February 28, 2006

Anybody practicing Geo-Arbitrage yet?


As advocated in Life 2.0 (good book - read it last year - on sidebar now) - the idea is to cash in on your house in over-valuedburgh, and buy low (or rent) near cornfields. Small town America. Where $100,000 gets you a great house. I'd suggest foreign countries too for this idea. Central America, Mexico, Eastern Europe, etc.

Cash in. Don't stress about $. Raise your kids right. Retire early. Slow down.

Anyone doing it? It is tempting...

On Geographic Arbitrage and Corn Fields

Thank you Rich Karlgaard http://www.life2where.com/ for helping me finally pull the trigger on the big move from the "skyrocketing coastal markets" to the flyover country. Reading Karlgaard's book "Life 2.0" and Po Bronson's "What Should I Do With My Life", have really helped me to grasp what it means to exit the California race for AM freeway position and enjoy a fuller life. Now, I'm taking my CA income and job to Des Moines Iowa.

We were able to spend some time there and my business travels keep me in the Midwest quite often and I've come to enjoy it. I realize that living there, snow, cold, etc. will be a shock for a while. But, as I frequently say to friends and family, "I don't know about you...but I tend to drive 2 hours a day to work inside an office after exiting a climate controlled car and then it's too jammed on the freeway all weekend long to actually go anywhere without popping a vein and I have 2 kids under 3....so what am I missing by moving to a different climate???"

As discussed in Life 2.0, we'll probably find a very nice house of roughly 2.5 X the size for about $250k. Yes, you can write a check for houses like that coming from CA. I wont but the thought of saying, "I'll write you a check right now if you take $25k off so I can go buy the Volvo instead of the Hyundai" feels nice.

The most important aspect of this move is obviously my family since money in the bank and a great house doesn't mean jack if things aren't good at home. My wife is a native Californian with relatives all over with frequent interaction. I'm an only child with parents in Ohio and have a very small family who doesn't get together. This has been a long road for her and to hear her say to our friends and family that, "This is the right thing for our family and for our future" makes me beam with joy.

I plan to chronicle the move and plan to write essays/articles on my "transition" to that Midwest lifestyle...and I can't WAIT for "The Iowa Caucuses" :).

My friend who just moved from CA to Utah told me, "You know Doug, on Sunday, you just want to put a bullet in your head". After laughing for about 5 minutes and joking about "Knowing who isn't Mormon by looking outside on Sunday at 11AM and watching smoke rising from the backyard BBQ and listening for the roar of NASCAR on the idiot box"...my friend admitted that he's actually starting to wind down a bit and is enjoying the slower pace.
I look forward to that.

46 comments:

Anonymous said...

Hi Keith.

Good Luck on your move to Des Moines! Nothing happens here, ever.

That's a good thing. We'll all be very glad to have you and your family out here. As it gets closer, please ask questions regarding schools, activities, events, churches, etc. If you've got an eye for it, the landscape and architecture (Morton buildings notwithstanding) are deceptively grand over here.

Welcome to your family!

Anonymous said...

Good luck to anyone that tries this.

I couldn’t imagine moving from California. Sure there are a lot of things that bother me, like traffic, pollution, illegal’s, the cost of livong and crime, but the benefits outweigh the negative parts. I love the beach, activities and the weather.

Every year I go to Oklahoma to visit people in my family, and I truly enjoy the people there. But there is no way I could live there after living in Ca for more than 2 decades.

David said...

My parents did that back in the 80s. Moved from LA to Chicago. Prices were really expensive in LA area at the time. My dad's job moved out there. They were able to buy a nice single family house in an inner suburb of Chicago. Sure the winters are cold. But cold winters are much better the smog, riots, the hollywood cultural, rampant crime, fires, and eartquakes. Ok enough LA bashing.

Anonymous said...

Not yet but getting close. I cashed out all my real estate in 04 and have been traveling the country in a motor home (in lieu of renting a place)with my family looking for a suitable place to settle. My plan is to build our dream house in 07 (08 if need be) when material prices are lower due to vastly reduced demand. We also want to take advantage of the latest alternative energy technology (solar/wind)so the delay in building is advantageous in that regard. We are looking at acreage in the midwest with some water and arable land for a small organic farm. Got enough in the bank to not worry about working ever again (outside of farm work) and a small child we'd like to raise in a small town atmosphere. Hopefully the plan will come together nicely now that I see the bubble has popped (which was a prerequisite before we could start planning purchases, etc). I'm hoping to save about 50% from today's pricing. I'll probably even find some nice plasma tv's and stuff on ebay to really pimp the place out in style now that the "investors" are starting to flee the scene of the crime (selling their HELOC aquisitions as they go). Just a matter of time now, the bubble is popping right on schedule!

moman said...

