The biggest hindrance to building a real estate portfolio that allows you to leave your job and become financially free is getting past the hurdle of covering your living expenses. Decreasing your costs by living overseas could be the most logical way to build a real estate portfolio in the U.S. quickly.
Why the Cost of Living in the U.S. Makes Saving So Difficult
According to the Bureau of Labor Statistics’ Consumer Expenditure Survey, the average household earned $94,003 in 2022 before taxes and spent $72,967 (just over $6,000/month) on total expenses. Of that number, $24,298 accounted for accommodation, which amounted to around $2,000/month on rent or a mortgage.
With the cost of living increasing, earning almost $73,000 a year in passive income so you can contemplate quitting your job is no small feat. With 33% of most people’s total expenses in the U.S. dedicated to living expenses, it is difficult to save enough to invest in real estate securely.
For older Americans in their 50s and 60s, investing in real estate to retire might seem beyond their reach. In 2023, the median 401(k) balance for Americans in their 50s was $57,000. Financial advisors T. Rowe Price recommends 65-year-olds should save 7.5% to 13.5% of their annual gross income. With adults living longer than ever, that still creates the fear of outliving your savings, let alone passing on an inheritance to your children.
Remote Working Has Created Options
The spiraling cost of living in the U.S. has coincided with the increase in remote work after the pandemic. Although estimates vary, BLS found that more than 27% of the U.S. workforce was working remotely at least part-time as of August and September 2022. However, some academic surveys have suggested that the number is closer to 50%.
To quote author Tim Ferris of the best-selling Four-Hour Work Week, the way to financial freedom is to “live in pesos and earn in dollars.”
When it comes to scaling a real estate portfolio, working overseas, where the cost of income is a fraction of that of the U.S.—aside from moving back in with your parents or house hacking— is a rock-solid way of keeping more of what you earn to invest in real estate. Also, living in a foreign country will keep your debt-to-income ratio low, making borrowing easier for your investments.
The Cost of Living Overseas
According to International Living, some of the most popular, cheapest places for couples to live a comfortable middle-class lifestyle in a safe neighborhood, accounting for transportation, food, quality healthcare, and other expenses, are in these countries.
Mexico
Overall monthly cost of living: $2,000
It’s entirely possible to spend much less than $2,000/month. American expat M’kali-Hashiki Nln, who lives in a furnished two-bedroom apartment in Oaxaca, Mexico, says, “I spend $800 to $900 per month… I could go cheaper if I lived in a different place, walked more, and took fewer taxis.”
Ecuador
Overall monthly cost of living: $1,900
Living well on the outskirts of a main city is possible for far less than $1,900 a month. A former Bay Area IT worker, Aaron Williamson, still works for a U.S. company, earning an American salary. “I knew I would save at least 30% from my North American burn rate without any budget restrictions,” he told International Living.
Malaysia
Overall monthly cost of living: $2,000
Living and working in Asia is extremely affordable if you do not need to be in a Western time zone. Once you get out of the main cities, it’s possible to live in a 1,000-square-foot, three-bedroom apartment with sea views that can cost as little as $300 per month. There is excellent transportation, and the food is delicious. There are also bucket airlines to the rest of Asia, allowing you to access the continent’s culture.
Thailand
Overall monthly cost of living: $2,000-$2,500
Thailand is a perennial favorite if you want to live in paradise with a large international community. A one-bedroom resort-style luxury villa on an isolated beach at Koh Samui will cost you $830/month. Move to Chiang Mai, and rents for a clean, quality apartment can drop to $250/month.
Colombia
Overall monthly cost of living: $2,000
Colombia has come a long way from its violent past. It has become a hub for digital nomads with quality healthcare and cosmopolitan attractions in cities such as Medellin, Bogota, and Cartagena. The cost of living drops once you go to smaller cities such as Manizales and Pereira. Expect to pay around $700 per month to rent an upscale apartment in Bogota and $500 in Cali, Pereira, and Bucaramanga.
How One Expat Plans to Use His Digital Nomad Lifestyle to Jump-Start an Airbnb Business
Faisal Qureshi was living in the Bay Area when the pandemic hit. He was working for a start-up, paying $4,000/month for a small apartment, using his entire income on living expenses, and unable to envision ever being able to afford a place of his own.
“When everyone started working remotely, I didn’t need to be told twice to leave the Bay Area,” Faisal says. He moved to Mexico City, where he could still be close enough to the U.S. to fly to cities for business while living cheaply.
“I lived in a huge luxury apartment in Mexico City for about 50%-60% of what I was paying in California,” Faisal says. “So I was able to start saving while still living well. When I left the start-up to join another U.S. company, I no longer had the geographical constraints of needing to be close to the U.S., so I’m currently living in Buenos Aires. Initially, my goal was to save up to buy a primary residence in the U.S., possibly in Miami, but living overseas, for a fraction of what it costs in the U.S. while having really good experiences, becomes addictive.”
“So now my goal has changed,” Faisal adds. “I want to buy a property in the States that I can Airbnb, giving me additional income and a place to stay when I visit. I’ll have all the tax benefits of owning real estate, appreciation, and a home when needed.”
Moves to Make Before Moving Overseas
If you’re looking into living overseas to save and invest in the U.S., you’ll need to do some legwork beforehand. Besides looking for accommodation in your desired new city, you’ll have to investigate healthcare.
Fortunately, unlike in the U.S., it’s possible to get quality healthcare for an affordable price, even if you are an expat. Equally, there are multiple affordable insurance options to cover you in case of any unforeseen circumstances.
International travel may not make sense if you travel with children and want to educate your kids in a private international school. Be prepared to join the ranks of multinational executives and their families and pay a much higher price than a U.S. state school. However, traveling with babies and toddlers before school age could save you a lot of childcare costs, enabling you to buy a primary residence or investment property before the cost of raising kids kicks in.
Final Thoughts
If you can work remotely and have wanderlust, working overseas to save money and see the world could be the perfect recipe for building a real estate portfolio. Whether you want to save for one or two homes or love extending overseas living to keep accruing property in the U.S. without sacrificing your lifestyle, consider taking a flight to set your investing alight.
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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.
