Home vs Boat

[Alaskaflyer]

Re: debt for a living situation...much of my current net worth is in tax-deferred accounts, the largest one I will be eligible to withdraw from next year (one can throw rocks at that investment strategy and if I had it to do over again I’d have “Roth’d” more of my savings but it’s water under the bridge at this point.) I’m fairly certain that if I did the math it would be break even or better to mortgage a >$100k boat and pay the installments than to withdraw the full value to pay “cash” and then deal with the resulting tax consequences. Maybe soon I’ll actually do the math to confirm that’s true for me. I’ve certainly known many other examples when it’s been true for others.

Just an example of how debt is not always bad.

 

[foggysail]

Gees, I have a different outlook on debt. Yes certainly if the purpose of debt is to purchase assets that produce cash or at least the purchase will appreciate. Never for anything that does not produce cash plus having a depreciation factor. Of course when I was younger my outlook was very different.

 

[rslifkin]

If keeping the money for something else will earn you more than the interest rate on the loan, then the debt comes out as the cheaper option in the long run.

 

[OldDan1943]

LOL, I think we are all smart enough to realize, if you want to make money, don't go boating. If you are trying to reduce your annual fuel costs, stay tied to the dock longer and when you do leave the dock, don't go WOT.
IMO, boating will have a negative impact on your net worth/estate.
Consider your boat like a car. Go fast, costs more in fuel. Your car depreciates, your boat depreciates.

 

[foggysail]

LOL, I think we are all smart enough to realize, if you want to make money, don't go boating. If you are trying to reduce your annual fuel costs, stay tied to the dock longer and when you do leave the dock, don't go WOT.
IMO, boating will have a negative impact on your net worth/estate.
Consider your boat like a car. Go fast, costs more in fuel. Your car depreciates, your boat depreciates.

One can go boating without being in debt. And one can purchase and use a car also without being in debt. To each his own.

 

[OldDan1943]

One can go boating without being in debt. And one can purchase and use a car also without being in debt. To each his own.

Then we do agree both your boat and your car will depreciate? And the faster go, the more fuel we will burn?

Per your other point, that is true. An example, until things change, if your boat qualifies as a second home, you can write off the interest.
If you are paying 3% for the boat loan and earn 2% on other assets, you are effetely getting the boat loan for 1%.
If you sell stock, you will have to pay at least 15% on your capital gains.... It is not a choice for me. I'll just stick with my 1% boat loan.

 

[RonR]

I am 40. So I have some time, but ordinarily, the financial advisors would say that I should use this time to aggressively invest, what with my 20+ year time horizon before retirement.

Man, this is a hard choice. My wife and I have successfully bounced from house to house, and we've been very blessed - we've come out ahead every time. The fact that I'm basically planning to come out behind is a hard pill to swallow.

Maybe a better way to look at it is to just consider how much we are willing to spend to enjoy the life we want to live.

Words from my Grandpa Max
Fun cost $$, better pay up while you can!
But don't buy so much that cant afford some fun later in life!

 

[foggysail]

Then we do agree both your boat and your car will depreciate? And the faster go, the more fuel we will burn?

Per your other point, that is true. An example, until things change, if your boat qualifies as a second home, you can write off the interest.
If you are paying 3% for the boat loan and earn 2% on other assets, you are effetely getting the boat loan for 1%.
If you sell stock, you will have to pay at least 15% on your capital gains.... It is not a choice for me. I'll just stick with my 1% boat loan.

Just a comment about my above post on debt. When I said that I never purchase anything that doesn’t make cash, I was referring to taking on debt. Most things in life depreciate, cars for one as you mentioned and most own one. But they do not need to be purchased with debt. Most homes although not all increase in value over time not only that but you need to live someplace so why not own a home....even if it’s a boat.

 

[smitty477]

Then we do agree both your boat and your car will depreciate? And the faster go, the more fuel we will burn?

