Homeless no more: We just bought a house last month! Over the internet! Well, not entirely over the internet because we actually toured houses in person the old-fashioned way. With a real estate agent, more on that below. But we eventually closed the transaction while we were on our epic trip through Asia this Fall! All the “paperwork” was done electronically! One reason we were able to pull this off was that we paid for the house in full. Applying for a mortgage would have required a lot more paperwork and notarized signatures. Probably not something you can accomplish while traveling in Southeast Asia! And just in case you don’t remember, we outline the reasons for not getting a mortgage while in early retirement in Part 21 of the Safe Withdrawal Series!
In any case, where did we buy, what and why? Let’s take a look…
Picture credit: Pixabay (this is not our new home!)
Where did we buy?
It was clear to us that in order to afford a comfortable life in early retirement we’d have to leave San Francisco, CA. Geographic arbitrage! Pick an area with a lower cost of living, especially lower housing costs and no or at least low state income taxes. The three finalists (five if you count the cities) we considered were:
- Northern Nevada: Reno and Carson City
- Southwest Washington: Vancouver and Camas
- Eastern Washington: Spokane
Some of the stats of the different places:
Let’s look why we were considering those and the pros and cons of each region:
1: Reno and Carson City, Nevada
We visited the area very frequently. It’s only about 3-4 hours away from our old home in San Francisco. You can always see the beautiful, sunny Carson Valley when skiing on the Nevada side of the Heavenly ski resort. It always struck me that even during the harsh winters when the area around Lake Tahoe drowns in snow you see very little or no snow at all down in Carson City. Sounds like another level of geo-arbitrage: you get all the benefits of living in the mountains close to a world-class ski resort without the hassle of shoveling (that much) snow! Let’s look at the pros and cons in detail:
Pros:
- By car, San Francisco is only 3.5 hours away. That’s without traffic, of course, but you can always count on the occasional traffic jam along I-80 and add 1-2 hours to that! In any case, we still have a lot of social/family ties there and likely want to drive back frequently, so the distance to SF is of concern to us!
- Climate: Dry and sunny summers and the winters are not that harsh. The ideal early retirement climate!
- Zero state income tax!
- Close to my favorite ski resorts around Lake Tahoe (Heavenly and Northstar). The Stagecoach lift on the NV side of Heavenly is only about 45 minutes away from Carson City! Northstar is only about 45 minutes from Reno.
- A lot of outdoor activities, both around Lake Tahoe but also in the Sierra Nevada in general. Yosemite National Park is only a few hours to the South!
- We already know quite a few people in the area.
Cons:
- Casinos. OK, I get it, casinos bring in the revenue and afford the state to keep the income tax at zero. But I personally find that they have a slightly dingy and seedy feel. They are an eyesore, especially for someone like me with a FIRE mind. It’s not to insult anyone but this is my personal and honest opinion.
- School quality is low in Nevada. According to U.S. News, Nevada ranks #44 out of 50 in overall education quality. #49 in Pre-K to 12 quality out of 50. Only New Mexico is worse! Other surveys from USA Today and Forbes confirm that Nevada is close to the bottom of the U.S. education ratings.
- Reno has some schools with high ratings on Zillow (sourced from Greatschools.org) but even the top schools in a state with such low rankings are potentially not that great. Quite shockingly, the Nevada State capital Carson City has only pretty mediocre school ratings.
- Housing costs were the highest of the three places we considered. Not necessarily when measured by the median home prices, which can be deceiving, but by the home prices in the neighborhoods we actually would like to live in!
- The median house price to median income ratio also seems quite high.
- Health insurance plans are quite expensive. We priced a pretty basic Bronze plan and it would cost us $1,400+ for the three of us! Short-term it’s not a big issue because we signed up for a Health Share Ministry but longer-term we may look for a standard health insurance plan again.
2: Vancouver and Camas, Washington
Vancouver, Washington has nothing to do with the Vancouver, BC in Canada. Vancouver, WA is in the Southwest corner of the state, close to Portland, OR and 300+ miles away from Vancouver, BC! Camas, WA is just one town over to the East. Both Vancouver and Camas are part of the Portland MSA (metropolitan statistical area), which ranks 25th in the U.S. by population size.
Some of my wife’s good friends live in the area and we’ve visited several times over the last few years. We always noted that this would be a nice place to settle down. Well, not on the Oregon side (one of the highest state income taxes in the nation) but on the Northern shore of the Columbia River. Here are the pros and cons:
Pros:
- Zero state income tax.
- The best airport with the most flight options among the three regions.
- Portland is a fun and happening place but it’s also nice to know that the mighty Columbia River separates us from the more unpleasant side effects of the big city, like crime, homelessness, potheads, etc.
- Public schools are excellent! Not everywhere but some of the schools in Vancouver and especially Camas are among the best in the state of Washington. Washington State is ranked #6 in the U.S. News report, though that’s mainly because of the #3 Higher Education ranking. Pre-K through 12 is ranked only at #26 in the nation. Still better than Nevada, though!
