Reply
 
Thread Tools Display Modes
 
Old 08-03-2017, 12:14 PM   #1
ejf
Member
 
City: Seattle, WA
Country: USA
Join Date: Aug 2017
Posts: 6
First Time Buyer and Financer

Hello,

First post and couldn't find another thread that addresses my specific circumstance, so here goes:

In about 2-3 years I'll be in the market for a liveaboard trawler and wanted to see if I could gain some knowledge (and hopefully not have my dreams crushed). My current financial set up: good income, good savings, very little debt, excellent credit, but no real estate history.

I plan to purchase a home in the next year, incur that new debt and then quickly put renters in to it before purchasing a boat. My overarching question, with that new debt, does anyone have experience with a lender that takes in to account rental income to offset their debt to income ratio? Maybe I'd still get approved without that, but it seems the ratio would be too high with a new mortgage. The primary reason for purchasing the house would be to have a solid asset on land (seems boat lenders want to have something they can hold on to in case you sail off to not be found).

Thanks for any wisdom.
__________________
Advertisement

ejf is offline   Reply With Quote
Old 08-03-2017, 12:26 PM   #2
Guru
 
dhays's Avatar
 
City: Gig Harbor
Country: United States
Vessel Name: Kinship
Vessel Model: North Pacific 43
Join Date: May 2015
Posts: 4,865
Quote:
Originally Posted by ejf View Post
Hello,

First post and couldn't find another thread that addresses my specific circumstance, so here goes:

In about 2-3 years I'll be in the market for a liveaboard trawler and wanted to see if I could gain some knowledge (and hopefully not have my dreams crushed). My current financial set up: good income, good savings, very little debt, excellent credit, but no real estate history.

I plan to purchase a home in the next year, incur that new debt and then quickly put renters in to it before purchasing a boat. My overarching question, with that new debt, does anyone have experience with a lender that takes in to account rental income to offset their debt to income ratio? Maybe I'd still get approved without that, but it seems the ratio would be too high with a new mortgage. The primary reason for purchasing the house would be to have a solid asset on land (seems boat lenders want to have something they can hold on to in case you sail off to not be found).

Thanks for any wisdom.
Not really sure as my situation is a bit different than yours. I have a ton of debt, two commercial buildings, a home, and two boats. Oops, make that one commercial building as I paid one off last month.

Rental income is definitely considered by a lender when looking at your income/debt ratio. I don't think that a boat lender will look at your dirt asset as being helpful since it will likely be heavily encumbered by debt itself. They will want to look at the value of the boat and if your income stream can support the payments and maintenance.

Do some research about the availability and cost of liveaboard slips in the Seattle area. There was a thread here recently on that very topic. Unless you have already done so, you may find that it is more expensive that you anticipate.

Also keep in mind that while a rental house is decent investment, a boat is a depreciating asset. You will be losing money every month just by having it sit in the water.
__________________

__________________
Regards,

Dave
SPOT page
dhays is offline   Reply With Quote
Old 08-03-2017, 12:48 PM   #3
ejf
Member
 
City: Seattle, WA
Country: USA
Join Date: Aug 2017
Posts: 6
Quote:
Originally Posted by dhays View Post
Not really sure as my situation is a bit different than yours. I have a ton of debt, two commercial buildings, a home, and two boats. Oops, make that one commercial building as I paid one off last month.

Rental income is definitely considered by a lender when looking at your income/debt ratio. I don't think that a boat lender will look at your dirt asset as being helpful since it will likely be heavily encumbered by debt itself. They will want to look at the value of the boat and if your income stream can support the payments and maintenance.

Do some research about the availability and cost of liveaboard slips in the Seattle area. There was a thread here recently on that very topic. Unless you have already done so, you may find that it is more expensive that you anticipate.

Also keep in mind that while a rental house is decent investment, a boat is a depreciating asset. You will be losing money every month just by having it sit in the water.
Thanks for the info!

