When you read blogs or news articles about geoarbitrage, it’s almost always the childless couples that travel the world. They leveraging the lower cost living of regions like Southeast Asia, Central or South American, and even Eastern Europe.
These “nomads” will stay in a location for a couple of months, enjoying that locale to its fullest. Then, when their tourist visa is about to expire, they move on to the next location, or do a “visa run” to extend their stay in the country for a few months if they so desire.
You’ve probably heard this story countless times before, as it’s often repeated by bloggers. But what about the people with families?
The stories of expats with families are decidedly more rare, but they do exist.
My buddy Jim over at Route To Retire is moving to Panama in a couple months, and he’ll be bringing his daughter along with. They’ll be homeschooling her in Panama, and at least for the first year they won’t have a permanent visa. That means every 180 days they’ll need to leave Panama for 30 days (which explains why homeschooling is a good fit for Jim and his daughter).
Jim’s plan sounds great, and I’ve enjoyed following his blog, but is it for the Tako family?
Geoarbitrage To Cut Living Costs
I’ve written about our plan to move in the past, but we didn’t talk about it in the context of geoarbitrage. Long term, I think we need to cut costs from our current big-city life.
After looking at a few spots internationally (like Japan), we decided that international geoarbitrage won’t be in the cards for the Tako family. Why?
The most important reason is that we’d rather not be constantly on the move. We like having a stable home to call our own. The kind of lifestyle that Mrs. Tako and I enjoy requires a more dedicated residence — She likes to sew and garden, and I really enjoy building things. Those activities are extremely hard to engage in when you’re living out of a duffel-bag, waiting to catch your next flight.
The second reason is, we want a stable lifestyle for our kids. We prefer that they get a good education, and neither myself nor Mrs. Tako has any interest in home schooling. We did some soul-searching about this topic, and just decided that we’ll be a happier family if we don’t have to home school the kids.
While it is possible to find good English speaking private schools overseas, the cost is prohibitive.
So, does this mean Geoarbitrage is completely out of the picture? Not at all! We plan to cut costs using geoarbitrage by moving domestically.
As some of you readers already know, the Tako family lives in the Pacific Northwest. We don’t live far from Seattle. If you’ve never visited Seattle, the easiest way to describe it is like a slightly cheaper version of San Francisco that’s cold and rains all the time.
Yes, there’s tech companies everywhere here too — which means big salaries and even BIGGER prices to go along with those big salaries. Housing is crazy expensive, traffic is horrible, and the weather is terrible 9 months of the year. (The 3 months in summer are actually quite nice)
If you can’t tell, we’re not terribly attached to the place! There’s a premium people pay to live in areas like this, and I’d rather not keep paying it for the rest of our lives. Our geoarbitrage plan is to move domestically — within the United States to cut living cost and ultimately improve our quality of life.
While tech-nerds working at Amazon or Microsoft might not mind staying indoors 9 months of the year, we’d like to be able to flip the weather equation around — 9 months of decent weather and 3 months of not-so-great weather.
Not only that, but if we move away from the expensive coastal cities, our housing expenses could be cut in half!
Lowering Housing Expenses
Like most families, housing is our single largest monthly expense. Every month we have a mortgage payment of $2,315, and that includes insurance and property taxes. According to Zillow estimates, our home could sell for $885,716.
I think Zillow’s estimates are a touch optimistic, so I usually estimate 90% of Zillow’s numbers. After paying off our mortgage ($279,142 remains) and paying real estate sale fees, we should have $494,692 in equity left.
Is this enough to buy a mortgage free home in cheaper regions of the United States? Or generate enough income for our rent?
You bet it is! There are plenty of cities in the United States that don’t have expensive home prices like we have in Seattle. In fact, there are at least 25 states where the median housing price is below $250,000. If we were to sell our home and move to one of those locations, we could easily cut our housing costs.
Not having a mortgage doesn’t mean our housing costs would drop to zero of course — there’s still property taxes, insurance, and home maintenance to consider. By my estimates (using potential cities we might move to), we should be able to cut our housing expenses to around $1,000/month. That would free up a ton of cash!
