extreme downsizing your housing to turbo boost your early retirement
How cute is this?! Ā£100k and it’s yours!
On our recent foray to the Wight Isle (no not Ibiza, the one just off the coast of Portsmouth š ) I noticed there were a few “For Sale” signs around the caravan park we were staying in. This intrigued me so I noted the estate agent name to have a look when we got home. I was then talking with Mrs T last night about possible options (purely theoretically speaking, for the time being at least š ) of how you could go and live in one of the cheaper housing options over there andĀ super charge your retirement plans.
This idea is in no way novel, we all know Jacob lived in an RV to minimize his housing costs and retire early. However it is worth exploring some of the other ideas out there to downsize or otherwise reduce your housing costs. This will not only boost your savings rate but reduce the amount you will need to retire on, because you’ve cut your monthly expenses.
1. living in a mobile caravan
As highlighted by Frugal Freelancer hereĀ the couple featured in thisĀ BBC articleĀ ditched their teaching jobs and decided to take the kids on an extended holiday in a caravan. Sounds sweet! It’s not totally clear what the couples plan is after they finish their year long holiday but I guess there is nothing stopping them parking it up, carrying on living in it, and putting the kids back into school. Alternatively they could just keep going and home school the kids? It’s a veryĀ alternative lifestyle that is for sure, and one that might raise a few detractors from both family/friends or even random strangers (I wonder how many idiots have called them “Pykies” so far!?) but you have to salute them for having the balls to just get out there and live life on their own terms.
Good luck to them I say!
The only thing is that there isn’t much financial information in the story so I did some very brief research to see how it might work out if we were to do the same. (All costs very roughly estimated!)
Caravan: Ā£5k – Used off eBay et al. Ā£5k seemingly gets you a pretty decent one
New (used) slightly bigger car to tow it around:Ā Ā£2k
Our Net Worth after selling our house* (probably over estimate on fees etc at Ā£10k here):Ā Ā£93,258.00 1 – 10k = ~Ā£93k
Total pot after car and caravan purchase plus a few other unthought of expenses: Ā£85k
*We’d also have to make the choice of either getting rid of/selling a lot of our stuff, which would actually increase our pot, or putting it into storage, which would severely decrease the life of our living expenses pot.
How long could we survive on Ā£85k?
This is the big question then! The only thing that I can imagine that might go up as a monthly expense would be petrol, and I guess the fees for parking up the van at a proper site. According to this the expenses would be roughly 2:
Ā£15 per night for pitching = ~Ā£5,500/year
Caravan insurance = Ā£300/year
Ā£30 per month on gas = Ā£360
So the total base expenses would be ~Ā£6,500/year
I reckon weĀ could easily get by with another Ā£10k of fun money when you are permanently “on holiday” and don’t feel the need to do the usual holiday type stuff that costs money (eating out, going to attractions, etc…). We could just engage in cheap or free pursuits such as seeing nature, walking, biking etc…
But to be on the safe side let’s round that up to Ā£20k/year on the expenses. Our current pot would therefore net us at least 4.25 yearsĀ of totally work free livingĀ š
That’s also assuming that we might not get a little bored and maybe pitch up somewhere a bit more permanent for a while to engage in some job like activity, or even be earning some money as we go if we could score a remote working opportunity or earn some money on line.
I am sure I’ve been way overly cautious with those expenses figures but overall this idea does not exciteĀ me all that much now I’ve put some numbers into š
2. living in a static caravan
Same deal as above but you would obviously be stuck in one place. However this would mean it would be much easier to score at least some part time work to keep the pot going for longer.
This strategy also obviously works much better than the mobile caravan one if you are still in the accumulation phase of your FIRE journey, again because you can hold down a job. Location will be key here of course and a caravan on a site near London will again be a hell of a lot more expensive than one on the Isle of Wight.
So overall I think I prefer this strategy to the mobile one, as it’s more flexible and probably all told a lot less faffing about finding new pitches all the time. The ‘vans are also a lot nicer to live in, no doubt.