This happens everytime the real estate gets lunatic in CA.

I grew up in a rural Midwest town ; the kind of town that people still don't lock doors and a trip to the Wal-Mart results in a parking lot full of trucks with keys in the ignition.

We had some a couple families move from CA nearby but they never fit in. The kids longed for the CA life and the parents spend the whole time drinking their sorrows away. My college girlfriend was from S.D. and could never stop talking about how great it was there. Another friend moved to Kansas City from LA and while she is tolerating it, says it just doesn't feel like home.

Good luck to anyone considering this. I hear South Dakota is a great place.

brokersleaveyoubroke said...

Good luck on your move. I wish I could convince my boss to move the company off the east coast to someplace affordable.
I also used to hate winter until I bought snowshoes and cross country skis, now I can't wait for the first snow.

Joe Formerly From Las Vegas said...

Good topic!

This is something my wife and I have been discussing for a while now since we left that desert hellhole! It has been becoming more and more important to me to find a peaceful, slower paced environment to raise my kids and live life -- away from long commutes, crime, road rage, nazi homeowners associations, etc.

The problem for me being a software engineer is that all the best opportunities are in the worst, overpriced congested areas (SF, Seattle, LA, Boston).

I definitely want to check out that book, as it may help me in my quest for family and career balance.

fishtaco said...

Here is an idea. Reprogram your brain so that renting money to own property is not required for you to feel good about yourself. Rent a house in a decent neighborhood close to your work. Stop letting the TV or your neighbors feed you garbage. The pace of your life is controlled by you, not your neighbors or co-workers. One of most important things in life is family and friends. I can say from experience that moving to a new local, site unseen or unlived, can be lonely, depressing and challenging. Basically, I would try to fix problems in the city I live in first, and move only as a last resort necessitated by dire circumstances.

Robert Coté said...

If only my SoCal house had gone up $2m instead of just $1m I'd be buying 400 acres in the NY/NE mountains, Adirondacks/Brekshires/Green Mtns. I'd build an airstrip and golf course, bungalows and great house. The privleged would come in the spring and summer to golf, fish and boat and in fall for the colors and events.

Anonymous said...

Yes I did it 22 months ago....Born and raised in California. 20 years in Los Gatos and 20 years in Encinitas. We were the typical California beach family. I surfed 3 days a week and worked as a software consultant. I would have thought I would never leave......but then we did!...being an equity bandit was a great choice!..We moved to State College PA and have never felt more at home! We love it!!! 1/2 acre, modest 2500 sq ft home for 167k. AND an awesome school system....ther is even music programs, drama, afterschool sports at the middle school level, and buses!

Since I was a Californian for so long I feel I can say this....Californians are like the frogs that are placed in a pot of water on the stove.....the state got bad so slowly you did not even notice it..

To be honest I am quite embarrassed....All those years of thinking California was the best and only place to live...ignorance is bliss.
Remember that human beings are adaptable and adapt to all kinds of weather and culture...It was 40 degrees a few days ago and it ACTUALLY felt warm.

think Big and do not let your fears control you...Change is good...and trust in Jesus!

OCPete said...

My wife and I are in phase 1 of our plan. We just sold our house (started escrow yesterday) and have lined up a beautiful house at the beach to rent for the next 1-2 years(1 kid in high school and 1 infant...long story). After my son graduates from high school...its open season. My wife is from the midwest, I am a CA native. Her family lives in Kansas City and we travel there at least 3-4 times a year. It is a great city! Plenty to do(museums, jazz, shopping, sports, food). However I must admit that I think I will miss many things about California but the trade-offs are amazing. We could own a beautiful house with cash to spare...wife can stay home with the baby and we could perhaps afford more kids and offer them a better standard of living. I love the mild weather in CA but the stress of Southern Cal certainly takes its toll. I am seriously considering this move! Anyone who has done this please share your stories.

Pete

novasold said...

I'm working on doing something very much the same right now. I never took to DC as I did to NYC but I can't see dealing with DC problems for the rest of my life.

Working on finding the right job in.....Maine. The next plan is to open my own business up there, but that is way down the road.

Wish me luck.
Novasold

Marvin Gardens said...

I agree completely with anonymous (Tuesday, February 28, 2006 2:26:43 PM).