Where Are We Moving?
Where we plan to move is the biggest question we haven’t answered yet. And it’s a hard question to answer.
Since we began our financial independence journey in 2015, we’ve been hunting for new places to live. Every summer when the kids get out of school, we pack our bags and hit the road to check out different towns and cities we’re interested in.
Two years ago, we toured small college towns around Washington and Oregon. Places like Eugene, OR and Walla Walla, WA scored a lot of points on our criteria. We really enjoy the cute small town feel in those places. Sadly, the weather is only marginally better in both locations.
Moving further afield, last spring we traveled to Texas to visit our friends, and found out we enjoyed the state… but everyone tells us the summers are just ridiculously hot. That’s definitely something we’re not used to — we don’t even have air conditioning here in the Seattle area!
Property taxes in Texas are definitely on the high side (around 2% of assessed value), which makes it a more expensive location to live and buy a house. No state income tax though, that’s a plus. I think we need to do a follow-up visit Texas to see more of the state, and also to see what those super hot summers are like.
Another low cost state that comes up in my searches is Idaho. In a small Idaho city like Boise, you can buy a nice family home for $400k, and pay very affordable property tax rates of 0.56%. Factoring in some very reasonable state income taxes, southern Idaho seems like a good option. The climate is much drier too.
Florida is another state on our list of States we need to visit. With plenty of sunshine, no state income taxes and reasonable property taxes (around 1%) Florida could be a good location to move to… but there’s the regular Hurricanes and climate change issues to contend with.
No place is perfect I guess.
Obviously the main goal of a geoarbitrage plan is to lower expenses, but we also want to lead healthy lives after our move. Living healthy is a HUGE issue in the United States. One of the biggest causes of poor health is obesity. Oddly enough, higher obesity levels seem to correlate with a lower cost of living.
That’s a little scary to me, because it implies cheaper places are less healthy places to live. Maybe I’m just overthinking things though, there are fat people and skinny people everywhere.
My personal belief is that you adopt some of the local culture when you move to a place. Food culture AND exercise culture. If the place you move is really famous for cheeseburgers and the people take pride in a cheeseburger making culture, you’re bound to eat a few extra cheeseburgers living there.
Likewise, if everyone bikes to work, you’re more likely to bike yourself. All this cultural mimicry isn’t set in stone of course, we do have free will, but it’s hard to say ‘no’ when an unhealthy culture is so pervasive.
I think it’s important to remember that poor health is a hidden cost that doesn’t show up in cost of living studies. If your sick all the time or in a hospital, trying to save a couple thousand dollars annually on cost of living doesn’t make a lot of sense.
Then, There’s Everything Else
Obviously I’ve done plenty of Google searching on potential places to move, and we’ve looked at all of the cost of living studies. But all the Google searching in the world can’t tell you the vibe of a place. There’s a TON of really important things you can only understand by traveling to a place:
- Ethnic Diversity
- Local culture
- Quality of the local library
- Good quality grocery stores
- Things to do outside for families (hiking, biking, camping, kayaking, nice parks, pools, etc)
- Walking / Bike friendliness (sidewalks, bike lanes, etc)
- Parking availability/cost.
- Crime/Homelessness/Gangs/Illegal drug problems
Ultimately, we’ve decided to keep traveling for a couple more years before we make the big decision. In total, we’ve visited 20 different U.S. states and I think I’m starting to get a feel for this place called the United States.
It might not be the cheapest place in the world, but it’s not absolutely necessary to live overseas to experience a Financially Independent lifestyle! You can cut costs here at home too!
As long as you stay away from the big coastal cities, living in US can be quite affordable. Housing is cheaper away from the coast, groceries are slightly cheaper, and the traffic is far less crazy. Quality of life really does vary dramatically from city to city, and the prices can vary even more. This is why we’re taking our time to really looking around.
So, we’re going to put our international travels on hold for awhile and keep looking domestically! If you have suggestions, please put them in the comments below!
[Image Credit: Flickr]