Is Geo-Arbitrage A Financial Fairy Tale?

When people talk about geo-arbitrage, they often tout the amazing advantages of moving from a high-cost location to a lower cost region.  It’s all double rainbows, unicorn farts, and ice cream sundaes when you read about geo-arbitrage on the internet.

I wish the real world worked that smoothly.  You don’t often read about the high cost of moving and all the little financial snags that happen along the way.  These “problems” get glossed over to tell a rosy story on the internet, but I can tell you from personal experience that the reality of geo-arbitrage is far from perfect!

Sure, throwing money at problems can usually solve them, but this sort of defeats the purpose of geo-arbitrage in the first place!

In our case, the Tako family recently moved from the Seattle area to a small town not far from Tucson, Arizona.  This was a move of about 1500 miles (2414 kilometers).  Generally speaking, Arizona is considered a “lower cost” state, but the numerous issues we’ve run into during our move have actually made it very costly.

Today I’m going to walk you through some of the “expensive challenges” we ran into, and let you know the financial realities of our own geo-arbitrage adventure.  It’s been a frustrating move to say the least, because we’ve run into a ton of problems (both large and small).

Read on to find out exactly how much this geo-arbitrage move cost us!


A Housing Slowdown

If you’re a frequent reader of this blog, you probably know that we put our house up for sale the last week of June 2022.  The plan was to put the house on the market right after the kids got out of school.

On the surface this plan seemed good — In the first half of 2022, the housing market was doing awesome (some might even say ‘hyper-active’).  Most houses would see multiple offers in about week.  Typically above asking price too!

It seemed like a good time to sell.

Unfortunately our timing was terrible!  The housing market shifted dramatically in the two weeks before we listed our home.  Interest rates shot-up to decade highs, and buyers dried-up overnight.  Uh oh!

While some home sellers can afford to wait months and months for their home to sell, we had a tight deadline.  We needed to move to our new home quickly, and have a new address before August 3rd (the school year starts here on August 3rd).

I didn’t plan on having our house sitting on the market for an extended period of time, but that’s how the cards played-out.  There wasn’t anything I could do at that point.  I literally locked the doors and drove off.

redfin yard sign
I never even saw the “For Sale” signs go up. I just locked the door and left!

This meant we had to sell our house entirely remotely, and this took a lot of trust on my part.  Thankfully we had some very good neighbors in the area that were willing to keep an eye on the house (and mow the lawn) while it sat on the market for a longer than expected time.

This might not sound so bad until you realize that we had to pay both our mortgage ($2313 per month) AND pay rent at the new place in Arizona.

On top of the mortgage and rent, we also needed to pay for professional staging (i.e. fake furniture) to make the house look nice for pictures and tours.  This cost $4245 for the first month, and then $1700 every month after that.

In total, missing the top of the real estate market probably cost us $200,000 and added a whole bunch of stress because of the cash flow needed to pay for two places at the same time.

It took about two months for the house to sell, and we ended-up selling our home for 20% off of the ‘peak’ price in our neighborhood.  State taxes, agent fees, and title transfer fees amounted to slightly over $100,000.

This isn’t a terrible result, but it will cut deeply into what kind of home we can afford in Arizona.


Rental Challenges

After leaving town, we stayed with my parents for one week.  This was the only cheap part of the move.  I only had to cover the cost of groceries and cook half of the meals.

Eventually we packed our bags again, and headed south.  The drive itself was very uneventful, and we arrived in the Tucson area without issue.

When we arrived, we stayed in a wonderful Airbnb for two weeks.  This cost $1500 for 14 days.  In hindsight, staying in such a nice place probably wasn’t a good idea.  Our expectations were set very high.  Once we began looking for rental houses, it was a big disappointment because the available rental houses were few, run-down, and rather expensive.

temp airbnb home
Our temporary airbnb was a really nice place… maybe too nice!

To make matters worse, most property managers would NOT rent to us for less than one year.  Nobody seemed willing to do a 6-month lease.  “One year lease minimum!” they all said.  And breaking a lease in Arizona is not something you want to do (it’s very expensive).