After 25 years in CA we moved to CT. Love it. Not always easy. Any big transition is stressful, but that give your life traction. It's so nice to be around real people!

cereal said...

i'm working towards my calif teaching credential. i'm a big-shot accountant right now but this is no life. i can take my credential and have more relocation options. my wife already has her credential.

maybe maine, or north michigan. somewhere cold. i love the cold.

allan said...

I too used to think California was the best place on Earth. After 10 years it dawned on me that success in Silicon Valley is all an illusion. Work your ass off to get what? Is a dumpy house in a so-so neighborhood with marginal schools really the grand prize in life? Don’t forget the traffic you slog through on the way to your 60 hour a week job. Ah, such sweet memories…

Hey, if you want to be a slave to your job go right ahead and stay. If you have substantial equity (we did), take the money and run. Our destination was the Research Triangle Park (Raleigh-Durham) region of North Carolina. We paid cash for a lovely 3000 sq ft home in a quality neighborhood. There’s also a great elementary school just down the road.

This is no bubba-land. A Lexus here is far more popular than a pickup truck. It’s also an ethnically diverse region--the Indian food here can put the Bay Area to shame.

And to top it off, I went from being a corporate slave to working at home for myself. I can play ball with my kids in the middle of the day. Try that in California.

Anonymous said...

After 10 years in CA, I sold my house in 2002, (just as the bubble was ramping up-- but I collected about $65000 which at the time seemed ridiculous for a house held only 3 years).

Moved to Charlotte NC and since then bought 3 houses. One for me and two for renting.

The bubble doesn't mean giving up on RE and building wealth. Just investing in rational markets, where rents can exceed the mortgages. (Unlike CA.)

chris said...

I sold a 1400 sq ft cookie cutter house June 05 in North San Diego county after owning it since 1999. I walked away with about 210K after I paid off my 2005 boat and 2002 4runner.I moved to Portland, Oregon real close to downtown bought a 2400 sq ft home for 222K. I took out a small mortgage to only have a 500/mo mortgage on it. Left me with about 70K. I invested 25K in a duplex on the same street that I rent out and I break even but get a nice tax break. The house is now worth 300K the duplex has gone up around 40K allready.
Portland prices are going up fast because of CA investors. Portland is still only 1.5 hours from the coast and an hour from great skiing. The city is beautiful, clean and liberal like San Francisco. Also no sales tax. I found a job 3 weeks after my arrival in my IT field.
We miss San Diego weather but our summers are gorgeous here and theres alot to do.And with only a 500/mo mortgage and everything else paid for we are happy with the move. I plan on maybe selling the duplex if RE stops increasing and take the equity and pay off the house. If San Diego tanks we will the rebuy there.

foxwoodlief said...

After months of bubble bashing now people are talking about value living? I vaguely remember some of m y thoughts being bashed for asking the question about value. Bubbles are hard to pinpoint and value is just as hard. $100,000 house in bubbaville SD? If there are no jobs that is more expensive than say $300,000 in Phoenix where there are jobs and good pay (at least in my field). Still there are many places left in America that are reasonably priced for incomes and especially for those who cash out and relocate and put their paper gains into real value.

Still there is a bubble on the coasts and in a few places where investors have landed but over all I think the majority of places still have affordable houses. We sold and bought in Austin a year ago when it was a big buyer's market and now the tide is shifting as they have had a flatlined market for five years, that negative appreciation after inflation, that has made Austin more affordable again compared to a lot of cities whereas in 2000 it was expensive compared to Las Vegas or Phoenix or Miami or Tampa etc.

And I grew up in Lost Gatos as I call it in Silicon valley and 20 years ago told my family it was Silicon Ghetto. The best book I read was "Your money or your life" and ten years ago it changed my outlook and my life. Another was the "Good life" by the Nearings, socialists form the turn of the century who where strong advocates of simple living and homesteading. There is more to live than materialism.

Anonymous said...

I've got the opposite problem. I'm retired, lived in Texas my whole life, have no real housing gains (like the half-million to 1 million that many in California have), and would prefer to live on the Eastern Seaboard between North Carolina and Maine, where I would have easy access to the great cultural and historic centers (New York, Boston, Washington, Philadelphia, Baltimore, etc.), plenty of gorgeous fall color, four distinct seasons, and easy access to airports that serve Europe. Everywhere I would prefer to live has housing that costs more than in Texas, so I guess I'm just going to have to be content visiting there.

Anonymous said...

rent in CA. wait a few years. no need to move, only not to own.

devestment said...

