Buying Real Estate In Costa Rica Is Our FIRE Escape Plan B

As we build our FIRE escape plan, health insurance continues to bedevil us. Our health insurance premiums went up several percentage points for 2019, and that was enough to put us over the $3,000 mark for coverage PER MONTH. Health insurance is our single highest line item. It is higher than our monthly housing and car payments combined!

If we’re going to feel secure in our FIRE escape plan, we’ll need to solve for the health insurance issue. The problem is that we have no idea what health insurance will look like in the coming years. That health insurance will continue to get more expensive seems to be the only certainty. All the other numbers are reliable knowns we can plan on or control. Even discretionary spending, while variable, is something we can estimate pretty well given that we have tracked expenses for years.

A move from New York City to Jacksonville helps with many expenses, but only a bit with healthcare. Our housing payment would decrease by more than half. But a cursory look at Florida health insurance on the exchange shows plans ranging from just under $1,000 to a top level of $2,600. We have a top level plan now, so $2,600 is cheaper but still not cheap.

Moving to Costa Rica however would solve the health insurance variable in our FIRE escape plan. Costa Rica has a well-regarded national healthcare system. However, the big appeal for us is that establishing residency there would enable us to qualify for private global health insurance, which is much cheaper than US-based insurance. You can find coverage from brand name insurers like CIGNA.

We have only done cursory research because our ideal would be to maintain US residency and grow our income streams to cover all insurance contingencies. However, given the unknowns, we need a FIRE escape plan B.

Establishing residency in Costa Rica using real estate

We didn’t buy our three Guanacaste properties to establish residency. However, buying real estate qualifies us for the Inversionista category of residency. Officially expatriating is a plan B so we haven’t looked into how long the process takes or how complex it is, but at least it looks like there’s a path to residency in Costa Rica should we need it.

The US expats we have met in our trips to Tamarindo haven’t bothered with official residency and instead just leave the country every 90 days, so their tourist status can renew again. They still qualify for private global insurance because that requirement is just to predominately live outside the US. You don’t need to be an official resident of another country.

Setting up Costa Rica as our FIRE escape plan B

We bought our three Guanacaste properties to give us a property to live in and properties to live off of. Two properties were purchased using our solo 401k account, so these are strictly investment purchases. Condo Boom was purchased outside the retirement account so we could both rent it out and use it personally. If we moved to Costa Rica, we have one place to live and two for income.

If we didn’t end up spending a lot of time in Costa Rica, then we would just have three income properties. Indeed, our short-term plans are to travel around the world and not stay in any one place that long, Having three investment properties, instead of two, is just a bonus.

Assuming that we do live in one and rent out the other two properties, the cash flow from the two rentals could support a basic lifestyle in Costa Rica. This is 100% diversification from our holdings in the US. If the stock market tanks our paper portfolio and if our US rental portfolio also gets into trouble, we still have Costa Rica.

Costa Rica fits our day-to-day priorities

The property we chose as our live-in option is perfect for the life we plan to lead. It’s a few blocks to the beach, perfect for twice daily walks and sunset views. Internet connection is fast so we could continue our consulting business. There is a spare room and additional sleeping in the living room for family visits. The airport is just over an hour away for visits back home.

We love a variety of food, especially Italian, and Tamarindo has many restaurants to choose from. It has a bustling social scene but is still so much quieter than New York City, of course. I don’t drive, so it’s important to me that I can walk most anywhere – the beach, the gym, exercise studio, spa, the Saturday fresh market, the Thursday night market, all my favorite restaurants. I could even walk to the Spanish school, since I’d have to learn Spanish.

Costa Rica complements our FIRE escape plan A

Of course, we could appreciate all of the above without establishing residency. Our FIRE escape plan A is to maintain all the residences we have now – places in New York City, Jacksonville, and Tamarindo.

• New York City gives us proximity to family, and our kids both think they want to stay here. So it’s not like the New York City apartment would be vacant.
• Jacksonville would be our primary US residence. It meets our first priority for warm weather, and it has great beaches, great activities, and great proximity to other states for the road trips we love. Tamarindo would be a treat at least twice a year – November ideally for NaNoWriMo (National Novel Writing Month) and January for the HOA meeting at our condo complex.
• Costa Rica would be a nice place to return to as we explore Central and South America. There are many places we want to visit, and Panama, Colombia, and Ecuador are high on our destination list.

In the meantime, the rentals in Costa Rica diversify our US portfolio. We put a significant percentage of our assets in US real estate. Rental income is key for us to maintain our cash flow, since we’re too young to tap our retirement accounts. I also don’t feel comfortable drawing down our paper portfolio (I want to just keep it growing in the background and ideally leave it to our kids). Knowing we have some geographic diversification in our real estate portfolio helps me sleep at night.

It also helps me sleep at night to know that Costa Rica is there for plan B of our FIRE escape should we need it. Now we can take more chances on plan A.

For example, this year, I’m taking time away from my time-for-money consulting work in order to focus on building out coaching products. It’s a financial investment, in the sense that we draw down savings while we’re earning less from other projects. If the products sell less than we estimate or ramp up more slowly than we expect, we have Costa Rica if we need to knock down our daily living expenses.

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Spending our spaghetti days in Costa Rica is a plan B I can live with!