We are currently in Seattle, but most likely won't be liveaboards here due to the specific reasons you pointed out. We are actually open to just about anywhere in the lower 48, and anticipate moving around a decent amount.

As for the depreciating asset side of things, that's where the motivation to have a rental property comes in. If anything, it'll help offset the cash we'll just be tossing into the floating proverbial endless pit.

Sounds like a dirt asset might not be required for us for the loan approval, but maybe is still a smart move over all to have that started before making the leap to the depreciating boat?
ejf is offline   Reply With Quote
Old 08-03-2017, 01:09 PM   #4
Senior Member
 
yachtbrokerguy's Avatar


 
City: Fort Lauderdale, FL
Country: USA
Vessel Model: I have keys to lots of boats...
Join Date: Jan 2011
Posts: 451
This forum is a great source of information but I suggest you talk to a few marine lenders now. Your local banker may not have much experience with boat loans unless they are everyday fit in the same box category.
__________________
Tucker Fallon CPYB
www.yachtbrokerguy.com
yachtbrokerguy is offline   Reply With Quote
Old 08-03-2017, 01:15 PM   #5
ejf
Member
 
City: Seattle, WA
Country: USA
Join Date: Aug 2017
Posts: 6
Quote:
Originally Posted by yachtbrokerguy View Post
This forum is a great source of information but I suggest you talk to a few marine lenders now. Your local banker may not have much experience with boat loans unless they are everyday fit in the same box category.
Thanks. I'm sure one can't advertise on here, but if you know of anyone in the Seattle area that would be willing to chat with a newbie I'd appreciate any info.
ejf is offline   Reply With Quote
Old 08-03-2017, 01:23 PM   #6
Guru
 
Tom.B's Avatar
 
City: Cary, NC
Country: USA
Vessel Name: Skinny Dippin'
Vessel Model: Navigator 4200 Classic
Join Date: Jul 2009
Posts: 5,061
**Cue all the nay-sayers that insist you should never take out a loan for a boat** (scoff)

Bess and I watch a lot of YouTube video blogs of cruisers. More than one of them has said that buying a boat as a live-aboard (meaning your SOLE address) does pose some challenges with lending and buying insurance. I wish I had more details, but that's all I know.
__________________
2000 Navigator 4200 Classic
(NOT a trawler)
Tom.B is offline   Reply With Quote
Old 08-03-2017, 01:29 PM   #7
ejf
Member
 
City: Seattle, WA
Country: USA
Join Date: Aug 2017
Posts: 6
Quote:
Originally Posted by Tom.B View Post
**Cue all the nay-sayers that insist you should never take out a loan for a boat** (scoff)

Bess and I watch a lot of YouTube video blogs of cruisers. More than one of them has said that buying a boat as a live-aboard (meaning your SOLE address) does pose some challenges with lending and buying insurance. I wish I had more details, but that's all I know.
Yeah, I can imagine that it being your sole residence would be tough, that's what I'm hoping to mitigate with the brick and mortar house prior to loan shopping.

I follow quite a few folks on youtube as well, would you mind sharing some of your favorites, maybe there's some I haven't found? Thanks!
ejf is offline   Reply With Quote
Old 08-03-2017, 02:17 PM   #8
Guru
 
MYTraveler's Avatar
 
City: West Coast
Country: USA
Join Date: Apr 2014
Posts: 815
If you finance your home acquisition with owner-occupied financing, and then turn it into a rental property, it is likely a default under that loan. Moreover, it will be reported to other lenders as owner-occupied, which will not match your story that it is income property. You should speak to a good mortgage broker (who does both owner-occupied and income), but I suspect you would be better off going for the income financing to start, although the credit requirements will be more stringent and rate likely a little higher.
MYTraveler is offline   Reply With Quote
Old 08-03-2017, 03:58 PM   #9
Guru
 