It’s been awhile since I’ve rented an apartment or house, but a one year minimum lease in a college town seems like a really tough sell.

Why didn’t we want to sign a one year lease?  We planned to begin house shopping just as soon as our house sold.  We didn’t know how long the sale was going to take, so we wanted a rental with a little flexibility.  One year was probably too long to be locked into a rental.

Finding a rental house took two weeks of continuous searching before I found a place.  This was a week longer than I expected, but eventually we found a property manager willing to do a 6 month lease (with the option to go month-to-month after that).  The monthly rate on this small (1640 square feet) house is $2200/month.

new rental house
Our new rental house. It’s small, but at least I can afford to pay rent AND the old mortgage at the same time.


Unexpected Moving Challenges

Moving itself has a large financial cost if you’re taking more than a couple of bags with you.  We ultimately decided to take 4 Uhaul Ubox containers of stuff with us to Arizona.  In total, this was 1028 cubic feet of “stuff” we shipped.  It cost just over $6,000 to ship and deliver.

This kind of move is far cheaper than full service movers like Atlas or United Van lines.  I got quotes from all of the full-service movers and ‘pod’ companies, and it soon became very clear this ‘pod’ style of moving is the most affordable.

That’s not to say there weren’t problems using Uhaul’s Ubox service.  For one, Uhaul is supposed to call and tell you when the containers will be picked up or delivered the day before they arrive.  Uhaul provides a 4-hour window for that day.

This went fine in Washington, but unfortunately in Arizona our Uboxes didn’t arrive as planned.  They arrived 4 days late!  That’s right, they called to tell us our stuff would be delivered, and then nobody showed-up!

I spend many stressful hours on the phone trying to find out what happened to our stuff.  Finally, 4 days after the scheduled delivery date they actually arrived!

missing uboxes
Hurray!  Our Uboxes arrived… finally… but 4 days late!

This meant we were camping on the floor for four days.  I was aware these kinds of problems happen, so thankfully we had sleeping bags, pads, and other necessities already prepared.  Mrs. Tako and the kids were actually pretty good sports about all of it.

Unfortunately, due to the delays, I had to pay for another whole month of storage for the Uboxes (even though it was just a few days over).  This cost an additional $550 for a month of “storage” for the 4 Uboxes.

As far as I can tell, most of our furniture arrived undamaged, and in good condition.


Heating & Cooling Challenges

Going into this geo-arbitrage adventure, we knew the climate in Arizona was going to be drastically different from Washington.  We were moving from one of the wettest and cloudiest places in the United States, to one of the sunniest and warmest!  The change was going to be dramatic, and our energy costs were going to shift from heating most of the year, to cooling most of the year.

cactus bloom
We’re still getting used to the dramatic change in climate after our move. It’s SO different to need cooling instead of heating!

The problem with rental houses, is that you never know what your energy costs are going to be until you actually live in a place.  I figured the cooling costs in the summer would be similar to our old heating costs in winter.

What I didn’t realize is that the rental house we moved into did not have a fully functional AC unit.  To be fair, it worked enough to convince me to sign the lease, but we realized within a day that the AC unit couldn’t cool the house down to a comfortable temperature.  This half-working AC unit has to run constantly just to get the indoor temperature under 84F.

When we get our first power bill, it’s going to be absolutely astronomical!  Will it be $500, or more?  I let you know in my monthly financial reports when I get it.

On top of this I made a really dumb mistake — I assumed that the power company was also the gas utility provider (like it is in Washington and many other states).  It’s not!  When I setup the new utilities for our new rental house, I neglected to setup the gas with SouthWest Gas.

Woops!  That was dumb!

To make matters worse, turning on the gas isn’t as simple as making a phone call.  They actually have to send someone out turn on gas appliances, and test the gas lines.  It can take over a week before they send a technician out to turn on the gas!

So, we ended-up going without hot water for a week!  It was totally my mistake because I didn’t understand how things work here.

