Geographic Arbitrage

I was always excited when I started to read about geographical arbitrage concept. I think people should use it more to improve their financial positions. They might feel tied down to a place mostly because of family and friends or job. I can understand that as I have relocated few times losing physical contact with my family and close friends. You can go and visit them on regular basis and if you live in attractive area, which should be one of the reasons for geographical arbitrage anyway they would be happy come to visit you often. With the job, there are always quite a few options.

It is important that you are financially prepared and you can overcome extended periods without income until you find something what works and suits you. Potential options for generating income in the new location are: holiday accommodation, standard rental accommodation, storage, Uber, café, massage, yoga, personal trainer, rental of some equipment (surf, bikes, beach umbrellas, etc.), online business (I know this one is difficult as I tried unsuccessfully myself), location independent job (translating, consulting, accounting, online learning, web design) or blogging. Mind you it takes years to start making money from blogging. Money should not be main reason to go start blog as majority of the blogs don’t earn much including myself.

Moving from Europe

Now when we got some idea how to overcome issue with family and job, we can have a look what kind of locations could be attractive from my point of view. I will start with special case of geographical arbitrage. I have originally came from the Czech Republic to study English in Sydney. And moved to one of the most expensive places in Australia (Manly beach). To share flat of course. But after few months there and after I have started to earn some income I have realised Australia would be great place for me to move to.

Reverse geographic arbitrage

Some of the reasons were sun, beach and girlfriend but the move made lots of sense from financial point of view. I know normally under geographical arbitrage you should find a cheaper place than where you live now so your current resources stretch further. When I moved to Sydney my net worth was negative thanks to loan to my family to pay for the College in Sydney. So I had no resources at all. But I have realised that Australian salaries are one of the highest in the world and at the time about 4 times higher than in Czechia. I have figured that if I kept my living cost down avoiding lifestyle inflation, I should be able to accumulate wealth much faster than back at home.

At that point though I had economics degree, I did not have much personal finance knowledge. So at the end much of my financial base I have created in Sydney thanks to average paying but stable job and couple of property investments. I talk about this in one of my other posts. So for me geographical arbitrage meant also changing place where you earn income to the highest possible while still having great Australian lifestyle with beach and sun more important than money. I have managed significantly improve my situation by moving to the place with extremely high living costs but with great salaries.

Great places for living

Next geographical arbitrage ideas will not be that much in depth as point of this post is to give ideas for further research. I will skip places in Latin America and Caribbean  that are popular with American bloggers, as I am not too familiar with them and most of them don’t tick one of the main boxes for me – low crime rate, but some of the popular ones include Mexico, Panama, Costa Rica, Peru, Chile, etc.

Also I don’t have the necessary knowledge of the United States, but I believe that there will be many places which should tick the main boxes for the geographic arbitrage relocation. Safe, cheap property, low taxes, requested infrastructure (schools, hospitals, jobs, etc). It should actually include most of the country outside major cities like New York and Boston and most of expensive California. It is not that simple to find many places on the beach which can be called cheap, but if the main preference is snow and mountains, or rolling hills, lakes and farmland, there would be plenty of great choices for internal move in the USA.

Some of the good places for move based on geographic arbitrage in Europe which I have bit experience with include following: Czech Republic, Bulgaria, Germany, Portugal, Spain, southern Italy, and Georgia. So what are the reasons for potential move? One of the advantages of the countries above maybe with the exception of Georgia which is bit cut off, is the easy travel. There are plenty of budget airlines taking you cheaply to many places in Europe and beyond. Also driving in Europe usually does not require to overcome distances common in the USA or Australia. History and culture goes thousands years back. All the countries above are quite safe with maybe Bulgaria less safe than others but still much better than all Latin America. One of the potential cons is that English is not commonly spoken outside large cities.

Where to live in Europe as FIRE?

Czech Republic

Czech Republic is very safe, has reasonably cheap property market, educated and inexpensive workforce, beautiful towns and countryside with many woods, mountains, rivers and lakes. It lays on the border between western and eastern Europe. Cons would include cold winters as in Germany.

Bulgaria

Bulgaria has very cheap property market, extremely low salaries, beautiful mountains and beaches on the Black Sea. Like other ex communist countries Bulgaria is not as developed as most of the western Europe, but that is one of its charms. Weather is quite warm and sunny still with good skiing conditions in mountains in winter. Border with Turkey makes it close for trips to Asia.

Germany

Germany is obviously very safe and one of the most developed countries in the world. Living costs are surprisingly low thanks to cheap groceries (probably due to a lot of completion of the large supermarket chains and also famous german high productivity and automation). Property prices are very reasonable probably thanks to declining population and besides most Germans are happy to rent so the residential property price pressure is lower than elsewhere. Germany would be probably easiest place to get a job for foreigner even without good knowledge of German language and you might have also good chance to land reasonable salary. It is also largest of the suggested countries with 80+ millions of inhabitants. German climate is cooler with 4 seasons, beaches allow swimming only not more than a month of each year. There are good skiing conditions in winter in the Alps area. Germany has also very good education system.

Spain

Spain is preferred destination for many English, German and Scandinavian retirees due to its property prices, culture, weather and the beaches. Before global financial crises there were too many houses built and the property overhang is still visible with many cheap houses available close to some Mediterranean beaches and some more inland areas though cities like Seville or Barcelona can be quite expensive. General living costs are quite reasonable.

