The Answer to How much it Costs to Cruise

[Macblaze]

Originally Posted by SimonV

Keep your boat for long enough and it will sell for what you paid for it new, just look at the 1970 price for a new at the time popular boat and what it is selling for now. Dollar for Dollar, don't get to deep.

Sent from my GT-N7105T using Cruisers Sailing Forum mobile app

That's just what the owner of a local charter company said: "I paid 130,000 new for my 1996 Beneteau 40 and they are selling for around $125,000 now..."

If only money decisions came with guarantees like that...

[Catamoron]

Originally Posted by rwidman

Depreciation is a real cost, whether you believe it or count it or not. You spend $100K now and get back $50K some years later the depreciation is $50K. That's basic economics and something you should have learned in school.

It's actually worse because if you chose to invest the $100K (wisely) you could have earned money on it. So at the end of the same period, instead of $50K you might have $150K. Now you see that it actually cost you $100K to own that boat for that period of time, not including any of the expenses such as dockage, maintenance, taxes and insurance.

Ok...that's all fine and good...but what you're not considering is this: I used to have a house that cost us $1700 to live in - mortgage + taxes and insurance. So lets multiply that times 12 (months) that equals $21,000 per year that I'm not having to spend because I live on my boat - so my boat is actually saving me $21k per year....say I sail for 5 years...so now the boat has just saved me $105,000.....RIGHT?

That's why trying to figure in depreciation into the "cost to cruise" equation is pointless. clangggg - (that was the sound of me dropping the microphone)

[Catamoron]

Originally Posted by SimonV

Keep your boat for long enough and it will sell for what you paid for it new, just look at the 1970 price for a new at the time popular boat and what it is selling for now. Dollar for Dollar, don't get to deep.

Sent from my GT-N7105T using Cruisers Sailing Forum mobile app

Well maybe not for the cost of the new boat, but in our case a 20 year old 42' Catamaran will hardly ever go much below $150k no matter how neglected its been. But if you keep it in decent shape, you can probably expect to get closer to $175k and above. Even in 5 years, my boat will still be in that ball park - cats are just in demand so they have a bottom number that they don't go much below....and if I'm even close to being right, I'll almost get out of it what I'll have in it.

[SV THIRD DAY]

Really....we are not factoring in depreciation into the cruising budget....see how nuts these type of discussion get....

[dannc]

The wifey and I have been discussing depreciation for a few weeks. I think it is something to consider with a couple finances, especially long term, but I am not sure depreciation has a direct affect on the cruising budget.

Is depreciation as large as it might first appear to be when considering buying a new or used boat?

If we buy a new boat, let say it costs $500,000, and it depreciates by 35% in 10 years so we loose $175,000. Flip side is we buy the same boat that is 10 years old that has taken the depreciation hit, so we spend $325,000. BUT, we will have to spend some percentage of the purchase price to upgrade and fix the 10 year old boat. How much will we have to spend, 5%, 10%, 20%, etc?

So the depreciation loss of a new vs used boat is really the new boat depreciation value less than the used boat purchase price plus upgrade and refit costs. In other words, one's, actual out of pocket cost of new vs used is not as much as one would think. Course the best money choice would be to not buy a boat in the first place.

I keep reading that one needs about 10% of the purchase price of a used boat, or depreciated value of a new boat, to keep up maintenance on the boat. That really seems high to me and the various posts I have read do not seem to show people spending that much money to keep up the boat.

Spending 10% each year to just maintain the boat means you would be spending enough to buy a new boat every decade. That seems very high to me.

The maintenance cost worries us more that depreciation.

Later,
Dan

[SV THIRD DAY]

Originally Posted by dannc

I keep reading that one needs about 10% of the purchase price of a used boat, or depreciated value of a new boat, to keep up maintenance on the boat. That really seems high to me and the various posts I have read do not seem to show people spending that much money to keep up the boat.

Spending 10% each year to just maintain the boat means you would be spending enough to buy a new boat every decade. That seems very high to me.