On the bright side, this worked out surprisingly well given the fact that the AC unit doesn’t work properly.  Cold showers are a great way to cool off!


Unoptimized Shopping

Any time you travel, you’re automatically putting yourself into situations where you don’t know how to get the best deals.  You’ll over-pay due to simple ignorance.  This means any kind of shopping is unoptimized.  The same goes for when you move to a new location — We don’t know where to shop to get the best prices!

When we lived in Washington, we knew all the best places to shop.  Our life was highly optimized.  I knew how to get all the best deals.  Unfortunately, I’m still adjusting to our new life here in Arizona.  I *know* I’m wasting money because I just don’t know the best places to shop yet.

I haven’t tallied-up a monthly grocery bill here yet, but I estimate I’m wasting around $50-$100 per month just buying groceries poorly.  The same thing goes for gasoline, car insurance, home owners insurance, and similar bills where you need to shop around to learn who is the best provider.

In other words, we have a long ways to go before we’ve really optimize our living expenses here!  Our living expenses might actually turn out to be higher…  at least temporarily.


Final Thoughts

Alright, so it’s probably pretty clear things didn’t go according to plan during our move.  I’d hesitate to call it a complete disaster, but it did end up costing a lot more than we’d planned.

I expected to have difficulties along the way, but the move was far more financially difficult than I expected.  It’s going to take many months before we make-up for the higher moving costs, and the double living expenses we had to pay.

If there’s one major point that I’m trying to convey here, it’s that geo-arbitrage is NOT a pot of gold at the end of the rainbow.  Traveling has a cost, moving has a cost, and there are numerous taxes and setup fees associated with changing location too.

One way to think about it, is like making an investment.  You put up the funds first, and then slowly earn back those funds over time through lower geo-arbitraged expenses.

For my family, it’s too soon to say how long that payback period is going to be.  I can guess that it’s going to be *years* before we’re financially ahead of where we were before the move.

So, for anyone considering a geo-arbitrage move — My advice is to please think twice about the costs involved.  The ‘payback’ period before your living expenses drop might take a little longer than expected.  Are you really willing to live years in a lower cost location to earn back those moving costs?

It’s something to consider before you move!


[Image Credit:  Flickr1, Flickr2]

42 thoughts on “Is Geo-Arbitrage A Financial Fairy Tale?

  • August 8, 2022 at 10:50 PM

    I’m actually visiting my dad in Tucson, and if you’re able to take a “cold” shower hats off to you. Since the pipes are barely below the ground I run as cold as water as possible and it’s still warm and steams the bathroom. At least you arrived with the monsoon season and the desert is in full bloom. Sorry to hear about the difficulties to get here, but I know the Tako family will just fine.

    • August 9, 2022 at 6:42 AM

      Yeah, the water certainly isn’t as cold here as “up North”, but it is still a bit cool for a shower. 🙂

      Thanks for the encouragement Jeff! We’ll get things sorted out… eventually.

  • August 9, 2022 at 3:01 AM

    Mr. Tako – You and I are going through the same thing at the same time, except a landlord needing his rental house back triggered the move. We ended up leaving our stuff in a POD container in South Carolina and rented half a furnished duplex for $3,000/mo in Florida. Fortunately our air can get it down to 76, but it’s still an adjustment from the great unit before.

    Our latest issue is realizing there’s a reason there’s a wide range of house prices here. There are just areas we don’t want to live and areas we do.

    Moving just stinks.

  • August 9, 2022 at 7:02 AM

    We moved a half hour away, and I couldn’t believe how much stuff our small townhome was holding. And to think I we don’t buy a lot of stuff. My goal now is to throw out / donate a few unused items every week.

    Good luck with house hunting in AZ. Hopefully, buying lower in the current environment offsets selling low in WA.

    • August 9, 2022 at 9:58 AM

      We threw out tons of stuff before we moved. I even sold our TV and some of our furniture. Still, it feels like we still have a TON of stuff. (Technically it’s probably a couple tons, but who’s counting?)

      Thanks gofi!

