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Old 10-07-2019, 06:14 PM   #61
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own our boats outright...

I would be downright pissed every month if I had to write a mortgage check for the boat considering how little time I get to use it.

I would sell mine tomorrow but the Admiral will not let me.. I figure she thinks I could afford a girlfriend if I didn't have to pay for the boat

HOLLYWOOD
Or she is waiting to get the boat in the divorce? LOL
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Old 10-07-2019, 07:06 PM   #62
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My initial guess was that we financed 70% of our boat. I was wrong. I just looked at it and we financed 64% not counting the rather large sales tax that we paid cash.


Great points about the increase in the standard deduction. We still itemize but unless our itemized deductions without mortgage interest are over $24k then that does mean we aren't getting the full value of that interest deduction and that starts to change the calculus a bit. I need to take a careful look at that. It may be that I'll want to pay down some of that interest sooner.
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Old 10-07-2019, 07:47 PM   #63
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My initial guess was that we financed 70% of our boat. I was wrong. I just looked at it and we financed 64% not counting the rather large sales tax that we paid cash.


Great points about the increase in the standard deduction. We still itemize but unless our itemized deductions without mortgage interest are over $24k then that does mean we aren't getting the full value of that interest deduction and that starts to change the calculus a bit. I need to take a careful look at that. It may be that I'll want to pay down some of that interest sooner.
One other mistake some make is they tax effect the interest they pay but they don't tax effect the investment income. The taxes may not be due today but they will be some day.
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Old 10-07-2019, 08:15 PM   #64
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One other mistake some make is they tax effect the interest they pay but they don't tax effect the investment income. The taxes may not be due today but they will be some day.
With some planning in many cases those future taxes can be minimized , as you likely already know.
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Old 10-07-2019, 09:28 PM   #65
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With some planning in many cases those future taxes can be minimized , as you likely already know.
Yes and no since we never know what future taxes will be like. We're always going a bit blind.

I know one assumption I've heard made often is that someone will be at a lower tax rate when retired and generally that's true and helps the numbers. The only problem is that is also the time that money is often most critical and taxes at any level most painful. Yes, in theory, they saved to cover them. I've seen a lot of people shocked by the impact of the taxes they deferred.

I've seen people hurt because they had their disability insurance paid from pre-tax dollars. Deferred the tax, but then they became disabled and got the standard 2/3 or so of their salary and then had to pay taxes on it. Same problem with the employer pays for the disability insurance.
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Old 10-07-2019, 09:40 PM   #66
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Yes and no since we never know what future taxes will be like. We're always going a bit blind.

I know one assumption I've heard made often is that someone will be at a lower tax rate when retired and generally that's true and helps the numbers. The only problem is that is also the time that money is often most critical and taxes at any level most painful. Yes, in theory, they saved to cover them. I've seen a lot of people shocked by the impact of the taxes they deferred.

I've seen people hurt because they had their disability insurance paid from pre-tax dollars. Deferred the tax, but then they became disabled and got the standard 2/3 or so of their salary and then had to pay taxes on it. Same problem with the employer pays for the disability insurance.
CA Comp ins is a real drain. Not called a tax... but hurts just as bad; sometimes worse! Back in the day [1970's]. Masonry construction on scaffold above 4' off ground neared $0.50 per dollar paid. Screwed up capability to give affordable prices on bids.
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Old 10-07-2019, 09:41 PM   #67
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Obviously no right or Wrong answer. I was able to get a 3.5% loan on or boat. I typically do more than twice that on my investments. I get to thank the bank for putting that extra jingle in my pocket.

I could have paid cash, but this way i can bank a little more money and yet let the bank make some too.
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Old 10-07-2019, 09:57 PM   #68
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Yes and no since we never know what future taxes will be like. We're always going a bit blind.

I know one assumption I've heard made often is that someone will be at a lower tax rate when retired and generally that's true and helps the numbers. The only problem is that is also the time that money is often most critical and taxes at any level most painful. Yes, in theory, they saved to cover them. I've seen a lot of people shocked by the impact of the taxes they deferred.

