Shelter Hacking

The highest expense in life is the cost of shelter. Homeowners' and renters' payments used to be 28% of their income, but recent reports show that this metric has climbed to about 50% within certain subsections of the economy.
For decades, many have attempted to lower their cost of living by buying duplexes to rent out one level while living on the other. More recently, the younger generation has expanded upon this idea and rebranded it as "house hacking". I dig this new language. My favorite variations of this include "rent hacking", "van life", and "geo- arbitrage".
Since one solution cannot be applied to all situations, I have researched variations of "shelter hacking" to analyze and compare within this article.

Downsizing

Downsizing, or avoiding large living spaces to begin with, is one way to "hack" your living expenses. However, this can be difficult, since the size of homes has gone up over time. My grandparents lived with their four kids in a 700 square foot space that only had two bedrooms and a den that was used as a third bedroom. When I was growing up, we had a “family room” to hang out and watch TV, but a separate “living room” where us kids were not allowed. Why have a living room if you aren’t allowed to live in it? The house where I raised my daughter was 1,800 square feet, which felt way too big for us. There was a breakfast nook, a kitchen island with barstools, a dining room, and even more space for a table on the lanai. Who needs four places to eat? Certainly not a family of two. While I was living there, one of my coworkers was retiring and mentioned that he was looking to downsize in retirement. When I asked him what size house he was shopping for, he said 2,500 square feet. I was shocked. I recommend starting small, staying small, and not chasing after more than you need; Aim for your shelter to cost only 30% or less of your spending.

Further down the traditional line is just renting or owning more modest accommodations, instead of the ideal place. Two of my properties are just that. One is a tiny cottage, just 569 square feet, with low property taxes and a private large yard alongside a nice river stocked with trout. It’s in a neighborhood with $400k houses, but I bought it for just $50k, and it’s worth just $70k now. At that low price, the mortgage, taxes, and insurance are just $500 per month. Yes, as you can imagine, the place required a lot of work. Doing some work myself helped mitigate the cost. I lived there for a while, then converted it to a rental unit and collected $950 per month. Eventually I paid off the mortgage such that it only cost $167 to hold the place. My other property is far off the beaten road in the country with 20 acres. It cost just $30k, and similarly is valued near $70k now, and has no mortgage. When I bought it, it was without a bathroom, it only had an outhouse. In the country, the building cost are incredibly low such that putting in a well and a septic system cost less than $4k and adding the bathroom cost less than $8k. An interesting twist, there is a gas well on the property, so I am now the landlord of this gas company. They have rights to any minerals found, or gas found, and they pay me by supplying me with free gas. Since it is in the country, the taxes are really low, only $200 for the whole year. I plan on using this as the home base on retirement. My first house, long since sold, was super deal. Driving around looking for houses, my boss at the time spotted this small place with the back yard torn up, with construction vehicles. He proposed that this scenario means the owner died, the kids inherited this place, they tried to sell it, and it failed for septic. He said that if I call them they are currently right now at a low point, and my offer will be the only offer and they will be happy with low offers, I on the other hand get this nice little place with a brand new septic system, something that is a risk otherwise. I did just as he advised, and he was correct. Finding cheap houses isn’t easy. People tend to know what the home will sell for and try to maximize to that amount. It’s not impossible, in fact most investors spend a lot of time looking. The benefit of spending a lot of time looking is that you become familiar with prices and what properties are on the market. That way when a new property (the great deal) appears, you are quick to jump on it, and you are skilled at knowing if it is a good deal or not so that you can get an offer in really fast, beating out the competition. At one time in my life, I got my real estate license just for the primary purpose of having the lock box combinations to look for houses myself. If sold real estate, all the better.