  • August 9, 2022 at 7:51 AM

    I am actually doing this, in reverse. We are selling our home in the Bay Area and moving to Seattle because of work relocation.

    We are selling our home for $200K less than just a few months ago. Hope I can get a place in Seattle for $200K less so it is net net even.

    Company is putting us in temp housing for $400 a day. Moving is $26K for full service movers and storage. It is not cheap.

    • August 9, 2022 at 10:02 AM

      Good luck in Seattle Kevin! If you don’t mind the cold and rain all the time, you’ll probably do just fine there.

      The real estate market has slowed down a lot there, but prices are still pretty high. Maybe a little less than in the Bay Area, but you’ll still have to contend with fees and taxes (which take a big bite out of your capital when moving)

      I hope it all works out for you!

      • August 9, 2022 at 2:06 PM

        compared to CA, the taxes and fees capital of the world, Seattle with no income taxes will feel like a dream.
        The weather is definitely an issue. Yeah, I am resigned to that.
        How long did it take for you to sell your place? Sounds like you listed end of June, is it still on the market?

  • August 9, 2022 at 8:01 AM

    As a native Arizonan I can’t believe the changes in my state in the last couple years. Costly of living has increased drastically. Short term rentals are not a thing sorry! I hope you adjust to the big changes! Very different here from Seattle. The winters are lovely though. Sorry your timing really hit at a hard time! I would rent a year a d make sure you want to stay! Housing is slowing here so that may help!

    • August 9, 2022 at 10:07 AM

      Thanks Kureen. I don’t think there’s any way Mrs. Tako would ever want to move back. She actually complained to me the other day that it wasn’t hot enough. (It was 94F outside)

      Compared to the Seattle area, the cost of living here still looks pretty affordable. It’s all a matter of perspective I suppose.

      • August 23, 2022 at 8:30 AM

        94 isn’t hot enough! haha well maybe you are at home now!

  • August 9, 2022 at 8:29 AM

    Sorry to hear of your difficulties Mr. Tako as I can definitely understand how frustrating it must be at times and how much patience required. But I’m curious as to what was the motivation for the move? As I assume it was not financially motivated right? Anyway best of luck going forward and hopefully worst is behind you.

    • August 9, 2022 at 10:08 AM

      Lower cost of living, and warmer/dryer weather were two of the main motivations for moving.

      Thanks for asking Lou!

  • August 9, 2022 at 9:26 AM

    For Tucson. You’ll want to get the Safeway and Frys apps. Albertsons is the same as Safeway with the same sales but I have noticed in the past that Albertsons regular prices can be higher than the two Safeways a street away. Traders Joes and Whole Foods are two of the organic type places. Food city can have better sale (and regular) prices on produce,rice,beans but not anything packaged. El Super is popular but I’ve never shopped there. Walmart actually can beat Safeway and Frys on some items like canned goods spices and sauces at regular prices . We have 3 Costcos and one Sams Club. Sams Club varies as to whether it beats regular grocery prices and by how much.

    • August 9, 2022 at 10:11 AM

      Thanks for all the tips Kerry! I’ll definitely check out all those places. How about Basha’s? It’s a local chain – are they any good?

      • August 16, 2022 at 6:24 AM

        It’s been awhile since I’ve lived near a Bashas. I found it to be slightly more expensive than Safeway and Frys for the items I bought. I took a look at the ads and they have a weekend sale of boneless skinless chicken for $2.99 per pound. Safeway recently had a sale at $2.77 per pound. It probably depends on what items you buy as far as regular prices.

  • August 9, 2022 at 9:51 AM

    Excellent look at the real-life challenges in applying a popular personal finance theory. Hopefully there were at least a few unicorn farts along the way.

    I’m in a similar HCOL area to Seattle in the Bay Area, so my ears perk up when I hear people talk about geo arb. Because housing is so ridiculous out here (I’m a renter), I think it would ultimately pay off fairly quickly if I were to move elsewhere, but your points on optimization are noted. I could see myself actually paying more in rent if I were to move to an area I wasn’t familiar with.
    Impersonal Finances recently posted…John Steinbeck’s Hidden Personal Finance Advice In East of Eden

    • August 9, 2022 at 10:14 AM

      Thanks Impersonal Finances! Yes, housing might cost a bit less, but the moving expenses, setup expenses, and potential tax bite from selling a house is significant.

