About five years ago, a finance friend of mine mentioned that his much wealthier colleague was buying property on a high elevation in Singapore as a climate change hedge. (This same climate change hedger was also stockpiling gold – not just shares of a gold ETF, but actual gold – and this was well before the pandemic.)
I filed that factoid about the Singapore purchase away, but it certainly planted a seed. Should climate change dictate where you buy real estate?
Wherever you fall on the climate change debate, environmental disasters are taking their toll. Reuters covered how the West Coast wildfires could influence financial performance nationwide:
Wildfires across the U.S. West are among the sparks from climate change that could ignite a U.S. financial crisis by damaging home values, state tourism and local government budgets….
– Ann Saphir
Buying the right real estate can impact your wealth across generations
I think of our real estate holdings as family wealth – ideally lasting over generations. With employment increasingly uncertain, a cash-flowing real estate portfolio would ensure an ongoing income stream somewhat insulated to the whims of the market. No need to wait for the government to approve a universal basic income. You can create one for yourself with rental real estate.
Owning real estate properties across multiple geographies already provides several benefits:
- You get economic diversification across geographic markets
- You get enjoyment from your bleisure trips (business + leisure travel), if you buy in areas you would want to visit anyway
- You have a range of housing options to choose from if you want or need to relocate.
Now, you can add climate change hedging to the list of advantages of multi-geographic real estate investing.
But where should you buy if you want to protect against the increasingly adverse risks of climate change?
If you’re committed to staying in the US, the winner is Duluth, MN
A 2019 article in The New York Times named Duluth, MN the best bet because it’s cool and inland.
Forbes actually included climate risk as a factor when putting together its list of 25 Best Places To Retire. While the list is retirement-focused, as opposed to general investing, the retirement objective gives the list a long-term focus. This is a good starting point for us, since we’re thinking about geographies that will be favorable across generations.
Two cities where we already have rentals – Asheville and Jacksonville – make the cut, as do several cities we have already looked at. (The climate issue is lighting a fire that we probably should invest sooner than later.)
Next Avenue posted a nice round-up on how difficult it is to pick a retirement destination based on climate factors alone. The coastal cities have rising sea levels. The Southwest has rising temperatures. The West has the fires. It seems like there isn’t a geography that’s immune – you almost have to pick your poison.
The University of Notre Dame has the Urban Adaptation Assessment, a nifty assessment tool where you can input your city to see its climate risk and readiness. The tool is meant for government leaders and covers cities with populations over 100,000. So it’s not a real estate investing model or even a relocation tool for the layperson, but it may give you some ideas.
If you’re open to an international relocation, consider Athens, Greece or Buenos Aires, Argentina
Four cities – Athens, Greece; Buenos Aires, Argentina; Honolulu; and New York City – received “exemplary” ratings for energy efficiency…
— Elliott Davis
US News highlighted best-performing global cities for energy efficiency, and Athens and Buenos Aires received exemplary ratings. However, so did Honolulu and New York City, which have other challenges, like rising sea levels.
One of the data sources that US News cited is from Nest Pick, which offers this handy list of international cities and their potential for sea level and temperature change between now and 2050. If you’re concerned specifically about these two climate issues, you can at least winnow down your list of potential geographies by these two factors.
We LOVED our 2017 trip to Greece so we don’t need any more convincing to return. But it was nice to see it on the list!
Climate risk is just one factor
Climate risk is a big factor in picking our next geography, but it’s one of many. Economic stability (both the currency and market performance), political stability (including the ability to invest) and healthcare quality, cost and access are other significant factors. (Here are seven questions to consider when narrowing down geographies for real estate investment.)
Fidelity recently came out with its annual estimate for healthcare costs in retirement – it’s $295k per person! A real estate investment situated in an area with low-cost, high-quality healthcare is something we could use for income right now, and then potentially move to as a hedge against healthcare inflation. Given the state of US healthcare, a proper healthcare hedge almost definitely means an international property. We are also looking abroad to help cover the high costs of elder care.
Costa Rica has checked off a lot of the boxes for now, including some of the climate risk (it is the Champion of the Earth for 2019!), but where will we diversify beyond Costa Rica? We’re still looking, and the border closures aren’t helping.
How about you? Where is your next real estate investment?
We are Scott and Caroline, 50-somethings who spent the first 20+ years of our adult lives in New York City, working traditional careers and raising 2 kids. We left full-time work in our mid-40’s for location-independent, part-time consulting projects and real estate investing, in order to create a more flexible and travel-centric lifestyle. 
Financial independence and early retirement is not something we originally focused on, but over time realized it was possible. Our free report, 
