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Old 01-12-2016, 12:19   #1
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Buying a Slip

I am preparing for a retirement that hopefully involves both cruising and living aboard for at least part of the year.

One of the things I am considering is purchasing a slip at a marina where I could live aboard and/or keep a boat when I wasn't sailing or doing other things of a more terrestrial nature.

I will be selling an investment property I own this coming summer and I am particularly interested in possible tax benefits/implications of applying a capital gain to the purchase of a boat and/or slip.

I would appreciate any advice that members of the forum could share that have already done this or at least researched it. I currently reside in Alaska, but am looking to retire in the West/Northwest.

Thanks in advance for any insights.
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Old 01-12-2016, 17:11   #2
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Re: Buying a Slip

We seriously considered buying a slip or a small property with a dock about thirty years ago, but we decided against it because most of our time would be cruising elsewhere. It could be a great advantage if you would expect to take short cruises from this home port and remain centered in one area.

We did purchase a waterfront lot at one time in the late 1980's, but it didn't turn into a location where we spent sufficient time.

I can see how this could work well with the right location and style of cruising.
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Old 01-12-2016, 17:36   #3
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Re: Buying a Slip

I looked into this as well. You should be able to do a 1031 exchange from your investment property to the slip as they are both real estate. I wouldn't expect to make a killing on it though. In the redhot SF Market the slips prices have not climbed nearly as much as housing or investment property.
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Old 01-12-2016, 21:34   #4
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Re: Buying a Slip

The economics are not there if you hope to cover the cost when not using the slip by renting it. Looked into it a few years back and rental income come didn't come anywhere near covering the monthly mortgage payment or a decent return on cash invested. Maybe in a prime spot like Palm Beach or Newport Beach it would work out.

If you wanted a place to come back to, buying a house with a slip might make sense. Very few people make a life out of cruising. With the appreciation of Real Estate, it could turn out to be a good investment even if you didn't eventually settle there.
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Old 02-12-2016, 02:42   #5
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Re: Buying a Slip

Greetings and welcome aboard the CF, CTcrew.
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Old 02-12-2016, 03:46   #6
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Re: Buying a Slip

My tax attorney said that I could not exchange investment property for personal property without tax consequences.
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Old 02-12-2016, 06:12   #7
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Re: Buying a Slip

Rent where you want to buy, before you buy if possible. Get to know the atmosphere and the costs. Buying the slip is cheap, owning the slip can be expensive, and may not net back a rate of return over the monthly dues and taxes. You also get to see what works, and what does not.

A lot of marinas do not have workable pump out facilities. They may have a pump out cart, that you get to figure out how best to work... If you have a high freeboard hull, they may not have the suction to do the job. The pumpout system costs money to install, and if the developers did not have that in mind the cart can comply to the letter of the law. If you are in the only marina in a half hour, then that means you don't get to use the head on board your boat without an hour round trip to pump out.

If the slip is an owned and deeded property, rather than a 100 year lease they are valued higher when you go to sell.

The plan for the marina with CAMA or other state office that handles permitting has to be perfect to make sure that your slip is supposed to be there. Don't end up purchasing something that wasn't intended to be a slip. Double check that face docks, are part of the CAMA approved plan, as they are what rents easiest. Don't buy something that doesn't exist...

The people that own the face docks care the most about the curb appeal, and if they rent the dock space they help keep the place up. They care that the bathrooms are clean, the washer and dryer work, and that there is a dock hand around.

The prettiest locations are often the worst ones to dock the boat in wind and tide... but if you are going to rent on month to month to liveaboards, they are the prettiest places to live.

If you have a wide open view, more often than not you've got wind and current perpendicular to your slip. If you plan to sail the boat often, try to get an outside slip, rather than one in the inner harbor if you have tide. You get to walk further every day, but you can normally get out of the slip any day any weather.

The perfect slip in pretty locations, is inline to the prevailing wind and current 90% of the time. You might have to spring for a 65 foot slip, rather than a 50 foot slip to get that... But your rental value is higher having a slip that is easy to get in and out of. If you are in the inner harbor, expect people to tie up at the fuel dock and ask the dock office for a different slip. Those spots are mighty tough to leave if it is gusting 20 knots...