- A vibrant and booming economy, not just in Portland but also on the Washington side: a lot of large employers set up shop there: Fisher Investments, and even tech companies, like Sharp Electronics and WaferTech in Camas and HP in Vancouver.
- Related to the previous point, Camas has a six-figure median household income, the highest among the five cities and the highest share of residents with college and post-graduate degrees. Camas has the same median income as San Francisco but a 60% lower median home price ($400k vs. $1m)! Not that we buy a house to make money on appreciation but a low price to income ratio leaves at least a little bit of room for our home price to appreciate. Remember, a house is actually an investment, and sometimes it can be a great investment, despite all the naysayers!
- Beautiful scenery: Majestic Mt. Hood is visible on clear days. Mt. St. Helens on the Washington side! Ski resorts are closeby. Lots of outdoor activities: hiking, fishing, etc.
- WA state has affordable health insurance plans! We got a quote for a basic Bronze plan with HSA for a little over $800/month. Still more expensive than the health ministry plan we found but a good option in case we don’t like the Health Ministry.
- The mildest winters and least snowfall among all three locations!
Cons:
- San Francisco is a long drive away. One could potentially manage this in one long day. But more likely we’d have to split the drive into two days. Not a bad option because we also have family in Southern Oregon, roughly at the half-way point. More likely, though, one would have to fly out of PDX airport! That’s not a terrible option because you get very affordable direct flights back to SFO from PDX!
- Sales taxes in Clark County are high.
- Property prices are high, though, not quite as bad as Reno.
- Property taxes are quite high. The money for good schools has to come from somewhere!
- The climate might be a little bit less pleasant than Reno, NV. Less sun and more rain. Though, the horror stories of bad weather in the Pacific Northwest are greatly exaggerated! But again, we like the idea of mild winters and are willing to trade off some sunshine hours for fewer days freezing our butts off in the winter!
3: Spokane, Washington
We drove through Washington on one of our epic vacations back in 2017. A road trip from San Francisco going North through Oregon, Washington, Idaho, Montana (Glacier NP!), Wyoming (Yellowstone NP!), and back to California via Idaho and Nevada. Spokane was on the way and struck us as a beautiful medium-size city with great outdoor activities all around. It’s also a short drive from picturesque Coeur d’Alene, Idaho.
Pros:
- Zero state income tax
- Lowest housing costs of the three. Spokane also has the lowest median home price to income ratio.
- Good public schools.
- Low crime, vibrant and friendly community
- Close to outdoor activities: skiing, hiking, fishing, etc.
- WA state has affordable health insurance plans! Similar rates as in Vancouver.
Cons:
- San Francisco is prohibitively far away. Driving back to SF would take at least two long days by car. Probably closer to three days.
- Spokane is the smallest of the airports among the places we considered. Going back to San Francisco by airplane, we’d have to connect through Seattle or Portland.
- We don’t know anyone in the city! Not that this is bad because we’d quickly make friends anywhere we move but it might feel awkward initially.
- The climate is pleasant during the spring, summer and fall but the winters are likely a little too cold for my wife. Maybe even for me!
OK, those were the three regions/five cites and some of the pros and cons. What location did we pick?
Drumroll… And the winner is…
Camas, Washington!
It’s the smaller of the two Washington towns just across the river from Portland, OR!
The first places we eliminated were Reno and Carson City, Nevada. That was with a very, very heavy heart because we visited the area so often and we know a lot of people in the area. For the longest time, even until about March this year, Reno/Carson City was our default location but in the end, the underwhelming school rankings and the prospect of sending Little Miss ERN to an expensive private school plus the unappealing health insurance options enticed us to scrap the plan.
Between the two Washington State location, the larger metro area beat the smaller one. Even if we had to spend more on the house, the slightly better school district and the more temperate climate won over the arctic climate in Spokane. But we’ll make sure we visit Spokane often. We really liked the scenery and the community there!
Picking between Vancouver and Camas we had a slight preference for Camas due to the slightly better school ratings. Camas High School seems to be one of the most sought-after schools in the entire state, probably topped only by some of the extra-pricy school districts in the Seattle area. But on our house hunting trips, we certainly looked at houses in both Vancouver and Camas and in the end, it really came down to liking that one house in Camas.
Finding our new home wasn’t as straightforward as we planned. We flew to Portland on the Sunday after FinCon for our second househunting trip in the area. We looked at houses every day for 6 days! Monday to Saturday! Early retirement can be a full-time job, everyone! We made an offer on Wednesday for a house in a great neighborhood but the house had some quirks and some waaayyy-strange design features that needed to be corrected before we’d like to live there. To account for the extra cost of bringing this house back into the 21st century we made what looked like a bit of a low-ball offer. Well, the sellers didn’t agree. They probably thought that those were actually selling points rather than quirks. They rejected the offer without a counter, effectively telling us that they were insulted by our offer and we should look elsewhere.
