Financing Older vs Newer Boat - Eventual Depreciation

[hellosailor]

Swabbmob-
"Ex-Calif, Unfortunately, our homes association prohibits rental properties or we would seriously consider the option of keeping the house." You can probably beat them at their own game using the old "lend lease" or "buyback" approach. You don't rent your home out--you SELL IT to someone, with a provision in the sale that on a certain set date and time you have the exclusive right to BUY IT BACK at a set price, in a set condition, etcetera.
As far as the HA is concerned--it is a legal sale. It just happens to have a provision in it that allows for a future sale to me made, under specific terms. How the financing (you hold the mortagage? Transfer it?) and the terms are worked out...doens't really matter. It gives you the chance to "sell" the house now, and the option to take it back in five years--if that's what you still choose to do. And it should be perfectly legal, unless your HA has been exceptionally clever in their rulings--there's no need for them to know anything about this. Heck, you can put all the fancy stuff in "Addenda 1, additional consideration and terms" and never show it to them. Got a lawyer?[g]

Your choice of boats and least depreciation should consider some other things. You want a mobile home, so sailing performance and seakeeping ability are not a primary issue, those boats will all sail. OTOH, the layout and space would matter and be worth money to you. On the third hand [g] you need to consider the resale market, the market for boats shrinks as they get larger, larger boats (over 36') are something like 1/10th of the entire recreational market.
When cars and boats are leased, the lessor always looks at the book value of older models to try to figure how the new one will depreciate. That's not firm--but a guide. So you need to look at the BUC BOOK values of those models, track 'em at 5 years old versus what they sold for 5 years before that, see how they devalued and try to figure what else affected their prices, i.e. stock market crashes, oil price changes, manufacturers who went bust...
There really is some science to the prediction, if you took a marine loan officer out to dinner he or she might be willing to help you with the research on the numbers. (And of course, offer to make the loan for you.[g])

[swabbmob]

Judging from the poll responses, it seems clear that the neighborhood sees less risk in the older Catalina Morgan than either of the Beneteau options.

Since creating the poll, I have found some smaller boats in the 42 to 43 ft range that would meet our berthing and privacy needs and fall within our budget - PLUS - they have much more character: Tayana Vancouver CC 42; Vagabond 42 and Hans Cristian 43T.

Would one expect these to hold their value a bit better than the larger Catalina Morgan?

[Tropic Cat]

Sorry about that photo I put up there. I just couldn't resist. Seriously, I would guess it really depends on what you are looking to do with the boat. Older boats tend (but not always) to be heavier and stiffer than newer ones. I've read some negative comments on hull flexing on newer Bene's. Perhaps others have as well.

If the boat is going to sit in her slip, I wouldn't imagine this would be a factor in the decision process. OTOH, if you plan on seeing a lot of Blue water, it most certainly would.

So, it depends...

[Pblais]

Would one expect these to hold their value a bit better than the larger Catalina Morgan?

Given the dramtically lower value of the Morgan it's a hard question. No boats hold their value given the maintenance costs. The Morgan has less room to fall.

Turning your question around - which boat would you rather purchase? Considering that idea might tell you what boat someone else might like to repurchase from you down the road. A boat can hold a lot of value and be hard to sell. When you get around to selling the boat you might not want to wait 2 years to get all the value back.

When you consider the idea that you want certain properties of a boat and it needs to fit your own budget I seriously doubt resale value will matter. You won't have three choices that are all equal. You won't buy a boat you don't like and why would you not buy the one you liked best? When everything is equal (it never is) buy the one you like best. Someone just like you will feel the same way 5 years later.

[Troutbridge]

I'm from 'across the pond' so the housing/boat markets are different. However, if you want to live on a boat for 3-5 years, make it a comfortable one, otherwise it's likely to be for one year only, followed by marital discord and acrimonious divorce!
You're going to lose money whichever boat you buy. If you're not really bothered about sailing, why not a motorboat-again, not sure what the market is like in your neck of the woods.
Living on a boat can be dangerous, you can never tell what/where it may lead to.....what you're proposing to do is not financially astute, but will be fun! If you're sure you're not going to disappear over the horizon then my advice would be to preserve your capital and take the largest loan possible whilst fully apprec iating that you will not recoup much if any of the money you spend repaying the loan.

[swabbmob]

Mr. Troutbridge,
Comments appreciated - regarding the financial astuteness of owning and living on a boat, I guess most folks that love this forum are way past that point .

[Kanani]

Hi,

I'm new to this forum but certainly not new to the concept that you are anticipating.

