It’s Complicated: Our Relationship with Home Ownership
In 2021, Darren and I embarked on our nomadic lifestyle after reaching financial independence and leaving our corporate jobs. We downsized our belongings into a storage unit, sold both our vehicles, and purchased one older truck.
We also sold our “million-dollar home” in a high cost of living (HCOL) area of the US and traded up to a $50,000 home in the Great Plains, a very low cost of living (VLCOL) area of the US.
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Our First Twenty Years of Home Ownership
Over the years, our careers took us to Kansas City, two cities in Indiana, and North Carolina. Each move was part of a corporate relocation. The companies we worked for paid for moving expenses (up to a certain amount based on pay grade) and provided support in purchasing a home (such as closing fees).
In hindsight, corporate relocations with home ownership incentives are a great tool for companies and may or may not be in the best financial interest of the employee. A company’s financial support for relocation is like a golden handcuff that locks an employee into a (typically two-year) contract. Before you know if you like your employer or new role in a new city, you are locked into a mortgage in a city you may know little about.
Relocation packages are also a great turnover reducer for managers, as few employees are willing to break a work contract in the first two years with a new company or at a new location and face repayment of relocation costs incurred. When employees break a relocation contract, they have to pay a portion or the entirety of the relocation package back if they quit or go to another employer. From personal experience, it’s quite common that the relocation packages for technical experts and mid-level managers are $60,000 to $200,000 for homeowners, versus $20,000 to $25,000 for renters. When an employee rents and utilizes a relocation package, typically the only cost of the relocation is for moving household goods.
We were encouraged by our new peers to take advantage of relocation packages. There were many stories in corporate hallways of families making huge profits on houses when they did a series of corporate moves. It seemed like our friends were more upset about the company not paying for a beer at dinner during a relocation than the potential downside of a $50,000 contract hanging over our heads if we hated our new role or location.
In our experience of home ownership, we did not make money on our first two home purchases. Without the relocation package, we would have lost money on our first two homes. And these were very modest older homes (1500 sq ft, ½ acre lots, and each under $160,000) in desirable neighborhoods.
Our home in Durham, North Carolina was the only home we owned that we sold for more than we paid. In hindsight, however, our net worth would be significantly more if we had rented in Durham rather than purchase a house and had invested the difference. That’s not to say we didn’t enjoy our house. We did enjoy it very much and were very proud of the improvements we made while we owned it.
We didn’t have a strategy that led to profit on our Durham home sale, it was simply dumb luck. We built our home in 2009 during the peak of the housing crisis - builders were giving big incentives including “free basements” and upgrades to buyers to keep their best employees and to remain solvent. We sold this same house during the pandemic as home prices were soaring. At the time of this writing (summer 2022) the home value is almost 3x what we paid for it in 2009.
When we sold our Durham, NC home it was the first time the two of us had the opportunity to decide where to live that wasn’t based on the location of our next career stop. The choice was completely ours and not at the whim of an employer. It was also the first time that we had to pay the cost of selling our home ourselves. In previous moves this expense was covered by our employers, so we hadn’t really given a lot of consideration to the costs of selling a house. This time was different. The cost of selling our home was over $50,000.
After 20 years of home ownership, we were excited to be free from the burdens of a large suburban home. We had learned that a primary home is an asset and not an investment. Once we removed the false American mantra “owing a large primary home is a great way to build wealth,” our eyes were wide open to a world of opportunity.
A Year of Renting
We knew we wanted to live on the coast. Every free weekend we had, we’d head to Wilmington, NC, and go fishing or visit friends. Darren was also able to pursue a boat captain license while he finished his last few months with his employer. So, once we sold our Durham home in 2020, we moved to Wilmington in August 2021 and rented a three-bedroom house in an older neighborhood within walking distance of grocery stores, a bookstore, and a bike ride from the beach for $1900 per month.
After living in Wilmington for a while, we started to meet people who were nomadic, typically in the sailing life. We started listening to podcasts and watching YouTube vloggers living a nomadic lifestyle. In early 2021, we started to make plans to become nomadic. Rents were already increasing significantly in the neighborhood we were living in, so we figured we could leave and then come back— surely rents would come down once the pandemic receded? Or there would be more supply since we saw a lot of housing construction taking place in Wilmington during the pandemic. If only we knew how wrong we would be!
The upside to renting is that you know your fixed costs month-to-month, typically up to a year at a time. And if you don’t like a city or area, you can move. In other words, renting buys you the freedom to change your mind. And if something major needs fixing, the landlord is responsible for it, not you.
