Riding the Trend Wave

How to Live a $120,000-a-Year Retirement on $40,000

Early to Riser Mark Fitzpatrick sent me an e-mail with some questions about Central American real estate. He has owned some ocean-view property in Nicaragua’s Brito foothills for about six years. (It sounds like it’s near the development I have an interest in, Rancho Santana.)

And he wants my take on what trends will play out in the next seven to 10 years. Specifically, he wants to know:

Would an increase in tax burden in the U.S. prompt even more people to consider retiring to places like Nicaragua?

And will Nicaragua — being underdeveloped — actually be able to develop using the latest in technology (for communications), energy (considering the country’s expansive geothermal potential), and industry (by becoming more involved as an outsource destination for U.S. companies)?

Let me start by saying that I’ve always said that you can live very well in Nicaragua on an income of $40,000 a year.

Here’s why:

  • Land is still relatively cheap. (You can buy a beach-view lot in Rancho Santana for $70,000.)
  • Taxes are low. (Property taxes on one of those lots are just $150 a year. I pay $50,000 on my main house in the U.S.)
  • Food is cheap. (You can eat great, fresh food for less than $10 a day.)
  • Help is cheap. (You can have a full-time housekeeper for less than $8 a day.)
  • Entertainment is cheap. (You can hire a four-person band for a party for $50.)
  • The cost of construction is relatively cheap. (You can build a house for about $65 to $75 a square foot.)
  • Medical care is cheap. (This is not the country for brain surgery, but they are very good at most routine procedures so long as you take advantage of the good hospitals in Managua and the good local clinics, like the one in Rancho Santana.)

What is not cheap is electricity (which costs about as much as it does in the States), cars and car maintenance (again, about what you would pay in the States), brand-name luxuries, and other goods that are imported from the U.S. or Europe.

But what really makes retirement (or partial retirement) in Nicaragua and other Central American countries inexpensive is the choices most people make when they move there. They rarely go out to fancy, Western-style restaurants. They prefer to enjoy the healthy and delicious food that is grown and prepared locally. They don’t build mega-mansions. They prefer beautiful little casas and casitas that nestle into the beautiful natural topography.

When you create a retirement or second home in a tropical paradise, you are looking for charm and ease of living, not fancy things to impress your friends. And that makes life much less expensive.

Let me give you the best example I know: the Masterson family retreat in Rancho Santana.

Rancho Santana, right on the Pacific Ocean in Nicaragua (and right over the border from much more expensive Costa Rica) has been a fully functioning community for many years. It has clean running water, reliable electric power, sanitation service, trained workers, full security, an active homeowners association, two restaurants, a pool and spa, and so on.

The community is a 20-minute copter ride from the capital city, which is a two-hour hop from Miami. But it is also accessible via a highway and is considered to be right in the middle of the country’s next big real estate market.

Our casa is big — 5,000 square feet. I paid something like $40,000 for my lot and spent about $300,000 over several years building and enlarging the house. It is way bigger than we actually need, even though I use it for business when I’m down there. Still, it has been a very good value. About 18 months ago, I turned down an offer for $900,000.

We employ two full-time people to take care of the property year-round. We also employ a part-time person to manage them and, because we rent out the house from time to time, a rental agent. The total cost of these employees is less than $6,000 a year. And I am paying above-average wages. (They also benefit from tips we and our guests leave them. They are happy. So are we.)

When we are down there, we eat mostly at home. Our housekeeper cooks the meals… whatever we want. We buy local ingredients — grass-fed beef, fish right out of the ocean, and organically grown vegetables — and it costs much less than what we pay for the same kind of high-quality food in the U.S.

When we go out to one of the half-dozen restaurants on or near the ranch, we seldom spend more than $12 a person, including drinks.

I can get a massage at the spa for $15, ride a horse for an hour for $10, play tennis or bocce ball or horseshoes for free, and swim for free. I can rent a boat to take me down to San Juan del Sur and back — a day trip — for less than $200.
Our total expenditure for our second home in Rancho Santana is well below $40,000 a year. The equivalent lifestyle in the U.S. costs us almost 10 times that amount. So the truth is, you can do much better than the promise I made in headline I wrote for this essay. You can enjoy a $400,000 lifestyle for only $40,000 there… but who’s counting?

And getting there is easy. You can fly in to the capital city of Managua or to Liberia, Costa Rica, which is about 50 miles south of the ranch. From the airport, you can easily arrange transportation.

Who Else Lives There?

We’re not the only ones enjoying everything Rancho Santana has to offer. It’s home to many part-timers, many of whom bring in significant income by renting out their places when they’re not there. There are also several full-time residents (retirees and people who can run their businesses from outside the U.S.).

