Millionaire Librarian

Part of moving to Ecuador was selling everything we owned in the States. We sold both our cars and all our furniture. We sold extra clothes and other household goods, and what we couldn’t sell we ended up donating or throwing away. Before we boarded planes to an entirely new country with only a few suitcases of belongings, we placed a few sentimental items with family to hold onto for later.

When we arrived in Ecuador we stayed at Airbnbs, then in a furnished apartment for a few months, before finding our current unfurnished house. Some items we had to repurchase, like beds, an oven, a washing machine, and a refrigerator. But we’ve been slow to repurchase almost everything else. It’s been nice to have less clutter in the house. It takes less time to pick up and clean. Fewer things for a toddler to throw on the floor.

The two big items we have not bought, and probably won’t buy for a long time, are a house and a car.

Renting Beats Buying, By a Lot

Renting is much less expensive in Ecuador than buying. In the U.S. there’s a rough guideline for rentals: if you can get 1% of a house’s value in rent each month, that’s considered a good return. That rule doesn’t hold up here. The house we live in is worth more than $100,000 to buy, but rents for $450 a month. That’s a 0.45% return, not even close to 1%.

Run the numbers over a year and it’s even more obvious. $450 a month comes out to $5,400 a year in rent. If we’d put that same $100,000 into an index fund instead and earned something like a 10% average return, that’s roughly $10,000 a year, and the money stays liquid and working for us the whole time. Buying the house would tie up six figures in an asset that, at least at these rent numbers, isn’t pricing in much of a return at all.

There are probably a few reasons rentals are priced so far below what buying would suggest: cheap property taxes, no A/C units to replace, and generally low maintenance costs compared to what we’re used to in the States. Real estate here is also viewed as more durable than money sitting in the bank. Ecuador’s move to the U.S. dollar, after the collapse of the sucre, is a recent enough history lesson. People woke up one day to find their life savings had vanished overnight. That kind of memory sticks, and it explains why locals lean toward property over cash even when the rental yields don’t make obvious financial sense to an outsider like me.

Skipping the Car

The other big item we don’t have is a car. Cars depreciate quickly in most countries. Here in Ecuador they hold their value better and stay relatively expensive to buy, but ownership still comes with taxes, insurance, depreciation, maintenance, and repairs, all extra costs on top of the purchase price.

There are also good, cheap substitutes to owning a car here: a solid bus system, walkable roads, and inexpensive taxis. A bus ride costs $0.30. Most moderate taxi rides run around $1.50, and crossing town might cost $2, maybe a little more. Even taking a taxi almost daily, we’d be hard-pressed to spend $100 a month getting around. A car, once you add up insurance, maintenance, and the taxes that come with owning one here, could easily run two or three times that before you’ve driven a single mile for fun. The math just doesn’t favor ownership when the alternative is this cheap and this convenient.

Staying Light on Purpose

None of this is really about furniture, or cars, or houses. It’s about optionality. Every dollar we don’t sink into a car sitting in a garage or a house’s down payment is a dollar that stays liquid, stays invested, and stays flexible if our plans change. That’s the same philosophy behind the index fund investing we lean on: don’t tie up money in things that feel secure but quietly underperform, when there’s a simpler and more flexible option sitting right there.