The maintenance cost worries us more that depreciation.

Later,
Dan

I hear that number also Dan and call it BS,
Maybe that is true for year 1-3 of boat ownership when you are doing all the major upgrades but that's just not anywhere close to what we have seen for the last 7yrs for cruising and living aboard a 36ft and then 50ft boat. But you know how internet/dock sayings and myths go....you can't kill them even with Garlic.

[Ex-Calif]

Originally Posted by Catamoron

Ok...that's all fine and good...but what you're not considering is this: I used to have a house that cost us $1700 to live in - mortgage + taxes and insurance. So lets multiply that times 12 (months) that equals $21,000 per year that I'm not having to spend because I live on my boat - so my boat is actually saving me $21k per year....say I sail for 5 years...so now the boat has just saved me $105,000.....RIGHT?

That's why trying to figure in depreciation into the "cost to cruise" equation is pointless. clangggg - (that was the sound of me dropping the microphone)

Like all things it gets complicated quickly.

You are now selling a house that has a negative cash flow of $1,700. You also have equity in the asset. Let's say it's $150k.

On the balance sheet you have just disposed one fixed asset (house worth $150k net) and replaced it with another asset worth $150k (your boat. Your net worth didn't change.

On the cashflow side you have to replace the $1,700 mortgage payment which was increasing the value of your asset (paying down mortgage) and now replace that with the cost of mooring the boat. So let's say $400 a month to moor the boat.

Your cashflow is up $1,300 bucks. Good news. Long term however the boat is not expected to appreciate so unless you invest the $1,300 elsewhere your net worth is not increasing.

i.e. After 5 more years paying mortgage you house will be worth considerably more (other things equal) than the boat.

[Catamoron]

Originally Posted by Ex-Calif

Like all things it gets complicated quickly.

You are now selling a house that has a negative cash flow of $1,700. You also have equity in the asset. Let's say it's $150k.

On the balance sheet you have just disposed one fixed asset (house worth $150k net) and replaced it with another asset worth $150k (your boat. Your net worth didn't change.

On the cashflow side you have to replace the $1,700 mortgage payment which was increasing the value of your asset (paying down mortgage) and now replace that with the cost of mooring the boat. So let's say $400 a month to moor the boat.

Your cashflow is up $1,300 bucks. Good news. Long term however the boat is not expected to appreciate so unless you invest the $1,300 elsewhere your net worth is not increasing.

i.e. After 5 more years paying mortgage you house will be worth considerably more (other things equal) than the boat.

Wow...I keep thinking I made my point, and then you bring up something else that I have to correct - your end argument is debatable - "After 5 more years paying mortgage your house will be worth considerably more (other things equal) than the boat" Not true....it maybe worth a little more after 5 years, but nowhere near "considerably" more - that house that we paid $1700 on for 3 years earned us hardly anything after we sold and after the dust settled. And it was a gorgeous house in an affluent neighborhood and we barely broke even after 3 years. So that $1700 per month ($61,700 in total for the 36 months we lived there) was POOF!! gone and we had nothing to show for it - so your comparison is invalid (and don't even bother trying to pay down a 30 year mortgage in the first 3 to 5 years.)

I think the ones that have tried to pry the depreciation aspect into the cost to cruise should let it go, its adding a completely unneeded layer to a simple discussion about how much is spent to cruise. I'm not worried about how much less my boat will be worth when I go to sell her - as far as I'm concerned, that money is already spoken for - but the bonus is that when I do go to sell her, it will be like hitting a mini lottery!!

[RTB]

Originally Posted by Catamoron

Wow...I keep thinking I made my point

You are trying too hard to defend yourself. You're cruising the Bahamas, and we're not. Have a Kalik for me please.

Hey, we sold our home to go cruising. After 12 years of making a mortgage pmt., we made a profit....unless you deduct the $57,600.00 we paid out in property taxes. Not to mention Homeowners Association fees. I never have bothered to figure out what I actually paid out in interest. I'd have a lot more money in my pocket if we had left 12 years ago, instead of buying that house.