Per your other point, that is true. An example, until things change, if your boat qualifies as a second home, you can write off the interest.
If you are paying 3% for the boat loan and earn 2% on other assets, you are effetely getting the boat loan for 1%.
If you sell stock, you will have to pay at least 15% on your capital gains.... It is not a choice for me. I'll just stick with my 1% boat loan.

"Then we do agree both your boat and your car will depreciate?"
Not in all cases.

"And the faster go, the more fuel we will burn?"
Yes - and the more fuel per mile or per hour as well as in general.

"Per your other point, that is true. An example, until things change, if your boat qualifies as a second home, you can write off the interest.
If you are paying 3% for the boat loan and earn 2% on other assets, you are effetely getting the boat loan for 1%.
If you sell stock, you will have to pay at least 15% on your capital gains.... It is not a choice for me. I'll just stick with my 1% boat loan."

Yes - precisely , or a first home for some.

 

[OldDan1943]

Just a comment about my above post on debt. When I said that I never purchase anything that doesn’t make cash, I was referring to taking on debt. Most things in life depreciate, cars for one as you mentioned and most own one. But they do not need to be purchased with debt. Most homes although not all increase in value over time not only that but you need to live someplace so why not own a home....even if it’s a boat.

I am fortunate. Until the Feds decide boats cannot be considered a second or maybe a primary residence, I shall continue to write off the interest on my boat loan. It is the only debt for which I can write off the interest.

 

[smitty477]

Words from my Grandpa Max
Fun cost $$, better pay up while you can!
But don't buy so much that cant afford some fun later in life!

"Fun cost $$, better pay up while you can!
But don't buy so much that cant afford some fun later in life!"

Great quote - thank you
The only purpose for money is to spend it so better to plan what to do with it that will be worthwhile in your views.

 

[OldDan1943]

Wifey B: We have a small group here today, but tomorrow we'll have 25 or so over for a cookout. I don't even know how many.

I don't even know 25 people.

 

[Zoar]

for what its worth. i am buying an Albin. To help buy it i am refinancing my home at a lower rate. my new mortgage payments will be just a little more. i am doubling my principal from $39K to $80K. i will have a house worth nearly $200K and a 40 foot Trawler second home and payments will be $800 bucks a month. Cash into this will be about $40K. Most acquisitions require some cash. my deal is no exception. i did not see any prior posts bring in the cash and addition to debt aspect. From my perspective having two homes, one that provides access to the world for a combined mortgage payment of $800 at 2.9% interest is a clear cut ---- Yea, baby.

 

[ssobol]

for what its worth. i am buying an Albin. To help buy it i am refinancing my home at a lower rate. my new mortgage payments will be just a little more. i am doubling my principal from $39K to $80K. i will have a house worth nearly $200K and a 40 foot Trawler second home and payments will be $800 bucks a month. Cash into this will be about $40K. Most acquisitions require some cash. my deal is no exception. i did not see any prior posts bring in the cash and addition to debt aspect. From my perspective having two homes, one that provides access to the world for a combined mortgage payment of $800 at 2.9% interest is a clear cut ---- Yea, baby.

That's all well and good, but a boat is a depreciating asset and will this deal let you afford the maintenance, upkeep, operating costs, etc. that go with having a boat?

Having a boat and a house is not really the same as having two houses. I'm guessing that the monthly operating costs for "access to the world" is going to be a lot more than your mortgage payment.

If refinancing and taking equity money out resets or extends the mortgage period, are you really saving any money once you figure the interest costs?

 

[SteveK]

That's all well and good, but a boat is a depreciating asset and will this deal let you afford the maintenance, upkeep, operating costs, etc. that go with having a boat?

Having a boat and a house is not really the same as having two houses. I'm guessing that the monthly operating costs for "access to the world" is going to be a lot more than your mortgage payment.

If refinancing and taking equity money out resets or extends the mortgage period, are you really saving any money once you figure the interest costs?

all I saw was 120k equity left in house, and a debt free boat currently valued at $40k. Yea, baby

 

[markpierce]

My boat's maintenance, taxes, berthing, and insurance exceeds the cost of my modest "dirt" home. Both are clear of any lien or mortgage. While the home will maintain its value, the boat won't. It is a toy, after all.