I've seen people hurt because they had their disability insurance paid from pre-tax dollars. Deferred the tax, but then they became disabled and got the standard 2/3 or so of their salary and then had to pay taxes on it. Same problem with the employer pays for the disability insurance.
Plans for maxing HSA, 401K , 401k catchup , backdoor Roth and similar accounts when accumulating and then Roth conversions, cap gains and losses and maybe a change of location to a state where state taxes are less or non existent can often remove much of the tax burden for most folks.
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Old 10-07-2019, 10:56 PM   #69
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Despite all the cash buyers here, the majority of boat purchases are financed. This information comes from both boat brokers and bankers. If there wasnít a reliable source of finance funding for boat purchases, the industry would be a fraction of its current size.

Also, the cost of money plays into the equation for some. Money is cheap these days. If you can finance the boat for 4.75% and your investments earn a couple of points more than that, or several points more, then itís tempting to finance.

The low cost of money the past ten years is a significant factor in current boat industry financial health. However, tariffs threaten some of that health.
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Old 10-08-2019, 12:48 AM   #70
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Despite all the cash buyers here, the majority of boat purchases are financed. This information comes from both boat brokers and bankers. If there wasnít a reliable source of finance funding for boat purchases, the industry would be a fraction of its current size.

Also, the cost of money plays into the equation for some. Money is cheap these days. If you can finance the boat for 4.75% and your investments earn a couple of points more than that, or several points more, then itís tempting to finance.

The low cost of money the past ten years is a significant factor in current boat industry financial health. However, tariffs threaten some of that health.
You're right about most purchases being financed. I was amazed to find out that even billionaires with their 100+ meter yachts finance them heavily. Every once in a while you see one repossessed.
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Old 10-08-2019, 10:01 AM   #71
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As I noted in my earlier post, I think it’s a personal decision. However, we are in the latter stages of an economic cycle that has been artificially pumped up and extended due to some unusual circumstances, including politics. It may take awhile, but the Fed will eventually tighten and interest rates will rise. Returns in the stock market are predicted to be very modest over the next ten years which could offset the borrowing/invest factor. These are not my opinions, but those of smart people in the finance world I follow. There are obviously others who have very different view points regarding these scenarios and believe the party will continue. The next few years in particular will be interesting.
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Old 10-08-2019, 11:55 AM   #72
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follow. There are obviously others who have very different view points regarding these scenarios and believe the party will continue. The next few years in particular will be interesting.
LOL IF I live another 10 years all my nieces and nephews will be very upset with me. They are counting dying soon so they can spend the money they think they are going to get. LOL SURPRISE!!!
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Old 10-08-2019, 12:39 PM   #73
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LOL IF I live another 10 years all my nieces and nephews will be very upset with me. They are counting dying soon so they can spend the money they think they are going to get. LOL SURPRISE!!!
Don't be a Scrooge! - LOL
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Old 10-08-2019, 01:06 PM   #74
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Don't be a Scrooge! - LOL
Someone's tag line reads, "I spend most of my money on my boat. The rest I waste on booze and women."
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Old 10-08-2019, 01:49 PM   #75
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I am not ashamed to say that we financed both of our boats because we couldn't afford it otherwise. Our first boat we ended up paying off early thru various means. The second boat we paid off early and it only cost me one dead father (sad... but true). Still, even without his help, we would still be very willing to keep paying on a loan to stay in the lifestyle.

And for the record... for those of us that go after our dreams like this (meaning: financing fun stuff), it does feel a little degrading for some of you to loft the idea that we shouldn't be able have "toys" unless we can pay cash up front. Yea, we get it... y'all are far more well off they we are. There is no benefit to rubbing our noses in it.

I hope we're not giving you the impression that you're bad for financing your toys. However, I could argue that financing toys is "generally" very poor financial planning and has the potential of high risk.

I've seen this time and time again, where young folks just "gotta have it now", go into debt and live their whole life that way. They typically start with a new car right out of school (or worse, during school). Then the car is worth less than the load balance so sell it and add the balance to the next car. Then some other toy comes along... boat, second car, plane, etc.

Of the young folks that I've talked out of this strategy early on or after a few mistakes, 100% of them have thanked me later on and ended up with some assets without the liabilities. The others are just broke several years later. And the real tragedy hits when they loose part or all of their income stream, and that does happen.... even with the wealthy.