A Year of AirBnBs, Hostels, and Hotels
Starting September 2021, we walked the Camino de Santiago, then spent some time in Portugal, Panama, Puerto Rico, Bonaire, Belgium, Germany, and the Azores.
While we really enjoyed the Wilmington, NC area, we discovered early in our travels that we loved the nomadic lifestyle and wanted to continue it. We also saw that rents in Wilmington, NC had shot up to over $3000 per month. It was impossible to find a three-month apartment rental for the summer due to demand and a bias toward more lucrative short-term weekly rentals for vacationers.
Homeowners Again
In April 2022 we talked about getting an old RV or sea crate to put on our farm in North Central, Kansas to live in during our April and November visits to Kansas. However, one mid-April day, we passed by a small home with a For Sale sign in the yard. The previous owner had passed away and the daughter who was selling the property happened to be at the house and showed us around. From the back yard of the home, we could see our farm. We left Kansas 10 days later as homeowners (again).
While that all sounds a little spontaneous and unplanned, we had been thinking for some time about our relationship with homeownership and wanted to do things differently this time. We’d also seen how much travel costs were increasing in early 2022 and anticipated that many people and families would have pent-up travel demand for the coming months and next couple of years, so having someplace economical would fit the bill.
We’d discarded old money scripts of home ownership and viewed a home as an asset that should take up as little of our net worth as possible. We chose an area with cost predictability and stability.
What We Did Differently in Purchasing A Home as Nomads
A big decision nomads need to make is whether to keep their home, sell their home and put things in storage to become nomads 100% of the time, or to downsize into a condo or small home and be nomadic part or most of the year.
Becoming nomads, we realized that a primary home is an aspirational expense, not an investment. The premium for owning stocks over a home is 5-6% per year. With our (new) knowledge that home ownership is a poor investment, we knew exactly what we were stepping into.
We Purchased a Project House
We purchased a home built in 1905 that measures 1091 square feet: two bedroom, one bath, and a detached unheated garage on ⅓ acre. Just enough space for two people and an occasional guest or two.
Structurally the home is quite sound. It is located on the edge of town with no neighbors behind us, with a view of a river and cropland. Inside was another story. The whole house needed updating. It had been smoked in for many years, and the garage roof needed to be replaced.
Essentially, we purchased a project house. We’ve done many home improvement projects on previous houses but never a complete overhaul. So far we’ve really enjoyed the renovation project and we are doing most of the work ourselves including demolition, roofing the garage, plumbing, electrical, flooring, and so much more. We are sourcing as many supplies and tools as we can locally to support local business. Since our home is not flashy nor located in a trendy neighborhood (although the small town we live in is quite lively), we expect just a few visitors per year.
We Purchased A Small Home to Fix Costs While We Are In the US
Owning a small home means that we will not be renting when we are in the US. The $4,000 to $12,000 per year we would be spending on AirBnBs can be repurposed in our annual budget as fixed costs.
We eliminated $1700 per year in storage rental by purchasing a home where we can leave our things (albeit our things are greatly reduced since our downsizing efforts in 2020 and 2021).
In our long-term planning, we had budgeted to purchase a $350,000 home at age 60. We’ve decided to spend 7 times less and spend the money at 50 instead of 60.
We Purchased A Home With No Mortgage and Less Than 5% of Our Net Worth
We used proceeds from our Durham, NC home to purchase this home, so we were able to avoid the mortgage approval process in the US, which is income (not net worth) based. This also means we will not be paying interest on a loan. By paying cash, we were able to accelerate the closing date which benefited both the seller and ourselves.
We Selected A Location Between our Families
Our families reside in Northeast Kansas, Missouri, and Colorado. So, having a spot to call home in North Central Kansas for part of the year is relatively convenient to visiting our families.
We Selected A Small Town in A VLCOL Area
I’ve never lived in a small town. I grew up in the country and then moved to the city in college. Living in a small town has been an adjustment. We’ve found several people who are well-traveled and who’ve also opted out of the corporate gig after 15 or more years for a different pace of life. It has been refreshing to meet worldly people in such a small town where the entire town feels like a small neighborhood.
We Have A Nomad Exit Strategy
We are active in several nomad groups. The topic of having a nomad exit strategy is not discussed a lot. We don’t see the housing shortage in the US receding any time soon—it seems supply cannot keep up with demand. Most of the housing growth consists of large suburban homes and luxury apartments, not the types of smaller homes that aging GenXer couples are looking for.
We know that the go-go years will be replaced by the slow-go years and then the no-go years. We can rest easier at night knowing that we have a small, modest place to go if we get a serious injury in our thru-hiking. There’s also a new regional hospital 15 miles from our tiny home, one of the few new regional hospitals being built in the Great Plains at this time.
