Fauxmads or Nomads Part III - Leverage

One of our back porch buddies in Santa Ana

Barbara and I were ready to be possession-less. We were ready to be location-independent freebird retirees. I (at least) was ready to wander the world with only the clothes on my back, swapping out my entire wardrobe every three days at whatever thrift store we passed by. Yes, we were ready to be one of those inspiring badass retired nomad couples we'd been following on YouTube for years, jumping in with both feet and eyes wide open.

Then we blinked and bought a condo in Santa Ana, Costa Rica.

From a practical standpoint, turning our family home into a pile of travel cash would have really simplified our life. From a financial standpoint, owning a home base in Costa Rica has increased our monthly expenses noticeably, although not profoundly. In the first two parts of this series I explained how we “chickened out” on going full nomad and I discussed some of the monetary considerations involved. So what the hell were we thinking? Here's why I don't think we were complete knuckleheads.

• Geoarbitrage Geographic arbitrage means relocating to a different geographical area to reduce expenses while still earning income from a higher cost location. Although Costa Rica is relatively expensive compared to other countries in Central America, the day to day cost of living there is about 30% lower than our old hometown, Providence, Rhode Island. We see big savings especially in what I call “nagging under the radar life expenses” like car insurance, property taxes, and health care. And when we establish residency (for which we qualify simply because we receive pension income from the United States), we will further benefit from Costa Rica's great and inexpensive national health insurance.

  More importantly, our real estate acquisition cost was 66% less to replace the home we loved in Rhode Island with a home we love in Costa Rica. We were five years away from paying off our pretty reasonable mortgage when we left the United States. Now we live in place that makes us every bit as happy to call home for about 15% of what we paid monthly for housing, insurance, utilities, home repairs, etc.

  
  

• Travel Leverage This is a variation on the geoarbitrage employed by most true full-time, location independent travel nomads. After blowing their budgets with a month in crazy-expensive Zurich the unencumbered nomads balance their travel books by spending a couple of months in the Balkans or Southeast Asia. We, on the other hand, plan to retreat to Santa Ana for a few months at a time when we need to recharge the bank account. For example, today we were looking at an 85 day cruise from Southampton, UK to Los Angeles in January that would take us to Africa, Asia, and Australia. It exceeds our maximum daily travel budget by 35%, which is scary. But when we run the numbers, two months hanging out with our expat friends and Tico neighbors will put us back on track to hit the road again, happy and rested, by July.

  Not an apples to apples comparison, of course – the true nomads reap the rewards of variety when they visit Albania or Phuket while we lounge on our balcony in the jungle canopy counting the toucans and ardillas. But at this point we have only spent 1% of our lives in Costa Rica – it will feel new to us for a while.

  
  

• A Productive Asset Earning investment income is nice, don't get me wrong. But our lovely condominium throws off value, too. We could rent it out in exchange for cash, of course, and may do so in the future. Currently we list our place on Home Exchange, which has afforded us the tangible benefits of accommodations in Dubrovnik, Seattle, and Zurich (remember I noted how crazy-expensive that city is!) to date. Better yet, we are looking forward to sharing our place with friends and family as their schedules allow. Being able to extend an open invitation to our loved ones to visit paradise whenever they wish fills us with joy.

• Security This intangible benefit is perhaps the most important, at least to me. I was a trial attorney for 35 years and only rarely involved in real estate transactions. But I remember the fundamental tenets of property law from my first year of law school: the legal right to exercise dominion over a specific thing or place, the power to include or exclude others, the unfettered availability of a specific spot on the planet that is ours alone.

  I am not, by nature, acquisitive. I don't think I've ever thrown anybody out of my house, nor have I ever been refused access to shelter. I recognize how lucky, let alone how privileged, that makes me. Perhaps it is just that sense of comfort and privilege I have always known that instills a need for just a little extra security in the later years of my life, to know that there is at least one place on earth with my name on it. Whatever the underlying motivation, the peace of mind I experience from maintaining a home base is real, even if it makes me a “fauxmad.”

Always interested in your perspective. Drop us an email at bandb@intheairbnb.com