What is a responsible percentage of net worth to have in a trawler/yacht?

[l00smarble]

am considering a purchase to go long range cruising for a period of time (maybe 1-2 years but depending on how we like the cruising lifestyle it may go longer or could be cut shorter.)

Any purchase will be done in cash from nest egg. Choosing a well maintained, pre-owned vessel with a relatively flat depreciation curve is part of my strategy. If we cruise 1 year and sell we would get much of the equity back. Of course there are transaction costs, depreciation and the costs to own/cruise the boat but this will be budgeted for spending. The underlying asset stay son the balance sheet in illiquid form.

So hypothetically buying $1M yacht if you net worth is $1.5-2M would be irresponsible. Having 50% of net worth in a depreciating asset is insane. But what about 25%? Or 20%?

Should one be worth $10M before spending $1M on a yacht (10%?)

Would you look at it differently if the yacht was your only housing? For us it won't be.

I'm thinking I would rather spend much more on a used Nordhavn (for example) than a brand new Beneteau Swift Trawler. I know not comparable boats but illustrative as one has a flat depreciation curve and one will drop like a cliff. Is it better to stretch the budget into something that will hold value or better to just spend less up front and only buy the minimum you need for immediate crusing plans?

 

[ranger58sb]

Hmmm... A question sorta like "How long of a piece of string does your financial advisor think you can afford?"

Almost everything depends on your personal financial situation, your personal risk tolerance, your idea of appropriate psychic income in a risk/reward equation, your intention to leave an estate to descendants or instead depart with about $0.25 in the bank, etc.

I too would prefer a used something to a new something else... in general and within reason. Ideally a well-kept used something. Unless I won the lottery for at least slight more than what my favorite new something might cost.

-Chris

 

[ksanders]

If your plan is to get in, cruise the world and then exit, I seems like you are in Nordhavn's demographic.

If it were me, I'd contact those folks and have them show you real world purchace-cruise-exit scenarios.

 

[Mac2]

Red flag: considering going cruising for 1-2 years, and not knowing if you’ll like the cruising lifestyle.

I don’t want to discourage you, but put things into perspective. A boat is not an RV that you can jump in and takeoff. Long range cruising means you need to know every system on your boat and be able to fix everything. This means you need to have the know how and tools/parts to fix. This alone will take 1-2 years.
I mention this because long range blue water trawlers, like Nordhavns, are much more complex than a coastal cruiser. Getting back to your question, stick with the name brand builders: Nordhavn, Krogen, Fleming, etc. Both boats I have owned, Krogen, Real Ships, went up in price. How are your mechanical/electrical skills?

 

[mvweebles]

Assuming you're at retirement or close, 15% in an asset that has zero chance of appreciating. Maybe a bit more if you have no other residential costs. A lot depends on personal approach and how well you sleep at night.

OP asked "should I have $10m net worth to buy a $1m yacht?" Have you added up the ownership costs of a $1m yacht to keep it in a condition where it might sell for something close to $1m in a few years?

Peter

 

[tiltrider1]

I can’t answer this question. I could give my opinion but I am fairly conservative so it won’t be of much value. I will say, if you are not already a boater odds are you won’t enjoy the cruising life. The dream is far from the reality.

 

[TodOneD]

I don't really agree with the notion that if you aren't already a boater, odds are that you won't enjoy the cruising life... of course I don't know, because I'm not already a boater, but living in New Mexico for the past 15+ years there is very little opportunity. We love RVing, and that seems like a pretty decent argument that we will enjoy cruising. Maybe @tiltrider1 is right in the sense that the odds likely favor people living somewhere near a significant body of water. If I can swing it, I hope to put perhaps 10 to 15% of net worth into a boat... most of that net worth has to fund upcoming retirement.

 

[l00smarble]

Red flag: considering going cruising for 1-2 years, and not knowing if you’ll like the cruising lifestyle.

I don’t want to discourage you, but put things into perspective. A boat is not an RV that you can jump in and takeoff. Long range cruising means you need to know every system on your boat and be able to fix everything. This means you need to have the know how and tools/parts to fix. This alone will take 1-2 years.
I mention this because long range blue water trawlers, like Nordhavns, are much more complex than a coastal cruiser. Getting back to your question, stick with the name brand builders: Nordhavn, Krogen, Fleming, etc. Both boats I have owned, Krogen, Real Ships, went up in price. How are your mechanical/electrical skills?