MY REAL EXPERIENCE.
I did the country move in the last bubble. Lots of unexpected downfalls and upsides to country life. I always rent in a new area before buying and take my own work with me. The locals will give the jobs and business to the long timers in a recession. Even the big money profits you take with you to the country can be depleated quickly with no or little income. I remember after the CA boom in the late 80's lots of folks moved out to the country, only to end up upside down and moving back to metro for jobs. I even remember a radio program about it. The rent move eliminates all the downside of the unknown local economy and custom. The slowest homes I have ever sold in a recession are the vacation/ country home. It can take years unless you are willing to slaughter the price. Now for the upside. It is REAL LIVING. Less stress and noise, great food, friendly people that are not threatened by you. Outdoor activity, the beauty of the earth unimpeeded by cement. It is great with an inexhaustable supply of money, but what isn't. Be realistic and not idillic in your rationalization of this move and you can come out fine.

cabinbound said...

A tip to those thinking of building soon: a new electrical National Electric Code (NEC) starts in 2008; it is axiomatic that it will be a little more stringent than the 2005 version.

If you start construction in 2007, you will be bound by the 2005 version even if construction continues into 2008.

(I am planning to use my fall 2005 CA house proceeds to build a cabin in the mountains in 2007. If I can build my nest egg by aggressive investing this year, I will be able to consider myself "retired" as well.)

Anonymous said...

Yep - we bailed out of Phoenix and traded the suburbia freeway madness for rural Tulsa, OK.

Great schools - cheap housing. Lots of cheap oil and gas.

We tried Salt Lake City, Utah - and the Mormon thing wasn't so bad - but ALL the food there just tasted wrong!! Just SLC, not the rest of Utah. Go figure.

Anonymous said...

Born and raised in LA, lived there for 40 years and cashed out after a 350% gain on a dumpy crime ridden condo after 4 years. I took a job in Atlanta and paid cash for a 2,000 sq ft. home on an acre for $150K that is 10 minutes from downtown and in a safe neighborhood. I really enjoy living in a real home now and not having to deal with condo associations. The weather change has been drastic, but it makes you appreciate when the weather is nice. Atlanta is a lot like LA with the traffic jams, cultural diversity, and all the attractions of a big city but with a much lower cost of living.

jen said...

In theory, I agree with so many of the reasons for leaving CA. High home prices, so-so schools, congestion, OC mentality, etc. However, I learned the hard way that your heart and head don't always listen to each other!

In July we sold our condo for 3x what we paid for it and move to Austin, TX. Bought a really pretty house (2,800 sf) in a wonderful neighborhood with access to the best schools.

After several trips, visits with friends who live there, lots of faith that we were doing the right thing for our family, I was totally unprepared to the meltdown I experienced after arriving.

Long story short: We moved back very quickly. We got lucky and sold our house for slightly more than we paid (still cost us but it could have been worse).

It was an expensive but valuable lesson: I learned that I'm a Californian at heart. Weather DOES matter. Proximity to the ocean is good for the soul. Being near family (mom, dad, sisters, etc.) is a good for the kids as a big house.

We're now renting. Our money is earning well in ING. We're looking to buy late this year or maybe early next year.

I know we don't represent all who decide to leave but I just want those who are considering it to be prepared for the possiblity that it may not work. My advice: RENT RENT RENT RENT. If you love it, buy. But if you don't, you will save yourself so much grief and money.

Being away made me appreciate CA and realize that there is a reason why it is expensive and crowded. It is a great place to live, even with its faults.

Good luck to all and may you find the hapiness you seek!

skytrekker said...

Located in CT here- but read the SF Chronicle on line- the other day saw a couple now in Barrington Rhode Island, relocated from the bay area. Bought a huge house near the ocean for 600K- They said they miss the 'hard play' attitude of California- but have adapted to southern coastal New England. Guess us New Englanders are a 'conservative' bunch to California-
But then again I have met people from the midwest who say Connecticut is fast paced! In any case Californians relocating to the northeast will find it uniformly more liberal then California in politics- not in 'lifestyle'. People here are more reserved and 'moderate' and even puritan in the way they live- must be a throwback to 400 years of history. The sushi and Asian food here is as good or better then CA- and the pizza is far better! The climate at least in southern New England has 3 'tough' months for a Californian to deal with- and housing outside of Boston and Fairfield CT is cheap for the east coast. Many X Californians in eastern and southeastern CT- median home price of 250K is over 100% less then CA- yet you have east coast sophistication, and 2 hours or less driving time to New York City, and much less to Boston.

skytrekker said...