To compare it fairly to the above let’s assume the plan is similar, sell up and see how long we can last for.
My in-laws seemed to score the deal of the century when they bought their caravan on the IOW and got it for just Ā£4.5k. This is actually amazing for what it is, a two bedroom static caravan that looks like it’s been barely lived in! Let’s assume we wouldn’t quite get the same sort of bargain but will also go for a cheaper location, we won’t be looking to keep our jobs and the rolling hills and coast of the Isle are a beautiful place to spend time relaxing and engaging in thoughtful pursuits and physical activities!
Total pot after caravan purchase and other expenses (Ā£10k) = Ā£83k
Yearly costs
Caravan pitching costs = Ā£3,500Ā (rough estimate from questions to father-in-law)
Other running and insurance costs = Ā£1,000
I may be wrong but I think living in a static caravan would mean you spend less money than a mobile one. You know where the cheapest shops are, you would surely be forced to eat out less, and there would be less constantly new fun things tempting you to blow all of your money.Ā I will therefore go with a total of Ā£15k/yearĀ estimated spend in this living situation. Again I’m sure this could be a fair bit lower if we really put our mind to it!
This would last us ~5.5 years so even though the initial costs are higher, I think we’d get a longer “mini retirement” out of this one! If we managed to score someĀ part time work it could evenĀ sustain usĀ ad infinitum, living on only Ā£15k/year between two people it doesn’t take much work to earn that amount.
3. living in a small house/chalet
This would mean finding a little “alternative” style house such as the one pictured above but instead of using it as a holiday home like most people would do, you are actually living in it full time. Prices in the small sample I had a look at were between Ā£50-Ā£100k but the one that I fell in love with was the pictured cottage/chalet which was Ā£100k. If we bought that place for the asking price 3 then after fees I reckon we’d be left with a mortgage of Ā£7k.
Obviously a mortgage of Ā£7k sounds brilliant but we’d have no jobs to go to and I can’t imagine the employment sector is bulging down in a fairly remote corner of the IOW!
Let’s say we could get a job each that would pay around Ā£10k per year, which would be tax free as below the personal threshold. I reckon that would cover the mortgage and living expenses quite comfortably. Let’s say we could work for an average of Ā£10/hour we’d have to work ~26 full time weeks of 37.5 hours or 40 weeks of part-time (25 hours).
It doesn’t sound too bad a life to be honest š
4. “other”
Some other ideas that are probably not worth spending much time on:
- Living in a tent/on a camp site
- Living in a tree house or self made shack
- Escaping to the wild and building your own – see Kevin McLeod’s 4 part show here if you haven’t watch it yet, very interesting!
downsides and possible solutions
The major downside I can think of for the final two options is what would you do in the winter time? I am surely living in effectively what is a holiday caravan park in the winter is pretty miserable (or may not even be allowed as they might turn off the utilities). Same goes for the holiday cottage, it is fairly remote and would get very lonely during those dark winter months!
You could alleviate this by moving back to your home town for 3-6 months during winter to catch up with friends and family and alsoĀ get a short term work contract to fill the coffers? This could work out well and then you’d have 6 months of the year off to spend on whatever you wanted to do.
One other major downside of this: if you have children then uprooting them once or even worse, every 6 months would be unfair, and obviously if they are school age then it would be even more of a nightmare. I guess you could homeschool but I have no idea on how you would go about that in the UK!?
The second downside is that it would mean moving away from friends and family, unless you already happen to live in the IOW or anywhere that has such cheaper housing options close by. There is really no solution to this apart from “Skype” plus “come and visit us any time”. Obviously you could go back to visit a few times a year as well. I am sure that it wouldn’t be as bad as it first might seem, people in America seem to move far across the country almost as a matter of course for example!
over to you…
As usual I’ll finish on some questions for you.
- Have I missed any other ideas out (I am sure I have!)?!
- Has anyone ever done anything like this and what were the major issues and solutions you came up with?
- Has anyone done this with kids in tow, and/or tried home schooling?