Portugal

Portugal would probably be my priority when scouting for relocation in Europe. Beautiful culture, one of the warmest and sunniest countries in Europe, great food, nature, incredible beaches with good surf (actually from the above countries only Portugal and Atlantic coast of Spain would be suitable for surfing early retirees). Property prices are very affordable. Local average salaries are quite low.

Italy

Southern Italy is very different to the north. Much lower living cost, less population, less infrastructure, lots of unspoilt nature especially in Puglia, Campagna and Sicily. Some of the coastal towns might be pricey but there are many cheaper beach towns and some of the mountain villages are giving houses away almost for free thanks to low population growth, high unemployment and trend of many especially young people moving from smaller places to cities to the point that some villages got virtually empty. That might be great opportunity for someone with capital without need to look for a job to create beautiful home and maybe some rental for tourists as many of these cheap places are in remote unspoilt areas often sought out by people for holiday. History, culture, food, beaches, weather and architecture are further draw cards for this destination.

Georgia

Georgia is at the very east of Europe. I have included this potential destination as I was lucky enough to visit this beautiful country. It sounds quite exotic and definitely has exotic neighbours, but the many places there, especially its capital Tbilisi are quite European like. I was originally concerned about safety as there was civil war in 1990s and conflict with Russia in 2008, but I was pleasantly surprised. Though some of the buildings (often the government ones) still have marks from bullet holes, I have researched it is one of the safest countries in Europe (and even safest according to some lists).

During my stay I have seen a bit of poverty there, but I have never felt unsafe. General salaries are extremely low (USD300/month is not unusual), villages are very traditional, there are beautiful mountains and beaches on the Black See, country has plenty of sun and the weather is pretty warm. Hilly areas can have very rough weather and due to size of the mountains, places can be quite remote. Georgia has long history, a second country which accepted Christianity it has many churches built in the first millennium. Their bread is mostly sold fresh hot and cheeses and wines are special. Country would suit someone on tight budget, who likes exotic places, wants to be close to Asia and loves mountains or beaches.

Geographic arbitrage in Asia

I would like to include couple of places from south east Asia, at least the ones I thought would be helpful for someone on the budget looking for home to stay on budget. From my own experience I can speak about island of Bali in Indonesia, Thailand, Vietnam and Cambodia. All of these places would be generally suitable for someone trying to stretch their capital, looking for warm place and loving Asian food.

Bali

I have been in Bali many times on surfing holidays with my wife. Main reasons for the trip were that it was hot, had great surf, cheap hotels and food. Culture is beautiful in Bali. It is the only part of largest muslim country which is hindu. We have explored ancient temples and palaces. Food is great as in most places in south east Asia, waves are as good as it gets. Prices are about ¼ what in Australia and I have inspected 2 bedroom townhouse walk to the Kuta beach available for rent for AUD 500/month! Cons are that Bali has bit too many tourists for its own good and it is densely populated. Traffic is quite bad as is sometimes pollution. We have actually considered to move to Bali ourselves.

Thailand

Another touristy country is Thailand. Again food is divine, prices low, many people speak English. You can stay on beautiful beaches, in the jungle, in the mountains or if you like busy life in Bangkok city. I had the opportunity to spend time in Bangkok, Phuket, Chang Mai and Hua Hin and depending on preferences each of these places would be good for long term stay of early retirees.

Cambodia

Neighboring Cambodia is incredibly beautiful, cheaper and poorer than Thailand. Siem Riep would be great for long term stay, Phnom Penh not so much. I have not visited Cambodia beaches in the south, but I believe it would be worth researching them. 

Vietnam

Further east is Vietnam. Again I have been only in Saigon and beach city of Vung Tau but I had great experience with both of them. Typical south east Asian package. Budget friendly, nice people, hot weather, great food.

India?

I would also note here that I have seen quite a few people trying to stretch their stay as long as possible in places like Dharamsala and Goa in India. I could see their point and it is definitely a contender among beautiful places for long term stay for early retirees. India with its long history, great food and reasonable prices is very interesting destination where people go to find themselves for decades.

Australia?

As the last location for early retirees I will mention Australia. Though it is by far the most expensive from the above destinations with reasonable property prices only outside major cities, it made great sense for me. It is reasonably easy to earn good salary, great weather, incredible choice of places from cool hills of Tasmania to tropical rain forests of Northern Territory, beautiful unspoilt nature, safe, good schooling and healthcare. And somehow even with generally extremely high costs of living it is still possible to live frugally even when compared to my home in Czechia. Do not expect to find cheap places in Sydney or Melbourne but if you are after cities, Adelaide, Perth or Brisbane seem to be much better value. I have found that due to my love for surf and hot weather, south east Queensland coast is best for me. There are thousands of other beautiful towns scattered around the coast and inland waiting to be selected by early retirees for their new life chapter.

I have not considered difficulties in obtaining long term stay or work permits in the places above. It would be topic for the whole new post (or more like a book). I am suspecting Australian visa conditions might be the toughest. I hope I have given you some idea and I wish you great luck in further research. Please let me know what are your potential contenders and why?