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Old 04-18-2019, 09:27 AM   #21
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I think you should just consider a hybrid solution. A $500k boat (assuming it is pretty large) is going to be very expensive to keep up. Even new boats have the same things break as older boats. So you shouldn't see this as a 1-to-1 swap; house for boat of same value. However, to downsize your house and upsize your boat would be the smart play. Look at much smaller homes to fall back to. And kinda escape to when the need arises. Having a dirt house, I feel, should always be an option... even if you go all-in as liveaboards you can rent the house to help cover its own costs. Then go for a boat the won't "max out your credit" so you can make payment on it and still afford the upkeep and put some aside for the major emergency repairs that will inevitably happen. Boats will always go down in value and houses mostly go up. Find a good way to enjoy boating, but with the safety of a fall-back position.
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Old 04-18-2019, 09:31 AM   #22
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We used a solution, that could work for you. I will use approximate numbers, consult a professional. Our home was too large for us anyway, so we needed to sell. (This was 2018) The market in our area was not all that great and in 15 years of ownership, even with a “Bidding War” or profit was less than 2%. Anyway, we took the funds from the sale and utilized a very good investment person. With approximately $250k we are pulling just shy of $1,000 a month in dividends which is a fair boat payment. If you have a $300k-$500k home to sell, well your pretty well off. Our principal stays intact for a purchase of a smaller retirement place when the boat is no longer an option. It’s a little bit the best of both worlds.
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Old 04-18-2019, 10:03 AM   #23
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We used a solution, that could work for you. I will use approximate numbers, consult a professional. Our home was too large for us anyway, so we needed to sell. (This was 2018) The market in our area was not all that great and in 15 years of ownership, even with a “Bidding War” or profit was less than 2%. Anyway, we took the funds from the sale and utilized a very good investment person. With approximately $250k we are pulling just shy of $1,000 a month in dividends which is a fair boat payment. If you have a $300k-$500k home to sell, well your pretty well off. Our principal stays intact for a purchase of a smaller retirement place when the boat is no longer an option. It’s a little bit the best of both worlds.
"Anyway, we took the funds from the sale and utilized a very good investment person."
Please share with us what method allows for a $12K withdrawal per year while having the remaining $250K principal secure long term.
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Old 04-18-2019, 11:02 AM   #24
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"Anyway, we took the funds from the sale and utilized a very good investment person."
Please share with us what method allows for a $12K withdrawal per year while having the remaining $250K principal secure long term.
That's a 5% dividend. Not hard to find reasonable stocks with that kind of dividend.

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Old 04-18-2019, 11:14 AM   #25
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That's a 5% dividend. Not hard to find reasonable stocks with that kind of dividend.

Ted

Thanks Ted but this was what threw me off....
"Our principal stays intact"
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Old 04-18-2019, 11:23 AM   #26
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If you are at or near retirement and making this decision to go all in on a expensive (nice) boat to replace your dirt house. There is a cold hard fact, that most likely you will pass before your wife. Every situation is different but my wife would be hard pressed to have a boat no matter how nice as her sole residence.
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Old 04-18-2019, 12:48 PM   #27
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"Now, thinking about homes vs boats and appreciation. Yes a home goes up in value and a boat goes down. That is a undeniable fact."

So sez a real estate broker , however a look at home prices in constant dollars may show that the house value is close to staying the same ,for the past century, without adding the coat of insurance, taxes , and of course maint.

Having money work for one is the simplest way to modest wealth.

If living on a boat is your goal , a modest $30,000 boat will have the same pleasures as the $800,000 boat , except it wont echo when singing in the shower. As well as being less costly to maintain.

The extra $770K , even in T bills would grow , stocks grow faster , tho risky.



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Old 04-18-2019, 02:51 PM   #28
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Boats are very different than homes. A home will require only 1-2% of its market value in maintenance each year and it should appreciate about 3-4% each year. Yes I know there are areas in this country with 10-20% appreciation at least short tem, but 3-4% is the national average.

A boat on the other hand takes about 5% of its market value in maintenance each year and it depreciates about 5% per year. These are broad averages.

So a house will earn maybe 2% after maintenance and the boat will cost you about 10% including maintenance.

I like your thinking as expressed above: "Me, on the other hand, am very concerned about the diminishing value of a boat vs. the increasing value of a house, and love the idea of being nearly debt free."

Never consider a boat as an investment.

David
I found David's numbers to be pretty accurate for our home of 25 years that we sold a couple of months ago.

Our home value grew at a compounded rate of around 3.5%. Maintenance and expenses ran about 2%, only because I did almost everything myself. Insurance, hoa fees, and taxes ran about another 2%.

We loved our home, it was on a wooded lot, lots of wildlife, comfortable, and a great place to raise a child. It had lots and lots of pluses, but as an investment tool is was Meh!

I tell my 25 year old daughter don't rush into buying a home. Take the extra money that the house would cost and invest it. Enjoy yourself and the time will come when home ownership makes sense.