 

[Zoar]

Yes, insurance, dockage, maintenance will exceed the portion attributed to acquiring the boat from the $800 monthly mortgage payment. And yes i can afford and have budgeted monthly money for these operational costs. My point was it can be achieved and no the boat is not worth $40K. The math is --- 40K in cash plus $40K financed equals $80K. There will still be $120K in equity in the house and the boat, yes, we all get it that it is a depeciating asset, will be a Trawler, one can live aboard for some months of the year, as an alternative to a second home. And yes it provides access that a conventional second home does not. And i ceryainly hope no one constued that i said a boat IS JUST LIKE a second home. i did not. However, as an alternative to getting a second home, the liveaboard boat is an attractive alternative for me, and i do not think i am the only person on the planet that can use a liveaboard as a creative and reourceful and economically viable place to live for a few months of the year. yes even as it depreciates.

 

[Zoar]

That's all well and good, but a boat is a depreciating asset and will this deal let you afford the maintenance, upkeep, operating costs, etc. that go with having a boat?

Having a boat and a house is not really the same as having two houses. I'm guessing that the monthly operating costs for "access to the world" is going to be a lot more than your mortgage payment.

If refinancing and taking equity money out resets or extends the mortgage period, are you really saving any money once you figure the interest costs?

Actually I am DECREASING the terms of payment. I had 14 years left on my OLD mortgage while the REFI is for only 10 years, so I wll actually pay less in interest.... Moreover that is even if I take the REFI to full term. And, as indicated my new total debt (allowing me to have a home and a liveaboard trawler) will be $80K. I hope and intend to actually pay this $80K mortgage off with 2 years. (I am working on some business deals that will allow me to pay this off). Thus I will be mortgage free within 2 years. Then my expenses will be---taxes on the house, marina fees on the boat, insurances on BOTH, maintenance on BOTH and other operating expenses.

 

[psneeld]

Ths is why my mantra is "it depends"....


Not all posts contain all the info up front or even through a long thread.


A short term mortgage that one plans to pay off early or is so small as to not really affect total available capital for enjoying life...well...that's different than a long term mortgage on a depreciating asset that is a big chunk of ones assets.


Thats why I never get nto the "meat" of a financing discussion as there always seems to be "more to the story" than one can definitively give good advice on. Sure general advice...but it may not apply at all in a specific case.

 

[ksanders]

Actually I am DECREASING the terms of payment. I had 14 years left on my OLD mortgage while the REFI is for only 10 years, so I wll actually pay less in interest.... Moreover that is even if I take the REFI to full term. And, as indicated my new total debt (allowing me to have a home and a liveaboard trawler) will be $80K. I hope and intend to actually pay this $80K mortgage off with 2 years. (I am working on some business deals that will allow me to pay this off). Thus I will be mortgage free within 2 years. Then my expenses will be---taxes on the house, marina fees on the boat, insurances on BOTH, maintenance on BOTH and other operating expenses.

Enjoy your boat!

If you did not finance your boat you would be sitting behind your keyboard wishing you had a boat.

Most folks cannot just write checks in the tens of thousands of dollar ranges until they have decades of life under their belt, many decades.

We all know that financially it would be “best” not to pay interest, as it’s an expense. The cost of renting/borrowing money.

The challenge is that most people do not have the patience to wait on the sidelines the time required to save for the things they want.

So... We rent money, and pay a fee for that.

What we get in return is the enjoyment of using the “thing” while we are repaying the rented money.

The folks that save up do not have the rental fee on the money, but they do not get the enjoyment either.

 

[Zoar]

Enjoy your boat!

If you did not finance your boat you would be sitting behind your keyboard wishing you had a boat.

Most folks cannot just write checks in the tens of thousands of dollar ranges until they have decades of life under their belt, many decades.

Indeed, getting in a boat is a life changer.

Regarding many decades, yea, that is the benefit of getting "old... There has to be some benefit, right?

