The IDEAL Investor Show: The Path to Early Retirement

Ep 83 Alternative Homes: Housing Options That are Not Related to Real Estate

• Axel Meierhoefer • Season 2 • Episode 6

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Listen in as Axel gives us some examples of what alternative housing would look like, giving some more options that are easier to reach than the usual houses and apartment buildings.

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Hello, and welcome to another episode of The IDEAL Investor Show season two, where we really focus on how can you improve cash flow? What are the things that impact cash flow? And what are all the different aspects that have to do with things that aren't related to real estate, mainly from the residential perspective. And after looking at some of the theoretical things, we also wanted to make an episode about alternative housing options. And I want to before we give you some examples, jump in and explain a little bit that there are really two ways to look at alternative housing options. The first one is from a cash flow perspective that looks more at the income, right, so when you're making basically rent income, or you're offering some form of housing, so the things that we normally do, as you know, is we're buying single family or duplex triplex properties. And then we have property management, put a tenant in it, and then we looking for making positive cash flow, the difference between all the expenses, and how much rent we're actually getting. And we don't want to do it for anything less than $200, ideally, more. So that's the traditional thing. Now there's one other way to do it with the same kind of property. And that will be having the same property. But instead of putting long term tenants in it, we could put short term tenants in it that is much more seasonable seasonal and has different other aspects to consider. But the thing that it can do, potentially, if you're in the right location, and you have access to the right, people that want to stay in your property, you can actually make more cash flow. But if there's a downturn, or if it's out of season, or the weather or whatever might be the reason you might have no cash flow. But when you look at an annual basis, you have a chance to make more income with a short term rental than with a long term renter, but you also pay on the expense side more, if you really want to have a great property manager for short term rental, we have an awesome guy named Bernie, but he rightfully charges 25% versus eight to 10% for property management. But all of that is basically the day to day traditional stuff that we do all the time. Just think about it. So those short term and long term rentals would be what alternative housing options, which I'm going to show you in a moment here, out there, from the income side, can we rent short term or long term, any of those alternative options. The other side of the coin is always when we look at what is our time freedom number, and the time freedom number just to remind you to come back to that is when you look at your current living expenses or live expenses, meaning what you pay for food, what you pay for mortgage, what you pay for insurance, what you pay for your car, what you pay for going on vacation, what you pay for your kids, all the kinds of things, clothing, you name it, any of the expenses in your life, you sum that all together and say this is the number I need $4000 5000 3000 6,000 A month to cover all of them. And that becomes then your time freedom number where you can say, Okay, if I had that amount coming in as passive income, positive cash flow every month from my investments, I wouldn't need to have to exchange time for money where the job any longer. Now, the amount of money that nowadays goes into housing is oftentimes 40-50 In some rare cases, even 60% of the income that you make. So if there were a way to reduce the cost of housing, that could actually lower your time freedom number, which obviously means you need less investments, and you can get to your time freedom point faster. So the other aspect, the second point of view, when it comes to alternative housing options is to say what would happen if I were to choose to live in any one of those alternatives, rather than in the traditional house that you would buy for yourself and move in with your family and then pay the mortgage? So those are the two things, how much money can they make? And how much money can they save you in your own cost if you were to choose any of those alternatives. Now, there are many, many, many, many different ones. I just tried to pick a few that I think are kind of interesting. And I want to kind of ask you to think about it. Maybe you get some comments when you download this episode if you listen to it as a podcast or if you see it on YouTube, right in the comments, any other options and alternatives that you have seen or any kind of comments that you have based on what I'm showing you so I'm going to switch in a slightly different view where I'm sharing a couple of different pages that I prepared for you to just show you how some of these alternative housing options can actually look like. So here we go. So here's the first one that I want to point out. And it's not really so much an alternative housing option in and of itself. As far as the property goes, if I'm scrolling down here, and you can see I'm