I would love to hear more in the comments if so or you have anything else to add I haven’t covered.
Cheers!
Notes:
- This is total Net Worth including the house, as we’d sell it off, minus the parts of it we cannot access right now, i.e. Pensions and SIPP value ↩
- I’ve added a little bit on for inflation and to be on the safe side ↩
- It’s already under offer unfortunately so I won’t even bother giving out the estate agent details! š ↩
Discussion (25) ¬
Houseboat? … The idea has always appealed to me and I think they are a lot cheaper than normal property but haven’t checked out the numbers recently. The UK has such a wonderful canal system though – lots to explore – and you don’t have to moor it somewhere expensive. You would always have views of water and greenery. š On the downside you can’t have much “stuff”, but then, that’s not really a downside. Yes I have been watching that series with Timothy West and Prunella Scales, with quite a lot of envy. š Also the Kevin McCloud series – as you say, FIREstarter, very interesting. I do love the idea of “building my own” – it doesn’t have to cost a fortune.
Oh yea! Great idea!
At a recent family party my cousin was talking about moving to a barge so not sure how I forgot that one! And they are also expecting a baby, so very unconventional! I’ll maybe do an update/interview with them if/when they do it as that would make an interesting post.
I’ll check out the canal programme, sounds very pleasant viewing š
Building your own, I hear ya… one day… one day…
I must say I wouldn’t go live right next to an active volcano, as one of the families on the McCloud show had decided to do. Not my idea of fun.
Yea that was a bit too extreme for my liking, especially when it said it erupted at the end credits! (Luckily house and inhabitants all escaped with no damage by the sounds of it)
Having struggled with nightmare neighbours time and again over the years in lower-cost housing I’d worry about extremely low-cost housing like this personally. I might consider it for a year or so but long-term the lack of space and worries as to who your neighbours are would be a cause for concern.
Right now we have a pretty good deal – a flat on an interest-only mortgage which we rent from the owner just covering their mortgage payments. They bought at the top of the market and now cannot afford to sell so we are getting it for a steal. Still have neighbours but much more space – and some of the cheapest housing we’ve ever lived in.
That’s a good point Richard, however I would counter that with Option 1 if you don’t like you neighbours you can just move on š
Option 2 you are essentially living on a holiday camp to most of the ‘vans are empty most of the time anyway, and Option 3, well there basically wasn’t any neighbours, it was surrounded by lush green fields… Obviously you’d do your research before moving somewhere like that to weigh up all the variables!
Sounds like you have a great deal though, how did you manage to negotiate that!? Why don’t they just charge you market rent, are they friends/family or just kind souls sharing their wealth with random strangers š ?
How about moving in with the parents? My sister did this once for 6 months when she was in between selling her house and building a new one. Maybe this reason is the only good readon to do so, but it would save you money in the move.
You touched the kids subject: they are the reason why we would only move after long and in depth thinking. They are rooted in our neighbourhood. They might be young enough now, but i think around 12 or so, they would gett oo rooted.
Yep that one I considered putting on there actually, a great strategy to give a short term boost to your savings I think but not a long term option for living arrangements IMHO (I guess you could say the same to all of the options really though).
Interesting timing…I’ve just posted an article on a very similar vein!
Don’t forget your future needs. Having just become a father I now various new things to consider when I look at our housing situation such as: kids bedrooms, proximity to schools, length of commute, future local job prospects (if needed) etc
Great, I’m off to read is ASAP! I signed up to your mailing list but am not receiving any emails when new posts are out btw?! I’ll try again…
Very good point, kids will throw a spanner into a lot of these sorts of plans unless you don’t mind so much about uprooting their lives. Obviously the ‘vanners in the BBC article weighed it up and decided it was worth it. I bet the kids are having the time of their lives anyway so I doubt they are complaining! š
Ah… if only i could persuade Mrs LCIL to leave the big smoke…. but alas she loves it too much to leave permanently. Being (I think) a decade or more older than you the house equity on my versions of those numbers is just crazy…. we could travel around for 15 years!