In '84, my wife and I did exactly what you are contemplating. We purchased our 1st "Live-aboard" sailboat. However, things didn't go exactly as planned. As you are planning, we planned to work for a few years and save some $ to go cruising. It just simply didn't work out that way because living aboard in the US is far more expensive than one might anticipate.

Your main concern seems to be the depriciation of the vessel. This is a valid concern but I will submit to you that keeping the vessel in pristene condition can be far more expensive than the depriciation that you are concerned with (even if you provide most of the labor). Then there is slip fees and the convenience matters.

The other thing that you may not be very realistic about is the usage of the vessel. It has been my experience that most live-aboards seldom move their vessel. It is no easy chore to change from everyday living aboard to sailing mode. It is a task that tends to tire easily.

We soon realised all of these things and found that we could go cruising and spend far less then staying in the US. We ended up cruising for 14 years before selling our boat and moving ashore, upon returning to the US.

Living aboard has a romantic alure about it but when work-a-day life accompanies living aboard, it can be challenging. Myself, I would recommend renting an apartment somewhere and saving every penny until you can achieve your desired goal. If you want to go sailing, charter a boat. It's far less costly than owning.

Buying a home these days is risky business and over the next few years (until the realestate market settles) you could lose more equity than you would if you just rented. Owning a vessel to stay at home and live aboard gives you about the same $ prospect.

I would never recommend to anyone to live-aboard in the US for the sake of "Cheap living". If one wants to do it just because they love to be close to the sea and enjoy that life-style, that's a different issue. Just don't kid yourself into thinking that it will be cheap.

In the 14 years of cruising, we spent just over $115,000 in boat up-keep (avg $8200 per year). That included 3 major refits in those years and 1 new set of sails (custom made in So Africa). We had a Passport 45 Ketch and I think that most of the $ spent was rather routine and it would have been little less if we would have been stationary. I did ALL labor myself. It is not the miles that causes wear & tear on a sailboat (for the most part), it is the environment. The ocean environment changes little from country to country. Ocean passages do very little to maintenance, unless something breaks. I never had anything break, in all those years and 80,000 miles of sailing.

Even if you figure $5K per year in up-keep and $600 per month in slip fees, you are looking at over $1K per month + depriciation, insurance and usage costs. It is not a "Cheap" way of life, as some assume.

I would recommend a Peterson 44, (if you want a recommendation). My Passport 45 was nothing more than an upscale version of the Peterson 44, with a little different deck.

I did a lot of boat deliveries between New Zealand and the SoPac Islands. I sailed a lot of different boats in some pretty extreme conditions. I found that hull design to be the most comfortable and sea worthy. The Passport 45 is very hard to find but the Peterson 44 is easy to find and hold their value well. Some of the boats that you mentioned, I would stay away from. You can pick them up cheap but they each have their inherent problems.

Another vessel that I like (as a live-aboard) is a Cal 45 Pilot House. That boat has an amazing amount of room. It has lots of port lights and is airy and open. The down-side is, I wouldn't want to be in one in a severe storm. I don't like big windows in heavy seas. However, for what you desire, it would be ideal. It also holds it's resale value well. I have a friend that circumnavigated (single-handed) in one and he absolutely loved that boat.

Remember, the bigger the boat, the easier it is to handle (contrary to logic) however the upkeep costs can get staggering over 50'.

Good luck with your quest.

[swabbmob]

Kanani,
Thank you for you response. I completely understand your advice on the costs of living aboard. And this thread was inspired to see the discussion of economics, it does not reflect many of my other goals or needs related to the idea of living on the boat and working. I think my situation is a bit unique, in that I will be receiving a fairly sizeable raise due to my transfer, which would most certainly be completely consumed if we were to purchase a home (mortgage and taxes). In fact, I wouldn't even be taking the transfer if I felt I had to buy a home. But I have a very strong desire to get back to the ocean and to teach my boys about cruising and navigation and history and people.... Nothing is forever, and we will be in a position to cast off within 3 to 5 years if we so choose.

I will take another look at the Peterson 44. Hadn't spent much time looking at them because they didn't have 3 staterooms. How similar is the Cal 45 to the Cal 2-46?

[Kanani]

Originally Posted by swabbmob

Kanani,
Thank you for you response. I completely understand your advice on the costs of living aboard. And this thread was inspired to see the discussion of economics, it does not reflect many of my other goals or needs related to the idea of living on the boat and working. I think my situation is a bit unique, in that I will be receiving a fairly sizeable raise due to my transfer, which would most certainly be completely consumed if we were to purchase a home (mortgage and taxes). In fact, I wouldn't even be taking the transfer if I felt I had to buy a home. But I have a very strong desire to get back to the ocean and to teach my boys about cruising and navigation and history and people.... Nothing is forever, and we will be in a position to cast off within 3 to 5 years if we so choose.