in a YouTube channel called wild, wonderful, off grid, and my wife and I are really followers of this. And when you look at the overall channel, you will find out they almost have 1 million followers. So that's a very, very popular channel. And what have these guys done. So the people that you see here in the picture, Aaron, and Josh, Josh is electrician by training, and Aaron is a teacher. And what they did is they said, Okay, we want to have a lifestyle, where we are no longer beholden to the traditional way of living and housing and stuff like that. So they bought a 70 acre property, I think, in West Virginia, and the benefit that they had, and I know this is not possible everywhere, but certain places in the United States offer you to buy a property and they don't really have a whole lot of risk restrictions, what you can do with your own piece of land, it's a little bit almost all the way back to the pioneers, you stake your claim. And you could basically bid on your claim, whatever you want it. So what these guys actually did, and you can see this year in the background picture is they bid in a frame house, and they bid this really by themselves pretty much these two, Erin and Josh built that by themselves now to be able to do this and lower down the cost of living so that they could use the income, especially from Josh's electrician job, they needed to lower the expenses. And so one thing they decided is they bought an oil, but pretty large, we put that on the property where they wanted to build the house and then started building the house, they started filming how that building is going forward, they ultimately got a big solar system, they got batteries, so they are independent for electricity, then they got a generator if the solar system wants doesn't work, and all these kinds of things that they basically installed. So that's why it's called wonderful off grid, because they're buying now having run this thing for more than three years are completely off grid. And now they're expanding the house because they first built it basically with our bedrooms, they just wanted to have the main house with the living room and the kitchen and utility rooms and stuff like that just a place to stay. So get out of the RV, and then basically build the second section of the house where the bedrooms will be under safety shelter, because they can sometimes have pretty nasty weather there in West Virginia. So this alternative is to say, find a place in the country where you can buy a piece of land and you don't have any significant restrictions to build on what you want in whatever time you want. And you can either do it yourself like these who or you can find somebody who does want to do it with you. But in the end, what they end up with is basically a traditional house on a seven acre farm. And that will sustain them another year or two, they will probably be able to completely live off the farm, raise their own vegetables, raise their own livestock and have their own house and everything is paid for now I mentioned as a first step that they did was they bought an old RV, put it on the property and then basically slept in the RV and work during the day to build the house while Josh went for his job, at least for the first year or so. Now there are other people who say I don't want to stay in an RV just because I want to basically develop a property I want to get out of the fact that a property the traditional way of having a house that you live in, or even in an apartment would basically mean you are fixed to a certain location and other than going on vacation and staying maybe in a hotel or an Airbnb, you are bound to be in that location. So one other alternative in housing would be you buy yourself an RV, and you literally live all year long in that RV and one of the benefits is you can move the RV around. For example, if you say I don't really like cold weather, what in the wintertime you can have the RV somewhere in Florida, or maybe in Arizona. And as the weather gets warmer, you can move it to Minnesota or you can move it to Vermont or somewhere in the Eastern or Canadian states. So stuff like that over the summer, enjoy that get to know the countryside and the whole areas out there and then as soon as the core comes along, you can move it to warmer climate zones again. Now when you ask yourself what kind of RV you see this one here which is actually being is a very big one obviously that is being pulled by a truck. There's a lot to be said if you research it a little more is that within the RV community, there's a lot of community building, people really help each other out. And everybody is very supportive. There's also these kinds of armies where basically your house is built onto your truck. The only detriment for this is if you go a little further than just a few miles away from any kind of shopping and stuff like that, yes, you can live in this kind of an RV for a while. But the problem is that as soon as you need something, you're not just taking your truck, if you look at this other one, see on this one, you can take your truck anywhere, even if it's 10, or 15-20 miles away to do some shopping, and your RV stays behind. If you have one where it's basically combined like this, then your whole house is coming with you wherever you go. So that's a decision. Obviously, these kind of integrated ones are smaller and more affordable, these big