I was a little bit deflated after that offer fell through and on Friday night I had already accepted that we’ll probably head to the PDX airport on Saturday emptyhanded. That could be a blessing in disguise, I thought, because why would we want to have a house when we still have almost 3 months of travel through Asia-Pacific ahead of us, right?
So, in any case, my wife wakes me up on Saturday at 5 a.m. and tells me she wants to see one more house that day before we head to the airport. “No way” I responded and tried to go back to sleep. But she didn’t relent; she found one more house that we needed to see. I told her I’ll think about it and rolled over back to sleep. 7 a.m. came around and after “thinking about it” for two hours I still couldn’t warm up to the idea of touring another house. I just wanted to have a relaxed Saturday brunch and head to the airport. And I felt also embarrassed contacting our real estate agent again after had toured us every day already Monday through Friday. But we did set up an appointment to see the house late morning (do realtors have weekends?).
Side note: Our real estate agent Curtis who toured us around Vancouver and Camas to look at too many houses to count was awesome. If you’re ever in the market for buying/selling a property in the Vancouver/Camas area, please consider hiring him. He has our strongest possible endorsement! He was most patient, knowledgeable and helpful in the process.
The “last chance house” was the second smallest one we toured all week but the space is used very efficiently. The listing price was competitive, quite a bit below the Zillow estimate and recent sales in that area. So, that house had a great price not just compared to our budget and the other (bigger) houses we had toured but also relative to the comp analysis of houses the same size and the corresponding Zillow estimates.
A little bit of background search yielded that the sellers were motivated: a corporate move to another state and they’d gained enough appreciation over the years that they wouldn’t want to haggle over the last few thousand dollars. So, we knocked off another 2+% from the asking price. We signed the offer and headed to the airport. I would have been happy if they had met us half-way but they didn’t even counter; shortly after we landed in San Francisco they accepted our offer! I presume the sellers were happy about the all-cash offer: no mortgage contingency! It took a few more weeks to go through the motions; inspection, title search, etc., and in early November we were officially homeowners again, Well, only remotely because we were in Sydney at that time.
One argument against Camas, initially at least, was the higher housing cost: $400k for the median home? We don’t want to spend less than the median price, right? I’ve lived in other states and cities in this country, and in all places I can remember, I would not find any below-median-price house very appealing. But it turns out that in Camas we could confidently buy a nice house in a great neighborhood even significantly below the median home value; in a nice neighborhood with sidewalks and in walking distance to some amenities, like coffee shops and grocery stores. Our house has just under 1,800 square feet (about 165 square meters), 3 bedrooms, 2.5 baths. In the U.S., that’s considered a starter home, everyone! But we realized it’s really all we need and we paid less than $350k, significantly below our $425k budget. The house is mostly move-in ready, except for a few minor things, e.g. new coat of paint in some of the rooms, change carpet upstairs, etc.
Even in our small new house, we should be able to host more visitors than we’d ever expect showing up all at once. It always amazes me when people buy houses with way too much space just to accommodate guests who may stay there for a few nights every few years.
Why buy a house already? Why not wait?
As mentioned above, we might have waited until early next year to start a home search again. But there were a few reasons that enticed us to go ahead and make an offer already in October:
- Impatience? We’d been on the road for many months already. Homeless! I wouldn’t say that any travel fatigue had set in but we could definitely see that in January 2019 we’ll be ready to settle down again. Living out of suitcases for at least another 1-2 months until we find a home, close the transaction and actually move in didn’t seem that appealing.
- Timing. Early October isn’t a bad time to make an offer. Sellers are likely motivated to move out before the buyer activity goes down for the season. January can be a great or a horrible time to search for a house. Supply will be low but you might be able to find a bargain from a motivated (desperate?) seller. But we didn’t want to take the risk of not finding anything until the spring of 2019 when supply comes back on the market again.
- Low opportunity cost. We had designated a pot of money for the home purchase already. The bulk of the money came from a payout of a deferred compensation package at work. That big chunk of money arrived in August and we decided to simply keep this money out of the stock market. That might surprise folks because, for example, I’m a big proponent of investing your emergency fund in the stock market, but for a one-time, extremely short-term investment of a substantial sum designated for a home purchase (all cash), I’m not going to gamble with the money and just I’d rather keep the money in a zero or low-risk investment (and the decision to stay out of stocks was the correct one ex-post, too!!!). So, long story short, the carrying cost of the house for the two months we’re not even living there was minimal; some property taxes, no mortgage and essentially zero opportunity cost.
OK, we’re at 3,000 words already! So much for the update today! Having a home, finally, gives us something to look forward to when our epic seven-month vacation finally ends. We are thrilled to meet more folks in our new home state Washington and neighboring Oregon. Fellow FIRE bloggers J.D. Roth (Get Rich Slowly) and Joe (Retire by 40) live in the area and I’m sure the Portland Metro Area will have lots more FIRE enthusiasts to hang out with. We look forward to connecting with everyone soon!
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