If you aren't in a pretty, wide open place... You don't get the wind in your slip and will probably run the air conditioner more often than not. So long as it doesn't take more than a half hour or so to get out into deep enough water to hoist a sail, you can still have some sailing fun even if you aren't right on the head of the river, sound, or at the doorstep to the inlet.

Somewhere near a half hour to open water people quit day sailing... It takes an hour out of the day round trip to get to and from the dock. To be out before lunch and back by sunset, the extra half hour means a lot.

Ask for past minutes from the owners association board for the last year or more, simply to prove that there are minutes from the meetings. A lot of marinas are governed by Roberts Rules, and fly without any real oversight. If the members of the board can't afford an increase in dues, then you get to watch whatever needs repairs fall into the water.

Ask about the rainy day fund, and yearly budget. You want the rainy day fund to be larger than smaller, if you are an owner. Otherwise if you have a the main floating dock rip loose, that connects out to your slip they have to wait for an insurance settlement before fixing things. If you plan on living there, then after a storm things are either fixed in a few weeks... If they have to wait for an insurance check it can take a season.

The same goes for having a budget for dredging if you are in an area that has sediment. Having a slip that puts you aground every tide, is not fun. Some places cannot go a year and a half without dredging to gain depth. This also accounts for the channel on the way in... If you can't enter or leave your slip due to draft, you don't get to go sailing when the moon isn't on your side.

If the marina is part of an owners association that pairs with residential condos, make sure that the board that operates the marina is separate. Those without boats do not care if your finger piers disintegrate, power poles light on fire, and can have a chip on their shoulder that you can use the land based facilities for 1/10th of the buy in they had for a unit, and half the monthly association dues.

If the pilings aren't greenheart pilings, then you may have some issues with them tapering down to nothing where they reach the mud and breaking off in storms. If you have floating docks, make sure that the pilings are higher than the expected storm surge...

The difference between a good piling and a great piling is $700 for one that tapers, or $2000 for one that is straight along its length. Both are supposed to last 25 years, but the one that tapers breaks if someone gets rowdy docking. You want them driven in, not jetted in.

If you are exposed to a decent wave fetch, even with a 5 or 6 foot stone break water if the storm surge puts the dock and finger piers under water... with a hundred slips you can have a 2 million dollar bill to rebuild and repair after a storm.

The insurance on the marina its self needs to be able to absorb that, and more if they sell diesel and gasoline. The life cycle on the tanks, pumps, and hoses makes the convenience expensive. You can run close to 60k to rebuild the system with new hoses, pumps, and controls if you have a 300 foot run of flex pipe.

Pine deck boards are cheap to build, but limit your top end price of appreciation. They never saw 100k a slip.

Ipe is a step up, but if you have fixed docks in an area of storm surge... may not live long enough to use the life expectancy. Concrete hog slat decking lasts longer still, but the dock has to be strong enough to take the extra weight.

Double check that the tax assessors office isn't using 2006 pricing. $15k buys a lot of slip today... and if they still want to charge taxes against a 105k worth of value, you are fighting a losing battle to get it re-assessed and may be the reason for the low asking price.

1k in taxes at the 105k value and 3-5k in dues means a 15k slip you bought for a steal exceeds its purchase price in 3-5 years.

Cheers,

Zach
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Old 02-12-2016, 06:31   #8
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Re: Buying a Slip

Great food for thought.
Many thanks
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Old 02-12-2016, 06:47   #9
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Re: Buying a Slip

Quote:
Originally Posted by Zach View Post
Rent where you want to buy, before you buy if possible. Get to know the atmosphere and the costs. Buying the slip is cheap, owning the slip can be expensive, and may not net back a rate of return over the monthly dues and taxes. You also get to see what works, and what does not.

A lot of marinas do not have workable pump out facilities. They may have a pump out cart, that you get to figure out how best to work... If you have a high freeboard hull, they may not have the suction to do the job. The pumpout system costs money to install, and if the developers did not have that in mind the cart can comply to the letter of the law. If you are in the only marina in a half hour, then that means you don't get to use the head on board your boat without an hour round trip to pump out.

