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

[ktdtx]

This will go against the conventional wisdom in this forum-but here goes.
I financed a 52' boat and did the Inside Passage twice. After I bought the boat I did some upgrades to get it where I wanted-that cost some money. I have no idea what percent of my net worth it was at that time but I had the cash flow to cover it.

I hoped to keep the boat longer and make the same trip a couple more times but my wife was getting older (not me-of course) and even though she loved the Adventures they were getting more difficult for her.
We sold the boat --asked our Good Broker about pricing and he asked how fast do we want to sell it...once you get into slip fees, insurance, fixing things that break while a boat is in a slip and living a long way from Anacortes..I told him..FAST. Boat sold in a few months for a little less than I paid for it--probably could have gotten more but, see above.

Two Great 6 month long trips on a Great boat in some of the best cruising grounds in the world cost me some money...what is a year worth of vacation like that worth. I lost a little on boat upgrades, a little on interest on the financing, fuel, repairs, maintenance, etc....but had two trips I wouldn't trade for anything.

Summary..don't know what percent of my net worth it was when I bought it, don't know exactly how much my year of vacation cost and I'm not going to calculate it either, because it was worth it. Yes, your boat "may be" a depreciating asset (maybe not so much any more) but the value isn't going to Zero. You get some or all of your boat money back unless something really stupid happens.

Enjoy your life.

 

[kernie]

I bought my N41 after looking at many different boats. The fit and finish and materials from Nordhavn is miles above the coastal cruising market. You do give up some features and functionality (sliding doors, etc). Crossing from St Pete this spring we encountered 9-10's and I never felt unsafe, uncomfortable yes, but not unsafe.

Since I travel alone mostly - I wanted a boat that I could self crew and manage most emergencies that might arise.

It's a well built boat - I did have to replace an engine this year - previous owner like to firewall engines - apparently didn't understand hull speed.

When you look at the finished product, the wiring, mechanical, structural etc -- there really isn't any competition in the mass market. i know their are small niche builders but no the mainstream.

Hope this helps.

 

[deputybubba]

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.

This is EXACTLY the conclusion I came to as well.
Would love to pay cash, but then I'm out of cash...

 

[PhilPB]

Everyone’s financial situation is different and we all operate to our own set of standards and comfort level.

Personally, I don't like any debt and have lived that way most of my life which helps me sleep well at night and have no regrets.

On the other hand, I know plenty of people that prefer to finance purchases and also sleep well at night too.

 

[mvweebles]

This is EXACTLY the conclusion I came to as well.
Would love to pay cash, but then I'm out of cash...

Despite having a finance background, for personal spending decisions, I'm sorta in the Dave Ramsey camp. If you cannot afford the toy you want, either don't buy it or lower your sights and get a cheaper toy. One of the posts extolling financing described not wanting to tie-up $800k for a depreciating asset. To the point of the OP's original question, if you cannot afford that type of tie-up, financed or purchased, don't do it. Stage of life makes a big difference - growth years or retired so there's no single formula, but I'd still maintain that if you cannot afford to purchase a boat cash (and maintain your other obligations including retirement funding ), you probably have no business financing it.

The only time you really need a boat is when the one you're on is sinking and the one next to it isn't.

 

[Iggy]

I like having my boat. Is it a money pit? Could be? But it keeps me busy! Being retired, I want to be busy. We need to keep our minds sharp as we get older.

Yes, I am getting away from the Op's point. But I think there is a line to be drawn. I just changed 2 A/C units in my boat. After 23yrs, they need to be replaced. I seat back and say to myself "I did that" and it makes me feel good. Plus other projects.....

Its all on, what makes you happy and what you want. You only go around once in life! If it makes you happy and you over invest, who cares! Spend within reason, you can't take it with you. Again, there is a line.

I put mini splits in my house. The friend says, but you electric bill will go up. I said, so your not worth $50 a month to keep cool? Its really less than $50, but he got my point.

 

[SteveK]

Despite having a finance background, for personal spending decisions, I'm sorta in the Dave Ramsey camp. If you cannot afford the toy you want, either don't buy it or lower your sights and get a cheaper toy. One of the posts extolling financing described not wanting to tie-up $800k for a depreciating asset. To the point of the OP's original question, if you cannot afford that type of tie-up, financed or purchased, don't do it. Stage of life makes a big difference - growth years or retired so there's no single formula, but I'd still maintain that if you cannot afford to purchase a boat cash (and maintain your other obligations including retirement funding ), you probably have no business financing it.

The only time you really need a boat is when the one you're on is sinking and the one next to it isn't.

Peter, I could not agree more.
Please repost this every time this topic comes up.
The example of not wanting to tie up $800K in a depreciating asset. to that I say your investment must return more, much more than the depreciation of any boat including the loan interest before it begins to make sense, or a net gain. Cash is after tax purchase, that investment must also appreciate enough to pay the taxes.

 

[FWT]

Whatever path you choose, be it pay cash or finance it, just don't fool yourself.

Pay cash and think you have an asset you can sell when the time comes or need arises? That this use of your funds is a semi-temporary decision? Lots of stories out there of a total loss in a sinking where insurance didn't pay or paid little, sometimes with a hefty environmental cleanup tab to boot. Not to mention it can take more time and deeper selling discounts than you thought.

Finance it and you can have the same situation arise where you still owe for the boat and that invested cash goes away. Not as rich as you thought.

Truth be told, the same situation can apply on a house. I hear a lot of stories about FL hurricane damage where the owners were offered pennies on the dollar for insurance settlements and years later they have made no progress in resolving it. A relative had significant tornedo damage a year ago and the insurance payout was way short of anything resembling fair.

Dry powder to handle the shocking setbacks as you map your overall position is important.

 

[tiltrider1]

While the logic of financing a boat is all wrong, the facts are that many people do it successfully. If we lived for ever, I could say financing would definitely be wrong but we don’t. So, if financing is the difference between achieving an experience and not achieving an experience than how can you say it’s wrong.

All my life I have been in a race with the debt monster. I have won that race. I am not going to challenge him to another race. Still, I have a friend who feels he is only alive when he is racing the debt monster and as soon as he wins he is ready for another race.