The first summer my husband and I went to Italy, we were young, poor backpackers. We did one of those "if it's Tuesday it must be Rome" holidays, visiting too many cities in too short a time, travelling by train, feasting on cheese and salami and cheap red wine, and staying in cheap but far from cheerful two-star hotels. We loved it all the same.

I remember catching the vaporetto down Venice's Grand Canal, gazing up at the obviously more affluent tourists sipping prosecco in glasses (not plastic cups) on palazzo terraces (not windowsills), and I think I actually sighed. I know I thought: "We're going to holiday like that one day."

Smitten with Italy – particularly with its fantastic food – we returned, each time staying longer. We hired a car and drove around, spending longer – several days, sometimes a week – in each place. But still we stayed in hotels, albeit nicer ones. We were a little older, but not yet wiser – because in Italy extra euros might get you a better bathroom and glassware, but it doesn't always buy extra space. We didn't yet realise we could be renting an apartment for a fraction of the price.

We began to seek out more interesting, idiosyncratic and intimate hotels. And that's when we started to think about how we really like to travel. In Italy, small boutique hotels are often on back streets, tucked into forgotten corners of quaint, quiet neighbourhoods. It's amazing what a difference location makes: being in those out-of-the-way spots gave us a taste for everyday life beyond postcard images of washing on balconies and old people gossiping on park benches.

The next year, we took things a step further, booking a studio in a centuries-old palazzo in Venice that I found on an estate agent's website. Located at the end of a skinny alleyway, slap-bang between Cannaregio and Castello, two of Venice's least touristy sestieri (districts), it really felt like a secret. We had to convert our sofa into a bed each night, the bathroom was bigger than the kitchen, and we didn't have that terrace I coveted. In fact, our two tiny balconies weren't much bigger than the two-star windowsills where we'd sipped vino years earlier. But there were frescoes on the walls, antique candelabra, and the Rialto market with its fresh produce was a stroll away.

Each afternoon gondolas would glide down our picturesque little canal with camera-snapping tourists who had no hesitation including us in their pictures. Did they envy us sitting up there with our tumblers of table wine from a hole-in-the-wall shop around the corner where staff filled our empty one-litre water bottles from a wooden barrel for two euros? We didn't care. We got more of a thrill out of saying buongiorno to the guys who manoeuvred their small barges down the same canal to collect our rubbish twice a week.

Ironically, it was participating in the routines and rituals of everyday life – taking the rubbish out, shopping in the markets and cooking, the very things we usually go on holiday to avoid – that gave us the biggest kick. They afforded us an insight into local life that you don't get as tourists. We were hooked.

We spent a summer in Milan in an flat overlooking the Naviglio Grande canal – an arty neighbourhood quiet until after dark, when intrepid foodies descended on the local aperitivo bars and trattorias. That was fine, because we were the ones living there, participating in the locals' early evening sipping and snacking ritual every single day. As in Venice, we took our cues from the little old ladies pulling their vinyl shopping trollies when it came to deciding which specialist vendors to frequent and what produce to buy. And it delighted us no end that our favourite cheese-seller took pride in teaching us how to order in Italian, little by little, each day.

Another year we stayed in a trullo, a whitewashed, conical house among olive groves just outside Alberobello in Puglia. Our caretaker, Maria, would turn up unannounced to hang a bunch of semi-dried tomatoes from the ceiling of our charming little kitchen or show us how to stoke the wood-fired oven attached to the home. One day she brought a wooden board, a rolling pin and a colossal bag of flour and taught us how to make fresh pasta and pizza. We insisted she call her family to come over and we all feasted together by candlelight next to the pizza oven.

But it was our last summer in Venice that was the most memorable. We finally graduated to a sprawling palazzo overlooking the Grand Canal – even if the mezzanine-level bedroom looked like it had been added in the 1970s, the crockery was of the same era, and the wallpaper was peeling. We stocked the fridge with prosecco, Aperol and Campari, and established our own ritual. Each evening we stood at our window – no, we still didn't have a terrace – and sipped our homemade spritz while watching the vaporetto cruise by. And we sighed.

• Travel writer Lara Dunston and her photographer husband Terence Carter have authored 60 guidebooks and countless stories. Living out of their suitcases since 2006, they blog about slow, sustainable travel at grantourismotravels.com