pulling ones, you have the RV, and you need to have obviously a very big truck, we had neighbors here in our area in San Diego that actually made that decision, they had a house and they decided we're gonna rent this house, and we're gonna buy ourselves an RV and get to know the country. And they bought exactly one of these big ones and a huge truck to basically able to do that. So that would be another alternative housing option would be permanently live in an RV and just go around the country. A third option I wanted to show you is there are houses that are built differently than the traditional way that you have seen in any kind of housing development or apartment development. And these are manufactured houses. And what that means is the houses are literally put together in a factory and then taken in sections and brought to a location where you bought a lot. And where one of the big benefits is that these companies that do these manufactured houses, they obviously try to have standardized plans that they bring to the permitting departments across the different cities and states in the country to get a blanket permit that what they are burning is within code. And so one thing that that does, if you really think about it is it forces them in a way to go and fulfill the strictest restrictions anywhere in the country. Because if they meet those, and they always gonna meet anything less restrictive. And for you as a buyer, it means you only need to find a lot that has generally the zoning to put a house on it, then you can decide, okay, let some contractor come and build a foundation like you know, concrete foundation with other utility lines. And then you buy one of these houses and they bring it and within a few days, maybe a week you houses there, it's not going to take months and months and months. And the permitting is easier because all these plans have already previously been permitted. And you don't have to wait for a permit and then have the house built in a year. So that's an alternative if you want to quickly get into something these houses depending on the sophistication can be equal, or sometimes a little cheaper than a traditionally built house. But one of the other benefits that shouldn't be underestimated is because they are made in a factory, they're not going to be rained on, there's no mold in the wood or stuff like that. It is all contained and climate contained and weather contain manufacturing process. So you get a fully enclosed component that gets put together very quickly. And that is definitely a benefit and it doesn't cost you anything extra. So let's look at another alternative. This is getting slightly crazier as we move forward, you could say why I don't want to have a traditional house just on the ground on a lot of stuff like that. So how about a tree house now one thing that people oftentimes don't realize is, if you want to have a tree house that you can really live in these tree houses are oftentimes at least twice as expensive than a traditional built house. And it's not just because it's in a tree, but a lot of things are obviously harder, getting electricity and getting a kitchen in it, making it so that it doesn't burn down right away the tree or the forest that the house is on. But it is a very cool thing. And you will obviously have to be willing to scale down the space because you're not going to have a 2000 square foot tree house. I'm not saying it doesn't exist. But traditionally, you're looking more at maybe a few 100 square feet that you can have. Now obviously when I say these things are about twice as expensive as a traditional house. This is more for the coolness or for just living differently, it doesn't really help on the reducing your expenses. Now on the other hand, if you own a tree house, if you make that investment, getting people to stay in a tree house can significantly increase your income. And this would be obviously one of those short term rental options and displeasure to have not just staying in an apartment, staying in a room or staying in a house. But staying in a tree house allows you to charge even more. So this might be an option from an investment perspective to get even more money than a traditional apartment or room. The next thing that is also becoming more and more famous, and I found this article here if you can Look it up. It's called the spruce is talking about all kinds of different opportunities to use tiny houses in tiny house community. So you can basically buy yourself a tiny house. Yes. For example, one in California. Yes, one in Texas, these tiny houses are typically defined in such a way that they have to have certain dimensions, and they have to be able to call them behind a huge truck. Right. So those are some of the requirements. So that means they also have to be small enough to pull them across the street or stuff like that. But it also means you're reducing your expenses in your lifestyle because something like this is obviously cheaper than a full on house. from an investment perspective, this is kind of a cool way to stay in a location in a limited space that can be very, very efficiently put together and demand quite a good amount of short term rental income. So it would serve both ways you would have less expense and you could have potentially a good income source if you were to invest in a tiny house. Now a variation on tiny house is a company that has gotten