We Can Host Friends and Family & Engage With Our Passions
The main thing we missed about owning a home was entertaining friends and family. We really enjoyed hosting get togethers at our homes. We also loved seeing our artwork on the walls. We were unable to sell Darren’s beer brewing sculpture before our move, so it came with us as well. Once the renovation dust settles, Darren will set up the brewery and make a few batches of beer to share with new friends and visitors.
Another one of our passions is to conserve land for wildlife. So, with this new home base, we will be better organized for taking care of our land and be in close proximity to it when we are in the States.
So What Is the Burn Rate For A Small Home on the Prairie?
In purchasing a small home, we acknowledge that it is, as JL Collins says “...an endless parade of repairs and maintenance, without which it will crumble into dust.” Yikes! But, we’ve carefully considered the overall, longterm costs of purchasing this “little house on the prairie.”
Electricity
The home has central heating (gas) and air conditioning. While we are away, we will need electricity for the AC as well as to power the WiFi router, dehumidifier, lights, and security system. When we are not in Kansas, we will maintain the home at 78 F in the summer. For that, we will use a programmable thermostat.
We plan $60 per month for electricity, with typical rates being $45 in the spring and fall and $200 in the summer, as it will get up to 100 F here many days in the summer months.
Here’s a programmable thermostat we trust:
Cost of Gas (Heat)
The home has a gas furnace.When we are not here, we will maintain the home at 55 F in the winter. We plan $45 per month for natural gas, with typical rates being $20 in the spring, summer, and fall and $120 in the winter.
City Utilities: Water, Sewer and Waste
The city we live in charges a flat $50 per month for water, sewer and garbage. Therefore, we plan $50 per month for water, sewer, and garbage. The main use of these utilities, while we are away, is the commercial dehumidifier. We purchased a commercial dehumidifier for the unfinished basement to control humidity. By controlling the humidity, we can reduce our chances of having a mold problem develop when we are away from the house.
Mowing and Lawn Maintenance
In our downsizing efforts in 2020 and 2021, we gave our push lawnmower to family. So that we don’t need to buy a new one, we pay a local retired teacher $70 per month to trim and mow the lawn during the summer months. Annually, we plan $35 per month for minimal mowing and lawn maintenance. Eventually, we may plant the entire yard to native species which will require mowing only twice per year.
Property Taxes
In our large suburban home in North Carolina, we were paying about $7000 per year for property taxes. In perpetuity, we would have been paying almost $600 per month in taxes.
In this smaller home, the taxes are about $700 per year or about 10% of what we were paying before. Annually, we plan $60 per month for homeowner taxes.
Insurance
In our home in North Carolina, we were paying about $1300 per year for homeowners insurance. There, the risk to property was high winds due to storms and hurricanes. In Kansas, the risk is fire. Our homeowner’s policy is $750 per year, so we plan $60 per month for homeowners insurance.
Security Monitoring
We will be using a DIY Home Security Monitoring system like Ring to monitor the temperature and moisture levels in the home. Having a security system means keeping an internet provider contract. For fiber internet and home security, we plan $60 per month.
Mail Forwarding
In 2021 we became South Dakota residents and signed up for Escapees mail forwarding service. The USPS does not offer to scan mail or forwarding of mail overseas to full or part-time nomads.
Mail forwarding and Escapees memberships are $285 per year, so we plan $25 per month for Mail Scanning and Forwarding services.
The Home Ownership Wrap-Up
In deciding to purchase a small home in a VLCOL area, we have not opted out of the nomadic lifestyle. We will still travel more than half the year as we prefer to stay out of the US to take advantage of lower health insurance costs. We want to do most of our active travel before the typical retirement age.
For us, purchasing a home is a hedge against rent inflation, a plan for our slow-go years, and a place to stay where we had already been planning to stay a few months out of the year.
Having a small home in a VLCOL area does bring with it additional annual costs of $4740. However, we would be spending $4000 per year on Airbnb in the same area. We’ve eliminated our storage unit cost of ~$1700 per year. In summary, by owning a small home and visiting it a minimum of three months per year, we should be cost neutral on our cash flow.
Are you a full-time nomad considering a small place to stay part of the year? Or are you currently traveling six months or more per year with a home base? We’d like to hear more about your housing decision. Share in the comments!
We’ve learned of other former East and West Coast dwellers moving to Kansas in early retirement. Check out this recent podcast on Retire There With Gil and Gene featuring Bradley Roberts who moved from San Francisco to nearby Lincoln, Kansas.