The person from Texas- wanting to relocated from Texas

yes housing in the Northeast is more expensive then Texas. FYI
A nice older 3 bedroom home in a nice town in rural eastern CT is around 180-220K A nice townhouse condo in A good suburban town outsdie of Hartford 148-163K
Retirement condos- 55 and up near the University of Connecticut in rural Mansfield CT 150K....
Brand new 2 bedroom townhouses outside of Hartford- 55 and up 180K and up.

Marvin Gardens said...

To Jen,

I agree. It's a tough transition at times. I can understand your feelings that you are a Californian at heart. This is definitely the key point to remember for anyone considering attempting this. It's a struggle psychologically to get over the California mystique. As one person observed, you have to "think big." I look at pictures from when we lived there and it looks so bright and cheerful. But for me, life needed to be more than being "comfortably numb."

It's undeniable. California IS a place that is extremely nice if you are well-off. However, it doesn't follow that if you live there and just make ends meet and pretend you love it, you are well-off. I'd say 99% of Californians fall into the second group.

Some observations from an x-Californian:

Irony: although the weather is extremely nice and mild, Californians don't spend that much time outside. Especially in southern CA most people are sealed up in air conditioning all the time.

Irony: there's a supposed abundance of healthy living in CA, yet I've never seen so many obese people.

Irony: California is supposed to be relaxing and laid-back, but it's the worst in terms of road rage. Californians seem like jerks.

Fact: the CA educational system isn't "so-so" as you describe it, it's almost the lowest in the country--down there with Mississippi.

Hey, I guess there's a certain appeal to being dumb and fat in the warm sun. I'd like to think there's more to life.

douglasbtrain said...

Sell and rent where you are. Don't move to a less desirable area. There is a reason that housing is cheaper in some places. It's because those places are less desirable. If you do move, you will spend an inordinate amount of time justifing your move while simultaneously trying to figure out how to get back.

Anonymous said...

douglasbtrain is absolutely right, don't move to a less desirable place. There are too many much more desirable places than California.

Anonymous said...

I've lived in all 4 corners of this country and in the middle, and in all 3 major CA metros of SD, SF, and LA. Nice weather just isn't enough to justify the horrendous cost of living, congestion, pollution, and sub-par schools. Once my kids are out of high-school and if housing has gone back to a sane level, I'd consider moving back, but not until then. Honestly the best decision I ever made was leaving CA, all the stress was lifted off my shoulders.

Anonymous said...

As a CA mortgage-owner with much paper equity, I am seriously entertaining the idea of cashing out myself and buying a home cash or almost cash in another state(although I may be a bit late). The only thing that stops me are emotions. Wife's emotions that is. She says she would be miserable away from family. I tell her we have our own immediate family to think of (2 kids under 3)Part of me says to take advantage pf todays situation but the other part think like some else posted: Being near family (mom, dad, sisters, etc.) is a good for the kids as a big house.

Anonymous said...

People from Kolyfonia are mostly nice, and we're seeing more of them out here every month. I just wish they would learn to leave their "big city" 'tudes and left coast politics at the state line when they change locales. We really don't want our small community to turn into the place you just vacated!

Anonymous said...

to anonymous (Thursday, March 02, 2006 1:12:13 PM)

It's got to be about more than greed, especially since your wife isn't into the idea and you have attachments where you live now. You could risk destroying your marriage. How important is getting your hands on a few hundred thousand dollars?

Anonymous said...

You need to seriously consider KC if leaving CA for somewhere in the midwest. We live in the Kansas City suburb of Lee's Summit, and it is great - fantastic schools, great housing, rolling landscape, old-school downtown with history, 1000+ acre parks within or next to city, and great down-to-earth people. Although Johnson County is prosperous on the Kansas side, the nicer folks are in Lee's Summit.

Kansas City, MO was a little behind in urban renewal, but if you want to live downtown or on the Plaza in midtown, there are great lofts available. The new Sprint arena is going in, and a fantastic performing arts center is on the way. Plus, great art in the crossroads district and in area museums. Also, Midwest Airlines (with wide leather seats) flys direct from KC to many desitantions, including SF, Ft. Lauderdale and other east and west coast spots. Getting to the mountains or beach isn't as hard as you might think. The winters are cold, but nothing like Minneapolis, Chicago, etc.

If you have questions, you can email me at: jbw_kc@hotmail.com. No, I'm not on any economic development board, nor am I a real estate agent, just an info source.

Anonymous said...

Enjoyed reading some of your blog. Nice to take a break from my own real estate work. Selling homes is getting to be a challenging business right now. Good luck, and thanks for the read. Visit my site if you have a chance.

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