To the OP, if you and your wife want to live aboard full time go ahead and do it! Don't regret that you didn't follow your dream. Be careful and take the financial risks that make sense to YOU and YOUR WIFE.
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Old 04-18-2019, 03:03 PM   #29
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Is it easier to get a $500k loan for a house than an equal loan for a boat?
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Old 04-18-2019, 03:40 PM   #30
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Is it easier to get a $500k loan for a house than an equal loan for a boat?
easier... well generally yes.
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Old 04-18-2019, 04:00 PM   #31
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Supposing you had a mortgage... let's say a $300k to $500k mortgage. If you could sell it and pick up whatever equity you had in it, would you ever consider buying a $300k to $500k boat and having a similar loan amount?

My wife and I are going back and forth between a big expensive boat that would replace our mortgage (payments would be a little lower because of equity in the home, but it would still be something upwards of a house payment), or a smaller and cheaper boat with very little debt. Her perspective is that if we're going to do it, we should go all-in and have a very nice boat. Me, on the other hand, am very concerned about the diminishing value of a boat vs. the increasing value of a house, and love the idea of being nearly debt free.


How have you wrestled with this decision?
My answer is "no way." The boat depreciates too rapidly and requires too much maintenance. Plus it requires a slip somewhere. But even more, I can far more easily sell the house. I maintain more flexibility. I would never tie everything I had up in a boat.

As to debt vs. cash, I'm afraid it's much too easy for those of us with available cash to say we'd never go into debt on a boat. That's great, but not practical for the vast majority of boat owners. What I would say is I'd suggest one not extend too far into debt for a boat. For instance, someone might buy a $200,000 home and finance $190,000 and most of the time they're safe. The exception was a few years ago when the market dropped and suddenly they were upside down. However, I'd never finance a boat like that. You'd be guaranteed to be upside down quickly. I personally think financing any boat over 70% is dangerous. Therefore, I wouldn't finance a $200,000 boat more than $140,000. If $30,000 was all I could afford to pay down, I'd only buy a $100,000 boat.

One other consideration, especially in the OP's case. One often has no idea if they'll like living on a boat. However, jumping back to a house isn't easy and it won't be nearly the house you left. If you are retired and have a 3000 sq ft home and plan on going to a 1200 sq ft condo, that's fine. But if you leave a $500k house for a $500k boat, you'll be moving back in to far less house. The old house may be $600k now and you may only get $400k for the boat.
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Old 04-18-2019, 04:03 PM   #32
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Sell the house. Buy an apartment building. Let some one else make your mortgage payments.
We own 19 units AND our house all mortgage free. Sure, rental property is a gift that keeps on giving, it like all things however has drawbacks. No need to make a list of the awe shucks other than to say not everybody is cut out to be a landlord. There is more to being a landlord than just collecting rents.
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Old 04-18-2019, 04:45 PM   #33
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Home vs Boat

We’re working toward the ‘Big boat, small house’ plan. Sell the current boat and our house in Seattle (were appreciation is currently mind boggling) and buy a larger, more liveaboard capable boat along with some land out in the boonies (recreational area) where we can plunk down a small, modern prefab.

If we do it well we’ll pay cash for both (the Seattle re market has been good to us) and have the possibility of AirBnB income from the prefab.

Ideally all by the time we’re 55. I’m still working and plan to continue in some capacity for a bit longer but for us this opens up so many options to travel and explore without kicking the stool out from under ourselves when want or need to re-enter the housing market.

As far as ownership and investments a lot of people don’t seem to consider the cost of money in home financing. You’d need to turn a considerable profit to offset interest over 10, 15 or 30 years. When we sold our house in the Midwest we turned a profit but I wouldn’t say we “made” money after factoring in the cost of interest over 15 years. Yet in Seattle we’ll see a considerable return on our total cost of ownership in under ten years.

Your market may vary.

Finally when considering a life aboard - the investment is not a financial one. You’re investing in a lifestyle no matter the length of boat or brand name on the side of the hull.

Good luck!
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Old 04-19-2019, 12:29 AM   #34
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If you count the interest paid on the mortgage, houses very rarely make money. For the most part, only people who buy houses for cash or flip them fast actually come out ahead. Your typical 30 year mortgage holder pays between 1.5 and 2x what the house is worth by the time they truly own it.

A $400K 30 yr mortgage at 4% means you'll actually pay $690K (not counting taxes and maintenance or the interest tax deduction) for that $400K house. If the property values go up enough in 30 years maybe it'll work out, but you're rolling the dice.

You also have to consider the inflation rate. A house whose price goes up at the same or lower than the rate of inflation is not actually increasing in value.