City: Au Gres, MI
Country: US
Vessel Name: Never Say Never
Vessel Model: President 41 DC
Join Date: Jul 2015
Posts: 631
Talk to Cindy (I think) at Sterling Financial. She was very helpful when we bought our boat.
Comodave is online now   Reply With Quote
Old 08-03-2017, 04:19 PM   #10
Guru
 
BandB's Avatar
 
City: Fort Lauderdale
Country: USA
Join Date: Jan 2014
Posts: 11,741
Quote:
Originally Posted by ejf View Post
Hello,

First post and couldn't find another thread that addresses my specific circumstance, so here goes:

In about 2-3 years I'll be in the market for a liveaboard trawler and wanted to see if I could gain some knowledge (and hopefully not have my dreams crushed). My current financial set up: good income, good savings, very little debt, excellent credit, but no real estate history.

I plan to purchase a home in the next year, incur that new debt and then quickly put renters in to it before purchasing a boat. My overarching question, with that new debt, does anyone have experience with a lender that takes in to account rental income to offset their debt to income ratio? Maybe I'd still get approved without that, but it seems the ratio would be too high with a new mortgage. The primary reason for purchasing the house would be to have a solid asset on land (seems boat lenders want to have something they can hold on to in case you sail off to not be found).

Thanks for any wisdom.
I highlighted the part of your post that disturbed me. Plan on what makes sense to you, then talk to lenders, including those in the boating world. You don't purchase an asset just because you think some lender might like it. Rental property can be great or a disaster.

Everything is taken into consideration. However, recent loans for whatever reason are a key factor. If you had a house you'd rented for years, then no big deal, but one you just bought and started renting, not the same. I'm a bit confused about this home. Where do you live now? Rental homes scare me, but perhaps because so many are available around me. There's tax benefit and profit when selling but the short term return on investment typically isn't all that great.

The warning you were given on converting the home to one you're not living in was a good warning. Something you would have to discuss with your lender.

Liveaboards finance boats without owning property on land all the time. Partly depends on what percentage you want to finance and it depends on you using a true boat lender that understands. There are thousands of boat owners with their legal address as 411 Walnut Street #xxxxx
Green Cove Springs, FL 32043-3443.

So figure out what makes sense to you, then get help to make it work.
BandB is online now   Reply With Quote
Old 08-03-2017, 05:29 PM   #11
Guru
 
kthoennes's Avatar
 
City: Sioux Falls, South Dakota
Country: USA
Vessel Name: Xanadu
Vessel Model: Mainship 37 Motor Yacht
Join Date: Oct 2013
Posts: 752
We did our financing through a local credit union and it was a breeze with a relatively low rate, but then we have a good relationship with that credit union. They didn't really have a category for boats as big as ours so they put it in the same category as a land-RV for financing purposes. (I was shocked at how long people are allowed to finance RV's, and how much they're allowed to borrow.) Ours was a relatively small amount at a low rate for a short term. We only financed about a third of its current value and we'll never be upside down which helps the approval of course.

Can't speak to the rental property angle or how most lending institutions count rental income. I do happen to work in a courthouse though and I've seen far too many eviction and small claims cases for property damage to ever become a landlord, but then my perspective is skewed. I only see the cases when it goes sour. Lots of people manage rental property and make a good income I know (if everything works out), but I never would.
kthoennes is offline   Reply With Quote
Old 08-03-2017, 05:49 PM   #12
Senior Member
 
City: Chicago
Country: United States
Vessel Name: Sea Jay
Vessel Model: Non Trawler ;-) Ask me if it matters LOL
Join Date: Jun 2016
Posts: 183
It all depends too on the equity in your rental property. Sink a ton in it, your equity will speak for you and some of the above concerns go away. Know whether you wish to actively manage your rental asset or to give it to a broker. I hated playing landlord until I got a broker who specialized in my area, then I sat back and collected the checks for the following 5 years.
Gmarr is online now   Reply With Quote
Old 08-09-2017, 01:49 PM   #13
ejf
Member
 
City: Seattle, WA
Country: USA
Join Date: Aug 2017
Posts: 6
Quote:
Originally Posted by BandB View Post
I highlighted the part of your post that disturbed me. Plan on what makes sense to you, then talk to lenders, including those in the boating world. You don't purchase an asset just because you think some lender might like it. Rental property can be great or a disaster.