I kind of wonder if in the future we will just rent our existing house out on a fixed term basis & travel on the rental income for extended periods of time, or it could be that the kids continue living there whilst they work to build up deposits of their own…. time will tell. We’re saving aggressively now so the options will be our to choose between thankfully.
For now we are firmly anchored for our children, that’s the one certainty.
Hah, I have some same age friends who built up a “sick” amount of London equity in just five years. If I did the same it would have put me already within grasping reach of FI… ho hum. In the main they are using it to buy bigger houses or keep as rental investments etc though…
That would work well if you want to travel extensively, you can use geographical arbitrage to great effect as well if you go abroad! Once the kids have flown the roost of course š
I like the first idea, I could certainly do that for a few years. A friend recently bought a fully functional caravan for Ā£90 including delivery to his front door!!
I love camping but Doubt I could last a month living in a tent though ha!
Wow, that is some great bargain hunting Joe!
You should pick his brains and do a post on how to get a good deal! š
Cheers!
You need to do something about your pitch fees for this to work. There’s been serious inflation in that ,market over the last five years.
I favour wild camping even on holiday unless I want to use a town – on the other hand I’ve stayed an urban campsites in winter because having electric hookup makes winter camping possible – you only need a 500w frost heater in a camper van. Never been in a caravan. Stayed in Whitby in October in the ‘shoulder season. I was wise enough to take a fan heater with me š
The obvious solution to the British winter for mobile campers is to move south, Spain is vile in summer but I found Madrid most agreeable in November.
But the big sticking point to the whole idea is kids. Dear exGF took some serious issues from being a teenage girl in a caravan while her dad was renovating a barn – no privacy as you’re growing up and the whole living on top of each other game. It’s one for the child-free, and it’s certainly an option I’d consider if I were a student or young adult now, but once you’ve had kids then a lot of these ideas are just pie in the sky.
Hi ermine, agree on the kids front if I’m honest. Or maybe it works for smaller periods of time while the kids are smaller as they don’t care so much about privacy and are probably more “up for an adventure” (depending on your kids personality as well I guess).
Cheers!
Surely you are making an assumption that house price growth + value of imputed rent, both of which are tax free for owner occupied housing, is not a good return? After all, you could borrow money, at say 3% and buy a Ā£100k house somewhere cheap. This would cost you less than the pitch for your caravan!
A very good point stuart!
I think you are basically describing option 3 above, and once you look at it that way it becomes a much more desirable option.
Cheers!
Nice post TFS.
There are plenty of alternative living situations you can put together which is pretty neat. All of which are cheaper than traditional homes.
I second cathybird’s comment on the house boat front. I also mirror ermine’s point that sans children it is a great idea. But with children it gets a little more complicated. However, with a baby up to school age I think it has its advantages (though maybe not the house boat)!
Cheers for the input DD.
House boat would be a cool thing to do maybe for a year or so, when the kids are grown up and have left the roost I reckon š
I second buying a cheaper house. The estimate for caravan site fees for a year is more than my annual mortgage payments + council tax when I commuted into London. This was a regular bricks + mortar 1 bed with none of the hassles (granted also none of the freedoms) and more space than the alternative options mentioned. Paying off a mortgage is likely to build capital whereas the money spent on pitch fees and caravan won’t be seen again.
Very good point on the pitch fees Emma.
I do actually remember reading Jacob from ERE remarking that living in his current house isn’t particularly more expensive than when he lived in his RV. It was in a lower cost area but remember him saying pitching fees were quite expensive, but a lot cheaper than renting a flat in the expensive California area he was living in.
Cheers!
A great post. One issue with the caravan idea is that I understand caravan site owners generally want you to move on after a month.
We are considering moving to a smaller home to free up money and give us more work options.
All the best,
smallholdingsister.
There are two types of caravan, static ones and ones you can move around and pitch up at, so I guess you would buy accordingly depending on what you wanted to do.
Good luck with your plan smallholdingsister š