I’ve owned many boats and I own and run a marine service business. At this point I have decades of experience on marine systems including

Hmmm... A question sorta like "How long of a piece of string does your financial advisor think you can afford?"

Almost everything depends on your personal financial situation, your personal risk tolerance, your idea of appropriate psychic income in a risk/reward equation, your intention to leave an estate to descendants or instead depart with about $0.25 in the bank, etc.

I too would prefer a used something to a new something else... in general and within reason. Ideally a well-kept used something. Unless I won the lottery for at least slight more than what my favorite new something might cost.

-Chris

The moment I posted that I reread it and I answered myself saying " it depends. "

There are many variables and I'm not trying to air out my full financial situation here but I was just thinking conceptually and was wondering if there was any rule of thumb.

Or I thought it might just make an interesting conversation of what people feel comfortable with as a percentage of yacht to net worth.

 

[l00smarble]

I can’t answer this question. I could give my opinion but I am fairly conservative so it won’t be of much value. I will say, if you are not already a boater odds are you won’t enjoy the cruising life. The dream is far from the reality.

I've owned many boats and I've done regional cruising but I've never lived on board for extended period of time. Nor have I had a both comfortable enough to do so yet.

 

[chanprr]

Buy a boat you can afford, and then maintain, based on your resources. Easy to say, but going to a vessel over 40', like a Nordhaven, Kady, Fleming, it's not only the purchase price, but annual maintenance cost. My trawler's annual maintenance cost will approach 20K for moorage, insurance, registration, haul out, servicing, and incidentals. And I haven't even mentioned the cost of fuel. If you can afford to buy and maintain, then enjoy life on the water, it's just amazing.

 

[psneeld]

First of all...can most people even define the cruising life? Even if they can define their version and maybe a few others, are they anything like what the OP envisions?

Heck .....I have been an RVer/camper for a pretty long time besides being a cruiser for many years. Even "RVing" is defined hundreds of ways by hundreds of RVers from what I see on forums and around campgrounds. Same for "cruisers".

As far as % of net worth.... I find that question curious. I would be asking what part of disposable income/investments will be needed to support the purchase/operations. Some life costs are fixed and must be maintained. Are they funded by some or all of that net worth? Can't really pin down a lot of expected costs till one has a pretty good idea of what cruising they will be doing, and what boat is best suited for that.

 

[tiltrider1]

I don't really agree with the notion that if you aren't already a boater, odds are that you won't enjoy the cruising life... of course I don't know, because I'm not already a boater, but living in New Mexico for the past 15+ years there is very little opportunity. We love RVing, and that seems like a pretty decent argument that we will enjoy cruising. Maybe @tiltrider1 is right in the sense that the odds likely favor people living somewhere near a significant body of water. If I can swing it, I hope to put perhaps 10 to 15% of net worth into a boat... most of that net worth has to fund upcoming retirement.

I can’t say you will or will not like boating. What I can say, liking RVing is no guide to the cruising life. RV,s stay where you park them. In a pinch you can spend the night at Walmart. Most importantly the difference between a perfectly smooth road and a gravel road is pretty insignificant to your safety.

With cruising, boats move, even at anchor. Many people find they cant sleep on a bobbing boat, then there is sea sickness. When something goes wrong help is usually not available. Difficult sea conditions can be more than many people can tolerate. The extra stress that comes with boating life is much more than a significant percentage of the population can handle.

My opinion is based on watching people move on to boats at docks with the dream of becoming full time cruisers only to watch them abandon the whole concept because they discover how difficult the lifestyle really is.

Over the 30+ years I have seen a much higher percentage of failure from the non boating experienced than from the experienced boating. Mind you, being an experienced boater does not mean you will be a successful cruiser but it does improve your odds.

 

[Endeavor GB 32]

Boating is not responsible "I spent most of my money on boats and women; the rest of it I wasted!" Good luck.
Regards,
Scott

 

[l00smarble]

If your plan is to get in, cruise the world and then exit, I seems like you are in Nordhavn's demographic.

If it were me, I'd contact those folks and have them show you real world purchace-cruise-exit scenarios.

Plan is coastal to start. Maybe Great Loop. Nordhavn may be overkill (and many too tall) for the loop. Still, the way they hold their value is likely one of the best of any brand. (Of course it requires spending significant money to make it hold its value. I get that.)