Everything is taken into consideration. However, recent loans for whatever reason are a key factor. If you had a house you'd rented for years, then no big deal, but one you just bought and started renting, not the same. I'm a bit confused about this home. Where do you live now? Rental homes scare me, but perhaps because so many are available around me. There's tax benefit and profit when selling but the short term return on investment typically isn't all that great.

The warning you were given on converting the home to one you're not living in was a good warning. Something you would have to discuss with your lender.

Liveaboards finance boats without owning property on land all the time. Partly depends on what percentage you want to finance and it depends on you using a true boat lender that understands. There are thousands of boat owners with their legal address as 411 Walnut Street #xxxxx
Green Cove Springs, FL 32043-3443.

So figure out what makes sense to you, then get help to make it work.
Awesome, thanks. This is the type of insight I was looking for!

Currently living in Seattle, but will most likely be moving in a little under a year. If we stay in Seattle, that solves the dilemma because there's no way we're buying here right now (wish I would've a year ago with the median price up 17% in the last year). We might end up back in Oklahoma where the market is almost always a good buyers environment, so that's where we'd consider buying.

If we could get away with not buying real estate and maybe eat a slightly higher rate on the boat loan, maybe that's the way to go.
ejf is offline   Reply With Quote
Old 08-09-2017, 02:05 PM   #14
Guru
 
BandB's Avatar
 
City: Fort Lauderdale
Country: USA
Join Date: Jan 2014
Posts: 11,741
Quote:
Originally Posted by ejf View Post
Awesome, thanks. This is the type of insight I was looking for!

Currently living in Seattle, but will most likely be moving in a little under a year. If we stay in Seattle, that solves the dilemma because there's no way we're buying here right now (wish I would've a year ago with the median price up 17% in the last year). We might end up back in Oklahoma where the market is almost always a good buyers environment, so that's where we'd consider buying.

If we could get away with not buying real estate and maybe eat a slightly higher rate on the boat loan, maybe that's the way to go.
If by good buyers environment, you mean cheaper, then of course as the demand there is poor. Not cheap in Oklahoma City. Of course a bit far from the coast in either.

You're doing right by thinking early but you need to not rush the decision process and not pick a location or solution until further down the road and more sure. Buying real estate if you want to live on a boat somewhere else just makes no sense and in no way improves your credit worthiness unless you mortgage the real estate and live in it.

You have two questions.

1-Do you want to live on a boat or not?
2-Where do you want to live?

That's before even considering things like owning or renting a house and/or what kind of boat.

All of a sudden you toss Oklahoma in and you started with liveaboard trawler. Well, those two just are so far apart.
BandB is online now   Reply With Quote
Old 08-09-2017, 02:22 PM   #15
ejf
Member
 
City: Seattle, WA
Country: USA
Join Date: Aug 2017
Posts: 6
Quote:
Originally Posted by BandB View Post
If by good buyers environment, you mean cheaper, then of course as the demand there is poor. Not cheap in Oklahoma City. Of course a bit far from the coast in either.

You're doing right by thinking early but you need to not rush the decision process and not pick a location or solution until further down the road and more sure. Buying real estate if you want to live on a boat somewhere else just makes no sense and in no way improves your credit worthiness unless you mortgage the real estate and live in it.

You have two questions.

1-Do you want to live on a boat or not?
2-Where do you want to live?

That's before even considering things like owning or renting a house and/or what kind of boat.

All of a sudden you toss Oklahoma in and you started with liveaboard trawler. Well, those two just are so far apart.
Yep, I lived in OK for 30 years, I'm pretty familiar.

