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Month: September, 2013

I went to the doctor today, and it felt like buying a used car.

I try to keep this blog impersonal, but a personal experience is making me break that rule.

I went to the doctor today, and it felt like buying a used car.

I lived in Asia and Europe for over a decade before coming back to America. I’d never gone to a doctor alone as an adult, and I’d never gone as an uninsured single payer. Being price conscious, I wanted to ensure I received just the medical care I need, nothing more.

I fear this is almost impossible in modern-day America.

First, I had to go through four doctors’ offices to find one that was accepting new patients. Then I was told I had to apply by providing some personal details and my medical history. I was told the doctor was too busy to take a new patient, but the resident LPN would see me.

See me she did, and almost immediately upon taking my medical history insisted on several lab tests as well as the need for an annual physical including EKG, as well as more frequent check-ups. She also said I would have to come in annually or the doctor would not accept me on his patient roster.

I tried to get the appointment because my family has a history of thyroid problems. I’m in great health; last year I had a physical in another country, and the doctor said I had normal cholesterol, blood pressure, and so on. My thyroid was fine too, but because of the family history, I still want to get an annual checkup.

No, that wasn’t good enough.

I’ll spare the details, but the nurse insisted on more tests, follow-up visits for the test, and annual checkups at the very least. When I protested citing cost, she adamantly said, “I get paid the same no matter how often you come. It doesn’t matter to me–I’m not trying to get money out of you.”

Well, her pay is indeed indirectly dependent upon revenue from patient visits, and I’m unsure how good the margins are on self-pay patients relative to the insured. It’s largely irrelevant, though; the pressing medical need is for a thyroid check.

Ultimately she refused to give me a prescription for just a thyroid checkup. Despite a normal BMI and no family history, I was to get cholesterol levels checked, as well as tests on iron levels, diabetes, and a few other tests.

I’m going to another doctor–preferable an immigrant to America who finds America’s broken medical care system as alien as I do.

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The Unsurprising, Unknown Property Bubble

For some, 2008 is a distant memory (although I suspect it’s still a painful reality, as knock-off effects stay with us), and a lot of enterprising investors have found double-digit returns in investing in distressed property. The new stage in America’s property market has given birth to some entertaining reality shows (of dubious reality, no doubt), and American real estate is facing some interesting twists and turns as mortgage rates rise, real wages stagnate for most Americans, and unemployment slowly slides.

 

At the same time, a completely new and fascinating real estate market is maturing right under our noses, and many Americans seem oblivious to it. This is the international expat retiree real estate market, which has developed into a self-contained marketplace whose physical footprint is all over the world.

 

I’ve written a couple pieces on the growing phenomenon of expat retirement (another is forthcoming on Bankrate), and could easily write a book on the topic. I’m considering writing a how-to guide for people thinking of retiring to Dominican Republic, after spending some time there. But for now, there is one thing I can say about foreign retirement with confidence: property prices are too high.

 

There is a lot of basic, Econ 101 logic to support this observation. Firstly, a number of retirees are of a generation when buying made more sense than renting, so when they look to live abroad they give more weight to buying. More demand for buying moves prices upward.

 

Secondly, the Baby Boomer generation is beginning to retire. That again adds demand for houses abroad. Boomers are not only retiring en masse (which is partly causing the labor participation rate to decline), but they are also in general more worldly than previous generations, and more open to moving abroad.

 

A third cause, and perhaps a reason why that second point is so sustainable, is that many developing nations have become very stable and peaceful, relatively speaking, in recent years. Steven Pinker has already pointed out that war and conflict are at all-time lows in human history. For whatever reason, countries like Thailand, Dominican Republic, Ecuador, Guatemala, Malaysia, and so on are now stable and peaceful enough to attract first-worlders savvy enough to know that these countries aren’t what they once used to be. This also creates an amusing disconnect between the so-called adventerous (who know that you can walk down the street in Cuenca without getting mugged or killed) and the more stereotypical American (who thinks anyone who even stops at an airport in Latin America is crazy).

