Annual Live Aboard Budget ?

[Talbot]

I do not intend to sell my house to fund the boat, It is much better to view the house as an asset that can make money in your absence (e.g. rent) and then if the worst were to happen and you lost the boat, you still have somewhere to live.

[Weyalan]

I understand that Talbot, and I would not have sold my house as a first choice. But, frankly, without selling my house, my assets would be so meagre that the dream of long-term live-aboard would be so meagre that it would probably be 15-20 years before it could be realised...and I just cannot wait that long. And anyway, when I do take off, the passive income will be generated without touching the principal capital, so, in theory, I could re-enter the housing market if I so desired.

[Talbot]

The problem with that argument is that it ignores house price rises. You may be able to do that in america, but it would be excessively foolhardy to do so in UK.

[Alan Wheeler]

Yeah that's a dilema we were faced with. When we sold our house three years ago, we thought we were at the top of the swing. The reasoning was that the swing was just plain silly. Huge amounts of money were being made and many thought it just can't keep going like it was. It had to fall. Just between you and me, we made $150K in 12mths. That bought our boat.
Long term outlooks suggested inflation hikeing up, over supply of housing and people not earning enough to justify the bank loans. The cost of home ownership for such things as power, water, rates and so on are going out of control.
So we got out at what we considered close to the top of the swing. Well three years later, the swing is still going up and we could have easily doubled maybe even trippled the amount of money we came out with. That's OK, we made the best judgment call at the time and I have no regrets, but still amazes me that the market is defying the gravity of pridiction. Sometime I reckon it all has to go bust. It's just when. Why will it go bust??? Well here in NZ, many of the "baby boomers" bought housing as an asset. They rent and the ride the property gain and they intend it as their nest egg for retirment. Problem is, NZ has an aging population. The number of investment houses averages to 6 properties for every baby boomer. Somewhere down the track and thats anytime soon, those housesstart coming onto the market for investment realisation. That has got to have an impact on the market. When??? who know's. It certainly wasn't when I expected it.
But I love having the boat and I don't mind that we put everything into something that is going to depreciate. I couldn't have done it if I didn't sell up and that would have made me one of those that just dream. I am living my dream. I ain't going to be shoved into some retirement home to simply wait for God.

[Strygaldwir]

What does it cost to live aboard. Take what it cost you today in your current situation as a base figure. If you like your life style and can't think of what you could possiblity give up multiply that figure by 1.15. That's what it will cost. Okay, but if you can take some reductions, multiply by .85. If you have to make payments on a boat, offset the cost of the boat buy what you're paying for housing.

Just kidding! But what I'd suggest is that your basic lifestyle and how you define your level of comfort is going to greatly influence what you pay. Don't just consider it from your prespective, consdider your significant others wants and desires and make sure you are factoring this in.

The problem with giving figures is they almost assuridly won't apply to you. I did some budget work prior to getting on the boat. Some of them were dead on, some were less, some were more. Overall it is costing me more than I'd originally budgeted for. I think that is the case with most liveaboards. There are things that break and they shouldn't cost as much as they should to fix, but somehow, they do. Things like $300 for a controller board for the frig, $500 for a starter, $1000 for a new generator ... etc. it is just difficult to foresee them all, and you might not have them, so they can't break and you don't have to replace them.

So, take the above figures as a baseline, and start pricing things out. Make a spreadsheet, make some call, check pricing on the internet, add 20% to that total and you'll probably be in the ball park.

Keith

[Cookie's Cutter]

Hi all,
This is my first post here but I've been following the threads for some time now. My husband and I decided to "pull the plug" this year and head out on our new adventures at the end of this hurricane season - we are actually going to begin our cruise in January so we can spend this holiday season with all the kids and grandkids. We are 15 and 20 years away from retirement but decided we simply could not wait that long to change our lifestyle. We have been planning our new life for about 8 years now and have saved money and worked very hard toward this goal. We sold the last of the houses we planned to sell and are keeping one as a rental for income while away. We purchased our 36 Pearson Cutter a few months ago and are outfitting it for an extended cruise. We will be debt free once we pay off the rental house just before we take off in January. We are keeping our jobs until the end of the year to build up the cruising/emergency kitty and are staying with our oldest daughter and her family until we move aboard the boat sometime in December. We plan to live on less than $8000/year and are confident we can do this. I know that the majority of you will disagree with me on this point and we know there will be expenses for which we didn't plan. We can work a bit while we are cruising if we need to, but ultimately it comes down to this: do we want to keep working now to make more money for later and feel as if we are missing out on life, or do we go now and worry about the unforeseen when/if it actually happens. We are minimalists and very self sufficient, so we don't feel like we will be deprived of anything. In fact, we will enjoy the same sunsets and sunrises as those of you on $15,000+ annual budgets.