Ralph

[Ex-Calif]

Originally Posted by Catamoron

Wow...I keep thinking I made my point, and then you bring up something else that I have to correct - your end argument is debatable - "After 5 more years paying mortgage your house will be worth considerably more (other things equal) than the boat" Not true....it maybe worth a little more after 5 years, but nowhere near "considerably" more - that house that we paid $1700 on for 3 years earned us hardly anything after we sold and after the dust settled.

You seem to be getting a bit passionate - All arguments are debatable that's why they are arguments.

Also every situation is unique. But a couple of truths (believe it or not) over time property appreciates. Over time boats don't.

Sure point out mortgage crises and market resets yada, yada, yada.

A boat behaves like a car - over time there is a residual value but it doesn't appreciate - ever (OK classic yachts aside). Real (dirt) property behaves like, well dirt property. They ain't making any more.

I made 3% per year on my house over the 9 years I owned it. I also "avoided" paying rent. I did pay a fair share of property taxes.

Ignore boat depreciation if you will. Your choice. Some people want to take house equity, buy a boat, cruise 5 years and think that 100% of the boat equity is available to re-buy a house when they are done. Good luck with that strategy is all I can say.

BTW - My brother refinanced after the crisis to a 15 year fixed at 3%. And yes I know how mortgage interest is loaded.

(Jeez I hate these cost of cruising threads that devolve into finance threads - I can always argue both sides - as can anyone and I am as much a part of the problem as anyone. Bottom line of How Much Does it Cost to Cruise is simply - How much do you have (Mic drop, Ex-Calif out))

[chuckr]

Originally Posted by dannc

I keep reading that one needs about 10% of the purchase price of a used boat, or depreciated value of a new boat, to keep up maintenance on the boat. That really seems high to me and the various posts I have read do not seem to show people spending that much money to keep up the boat.

Spending 10% each year to just maintain the boat means you would be spending enough to buy a new boat every decade. That seems very high to me.

The maintenance cost worries us more that depreciation.

Later,
Dan

We bought SoulMates new in 2003 at say $180k. We did not do much to her except paint the bottom until we took off.

Take a look at our 6 years of cost data and you can see what we spend on her. We try to keep her in primo condition and try to do one major upgrade a year.

http://www.cruisersforum.com/forums/...ta-141717.html

[brookiesailor]

Ok we agree that sailing costs more than staying home...but think of all the sights and experiences you would miss if you only had your back yard to look at


Sent from my iPhone using Cruisers Sailing Forum

[rwidman]

Originally Posted by Catamoron

Ok...that's all fine and good...but what you're not considering is this: I used to have a house that cost us $1700 to live in - mortgage + taxes and insurance. So lets multiply that times 12 (months) that equals $21,000 per year that I'm not having to spend because I live on my boat - so my boat is actually saving me $21k per year....say I sail for 5 years...so now the boat has just saved me $105,000.....RIGHT?

That's why trying to figure in depreciation into the "cost to cruise" equation is pointless. clangggg - (that was the sound of me dropping the microphone)

I'm not considering your house because it has nothing to do with depreciation of your boat. You can choose to ignore the boat's depreciation if you wish, but it is still a cost in the end. That's a fact. Ask your accountant.

[jaybird1111]

If, as mr Catamoron has done, one purchases a boat at the bottom of its depreciation, which generally is 20 years for catamarans, he's already dealt with that cost IMO. Let's just call 'depreciation' 'maintenance' instead and put that into the monthly costs if you like

Neither boats nor automobiles are good investments. Only a fool would purchase either and think he will come out ahead in the end, no?

[rwidman]

[QUOTE=jaybird1111;1762955

Neither boats nor automobiles are good investments. Only a fool would purchase either and think he will come out ahead in the end, no?[/QUOTE]

That's it in a nutshell.