Now, having said that, before you shoot me, let me offer the financing techniques that "can" work and could be reasonable solutions:

First is to have the discipline to borrow smart. One was is to borrow for an absolute KILLER deal, the one that just doesn't come around very often. Especially where the savings well exceeds the cost of money.

Another one is where you are expecting a generous income down the road that's pretty secure and the buying climate is really good.

Still another one is where you can offset the cost of boat money with another investment asset that pays for the boat.

And there is an argument that the cost of money is very cheap today, so borrow for the boat with cheap money, and invest your cash into something that gives a greater return.

But all in all, seems like the vast majority of the folks here believe that the the risk of consumer debt is not worth the risk which is totally understandable.

We all have our risk tolerance for debt. And, personally, I love debt, and invest in debt often.... but only for an asset that creates income that well exceeds the debt.


So.... it all depends.
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Old 10-08-2019, 02:37 PM   #76
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I have to question the "I get better deals with cash" notion. The seller doesn't actually care whether he deposits a check or cash. The balance in the account is still the same. Where I get my money from has no bearing on the negotiation process.
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Old 10-08-2019, 02:39 PM   #77
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We all have our risk tolerance for debt. And, personally, I love debt, and invest in debt often.... but only for an asset that creates income that well exceeds the debt.


So.... it all depends.
A simple example of what Seavee references and I am going to oversimplify here.

Property available for $100k with 8% ROI. Invest $100k all cash, get $8K per year, 8% return.

Same property for $100k, pay $10k down and balance at 4% interest. Annual return is $8k less $3.6k (.04*90k) so $4.4k on an outlay of $10k so a return on dollars invested of 44%. In fact, could do this ten times and have $44k annual return versus the first example of $8k.

Then there are extremes. Real estate investors who do that at no risk because if it fails they'll let it be foreclosed and only lose the $10k, not more.

Another strategy is one done every day by large apartment owners. They find a property, sell partnership interests to investors, retaining a percentage themselves, but with $0 outlay. On top of that the Partnership pays them to manage it.

I know that financially it would make sense to finance some real estate investing anytime you can get a higher rate of return than the interest rate. Just not something I can bring myself to do. So we're back to personal preference. I'd find it easier mentally to finance a boat than to finance a real estate investment.
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Old 10-08-2019, 02:51 PM   #78
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LOL IF I live another 10 years all my nieces and nephews will be very upset with me. They are counting dying soon so they can spend the money they think they are going to get. LOL SURPRISE!!!
That's right! You're leaving all of your billions to us here on TF, right?
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Old 10-08-2019, 02:52 PM   #79
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I have to question the "I get better deals with cash" notion. The seller doesn't actually care whether he deposits a check or cash. The balance in the account is still the same. Where I get my money from has no bearing on the negotiation process.
I'd change the phrase to "I get better deals with immediacy." If you can complete the deal right then, it pays. Now, if you have financing lined up and do that subsequently or immediately, no issue. However, if one has to wait, it's a different story.

Years ago, I knew an incredibly successful used car dealer, finest cars around and great reputation. Long before Car Max, he'd purchase very nice used cars at more than other dealers. However, he also regularly drove around the country side. He never used the interstate, but he looked for cars along the way for sale and some not for sale. He'd see a car in a front yard of a farm house and pull up. He'd offer cash right then and his wife was a notary so could complete the deal on the spot. People would sell to him who had no plans of selling, really on impulse.

We buy small businesses and guarantee closing within 7 days from our offer, doing all due diligence and other in that time. The norm is months and most never complete. I recall Wayne Huizenga (who I'm not a fan of) making the statement decades ago that all his business negotiations for acquisitions were negotiated in a maximum of 3 days. He'd tell his lawyers and the other side that he wanted to make the purchase and they had 3 days to make it work. Contracts had to be short and succinct too. Many good deals for both sides are ruined by teams of people nit picking the agreements for months over things really immaterial.

For the most part, the kinds of deals we're talking about here though are cash which can be now vs. financing which can easily drag out for a month or more. In that case, cash may get the best deal.
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Old 10-08-2019, 03:08 PM   #80
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If your assets (dividend paying stocks) are earning 10% and you can borrow money at 4.5%, you are still earning you are still earning 5.5% above the loan interest rate plus writing off the interest on the 4.5%. Now that is cheap money. That is assuming you do not have to 'disturb' your assets.
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