Anyway, we are so excited that we are about to be living our dream.
Safe sailing,
Janet

[Talbot]

Good Luck to you

[Weyalan]

Yeah, good luck Janet. I am envious of your imminent departure date. This is another example of budget equalling income, and that the important thing is to start!

The reason that my departure is still a few years away, frankly, has as much to do with my XO's children as it does with any real financial concern. It is going to be 5 years or so before they will be sufficiently independent, so, given this constraint, I might as well maximise the cruising kitty/budget...

[chuckr]

Interesting thread in that my prelimary budget is in the $15-18k range. I have a new (2001) Jeanneau DS40 so that should help hold down the maintenace cost. My house is currently for sale in Miami and with the proceeds i plan to pay off the boat and put a little in the cruising kitty. I do not plan to spend most of the time on the hook so should keep the marina costs down.
One question is insurance. How many cruisers are carrying boat insurance. I got hit by lightening in the bahamas and lost all my electronics. the cost was over $20k and most of it was covered by insurance. tough time if i had to folk out that much from my emergency funds.
so what are everyones thoughts
chuck and soulmates

As to insurance...what if you cause an accident? Insurance will cover your damages to other boats & people. Many marinas are requiring insurance for dockage.
Your boat pretty expensive, what if it is a total loss or stolen?
Consider a high deductable to hold down the price of insurance.

[RandyAbernethy]

When it comes to long term cruising, I think Janet has it right. If you're keeping your house because it is a good investment vehicle, great. If you're keeping your house because you're emotionally attached to it, you should get unattached and sell it.

Value appreciation in the housing market is likely to fall short of its previous track record. The housing bubble in most countries has already popped and interest rates are going the wrong way.

The spread between rental income and cost of capital is often dreadfully overestimated by folks (especially those who are emotionally attached to their house). Managing a home rental is a fair amount of work (qualifies as a job in my book). Houses get damaged, tenants go bad, and rentals sit vacant from time to time. These are not only financial issues but time, possibly flights back, and limits on your cruising freedom.

Prime is over 8% right now and there are a lot of reasonably secure investments to be had at prime +. If you have $150,000 in equity locked up in your house, are you going to be able to generate $15K in annual profit with no headache? If not maybe you should put the money to work elsewhere so that you can check up on your dividends on the Internet with no tenants to worry about and possible long term cap gains treatment.

On the other hand, many savvy home owners have a 5% note for a few hundred thousand tied to their home. That’s hard to walk away from. Put the banks $300,000 in a program that pays out 9% while you pay the bank 5% and keep all the upside on the home appreciation, not to mention the interest write off.

Every situation is different but I have seen people make the wrong call on the house for emotional reasons. In the end I think most would be happier buying a brand new house at the end of the cruise, not to mention wealthier.

[Charlie]

In terms of investment Real Estate I think that Randy is correct. Real Estate has had big gains in the last few years and probably won't see that kind of appreciation in the near future.

On the other hand at some point you might get sick of, or become physically unable to sail. If this happens it sure would be nice to have a house to come back to. Before I got married the admiral and I agreed that we would like to go cruising but that we didn't want to sell everything to do it. If you have the option to keep a house I would do it. I'm trying to get in a position where we have such a low mortgage and the passive income to cover it (on top of cruising) that we can afford to kmeep botht the house and go cruising. If I get lucky enough I'll be able to not even have to rent the house out.

The very long tem average in real estate is around 5% growth per year.
In some markets real estate is currently flat or declining. You have taxes & maintainence to pay every year.
I'm leaning towards putting a real estate kitty aside and earning over 5% on it. If some markets exceed this then I'll buy in some other market.

Anybody have positive real world experiences in renting their home or condo while out cruising for extended periods? I've heard nothing but horror stories.

[Cookie's Cutter]

We definitely didn't keep a house because we are attached to it. If that were the case, we would have kept the one we just sold as it was an awesome property. We have been and still are weighing our options with respect to the rental property but believe we will come out more favorably by paying it off and continuing to rent it out. Our oldest daughter has agreed to manage the property for us while we are gone and we always keep a home warranty (about $40/month) in place for any major items that break. As of this moment we plan to keep the property - if something happened to one of us and/or if we decided to come back we will still have a property that is paid for and we can move in or use the equity or whatever.

At this point we are so ready to go but plan to keep on schedule and leave in January.

Safe sailing,
Janet

[RandyAbernethy]

A house is a lot of responsibility to manage from a less than convenient location. I think the outcome on this issue also depends on your time frame and cruising grounds. If your going to circumnavigate, it might be tougher unless you have someone you really trust to manage the place as Janet does. If you're in the greater area or staying in national waters maybe easier. Landlords get the short end of the stick here in the US (IMHO).

Regarding the place to come home to thought, if you invest the money and don't spend it you should have a fairly easy time re-establishing dirt. To me it is kind of exciting to know that we can settle anywhere we want whenever we want.