Financial success comes with mindful habits and creativity. It is a way of life for us to be open to new ways to improve our numbers, thus giving us more freedom and time to live meaningfully. We quit our full time jobs in 2017, but our financial journey didn't stop there. Recently, we implemented another key part of our long term strategy, we committed Geographic Arbitrage (I am not sure if committed is the right verb, but it seems edgy so I use it). We are dedicated finance geeks, always on the lookout for more optimization and this move was golden.
Geographic Arbitrage can play out in several scenarios, but the basic idea is to leverage wealth or gains in a high income area by living or spending in an area with lower costs of living. For instance, now that working remote is so popular, some folks keep their high paying job in the big city and work from home, but live out in the rural surrounding areas. This way they earn a higher wage but live in a place where that income stretches much farther.
We don't work full time anymore, so this isn't how we did it, though we do earn incomes remotely so there is a degree of portability to our structure that is similar.
Instead, we made a move that we had been scheming for years. We left the busy Ft. Lauderdale area on Florida's east coast and settled into the quiet west coast of the state where the vibe is more laid back, there is more land and living costs much less. Oh, and sunsets are magical.
We had been living in the home I purchased as a single gal back in 2003. It was small, but completely remodeled. It had lots of character and a thriving butterfly habitat, but the neighborhood wasn't our favorite and traffic in the area was horrendous. I only paid $116K for it because even back then I knew I didn't want to be stretched financially. It was paid off several years back, so we were enjoying mortgage free living but we felt it was time for a change.
Here's a freebee, we used a Limited Service Realty Company which is a non-traditional, but not new, way of selling that puts more cash into the seller's pocket. We went with Homelister but there are many options out there in states where it's legal. The idea is that you pay a lower fee and receive less service, because you do the work yourself (which is not as difficult as the real estate establishment wants you to think it is). We paid a low, flat fee to a realtor and in exchange they provided professional photos, listed us on MLS and offered guidance as needed. They even helped us negotiate and counter offer, but they are mostly hands-off with all else. The idea is that instead of paying the traditional 6% of the sales price to realtors, the seller does most of the leg-work themselves including setting the price, finding comps, showing the house, open-houses and negotiating. We were also responsible for marketing but in truth, once a home is on MLS it is only hours until Zillow, Trulia and Realtor.com find it, so that's a breeze. Turns out, many multi-millionaires use this service when selling homes upwards of $5M. This should tell us something about the financial savvy of the concept, if we're paying attention!
We don't work full time, and we are usually home so this was a no-brainer for us that ended up saving us a nice chunk of money. We got to set the percentage we would pay to the buyer's agent. Please note, most realtors do not like this and they will do their best to steer people away from it (duh, it takes money out of their pocket and puts it in yours). For us, it saved many thousands of dollars, and we would do it again in a heartbeat. We got way more than we would have gotten had we listed with a full-service realtor and our asking price was over $20K above what the realtors we had previously consulted recommended we list it for. The hot market of 2021 made it a breeze and we were under contract in less than a week.
We sold that house and we were able to take those funds and shop on the west coast. We knew we didn't want a mortgage, so we had a strict budget based on what we could pay cash for. Additionally, we hoped to purchase a home for much less than the sales price because we could invest the balance. That's what we did.
To recap, we sold a 1,000 square foot home in a busy city and purchased a 1,500 square foot home in a nicer area, on a bigger lot, with a pool (I am so happy) in a serene area with a lower cost of living and saved six figures from the transaction! The new home needs work, but even with the price of work we will be way ahead. We do the work ourselves, and there will be posts on that to come.
I shared our experience with a friend of mine and now she has also sold her home happily and easily with limited service realtors. She is also committing geographic arbitrage, moving farther north in the state. She is elated at the savings just like we were. This idea is a great solution that saves you big if you put in a bit more effort. The hot market is a big help and in a slower market it would be more work, no doubt.
So, that's our Geographic Arbitrage in a nutshell and the Limited Service Realty was the icing on top.
Cheers to creative finances!
Jessica