Arbitrage is a fancy way of saying there is (risk free) money to be had by exploiting certain opportunities, for example, the act of buying and selling stocks in different markets to take advantage of different pricing for the same asset in different markets. When the arbitrage is applied to geography, we get Geoarbitrage.

Geoarbitrage is defined as the act of exploiting (or taking advantage of) price differences in cost of living between two distinct geographic location, without compromising the chosen lifestyle. This terms has gained particular relevance in the Covid-19 world wherein majority (non-essential workers) of the workforce is forced to earn their living working from home.

Before the forced mandate for working from home, firms were under the impression that work from home (WFH) is a productivity killer. As it turns out, firms are finding out that the situation is quite the opposite. My employer did an internal polling and found that the people productivity in the last month has infact improved and given an option majority of employees would choose to continue to work from home. As such, a few software firms, such as Twitter and Facebook have officially announced the policy for allowing workers to work from home, should they choose to, forever.

Just imagine, you are working for one of these firms in the bay area and the firm offers you the incentive to work from home! Home could be anywhere in the world! Even if one does not go to that extremes, just moving to southern states such as Texas or Florida would be a big savings booster for these employees. That is exactly what has been going through Mr AVI’s mind for some time now.

Articles have begun to circulate in media of city dwellers thinking of a move to suburbs (see here and here) amid the pandemic, a possibility for many folks only because firms are willing to let employees work from home permanently. While this exodus from cities is not explicitly for geoarbitrage reasons, implicitly, I believe geoarbitrage does come into play in folks making such a move!

Some credit Tim Ferriss  for making geoarbitrage popular through his globe trotting ways and blogging as a way to stretch dollars further. I however think, Warren Buffett should be considered the father of geoarbitrage! After Ben Graham retires in 1956, and folds his partnership, Warren Buffett returned to Omaha to start Buffett Associates.

While Wall Street operates from New York, Buffett never returned back to the capital of finance, starting the ground work for his empire right from the 5 bedroom stucco house that he bought in 1957, in which he still lives! He eventually moved to Kiewit Plaza, where Berkshire headquarters remain to this day!

Within AVI family we had a discussion on the possibility for geoarbitrage and what the location within the country that would work for AVI family to accomplish savings maximization, as a path to early FIRE, without compromising on our current lifestyle.

Below are list of things that are important for AVI family to consider (in no particular order) in a geoarbitrage move:

1. Location with good schools (greatschools.org school rating >8)
2. Temperate weather with lots of sunshine
3. Access to beach within one hours drive
4. Suburban life style with strong sense of community within our ethnic group
5. Safe neighborhood
6. States with no income tax
7. Housing that is comparable to our current abode, >2400 sq. ft with a reasonably sized backyard for kids to run around and Mr AVI to engage in his gardening activities and at a price point that Mr AVI can buy cash down!

No state tax requirements leaves us with the following options: Alaska, Washington, Nevada, Wyoming, South Dakota, Texas, Florida, New Hampshire and Tennessee

Temperate weather with lots of sunshine and closeness to beach requirement further willows down our options to Texas and Florida. Among the two states in consideration, our familiarity with Florida, having lived in Florida for seven years, makes Florida a top state to consider for AVI family geoarbitrage.

Having settled on Florida as a destination state for geoarbitrage, I looked into candidate cities that would meet our other requirements! The criteria for safe neighborhood, good schools and housing restricts our options to quite a limited number of cities, top 2 of which I am listing below:

• Satellite Beach, FL: Satellite Beach  ranks number 1 in the ranking for safest city in Florida. The city also boasts of several highly ranked public schools. A quick search for available houses for sale in the market led me to find this this house, which meets AVI family housing requirements to the tee. Downside for Satellite Beach is its proximity to the Atlantic oceans, and the threat of hurricane!
• Oviedo, FL: Oviedo ranks 8 in the safest Florida cities. Housing in Oviedo is quite affordable with several options for housing that fit our criteria, see for example, here.  The city is centrally located, close to Orlando, and Disney World, the theme park capital! Given its central location, the hurricane threat is low and given its proximity to Orlando, employment prospects are higher. Public school system is not universally good in the city and it would matter very much where in the city one decides to settle down!

Having found the top two places that would make perfect sense for AVI family to consider a geoarbitrage move, let us delve into some statistics on what we could achieve with above geoarbitrage move.  For the same, we can head over to areavibes.com.

As can be seen from the above table, except for the all important employment axis, the geoarbitrage move to the two cities in Florida is a big positive.

However, as the basic premise for this article is for AVI family to only consider geoarbitrage if Mr AVI would be able to continue his employment with his current employer, the one negative against geoarbitrage to the above two cities is moot!

The cost of living score needs some explanation, see below:

As can be seen from above, both Snoqualmie, and Satellite beach get an F rating but the score differences are night and day. Infact Snoqualmie is ~44 % more expensive to live in relative to Satellite beach. It just so happens that in relation to the national average (100) both are on the higher end of the spectrum!

AVI family loves our current residence, its suburban, family friendly, safe, welcoming and rather beautiful (see spring colors in our neighborhood)

AVI family is not currently actively considering geoarbitrage, but that does not mean AVI family will never consider geoarbitrage and knowing there exist cities in the country that meet AVI family requirements for an idlyllic lifestyle is encouraging and a strong motivator to keep geoarbitrage as an open option for a fast-tracked-path towards FIRE!

Video/Book/Article/Audio for the Week

• Podcast: Ken French on Rationale Reminder podcast. The highlight of the podcast was Ken French answer to the question, how to evaluate his investment decision! His analysis of why Price-to-Book is still a good metric to analyze value-stock is also quite interesting.
• Article: Latest Howard Marks Memo: Uncertainty-II
• Article: The Hertz bankruptcy story is not what you think. Fascinating look into the financialization by entrenched, self-dealing minority ownership.
• Article:  Whitney Tilson on Why reports on value death is an exaggeration?
• Article: Arguments against value and why they do not hold water!