If the slip is an owned and deeded property, rather than a 100 year lease they are valued higher when you go to sell.

The plan for the marina with CAMA or other state office that handles permitting has to be perfect to make sure that your slip is supposed to be there. Don't end up purchasing something that wasn't intended to be a slip. Double check that face docks, are part of the CAMA approved plan, as they are what rents easiest. Don't buy something that doesn't exist...

The people that own the face docks care the most about the curb appeal, and if they rent the dock space they help keep the place up. They care that the bathrooms are clean, the washer and dryer work, and that there is a dock hand around.

The prettiest locations are often the worst ones to dock the boat in wind and tide... but if you are going to rent on month to month to liveaboards, they are the prettiest places to live.

If you have a wide open view, more often than not you've got wind and current perpendicular to your slip. If you plan to sail the boat often, try to get an outside slip, rather than one in the inner harbor if you have tide. You get to walk further every day, but you can normally get out of the slip any day any weather.

The perfect slip in pretty locations, is inline to the prevailing wind and current 90% of the time. You might have to spring for a 65 foot slip, rather than a 50 foot slip to get that... But your rental value is higher having a slip that is easy to get in and out of. If you are in the inner harbor, expect people to tie up at the fuel dock and ask the dock office for a different slip. Those spots are mighty tough to leave if it is gusting 20 knots...

If you aren't in a pretty, wide open place... You don't get the wind in your slip and will probably run the air conditioner more often than not. So long as it doesn't take more than a half hour or so to get out into deep enough water to hoist a sail, you can still have some sailing fun even if you aren't right on the head of the river, sound, or at the doorstep to the inlet.

Somewhere near a half hour to open water people quit day sailing... It takes an hour out of the day round trip to get to and from the dock. To be out before lunch and back by sunset, the extra half hour means a lot.

Ask for past minutes from the owners association board for the last year or more, simply to prove that there are minutes from the meetings. A lot of marinas are governed by Roberts Rules, and fly without any real oversight. If the members of the board can't afford an increase in dues, then you get to watch whatever needs repairs fall into the water.

Ask about the rainy day fund, and yearly budget. You want the rainy day fund to be larger than smaller, if you are an owner. Otherwise if you have a the main floating dock rip loose, that connects out to your slip they have to wait for an insurance settlement before fixing things. If you plan on living there, then after a storm things are either fixed in a few weeks... If they have to wait for an insurance check it can take a season.

The same goes for having a budget for dredging if you are in an area that has sediment. Having a slip that puts you aground every tide, is not fun. Some places cannot go a year and a half without dredging to gain depth. This also accounts for the channel on the way in... If you can't enter or leave your slip due to draft, you don't get to go sailing when the moon isn't on your side.

If the marina is part of an owners association that pairs with residential condos, make sure that the board that operates the marina is separate. Those without boats do not care if your finger piers disintegrate, power poles light on fire, and can have a chip on their shoulder that you can use the land based facilities for 1/10th of the buy in they had for a unit, and half the monthly association dues.

If the pilings aren't greenheart pilings, then you may have some issues with them tapering down to nothing where they reach the mud and breaking off in storms. If you have floating docks, make sure that the pilings are higher than the expected storm surge...

The difference between a good piling and a great piling is $700 for one that tapers, or $2000 for one that is straight along its length. Both are supposed to last 25 years, but the one that tapers breaks if someone gets rowdy docking. You want them driven in, not jetted in.

If you are exposed to a decent wave fetch, even with a 5 or 6 foot stone break water if the storm surge puts the dock and finger piers under water... with a hundred slips you can have a 2 million dollar bill to rebuild and repair after a storm.

The insurance on the marina its self needs to be able to absorb that, and more if they sell diesel and gasoline. The life cycle on the tanks, pumps, and hoses makes the convenience expensive. You can run close to 60k to rebuild the system with new hoses, pumps, and controls if you have a 300 foot run of flex pipe.

Pine deck boards are cheap to build, but limit your top end price of appreciation. They never saw 100k a slip.