      It might take us a year (or two) to break even!

  • August 9, 2022 at 9:55 AM

    I would work with the rental management person diligently to fix the AC issue!! 84 degrees is just too hot. Or, Maybe invest in one AC window unit for master bedroom from Home Depot so whole family can keep comfortable in there. Actually, if it was me I’d buy 2 – one for master and one for kid’s bedroom. And they wouldn’t be the weak cheap ones. Even though in 6 months probably can’t resell.

    Second, the hot house is a great reason to spend many hours in local library. 🙂 To me, keeping your family reasonably cool is excellent use of some dollars – even though you’re feeling pinched. Sweating it out and sucking it up for 6 months…it would have been a no for me and our 6 (now grown) kids.

    And, you already know this but it’s a glorious time to let your good attitude shine and make everyone feel proud of the new family adventure. It’s going to be awesome guys!!!!

    This too shall pass. Look at all the stories your family will have to tell!

    Thank you for your honesty and letting others be a part of your family/financial journey. Blessings to you all!!

    • August 9, 2022 at 10:15 AM

      Thanks David! I love your positive attitude! It seems like the landlord is actually going to replace the AC unit!

      • August 10, 2022 at 3:56 PM

        Good news that landlord fixing AC!!

        “When life throws this family curveballs we’re all good – because we hit curveballs over the fence!”

  • August 9, 2022 at 11:36 AM

    Thanks for the honest experience. It will help everyone who is considering moving to save money.
    With the new “Inflation Reduction Act” there will be ~30% credits on solar. It might be worth looking into harnessing the sun in sunny AZ to pay for cooling!

  • August 9, 2022 at 12:17 PM

    Wow, I didn’t realize how much of a pain and how costly this was for you – so sorry!

    We seemed to do better when we moved to Panama since we got lucky and sold the house at a much-appreciated value (though nowhere near what it would have been a couple of years later). And selling everything we owned and just flying out there with a couple of suitcases each made it pretty easy and not very expensive.

    That said, moving back has been a pretty good challenge. Between coming in to inflated rent prices and needing to buy all new furniture (though at a huge discount), it’s been a wake-up call… maybe we should have just stayed in Panama!

    I hope you guys are settling in ok, getting the hang of the new place and area, and enjoying it!
    Jim @ Route to Retire recently posted…Stepping Out of My Comfort Zone Led to an 8-Night Fishing Trip of a Lifetime in Canada

    • August 10, 2022 at 12:17 PM

      Yep, that’s exactly what I was alluding to in the post. If you sell everything and only have a couple of suitcases, moving is a lot easier.

  • August 9, 2022 at 4:18 PM

    Oh man, that sounds like a lot of pain you’ve gone through. Definitely cost way more than you had anticipated, sorry to hear that.

    I didn’t realize it’d be that hard to find a rental place down there. And you’re right about not knowing what the utility cost would be, that’d be very challenging to try to budget.
    Tawcan recently posted…Should I hedge? Hedged vs. Unhedged ETFs in Canada

    • August 10, 2022 at 12:14 PM

      It certainly was a challenge. In the old days (before I owned real estate), I don’t recall renting being that onerous.

      It definitely tilts my opinion strongly toward the buy-side of the buy or rent decision.

  • August 9, 2022 at 5:40 PM

    I live in the competitive Silicon Valley, and the schools here are very achievement-oriented. I suspect the school situation was similar in your area of Seattle. I am not familiar with the schools in the Tucson area, but I am with the Phoenix area schools. I don’t know of any schools in the Phoenix area that are as strong or as competitive as the better schools in the Bay Area. Depending on what you value in schools, you may not be happy with what you find down there. Interested in hearing how that works out for you.