 

Finally, there is infrastructure: developing countries are so named because they are developing an infrastructure. Visit Bangkok or Guatemala City, and you’ll quickly realize that these countries have been developing for quite some time–the infrastructure isn’t perfect (neither is America’s), but it’s definitely good enough for a growing number of retirees.

 

All of this encourages more migration to a specific set of developing countries that have a pension visa system, advanced infrastructure, and groups of attractive condominiums in desirable locations (by a beach, in a booming city with a lot of things to do, near a rainforest, and so on).

 

Okay, that’s nice; but what’s going to happen to prices now?

 

To answer that question, we must acknowledge that countries like Thailand and the Dominican Republic have two very distinct tiers of housing: those for the rich, and those for the poor. Americans might immediately want to respond by saying, “so does America,” but it’s really not the same. Bangkok has small, dilapidated apartments for $100 per month, and luxurious condos for $1000 per month. And both would be the same size, just in different locations and with different proximities to amenities, transport, and so on.

 

Other countries, such as the Dominican Republic, have a similarly massive disconnected between “us” and “them” housing. In many parts of the third world, these two co-exist in ways that Americans have a hard time visualizing.

 

So we need to acknowledge that these observations apply to the “us” housing, and that market dynamics for housing for the poor in developing countries is very different. This observation, by the way, points out the most fascinating thing about the boom in expat retiree homes (and, for that matter, in homes for wealthy natives of developing countries): we are seeing the globalization of home prices in markets for the wealthy, who are increasingly living more global lives. This is very interesting, but not too unexpected.

 

So what will happen to housing costs for the rich of the world? The third and fourth points above (better infrastructure, political stability), suggest that there is still room for expat-oriented homes to grow in value. As more late-boomers age and word spreads of just how safe and advanced these places are, more and more will “brave” it outside of their comfy suburbs and this will raise aggregate demand for the expat condos, planned communities, and houses in the developing world.

 

Longer term, however, there is an upward bound limit to the value of expat houses. As prices boom and as expats brag about their wonderful lives abroad, it’s easy to lose sight of why these expats retire to foreign countries: it isn’t just the weather (if so, what’s wrong with Florida, and why did I see so many Italians in the Dominican Republic?). It’s cost. These countries are cheap. You get labor, some materials, and most crucially, property and amenities, at a discount.

 

That discount is dwindling. In the DR, the apartment I stayed in was on the market for about $230,000. This was a new two-bedroom condo with a pool shared by 32 other units about 1 minute of a walk from the beach. Another apartment I visited, also a two-bedroom, was a bit more–$395,000. That unit also had a view of the beach and some incredible amenities.

 

Sounds good, right? Except that it isn’t that good, really. A quick search on Zillow uncovers many similar properties in Florida for that price or less. Yes, the DR property is newer, so you are buying that, but there are trade-offs; the water isn’t potable (and too salty to shower with, I might add), the power is unreliable, and the internet was so bad that I had to cut my trip off early to get back home to work. Again, infrastructure improvements will eliminate these trade-offs, but I suspect growing demand for homes in the Dominican Republic to offset the value to buyers that these infrastructure improvements will yield.

 

I could give more examples from other warm, pleasant countries I’ve visited in the past couple years, but this is already too long. I am writing a piece on renting in developing countries for Bankrate, which I think is going to be the next big thing for expats. After all, why tie yourself down to one city and one country without needing to go to work? And why take on board risk factors that you don’t need to?

 

And if you’re looking to retire abroad now, I suggest renting. That condo in the Dominican Republic rents for $900 per month, (which is really only $750 in net rents, since the landlord pays the $150 association fees for the pool, beach access, and groundskeeping). Instead of buying, save that $223,000 and invest in something that pays 4% interest, then use that interest to pay the rent. For now, and I suspect even more so in the future, that’ll be the smartest way to retire abroad.