Buy House or Sailboat?

[TaoJones]

Originally Posted by Dockhead

My father loved to say: "If it flies, floats, or f**ks -- rent it."

Heh.

My grandfather used to tell me, "Get lots while you're young!" If he'd only explained that he was talking about real estate, I'd be a wealthy man today.

TaoJones

[neelie]

There has been a stack of the most excellent financial and investment advice given in these previous 40 posts.

However, if I may quote the last paragraph of Kiteboarders initial post:

"We'll see. The "correct" way of doing things would be to buy the house instead of the boat. But, I don't usually tend to take the wider road. I'm happy about that."

I suspect that the lad has long made up his mind. He was merely looking for moral support to justify the gloriously "irresponsible" decision he has made. I think we have failed him in his hour of need.

So, Kiteboarder my vote remains unchanged - buy the boat. Who knows what tomorrow or next year will bring?

[Brent Swain]

Money is not the only definition of success, nor is it a reliable one.. I had the option in my early 20's ,and I thank god I went for the boat. I've had a great life ,as a result of that decision ,off the treadmill, being my own boss, since my mid 20's on a tiny fraction the money and work making the other decision would have required. As a friend said ( just before doing a circumnavigation)" This is not a rehearsal. Screw this life and you don't get to do a re run."
Some of the most self reliant , mature, and capable kids I have ever met were those who grew up on a cruising sailboat. Most say "Thank god dad got us out of town and out cruising when he did. I'd hate to have turned out like some of my friends." Some of the most screwed up are those who grew up in suburbia, living the prescribed "Cookie Cutter" lifestyle.
Houses are badly built boats, so hard aground one cannot think of moving them
The desire to build a house is the tired wish of a man content thenceforeward with a single anchorage. The desire to build a boat is the desire of youth , yet unwilling to accept the concept of a final anchorage.(Arthur Ransom)
Look at those who buy a house and ask if that is the type of lifestyle you wish to waste your life on, and program your kids to accept as the only option. I have many friends who used to cruise ten months a year and work two. Once they bought a house, long after it has been paid for , they work 11 months a year and cruise one. You don't own a house , it owns you.
With the story in the New York Times about abandoned boats littering east coast waterways, with a bit of energy and imagination, you could get your boat cruising cheaply enough to leave you with enough of your nest egg to go cruising for a long time. In the proccess, your kids will learn self reliance that they will never get being programmed in school, by people who's entire life experence is going to school, and have no experience with the outside world that they are claiming to educate your kids about. Cruising lets you spend the entire day with your kids, instead of living separate lives with only occasional contact, and their values being formed by strangers who have so much personal success that they have graduated all the way to the lofty status of high school guidance counselor.( WOW!)
A friend raised two teen age daughters on a circumnavigation, and had a son born halfway.He said when the girls became too teenage to listen, he and his wife would discuss things among themsleves that they couldn't say to the girls faces. Those big ears in the forepeak were listening. If they were hanging out with sleazy kids, they didn't have to argue, they just left. If they were hanging out with good kids, they would stay a little longer. All grew up happy, mature and self reliant , far more so than if they grew up in a "Normal ": way. All became cruisers.
Go for the boat. Forget the house( leg iron)
Brent

[forsailbyowner]

We first lived elbow to elbow in a travel trailer and vacationed in a 23 foot sailboat. Then bought a 3 bdrm house. It split the family up terribly. Was like the last time we saw kids, they were in rooms or gone. Wife and I moved on boat as soon as kids were done with scholastics and took job/enlisted in navy. We had to do again would have lived aboard and home schooled.

[Sailormann]

You can live on a boat but you can't sail a house.

[keelbolts]

I see there are a number of replies in this thread that view the question in terms of buying a boat v. INVESTING in a house. I think that, for the most part, the days of investing in a house are over for a while at least - if not longer. It might be OK to buy a house to live in, though I wouldn't do it right now, but not to invest in. That bubble was little more than smoke & mirrors and it popped. I believe the days of buying a $100k house and selling it 5 or 10 years later for $200k are gone for some time. I know, it's what you've heard for years... your friends Bill & Susan tripled their money in 5 years... Yes, that did occur. My parents made a boatload of money buying & selling houses, but, if you're looking to do that now... Well, I'm afraid that train's left the station without you. Read up on the Dutch tulip market. It was foolishness and, when people realized the insanity of what they were doing, the balloon popped and never returned. Seriously, if you've never heard of it, google it.