quite a bit of attention because of Elon Musk because he put one of these so called boxable casitas on his property close to Starbase in Boca Chica, Texas. So this is basically like a studio apartment. But what's really the cool thing about boxing is that the whole thing is basically being built again in a factory, kind of like in a manufacturing line, like you would do a car and then it's being transported on a truck in a folded up way. So it can go on a regular truck, and then all you have is the truck and a crane. The crane picks up the folder together house puts it on either concrete blocks or a foundation and unfolds and then so basically within a few hours, you go from having an empty lot to having a casita little tiny house and these guys at Box ever working on making double size, proper size, quadruple size. And even I've heard the latest, they even want to do two storey houses where each of those components is pulled together, and you just have to have more trucks. And when everything is built in a manufacturing line fashion, you can have benefits of scale, right if you know you will build 1000 of these and you buy 1000 toilets, 1000 dishwashers, all of that kind of stuff, the economies of scale can be beneficial on the purchase. And if you were to find a community where multiple of these there's one actually in Austin, not from I don't know that boxable but they are also similar to boxable or to put together in kinda like a small community almost like a similarity to a campground where the nature is pretty much preserved or not everything is ripped away when construction starts, then this could be a very good option both for living in an affordable way as well as a rental option that can give you kinda like the specialty factor. And the last one I wanted to share. This is from a friend of mine by the name of Leslie one, she created this company three squared and I just wanted to show you a few examples. So Cochrane comments is a commercial complex. This is kinda like a unit out in the woods, there is a house the Aibling houses literally a pretty large scale house you see here, square 2600 Square feet, that Detroit shipping company has one of their houses, there's an Italian kitchen that they bid, and they made a model center. So what's the deal? What is three squared about why did Leslie do this? Well, there are millions and millions and millions of shipping containers out there in the world. And oftentimes, they come over from China, there are pretty much brand new containers, they get emptied out. And there is no merchandise to go back to China. So we have lots lots and lots and lots of empty containers that were only used once or very few times. And so you can get these containers anywhere between three and $5,000. And you can if you have a company like three square put these containers together in all these kinds of different arrangements that I showed you some examples. So shipping container houses would also be another alternative. Now the last one I want to mention I didn't really find any good images or stuff like that about them is what's called 3d printed houses. This is basically you printing in a sense with a concrete machine that is computerized the walls of a house you just put a roof on it. And it is kind of like a concrete house. I wanted to mention this because I've oftentimes seen and especially 2023 We have seen it a lot again, that there are these nasty tornadoes and all kinds of really bad weather incidents where most of the time you have really really high strong winds and hail and rain and stuff. And then you see houses destroyed or neighborhoods destroyed concrete printed house, the worst that could happen is that the roof flies away, but the house is not going to go anywhere similar by the way to the shipping container houses when they're properly anchored to the ground. They're not going to go anywhere either. So there are ways to be Add something alternatively that sustains these more and more crazy weather phenomenon. So I hope that gave you a little bit of idea what we're talking about when we're talking about alternative housing. And I want to remind you always think about from two perspectives. Number one, how much cash flow income can I make by owning any one of these options? And how much of my living expenses can I potentially reduce if I were to decide to live in one of those places, and again, except for the tree house, I don't think that would ever make you any less cost because the building cost is so high, but all the other ones would be alternatives to lower your cost, lower your time, Freedom point number and therefore reach the time freedom point sooner rather than later. So I hope this was informative. Again, like I said, please download the episode. If you saw it as a podcast. Please give us a like and comment if you see it on YouTube, and I look forward to catch you at the next episode. Be well, and stay safe. Thanks for listening. And I hope you enjoyed today's episode of The IDEAL Investor Show more info and the links we mentioned during the show in the show notes or you can go to our website at idea where to go.com and sign up for the Apple podcast link. And if you'd like to talk to me sign up for a strategy call. Hopefully you want to share what you learned with your network and bring more people in we are really eager to hear your comments and until next time, be well stay safe and ciao.