Retirees Sylvia and Dennis Green moved down from New England in 2003. They actually drove down in their pick-up truck, packed with their personal belongings, over 12 adventure-filled days. (Did I mention that they didn’t speak Spanish?)

These days, they run the on-property market, which stocks such U.S. favorites as bagels and nondairy creamer.

“I really do believe Rancho Santana is the best place to be in this entire region and coastline,” says Sylvia. “The progress they’ve made over the years is truly impressive…. I have never been disappointed here… it is wonderful; there are so many avenues to take here, to be quiet or as busy as you like. It is hard to find people who love this place as much as we do. Just down the road in Costa Rica, they have the tourists and the fame, but we have the fortune!”

Fellow New Englanders Christopher and Maren Boothby come to Rancho Santana throughout the year, staying connected to their work responsibilities back home (she runs a speech and occupational therapy center for kids and he’s a county commissioner) through high-speed Internet and video conferencing.

Since they spend most of their time in the U.S., they are able to offset a lot of their costs by renting out their home. (Homes in Rancho Santana bring in 10 percent higher rental fees than neighboring properties.)

Is Your Investment Safe?

With its history of coups and revolution, Nicaragua still has a bad reputation among many in the United States. Perhaps that is why Costa Rica just to the south is more popular with vacationers and retirees… and so much more expensive.

But those issues are in the past. The country has been a strong democracy with a stable government for decades now. And international agencies and institutions rank it as one of the safest places in Central America to both visit and invest in.

It ranks only behind Costa Rica in terms of safety, according to the Economist Intelligence Unit’s 2010 report.

And the World Bank Group cites Nicaragua as the top country in the region to start a business. The same report ranked Nicaragua as number one in investor protection.

What About the Future?

Do I think the economic situation in the U.S. (and the rest of the developed world) will push more people to places like Nicaragua? Yes, I do. But I never make investment decisions based on future predictions. I focus on what a specific investment can do for me presently and in the near future. And from that perspective, having a second home in Nicaragua is a no-brainer.

Regarding future technological developments — ETR reader Mark Fitzpatrick brought up a good point in his e-mail to me. Because Nicaragua never had a national phone system (to speak of), cell phone communications exploded there quickly and cheaply. I get better service in Nicaragua, and more cheaply, than I do in the U.S.

The same is true for Internet communications. My service in Rancho Santana is on par with my service here. And things are getting better every year.

Did I mention the other amenities of Rancho Santana?

  • On-site spa, yoga center, and gym
  • Market and grocery store
  • Lighted tennis courts
  • Equestrian tours
  • Full-time concierge in the clubhouse
  • Five private beaches (great for surfing)

The Bottom Line

If you can run your business from home (as I can), you could relocate to Nicaragua and enjoy an amazing lifestyle for a fraction of the cost you are paying in the U.S. One great example of what I’m talking about is Marc and Kathy Brown, who moved to Rancho Santana in 2005. (From what I hear, the surfing is what originally attracted them to the community.) Marc previously worked in sales for various software companies. But when he came to Nicaragua, he worked in real estate. In 2008, he took over the Rancho Santana sales office and helped increase sales by over 100 percent in just his first year at the helm.

If you’re interested in retiring overseas or having a low-cost tropical getaway, I urge you to check out Rancho Santana. They are hosting a Caravan Weekend from May 19 to 23. It’s a great opportunity to check out the community and some properties. You get a great deal on accommodations. Get in touch with Marc Brown at marcb@ranchosantana.com to get all the details. Tell him I sent you. And if you can’t make it then, you’re invited down anytime.

[Ed. Note: Looking for an ideal retirement haven — or a winter getaway that you can buy now? Have you been curious about whether it’s actually possible to live and work overseas? As a member of the Liberty Street League, you’ll learn that it’s not only possible to live in the most beautiful tropical paradises, bustling foreign capitals, and more… it can be cheaper, safer, and a hell of a lot more fun than living in the U.S. Each month, the League’s premium, members-only newsletter details strategies you can use to make your escape, while it pulls back the curtain on the world’s best hidden destinations.

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Find out more about how the Liberty Street League can change your life here.] [Ed. Note: Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Palm Beach Letter. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.]

Mark Morgan Ford

Mark Morgan Ford was the creator of Early To Rise. In 2011, Mark retired from ETR and now writes the Wealth Builders Club. His advice, in our opinion, continues to get better and better with every essay, particularly in the controversial ones we have shared today. We encourage you to read everything you can that has been written by Mark.