 

[ksanders]

Indeed, getting in a boat is a life changer.

Regarding many decades, yea, that is the benefit of getting "old... There has to be some benefit, right?

Yep, net worth is acquired over long decades of life.

 

[Zoar]

Yep, net worth is acquired over long decades of life.

I rather wish it was linear. In my experience it has been more UP and DOWN. And now about to go UP. Again. Yet I also know it can go the other way, without much notice.

 

[OldDan1943]

My boat is financed, my condo is paid for.
If my finance company takes the boat back, my condo is still paid for.

 

[proudsailor]

This is a great thread and an enjoyable read of everyone's perspective. Jovial Cynic, if you're supplanting a mortgage payment for a boat payment and can afford the extra money associated w/ maintenance & slip fees in your 40s, why not? If you're able to continue to invest in your retirement w/ potentially decades left in investing, it doesn't appear to be that you would be that much further ahead or behind. So then the choice is whether the additional costs are worth the additional pleasures of truly living the boating lifestyle.

We hem-haw over a similar decision. I am the boater, my entire adult life (mid 50s now). She loves the water (but not boating) and would be willing to live on a trawler but would have to be something higher end. We're struggling w/ this as I'm not sure if the price of a higher end trawler is a worthwhile investment as essentially a floating condo.

Vicariously though- if my spouse were an adamant boater and loved the lifestyle, then this would be a no-brainer decision for us. Food for thought?

 

[OldDan1943]

Vicariously though- if my spouse were an adamant boater and loved the lifestyle, then this would be a no-brainer decision for us. Food for thought?

She's a keeper. SMILE

 

[Donna]

I’m going to weigh in on this subject. For the past few years I have been considering moving onto a boat as my full time residence. It has been a dream of mine.

My current boat, a 36’, 44’ OAL, and is comfortably fit. However, I would not be comfortable living full time on her, so I would look for a larger vessel.

When it came right down to it, I have looked at new boats and new homes. I have decided to keep Southerly and use her for continued jaunts to the Bahamas and up and down the coast.

I am in the process of selling my home, building a new one and using my boat as a weekend/vacation getaway. It was a really hard decision.

 

[foggysail]

I’m going to weigh in on this subject. For the past few years I have been considering moving onto a boat as my full time residence. It has been a dream of mine.

My current boat, a 36’, 44’ OAL, and is comfortably fit. However, I would not be comfortable living full time on her, so I would look for a larger vessel.

When it came right down to it, I have looked at new boats and new homes. I have decided to keep Southerly and use her for continued jaunts to the Bahamas and up and down the coast.

I am in the process of selling my home, building a new one and using my boat as a weekend/vacation getaway. It was a really hard decision.

Mine is a 40’ with about 500 square feet of living space plus the space under canvas compared to 2500 sq ft our home provides. For us, no way could we live comfortably on it. A boat large enough to live comfortably on would be unaffordable for us when dockage, maintenance and storage are considered. Also around here slips for boats larger than about 45’ are few in numbers.

Your choice to build a new home over getting a larger boat is in my opinion much better way to go.

 

[OldDan1943]

A house has one distinctive disadvantage, someone has to watch it when you are not there.
One advantage, the house appreciates whilst a boat depreciates. Let's hope one offsets the other.

 

[ksanders]

My opinion is that for a single person and some couples a boat if its large enough can make a very comfortable home.

I could live on my boat as my only home, and actually stay on it about a third of the time right now. My wife not so much. She likes more space, but has yet to experience the amenities of a nice marina either.

If a boat does not make a great primary home for all, it certainly makes a Great second home for almost anyone that likes the water.

All of my quickly retiring neighbors in Alaska have second homes someplace warmer.

I have a boat as a second home. That second home can go anywhere I feel like parking it, and it can be moved with the turn of a key and the casting off of a few lines.

San Diego
Mexico
the PACNW
Cali Delta

All inviting places

To me that is the advantage of a boat as a home, over a dirt home. Either as a primary residence or a second home. The ability to move it at will.