I will take another look at the Peterson 44. Hadn't spent much time looking at them because they didn't have 3 staterooms. How similar is the Cal 45 to the Cal 2-46?

Ya....my bad...I meant Cal 2-46. They have lots of room, make a great live-aboard and sail fairly well.

[waterworldly]

One point not considered: I believe that if your only domicle is the boat, then the interest on the loan is deductible.

[Pblais]

One point not considered: I believe that if your only domicle is the boat, then the interest on the loan is deductible.

It does not have to be your only domicile not unlike your cabin in the moutains or at the lake.

[hellosailor]

Domicile, home, and residence are all very different legal terms in the US. Forget about domiciles, see what the IRS code has to say about various mortgages being deductible and which criteria they are based on. (Among complications that using those words can bring.)

[Mike Banks]

Well--the 1990's range of vessels should get you something using epoxy, or at the very least vinylester resins. I would not buy anything using polyester resin of that age--so it is important to know what you will buy since fixing osmosis is horrendously expensive.

I have an old trimaran built in the seventies which is still good--thanks to epoxy resin. Anything less it would have disintegrated years ago. Recently had her slipped and stripped--the shipright claims she is as good as when first launched. Mind you--it costs to keep her that way.

I think your choices are a bit limited in the sizes of boat. If you want to sail--forty something feet is about as much as you can handle on your own if you are not experienced. In calm water and a gentle breeze one can singlehand almost any size, but in a current and a bit of a blow you need a crew if the boat is large.

I would sell the home that you can not rent and buy another in a nice semi-rural high capital gains area that you can. I would also investigate a large trailer sailer such as a thirty foot trailer-tri for the odd weekend or longer sailing excursion--fun and no marina fees, and you can tow her anywhere with a four wheel drive and with shallow draft explore anything from lake to ocean. When you are skilled and ready to chuck it all in--then you can buy the fifty foot plus and sail the world, coming back to a property worth a heck of a lot more than you paid for it and having had an income from it meantime.

The complete boat and 4wd will cost you less than depreciation plus marina fees--which are huge for anything over thirty five feet in the Land of Oz. That is why most multihull owners anchor out or own moorings--we take up two berths.

There is no such thing as cheap boat ownership--but some courses of action are less financially ruinous than others. These days it COSTS to be a dreamer--

Of course you should pay no attention to me either--I still have a couple of homes and some dough in the bank--

[Jolly Roger]

Mikereed is right—if you only consider the financial side of the venture, but that’s not why you are considering it—is it? I sold our business, house, furniture and a Jaguar E type to “go walkabout.” I really wanted a center cockpit, but finished up with an Endurance 40, because it was the best value/price/condition we could find. We lived on it and cruised the Mediterranean for seven years, keeping it in “charter” condition by doing the maintenance ourselves, and not spending much else on it. Seven years later we sold it for exactly what we bought it for. I know all about depreciation, inflation, etc. etc., but factoring in our fabulous experience and that of our daughters, who by then spoke fluent Spanish, all that goes out the porthole and we reckon we made a profit which no amount of money could buy.
One memorable time a couple were chatting me from the dock, envying our lifestyle etc., and the wife said “We’d love to do what you are doing, but we have two small daughters.” Just then my two 6 & 7 year olds strolled up from school and jumped aboard. I just shrugged and carried on with the varnishing.
It’s no good gong on about this boat or that, because you might not find one in the right condition/location/price. Start looking at them all and you will know when you have found the right one for your needs. Then just get on with it, and stop worrying about the money you are loosing or not loosing, then talk to us again in two years.

[swabbmob]

Just wanted to thank all of you who have responded to this. Excellent advice from all perspectives. After all I've read and studied about this boat or that and the financial costs, I tend to see things in the same light as Jolly Roger. I am very fortunate to have a career that is in demand, and if I choose to step away from it temporarily, I know that I can find work again once I want or need to work. If I didn't have this sense of security, I would be hesitant to bear the financial costs of owning a large boat. Mike Reed'ssuggestion to own a trailer sailor resonates with me(granted a much more sensible approach financially), but I see that as my set up after we've experienced the live aboard lifestyle.

Regarding deductible interest, I am pretty certain the interest would be deductible - the benefit of which will be immediately erased by AMT!

Thanks again - and by all means, please come forward with your thoughts.