1. Yes
2. Anywhere

Here's the deal if I haven't made it clear: Liveaboard 2-3 years from now. In the mean time, I want to make the most sound financial decisions I can that point me in the right direction to get a loan on a large, depreciating asset 2-3 years from now. Some might say thats a rash decision. So do I. Again, insight is what I need, and I thank you for yours.

To clarify more: Oklahoma and owning a trawler are far apart in the sense that OK is not on the coast, correct. I'm an airline pilot, she is a traveling nurse, we are mobile and nomadic. We aren't going to stay in one place with a boat or at any time in life.
ejf is offline   Reply With Quote
Old 08-09-2017, 03:29 PM   #16
Guru
 
BandB's Avatar
 
City: Fort Lauderdale
Country: USA
Join Date: Jan 2014
Posts: 11,741
Quote:
Originally Posted by ejf View Post
Yep, I lived in OK for 30 years, I'm pretty familiar.

1. Yes
2. Anywhere

Here's the deal if I haven't made it clear: Liveaboard 2-3 years from now. In the mean time, I want to make the most sound financial decisions I can that point me in the right direction to get a loan on a large, depreciating asset 2-3 years from now. Some might say thats a rash decision. So do I. Again, insight is what I need, and I thank you for yours.

To clarify more: Oklahoma and owning a trawler are far apart in the sense that OK is not on the coast, correct. I'm an airline pilot, she is a traveling nurse, we are mobile and nomadic. We aren't going to stay in one place with a boat or at any time in life.
There are many marine lenders. I'm sure some have been mentioned here. Here is a link to the National Marine Lenders Association. A good bit of information there.

Home

Essex Credit has a good reputation.

https://www.essexcredit.com/home/boat/

Trident Funding is large.

Trident Funding

Ultimately, if you want to live on a boat, you buy a boat to live on and finance it if you need to.

If completely separate from the boat you have some great desire to own property in Oklahoma then you buy it.
BandB is online now   Reply With Quote
Old 08-09-2017, 11:33 PM   #17
Guru
 
Seevee's Avatar
 
City: st pete
Country: usa
Vessel Model: 400 Mainship
Join Date: Sep 2016
Posts: 762
Quote:
Originally Posted by MYTraveler View Post
If you finance your home acquisition with owner-occupied financing, and then turn it into a rental property, it is likely a default under that loan. Moreover, it will be reported to other lenders as owner-occupied, which will not match your story that it is income property. You should speak to a good mortgage broker (who does both owner-occupied and income), but I suspect you would be better off going for the income financing to start, although the credit requirements will be more stringent and rate likely a little higher.
MY,

That's not entirely true and there's often nothing in reporting to indicate owner occupied or rental. And I'd bet it wouldn't trigger a default unless one did not pay the note. However, need to read the fine print. I've done a few like this over the years, never an issue. And with one, I went back and forth over the years as a owner occupied/rental home. And, yes, the bank will look at a rental home as income, and not ding you for debt ratio (usually). I've sold a number of houses to other investors that deal with this, and no issues with the traditional lenders.

I like dirt and like to invest in debt and pay cash for toys and personal things. I don't use banks... too much of a hassle and there's better lenders out there.

If one hasn't done rental income they certainly need some training and education. While it's very profitable it can be a money pit with poor management or the wrong house. I'm a single family home investor and can speak with some intelligence on them as a great investment.

The boat or your personal residence is NOT an investment... it's an expense. One can get some good rental homes that can pay for the boat, if that's the goal... and when done with the boat, move into one.
__________________

__________________
Seevee
Seevee is online now   Reply With Quote
Reply

Tags
financing, lender, loan

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off





All times are GMT -5. The time now is 12:41 PM.


Powered by vBulletin® Version 3.8.8 Beta 4
Copyright ©2000 - 2017, vBulletin Solutions, Inc.
Search Engine Optimization by vBSEO 3.6.0
Copyright 2006 - 2012