 

[O C Diver]

IMO, don't spend more than you can comfortably afford to lose. While having insurance is a good thing, it's not a guarantee.

Secondly, I wouldn't finance a depreciating toy, but if you do, factor in that long term financing with a quick exit could have you substantially underwater.

Finally, there's the operating budget. While you may be able to handle some repairs, the all in annual cost of boat and cruising can be substantial if doing it 12 months a year. If you bought a million dollar boat and cruised for a year, not counting financing the boat, how do you feel about $100,000 to $200,000 annual budget?

Ted

 

[l00smarble]

I guess another way I could pose the question is to ask owners here what is their yacht value to net worth percentage. Kind of personal so I didn't ask it that way.

 

[l00smarble]

IMO, don't spend more than you can comfortably afford to lose. While having insurance is a good thing, it's not a guarantee.

Secondly, I wouldn't finance a depreciating toy, but if you do, factor in that long term financing with a quick exit could have you substantially underwater.

Finally, there's the operating budget. While you may be able to handle some repairs, the all in annual cost of boat and cruising can be substantial if doing it 12 months a year. If you bought a million dollar boat and cruised for a year, not counting financing the boat, how do you feel about $100,000 to $200,000 annual budget?

Ted

Agree on the concept of not extending oneself in such a way that would be financial ruin if the boat were lost altogether. Also agree on not financing. I mentioned this in original post. Would pay cash but it will be a noteable percentage of the nest egg (hence the question.) What chunk of the nest egg is reasonable to allocate to a boat?

$100-200K/year to go cruising sounds manageable. I would expect a million dollar boat to be at the upper end of that or beyond but depends on many things.

 

[ABfish]

I was raised to pay cash for toys, but I've changed my thinking. I'd rather keep my cash, make a 20 percent down payment, and finance the rest. I like $800k in the bank and $800K in debt more than $0 in the bank and a paid-for boat that begins depreciating immediately.

If you keep the $800K, depending on your investment choices, you can tap it or borrow against it for boat payments or other contingencies. If you sink $800K in the boat, that's $800K that's losing value every day that you own the boat, and is not available to you for other purposes.

 

[mvweebles]

Plan is coastal to start. Maybe Great Loop. Nordhavn may be overkill (and many too tall) for the loop. Still, the way they hold their value is likely one of the best of any brand. (Of course it requires spending significant money to make it hold its value. I get that.)

Nordhavn is a great boat but a lousy looper. You have more research to do.

Yes Nordhavns hold their value but require a LOT of maintenance to keep them sellable. Don't get me wrong - I'm a big fan of Nordhavn. But they are deep-ish draft, tall, and have lousy interior ventilation - all lousy attributes for the Loop. The wing engine is a bauble. I know, I know - "if they can cross an ocean they can do the loop." Sure, but it's far down the list for loopers.

In my opinion, you really need to dream-the-dream on what you want your life to look like, then select the boat that ticks the boxes.

Good luck -

Peter

 

[l00smarble]

Assuming you're at retirement or close, 15% in an asset that has zero chance of appreciating. Maybe a bit more if you have no other residential costs.

Peter

OK...Finally a response with an answer to the question! Thanks. 15% seems reasonable (still depends on many variables.)

But now that I think about is percentage just doesn't tell the whole story. Now that I think about it more the reasonable percentage would be on some kind of curve vs. net worth because as net worth gets higher financial security is assured and you can do whatever the hell you want as long as you leave enough nest egg to cover basics.

Example: A guy worth $1M buying a $150,000 boat may be a bit reckless as that $1M is not enough to give long term financial security.

But a guy worth $10M buying a $1.5M boat is just a decision to "burn" some on a depreciating asset. There is so much remaining that you could sink the boat tomorrow on purpose and still have $8.5M which can still easily cover anyone's basic needs in perpetuity.

 

[Delta Riverat]

Mine cost me about 3.5%, yeah, I'm cheap -

But I wanted something comfortable and my cruising will be mostly Delta - SF Bay. One day I hope to visit Monterey by water. We just love that place.

 

[tiltrider1]

I guess another way I could pose the question is to ask owners here what is their yacht value to net worth percentage. Kind of personal so I didn't ask it that way.

I’d love to help you with this but my situation won’t translate into anything meaningful.

My advice would be to first put together the financial assets that will give you a cash flow that you can live the rest of your life off of.