In the example above, if after 30 years you sell the house for $700K, you can brag to your friends that you made $300K on your house, but all that really happened is you broke even (which is probably better than most people).
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Old 04-19-2019, 12:49 AM   #35
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We own 19 units AND our house all mortgage free. Sure, rental property is a gift that keeps on giving, it like all things however has drawbacks. No need to make a list of the awe shucks other than to say not everybody is cut out to be a landlord. There is more to being a landlord than just collecting rents.
I would agree with you. Rental property is a great investment. However, I know I am not cut out to be a landlord. I own two commercial buildings. One is entirely owner occupied but the other has additional tenants. Just that (rather painful) experience has taught me I'm not cut out for it. I greatly respect those that can do it well.
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Old 04-19-2019, 06:26 AM   #36
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If you count the interest paid on the mortgage, houses very rarely make money. For the most part, only people who buy houses for cash or flip them fast actually come out ahead. Your typical 30 year mortgage holder pays between 1.5 and 2x what the house is worth by the time they truly own it.

A $400K 30 yr mortgage at 4% means you'll actually pay $690K (not counting taxes and maintenance or the interest tax deduction) for that $400K house. If the property values go up enough in 30 years maybe it'll work out, but you're rolling the dice.

You also have to consider the inflation rate. A house whose price goes up at the same or lower than the rate of inflation is not actually increasing in value.

In the example above, if after 30 years you sell the house for $700K, you can brag to your friends that you made $300K on your house, but all that really happened is you broke even (which is probably better than most people).


"In the example above, if after 30 years you sell the house for $700K, you can brag to your friends that you made $300K on your house, but all that really happened is you broke even (which is probably better than most people)."
Except for the fact that you lived in the home replacing rent that would have been required costing another $700K which makes your equation a bit different. FWIW - our homes have appreciated much more than in this example and any interest paid on a home would be counted no differently than any interest paid on a boat loan.
YMMV
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Old 04-19-2019, 11:52 AM   #37
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Sold the condo in the Rocky Mountains, took some of the profit and paid cash for a 42' Trawler after searching online for 6 months, talking to every boater I knew, and physically looking at 12 boats. Built a shed in my son's backyard to store the precious things, and sold or donated the rest. We're moving to the boat next month. No mortgage, no boat payments, the admiral is a traveling nurse and I have a retirement check from teaching. We think it's going to work; we'll let you know.
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Old 04-19-2019, 12:00 PM   #38
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The best investment most people make is purchasing a home. The worst returns in real estate is residential homes. If you can move up just one rung on the ladder you will probably double your net worth.
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Old 04-19-2019, 12:17 PM   #39
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Been there, done that!

Back in 2017 we made the decision to reduce our debt obligations by (a) selling the house, (b) selling the 37’ trawler and (c) buying a 42’ to 48’ live aboard trawler. It all made sense at the time. We had exceptional credit ratings and didn’t worry about getting a new loan. The 37’ boat sold first, and then we had an offer and quick close on the house. In the fall of 2017 we had gotten rid of all the furniture and household stuff, had no boat, were sitting on a big chunk of proceeds from the house and renting a place in town while we looked for the right boat.

We looked at older Krogen 42s (which had lots of teak trim, teak decks and moisture at the bow and on the boat deck), DeFevers, Selenes, Nordhavn 40s, Ocean Alexanders and other trawler style boats. We made offers on a couple of Selenes and one DeFever but never got to survey. The idea of paying cash for an older trawler went by the wayside when the amount of restoration, moisture and teak maintenance came into play. We didn’t even consider the fact that we couldn’t find the solution boat right away.

Along this journey we started looking for “live aboard” financing since we were now in the market for a larger, newer trawler. This was a rude awakening. Back in 2010 the Dodd-Frank legislation levied significant rules and process changes on the financial industry. Live aboard loans are not readily available at most banks or credit unions any more. If you have no real estate you will be hard pressed to find an institution ready to loan you money with just the boat as collateral and no permanent dirt residence. We called everywhere and talked to the marine mortgage people who set up at every boat show. No live aboard loans were being made. We were even advised that we should have found the boat first, gotten a loan on it and THEN listed the house for sale. In other words, we would move from home owners with a big boat to being a live aboard on a big boat, in that order. The only place we found that advertised live aboard loans was Essex Credit, a subsidiary of Bank of the West. They were about all we could find until we found a small, local bank here in Washington who was more than happy to take on the added paperwork and regulations and give us a loan. But this only happen AFTER we had been renting for six months and we had an accepted offer and survey on an acceptable (to them) boat. We ended up buying a 2007 North Pacific 52’ trawler.

The second point to make to anyone looking to move aboard is make darn sure you have arranged for moorage and you have been guaranteed live aboard status. In the PNW you will be hard pressed to find 48’ permanent moorage anywhere. And virtually every marina around here has a long wait list for live aboard status. Our marina has a limit of 10% live aboard tenants and the list currently has eleven people waiting. Even the “condo” marinas have limits on how many of owners can reside full time on their boats.
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Old 04-19-2019, 02:12 PM   #40
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Is it easier to get a $500k loan for a house than an equal loan for a boat?

Credit standards are higher for boat loans.
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