Duplexes

As I mentioned before, buying a duplex to collect rent on half of your house is another common “house hack”. In theory you lived rent free, but in practice you only lived with slightly cheaper rent. Overtime, you are building equity such that the real cost (cost excluding the portion of cost paid toward principal in a mortgage) slowly increases. Additionally, rent tends to rise over time with inflation, so while others renting will only see their rent rising, the person that takes this route, sees decreasing cost of shelter over time. The final level of duplex related hacking is the person that renovates their attic or basement, and moves into that extra room so that they have two rent checks come in. Of course this doesn't have to be a duplex, you can also get a triplex, a fourplex, or go all in with an apartment building. In each case, the cost of entry rises, but to your surprise, so do the rules. At the low end of duplex you take a standard mortgage, and the mortgage company gives you a loan based on your credit score, your work history, and your cost to income ratio. Ideally, they prefer for your total borrowed cost plus associated expenses (property taxes and insurance) to be less than 28% to 30% of your income. At the higher end, with many units, the loan is considered a business loan. In this case, the bank looks at any business background, and your proposed business case. In other words, if you can prove your building makes plenty of money, they are inclined to lend. So surprising to many, this idea is more affordable than you would expect, as it is not tied to your income.
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Alternatively, you could rent out a room or two in your house. At the simplest end, you and a roommate would have a few shared spaces within the house. However, you can command better rents when there is less sharing involved. This is where many doors open up in the hacking arena. You can tackle your creativity here by renovating rooms to have more functionality than just a bed and closet. Take notes from tiny houses and RVs that have built in kitchens and bath rooms, yet are as small as a room. Thus, it is certainly possible to convert rooms to have a shower, sink, and toilet, as well as a place to cook. I have seen many creative concepts. On the easy side is a nice master bedroom with its own attached bathroom. In this case, you only need a countertop with a single portable plug in burner and a microwave. Adding a private entrance gets you even more rent. For regular bedrooms, I have seen half of a closet has be converted to a bath, yet still used as a closet. There are also kits that have all inclusive facilities, but these come at a higher cost. If you’ve never seen them, inside boats and RVs are toilets that are inside the shower such that you sit on top of it with a closed lid while showering, or it slides in and out of place to allow for standing in the shower. The plumbing for adding a bath is simpler than most expect. If adjacent to a bathroom, a plumber can go through that way, and if not, the plumber can add a pump to push the waste up and connect through the attic space back to the main drain pipes and supply lines. Many houses also have laundry rooms, which already have plumbing, and is easy to convert to a bathroom. A little rougher, and thus less cost, is the same equipment people use camping or living in a van; The toilets are portable and require manual emptying on some frequency, the water supply is in bulk containers that need to be refilled. Both of these ideas are good to read and explore. Search for "adding toilet and shower to bedroom", and also search for "adding toilet and shower to van" to find so many creative solutions. Lastly, convert more spaces into living or sleeping spaces. A garage, attic, or dining room can be converted to a bedroom. A loft sleeping area added to any room works well. In each case, you choosing to live in the lesser of these options means you rent the nicer parts and collect more money. One person I heard on a podcast slept on his couch, surrounded by dividers set up as temporary walls. It’s easier than you'd expect to add a wall to a house. For example, a three bedroom two bath house typically has a bathroom connected to the bedroom. If this can be sectioned off in some way then someone looking to rent a two bedroom place can still have privacy in the second half of the house. Try to envision a house with doors and walls in different places to come up with some odd ideas. For example, if the main bedroom with an attached bath has a huge walk in closet, that door can be locked and a new door accessing that closet from the living room can be added, so that this space is converted to a sleeping area. A wardrobe can then be purchased and added to the room. In all of the cases I mentioned so far, there are rules about crowding, that is legal limits on how many independent tenants are allowed to occupy a duplex or house. You should be careful to know the consequences of running afoul of these laws and try to stay legal. While you think you can get away with something, a disgruntled tenant you are kicking out may threaten to tell on you, and even nosey neighbors may tell on you as they are sometimes just like that.

Rent Hacking

Before we leave this standard dwelling units concept, let's talk about "rent hacking". The concept is to rent a house with multiple bedrooms, then individually rent out each of the rooms. In many cases, you end up living for free. This is common for college students to do this. What it also provides is a potential lifestyle rise in that the house can be in a very nice neighborhood or maybe have a pool. Landlords often write in contracts that you cannot sublet, but nothing ventured, nothing gained, so the best plan is find a place and tell the landlord exactly what your plan is. Slight changes to language might be more palatable to a landlord, like "my friend the doctor will rent the one room and this couple of engineers will rent the other room" instead of "I plan to advertise and get any breathing idiot to occupy the rooms".

Renovating & Reselling

A couple I know buys fixer upper houses in nice neighborhoods in the same school district. While they live there, the kitchen is a construction zone, or they all share one bathroom while working on the other. They buy a house, live in it while working, sell it within a year or so, then move on. Their child gets to stay in the same school district.