As I was typing this you responded with my basic message so I think you have a good understanding.

 

[RedRascal]

Another perspective if you are just keeping the boat a couple years is to borrow the money. Keep your money invested, go find some money for 6-7% and buy a boat. 6% loan interest on a million is $60k a year so around 120K for a couple years. Target investments that make 10% so $100k on a million and you'll cover interest and inflation. Yep you may not make 10% on your investments but you may make 15% or you may have a health issue and never make it out there. I'd consider borrowing if you portfolio has a track record of healthy returns BUT of course you need an exit path you can live with if there is an economic downturn when you want to sell the boat.

 

[SteveK]

Suppose we assume that the average boat value of TF members is $150,000. Does that mean the average net worth is 1M too.
This 15% formula then would apply.

But not everyone with 1M net worth is an investment speculator, that value can be in the principle residence, one of the best long term investments.
Not everyone has the average $150,000 in liquid assets with which to buy a boat.

I did a terrible job sayin there is no one size fits all.

 

[Uisce Beo]

This is one of those “it depends “ questions. Couple A - retired, debt free, good income from investments, etc and plan to live aboard with no house, I say 50% is not unreasonable. Couple B - mid forties, house in the burbs, two kids in school, 15% might be too much. Couple C - mid twenties, no house, no kids, few assets but have big dreams? I say go for it and 80% works for me.!

 

[cafesport]

am considering a purchase to go long range cruising for a period of time (maybe 1-2 years but depending on how we like the cruising lifestyle it may go longer or could be cut shorter.)

Forget the number for a bit.

If you want to really enjoy boating you need three things money health and time. You can enjoy it with two but three is the best.

Schedules and boating don’t mix.

I won’t say there are none, but the odds of finding a turn key boat to accomplish your goals may take a year or more and will probably be double your price. Selling also has it's own problems.

I’m pretty familiar with Nordhavns and even the new ones need considerable amounts of time before they are ready to cruise anywhere at anytime.

Instant gratification and trawlers are also on opposite sides of the boating coin.

So you wanted a number, I’d suggest if you are comfortable loosing 300 to 400k over 2 years look at million dollar boats. If you can stay away from docks for 6 or 8 months a year you can start banking the savings and get that number down. Also don’t forget about commissions on the back side.

Good luck with whatever you decide.

 

[ranger58sb]

I’ve owned many boats and I own and run a marine service business. At this point I have decades of experience on marine systems including

The moment I posted that I reread it and I answered myself saying " it depends. "

You might mention which kind of marine services, presumably near Annapolis? We're always on the lookout for somebody nearby who might be able to fix things I can't get to.

-Chris

 

[psneeld]

I know of a comfortable boat that was cruising ready (but an ongoing maintenance boat) that was sold a few years back for way less than $50,000. After factoring in it's loop/coastal cruising costs the whole mess would come in pretty inexpensive if you factor the tourist costs are based on personal preferences and cost the same whether a 40 year old TT or a nearly new Nordhavn.

So for what some may spend on interest of a million dollar yacht, they might have the exact same experiences in a much less expensive "throw away boat".

They just may not have a dishwasher, laundromat, and a few other boating luxuries aboard that I have never had in 3 liveaboards and 3 well used RVs spanning over 20 years.

People do the loop in skiffs and jet skis.... doing it with a passage making Nordhavn is almost ridiculous unless your plans are to cross oceans or circumnavigate North America right after your looping.

 

[l00smarble]

You might mention which kind of marine services, presumably near Annapolis? We're always on the lookout for somebody nearby who might be able to fix things I can't get to.

-Chris

I'm new in this forum and I'm sure there are rules here about promoting one's business. Maybe there is paid sponsorship or whatever but I don't do advertising. We are in a niche business and have more work than we can handle by word-of-mouth so we limit how many new customers we take on.

Plus my purpose here is entirely personal. I'm thinking of buying a trawler and going cruising in semi-retirement and/or sabatical.

 

[l00smarble]

People do the loop in skiffs and jet skis.... doing it with a passage making Nordhavn is almost ridiculous unless your plans are to cross oceans or circumnavigate North America right after your looping.

Agree. I only used Nordhavn as an example of a yacht that has a very flat deprecation curve after it is a few years old.

I think it is better to get a boat more suited to coastal/loop and if the bug bites and we want to keep going on going further we can upgrade to a XXXX (maybe Nordhavn.)