management like a rental property or maintenance like a house does.

kyshoc · Answer

I haven’t heard of a service for this, but Tynan did a blog post a couple years back detailing an experience with group property purchases among friends.
(I’m a new user, so I can’t post a link, but do a Google search for An Island, Vegas, Budapest for A Fraction of the Median House Price.)

sparrow_23 · Answer

Thanks Hannah. Would be happy to chat and discuss the topic!

heyhannahbailey · Answer

I’ve been thinking a lot about this for a few years. I’m a designer and creative director and I too constantly move between cities- San Francisco, Berlin, Barcelona and Chiang Mai (generally for a few months at a time). I’ve looked into buying property, but A- it’s expensive (well ok, really we are talking about San Francisco in that regard) and the idea of having to manage it when I’m not there is daunting. But Airbnb and typical rentals don’t give me any sort of return on my investment. At this point, I’ve been getting rather sick of throwing my money away. I’ve been toying around with an idea for a while and am thinking about potentially looking for a partner to help me vet it. If you’re interested in chatting about another venture, give me a shout.
By the way- the answer to your question (should digital nomads buy properties) is yes. It’s the how that the world has yet to figure out.

alexnapierholland · Answer

Property can be a great investment. It depends.
For me, it’s worked out great.
I bought my apartment when I had a corporate job. There’s no way I’d be able to buy that same apartment today. I worked as a freelancer for 18 months and only set my business up a few months ago. You need around three years of consistent earnings for a mortgage broker to take you seriously in the UK, if you have your own business - and you get scrutinised way-harder than salaried employees.
Mine’s gone up by 20% (about £100k) in value while I’ve done nothing.
However, I know people who have bought elsewhere in the UK that have had a rough ride.
Negative equity is of course a potential risk for anyone, but I would describe my location as ‘low risk’ (relatively speaking).
And yeah, having a huge cupboard to keep all my snowboards and gear in while I’m away is pretty sweet. I’m basically a fake minimalist.
If I had a million pounds spare tomorrow, buying two £500k flats in London that each generate around £15,000 income each while holding and probably climbing in value long-term would still be appealing.
The UK market’s in a funny place right now, with values still sitting high on paper, but with lower demand/responsiveness. And I think it’ll be tough for 2-3 years post-Brexit. But I feel the 5-10 year prognosis will still be positive.

sparrow_23 · Answer

thanks for flagging - Tynan’s article was actually interesting!

naz · Answer

Hey! The idea is great. I’m interested in the structure of ownership you guys plan to do? Have you looked into tax implications of owning a share in such a “fund”?
For example some countries (Poland) would consider owning a property being a “center of life interest” and would go after your income to tax.

yann · Answer

Definitely agree index funds and similar ‘set and forget’ investments can offset rent if you’re capital rich, but what attracted me to property is the concept of leverage. In the UK buy-to-let mortgage market, for example, you can control an asset with only 25% deposit. Taking a pessimistic outlook of 3% annual return (also bundling together capital appreciation and rental yield for simplicity), that’s actually a 12% return minus interest on borrowing on the capital you’ve put up.
We’ve essentially traded rental income for paying rent elsewhere, which is virtually the same as owning property wherever you go except as a downside you don’t have a static place to store stuff / return to, but on the upside you don’t have any place sitting empty.
Also agree on the above point - short term (holiday / business) rental looks great on paper, but only commit if you’re ready to commit at least part-time to running it. Long term rental respects your time far more. But that being said, neither is as background as passive index funds.

analogmario · Answer

I, I only read the first post.
In the 80’s there used to be a company called “Tiempo Compartido” or “Time Shares” that you could buy and then choose properties around the world but I guess didn’t work.
If you want to diversify and stop spending money in Airbnb’s and so on.
Maybe it could be a good idea to “hedge it”.
Find some good opportunity under market value similar to what you usually rent, buy it, and rent it out as an Airbnb, and let a company to manage it. Plus you could invest in a property that charges in a strong coin like EURO, while you may sometimes rent in cheaper places.
In Some countries in Europe interested rates are incredibly low, for taking loans/credit.
So if you use leverage wisely your investment on your own Airbnb to let could give you much more money than the one you end up spending to every place you go.
Airbnb, rental… it’s the same.
I am not a finantial or real state expert at all, but been looking and researching quite a lot lately.
Hope that was helpful

sparrow_23 · Answer

Hey!
That’s a fair question! We have been looking into the legal/tax aspect of transnational property ownership over the last few months. So we are currently releasing a new version of www . nomadwise . co with which we like to help in a “bespoke manner” digital nomads buying houses internationally and help them understanding what makes more sense for them based on their income, tax residency, budget, preferred buying locations etc…
To learn more, check out www . nomadwise . co

joshstraw · Answer

One of the key problems I’ve run into is taxation. More and more countries penalise no residents for buying and holding properties.
The other problem you have the holding cost of a property just sitting there.  Of course we all glamorise making money out of them through short term rental, but as someone in that industry I can tell you it’s a lot of work. You need a property manager, cleaner etc. So yes it can be done, but it’s a pain in the ass.
That all said, it can certainly be done, just needs a lot of work.
Josh

flipchan · Answer

Co owning real estate ? Yeah bedcoin dot global is doing that aswell, seems to become trendy

alexnapierholland · Answer

FYI I was still scraping together cash for noodles when I started my business, in Sydney.
Property appreciation is paper money. It’s a nice feeling knowing it’s there, but my bank account still had $20 in it a few times.

ld · Answer

In the US this is called a timeshare property - a part ownership of various properties that you stay at periodically. I bet there’s timeshare options that offer international properties.

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