Ipe is a step up, but if you have fixed docks in an area of storm surge... may not live long enough to use the life expectancy. Concrete hog slat decking lasts longer still, but the dock has to be strong enough to take the extra weight.

Double check that the tax assessors office isn't using 2006 pricing. $15k buys a lot of slip today... and if they still want to charge taxes against a 105k worth of value, you are fighting a losing battle to get it re-assessed and may be the reason for the low asking price.

1k in taxes at the 105k value and 3-5k in dues means a 15k slip you bought for a steal exceeds its purchase price in 3-5 years.

Cheers,

Zach
Thanks. it's posts like this that make this forum valuable.
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Old 02-12-2016, 07:01   #10
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Re: Buying a Slip

I've owned my slip in Muskegon, Michigan for four years now. It's a nice marina, with a perfect location. Purchase price was a little under 10k. When the marina opened, the slips were selling at 24.5k. Those who bought in at 24.5k are reluctant sellers at <10k, but the market is the market.

Our slips are definitely real estate, and I have the tax bills to prove it.

We live next to the marina, and from home to slip is a three minute walk. That's a big part of the impetus behind making the purchase. It guarantees we'll have the same slip each season. It'd be a bummer to not find a slip to rent and have to drive to a different marina.

Currently, occupancy in our marina is very high, and those who own slips but don't occupy them are very likely to rent them at an amount that exceeds their dues + taxes.

We didnt buy our slip with an expectation of it increasing in value, however, local conditions lead me to believe that values may increase soon.
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Old 02-12-2016, 07:25   #11
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Re: Buying a Slip

I don't see a boat slip as a good investment. A home, yes, a boat slip, no. In areas where boat slips are scarce, it might be a good investment but not in most parts of the country. Homes will usually increase in value as everyone needs a place to live. Most people don't need a boat slip.


Circumstances can easily change, you might leave the area, you might get ill and not be able to boat, etc. Boat slips are hard to sell and you'll often be competing with the developer when trying to sell a slip.


Check into the finances before buying a slip.
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Old 02-12-2016, 08:15   #12
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Re: Buying a Slip

In addition to the above, I would not buy a slip until you already own the boat. What if you decide that you are going to buy a boat in the 40-50 foot range? So you buy a 50 foot slip. Then when you get to actually buying the boat, the perfect one for you turns out to be 55 feet? Oops! Now you have to sell the slip and find yourself another.

Or, on the other side, you find the perfect boat and it is only 35 feet? You could have bought a much less expensive slip, but now you have the 50-footer.
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Old 02-12-2016, 08:39   #13
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Re: Buying a Slip

Quote:
Originally Posted by rwidman View Post
I don't see a boat slip as a good investment. A home, yes, a boat slip, no. In areas where boat slips are scarce, it might be a good investment but not in most parts of the country. Homes will usually increase in value as everyone needs a place to live. Most people don't need a boat slip.

The other side of that coin though is if you buy it at $10K and slips rent for $400 a month with live aboard fee and you keep it for ten years then that would have been $48K in slip rent that you didn't pay, so even if it is worthless in ten years you come out ahead.
Of course I doubt you could buy a slip for $10K either if they rent for $400 either, or if you could, sign me up for a dozen

Sort of a similar argument, do I buy a boat or Charter?
Course there isn't any one place I want to be at for ten yrs is the problem for me.
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Old 02-12-2016, 09:20   #14
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Re: Buying a Slip

Buying a slip not only ties up your money that you could otherwise invest (or involves paying interest on a loan), it involves paying taxes and usually maintenance fees (condo fees). That $10K slip will cost you far more than $10K over a ten year period.

My point is, there are a lot of things to consider before buying a boat slip and I believe for most people, once these things have been considered, a boat slip is not a good investment.
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Old 02-12-2016, 13:53   #15
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Re: Buying a Slip

Like any real estate investment it all depends on the location and current market. Ive bought two properties for dockage. One in Belize. One in Guatemala. Both have appreciated significantly...on paper at least. Belize property comps are up over 200%. Guate property about 100%.

Ive not bought just a slip before, but know those who have. In FL at least you can actually hold title to the seabed under the slip. Have a friend who bought such and did well on it.
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