  • August 9, 2022 at 6:22 PM

    I feel for you, Mr. Tako. We moved from the Midwest to the Mountain West a few years ago for reasons similar to yours. And that move was exxxpensive! And even all this time later, I still scrunch my face when I think of all the mistakes—both those possibly avoidable, and probably not avoidable—we made once we landed. It’s valuable to cut yourself slack and extend grace to yourself. I’ll also add that more than offsetting the monetary cost was the exponentially greater happiness I’ve experienced since the move. Hopefully you and the rest of the Tako family realize a similar ROI.

    • August 10, 2022 at 12:15 PM

      I’m hoping we experience a similar happiness ROI! Thanks for sharing your experience!

  • August 10, 2022 at 5:50 AM

    Good to see a post again, see all this as some stories to tell. All the new things (that definitely feel
    Tiring like optimized food), but also means you will meet some new people, get tips and new adventures.
    I used to travel to Tucson for work and it’s a lovely area, the UofA is a good hub to connect into.
    Looking forward to hearing about your new adventures

    • August 10, 2022 at 12:16 PM

      Thanks FIwithKids! Hopefully life is slowing down a bit so I can post more often!

  • August 11, 2022 at 7:03 AM

    Glad you made it to Arizona safe and sound, albeit a bit lighter in the pocketbook! Yes, moving is super expensive, the hidden costs as you’ve found out can be shocking. Hope Arizona turns out well for you and your family!

  • August 11, 2022 at 8:03 AM

    We moved to a big college town in the midwest two years ago and man, what a fiasco. We rented first until we found a house to buy. All of the rentals are on the same schedule here whether it is apartments or houses and there is no wiggle room in terms of the leases. Everything is a one year lease and they don’t do month to month after that period. I even tried to negotiate a higher month to month rent payment to give us some wiggle room but nope, they wouldn’t entertain it. Frustrating.

  • August 11, 2022 at 9:00 AM

    This is a great and realistic case study in what something really costs, sorry about some of your misfortunes but by writing about it you are raising awareness to reality. There are TONS of costs in moving that many who claim to be saving by constantly moving around do not bother to discuss. It’s the same in the DIY community – so many bloggers and youtubers tout that they saved $10 by remaking their bathroom themselves, but they fail to mention all of the tools they had to buy, and of course the HUGE amount of time it took which is a big cost in itself. And of course the same goes for stock picking. Many who claim to be beating the market averages are not beating them at all when you take in to account they’re spending 20 hours a week pouring over stock data. That’s a huge cost.

  • August 14, 2022 at 9:45 AM

    linked to the article from POF. Too bad that you had a bad experience with the move, guess there is no where to go but up. Curious how you managed to build over 5M nest egg when you are 38, no inheritance and no high income. A lot of physicians who make multiple than that don’t do as well. Congratulations on your success

    • August 14, 2022 at 5:31 PM

      To be fair, I’m not 38 anymore! As far as how I did it, there’s really only two factors that matter — saving and compounding. I try to be good at both.

  • August 19, 2022 at 3:24 PM

    As a fellow would-be PNW escapee, I’m looking forward to reading more about your experience with geo-arbitrage. After running the numbers on a few relocation alternatives, I’ve suspected it’s more geo-mirage than arbitrage. Maybe a decade or so ago it was different. Now I’m not so sure every moderately desirable locale hasn’t already been sussed out and bid up!

  • August 22, 2022 at 7:32 AM

    Ouch, sorry to hear that. The timing of the house sale hurt a lot, but you still made some money, right? The housing market also seem to hit these rough spots whenever we needed to move. Next time, we’ll try to sell way before moving.
    It’s hard to move with kids. We’ll probably wait until our son is off to college before we move.
    Thanks for sharing.

  • September 7, 2022 at 5:22 PM

    I have not heard of a Real Estate company that charges a monthly staging fee. All the realtors I know in Washington, include that in there 3% fee? Did you use Redfin? Crazy.

    Good luck in Arizona, I am sure the savings will catch up quicker than you think.

    It is a beautiful state. Definitely different than Seattle but still beautiful.


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