Accessory Dwelling Units

Accessory dwelling units (ADU) are another shelter hack that is becoming more and more common. You may have seen the insurance commercials for the she-shed. Anyone with a pool house, or a large shed can easily convert it to more than what it is. This is an opportunity to rent at a low cost, while having a private place, versus an apartment, or if you buy a home, you can't rent this out, or ideally you live in the smaller ADU, while renting out the whole larger house. I think there is an opportunity to be the first to propose this to a homeowner, selling them that you will convert their unit into something livable and rent it out. Sarasota, Florid just announced they are now allowing ADU’s (as of August 2021) and I bet the average homeowner in Sarasota doesn’t know about it.

Van Life

When you first approach the concept of living in an RV or camper van, your thoughts go straight to campsites that have RV hookups. If a site is close to a city, it may cost a bit more, and when you combine that with your RV cost it may not be much cheaper than other options, even though it should be cheaper. Far off the beaten track, places are way cheaper. An RV site inland of central Florida with a long term lease goes for $450 versus $850 closer to the ocean. When you add on the cost of a loan or maintenance on a vehicle, you can approach normal rent cost in the cities, near the water, but still be cheaper inland, far from towns. You can also decide that the far from town one requires your commute time and gas costs that lessen its appeal.
Stopping the thought there makes you turn the page, but going onto these many other avenues opens many other doors. Welcome the concepts and an expansion of our vocabulary in the world of "boon-docking", "driveway surfing", "mooch-docking", and "harvest hosting". In short, this is parking your rig for free. In some cases, you pay, but pay very little.
Driveway surfing is when you stay in someone's driveway. Many RV travelers offer their driveway for free to other travelers, as well as their wifi connection, and some are happy to invite you in to talk or share a meal. I’ve seen YouTubers that are in an RV, but permanently parked in their friends driveway, and pay them something really low or even nothing.
Harvest hosts are people that own wineries, or other similar places, and offer a place to park your RV to sleep. The concept is you’ll likely check out their place while there, sample a wine or two and maybe buy a bottle. There are government lands owned by the Bureau of Land Management where staying is free for 14 days or more, but there are no hookups, so you must have the ability to store your own power, solar, or run a generator, and keep water. This is similar with national forests as well. There are a dozen apps that help you find these places: RV Parky, FreeRoam, StayFree, Free Campsites.Net, Hipcamp, Harvest Host, Boondockers Welcome, Allstays Campgrounds, iOverlander.

Many that have vans, SUVs, or just cars that they converted to live in have all done what they call “stealth camping,” which replies on the theory that no one knows they are sleeping in the vehicle, it just looks like a parked vehicle. In fact, there are many places where it is allowed. Some Walmarts, Cracker Barrels, and other businesses welcome this and allow it. A courtesy phone call ahead of time to check is best. Another courtesy is to just sleep there, don’t spread out your camp chairs and start cooking. This behavior makes them stop offering the service. Many YouTubers and bloggers doing this provide their list and opinions on the best places they like from hotels, residential neighborhoods, truck stops, and 24 hour gyms. Listening to a few YouTube videos gets you an education on how they think with some detail, like don't park in front of a house, but on the side between two yards, prepare for bed somewhere else so when you pull in it will be late, you are prepared to jump in the back and leave as soon as you get up, and don’t repeatedly stay at the same places. Also, it seems amazing the range of work people do to live in their vehicles. Many spend a lot of time building platforms for beds, clever storage and running water solutions. Most cars have the ability to fold down rear seats for trunk access. It is thus easy to fit with your feet down in the trunk and your body on the folded down seat, sometimes with extra support for taller folks. I’ve figured and tested my own car, a tiny Infiniti G37 coupe, and I can lay down nicely this way. I added a small thin board to close the gap between the folded down rear seat and the fully pushed forward passenger seat and added outdoor furniture cushions as bedding, and I have slept just fine on road trips in rest stops and at my gym LAFitness in another state. I plan on doing this a lot more in retirement when doing road trips to save on hotels and get me closer to trailheads and destinations I really want, versus the hotel becoming the destination. Many of these car dwellers and van dwellers have added facilities to their vehicles, many just shower at gyms. So much information here, many of them have blogs and video channels with different topics from how they handle weather changes, ventilation, best places to park, how they cook and eat on the road, where they go to the bathroom.

I’ve explored these options and I’ve done my own financial analysis, here is my take: A house has a lot of maintenance, so does an old vehicle. An RV is both a high maintenance vehicle and a poorly constructed high maintenance house. Even a new RV, which should alleviate some issues, still has issues, but comes at a high cost. Many of these van builds look like a lot of work, and since people are customizing these things, they will have ongoing maintenance. I think the best solution is highly reliable name brand vehicles like Toyota, Honda, and Lexus. People that manage to live in a Toyota have low maintenance cost, the thing always starts, and if they minimize the modern conveniences, they will minimize the added maintenance cost. By that I mean, carry a porto-potty, but make a strong attempt to use public bathrooms instead of the potty. Store some water, and have a way to shower or bathe, but similarly attempt to do it in the gym. Keeping the vehicle small, like an SUV, means the heat and cooling already exist, instead of having a second one to maintain and power. I think that the van lifers showcase their build - in that way they seem like homeowners decorating their houses and adding features. The concept of doing this alternative lifestyle is to be outdoors more often, explore hiking trails, and not just sit around in a car or van like you would in a house. A great many of these van dwellers however are working remotely, and thus need more conveniences, an onboard bathroom, a good wifi connection. So decide what is needed based on your goals. If you will be spending a lot of time in the vehicle, by all means make it spacious and add features, but if it's just a place to sleep, you don’t need much. For a point of reference, let's talk about Hot-Shots. These are truck owners that work to haul things long distances. The majority of them have just converted their back seats into beds, and little more. They are on the road for many days per week so they are essentially living in their cars. I think they have made the best of many worlds. They make money, get paid to travel, and don't add a whole extra cooling system or bathroom.

Geo-Aritrage

That brings us to our final buzzword and topic, "geo-arbitrage". Arbitrage is a term used in finances, it is derived from when an investor would exchange dollars for another currency by borrowing dollars at a low rate, and investing in the other currency at a higher rate, hedging the currency they could guarantee returns. This has with time diminished, as we now do online trading of currencies and banking at internet speeds, but it was virtually making free money. The concept of geo-arbitraging is meant as living somewhere else way cheaper. At first this is just a rural country low cost area versus high cost city areas. A little further and you have a place at one fifth of the cost in some rural state as you do in a big city centric state. Further still is to take advantage of currency exchanges and low cost of living countries outside the U.S. Many of these places are very nice, and you can find many where everyone in town is someone from the U.S. doing the same thing, so perceived foreigner barriers are diminished. Mexico, Ecuador, Belize, Portugal, Bali and many more usually top the list of favorite destinations. The thing to search for is "best places for digital nomads", which is another term for people who can work from anywhere choosing to work abroad either to enjoy a better lifestyle or save a lot of money. In many of these places you can live in very nice accommodations, and still be way cheaper than what it cost in the states.

Summary
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I know I didn’t do a deep dive in any of these areas, and maybe I will soon in a blog, book, or video, but I wanted to get to just a simple list, so I tried to be brief. Below is the simple list based on the above discussion:

• duplex
  • rent out 1 section live in the other
  • convert the attic or basement to a bedroom, then live there while renting out the other sections
• triplex/fourplex
  
• apartment buildings
  • business loan
• rent out rooms in your own house
  • collect higher rent on rooms with kitchen & bath
  • add a private entrance & countertop for cooking supplies in bedrooms with private bathrooms convert attic, basement, &/or dining room to a bedroom
  • section house to make multiple private areas
  • convert space creatively
  • create sleeping area by building a loft
  • convert walk in closet to bedroom by adding doorway to living room convert laundry room to a bathroom
• "rent hacking" a larger house
  • rent out a house to ​live in one room & rent out the others
• buy cheap houses, really cheap, fix them yourself while living there, then resell
• accessory dwelling units (ADU’s)
  • live there while renting out main house
• "van life" or "car life"
  • stay at RV sites "boon-docking"
    
  • driveway surfing "mooch-docking"
    
  • find a harvest host
    
  • stealth camping
    
  • gym showers
• geo-arbitraging
  • live abroad cheaper at much nicer places