Drop, from your mind, what you've been told about real estate and ask yourself this simple question: Of everything you own or have owned, what can you buy and sell for more later? Your car? No. Your shoes, pants, and shirt? No. Your TV? No. Your lawnmower? No. I don't think I need to go on, do I? You generally can't sell used stuff for more than it cost new. Their are select things that, usually thru supply & demand do appreciate, but I bet I can name twenty-five things that don't for every one you can name that does. If you have a beautiful house on a point of land jutting out into the bay, S&D will probably push the value of your house up. If you live in one of 50 matching home models in Shady Acres, why would the value of you house go up as you wear it out using it?

To better answer your original question, don't ask yourself if you should INVEST in a house, ask yourself only if you'd rather get sucked into the game to LIVE in a house or if you'd rather live on a boat and retain a good bit of your independence. You ain't gonna get rich off the first option, but you might get rich, in life experiences, off the second.

[Dockhead]

Originally Posted by keelbolts

I see there are a number of replies in this thread that view the question in terms of buying a boat v. INVESTING in a house. I think that, for the most part, the days of investing in a house are over for a while at least - if not longer. It might be OK to buy a house to live in, though I wouldn't do it right now, but not to invest in. That bubble was little more than smoke & mirrors and it popped. I believe the days of buying a $100k house and selling it 5 or 10 years later for $200k are gone for some time. I know, it's what you've heard for years... your friends Bill & Susan tripled their money in 5 years... Yes, that did occur. My parents made a boatload of money buying & selling houses, but, if you're looking to do that now... Well, I'm afraid that train's left the station without you. Read up on the Dutch tulip market. It was foolishness and, when people realized the insanity of what they were doing, the balloon popped and never returned. Seriously, if you've never heard of it, google it.

. . .

To better answer your original question, don't ask yourself if you should INVEST in a house, ask yourself only if you'd rather get sucked into the game to LIVE in a house or if you'd rather live on a boat and retain a good bit of your independence. You ain't gonna get rich off the first option, but you might get rich, in life experiences, off the second.

I can't agree with this. At the moment and maybe for a few more months, it's possible to buy a house at the lowest price in many years, and on a low-interest fixed mortgage rate to boot. And we are on the edge of a period of high inflation which will inevitably result from all the money being simply printed to try to keep us out of macroeconomic abyss.

When there's too much money printed, the value of hard assets goes up (supply and demand -- more money chasing the same supply of assets = higher prices). The same thing drives up interest rates -- a lender does not want to get back less money than he lent, so if you have 10% inflation, interests rates will be 10% plus the cost of the money.

So if you buy a house now, it is very, very likely to be a great investment. Just make sure and get a FIXED interest rate loan, even if the initial cost is quite a bit higher. The inflation which is coming will wipe out the mortgage, and you will be left with handsome equity in the house. A lot of equity in your house = wealth. Wealth = independence without having to live a too spartan lifestyle. You can sell the house and live on the money, or borrow against it.


Someone else wrote that he sold out and sailed off at 28, and would never do it over again any other way. More power to him! That's also a perfectly valid way to do it, a more courageous way in fact, to turn your back on the treadmill of earning and investing money and just living your life.

Only you can decide what is the right balance. Each approach requires its own trade-offs and sacrifices.

I think a key issue has not even been discussed here -- that is, how much pleasure and satisfaction do you get out of your work and your professional life. If I did not have any work or profession which I loved, and if the only thing I got out of my work was money, I would probably do without the money and choose a different path -- maybe one like Brent Swain's. As it is, I was lucky to end up with work which gives me great fulfillment and satisfaction, and which I plan to keep on doing for at least a few more years. That means I can't sail as much as I would like, for the time being, but life is all about these trade-offs.


I might add the following: I am able to be buying a really nice boat right now exactly as the result of sacrifices I made earlier in my career in order to invest in real estate. I bought my first house right when I finished my education, and when I bought my second house a couple of years later, I kept the first house as a rental property. Then I bought a third house as rental property. Then I picked up other properties along the way. The house I live in has no mortgage on it now, and I have rental income, so I wouldn't really need to work if I didn't want to; if I didn't really enjoy it. And I'm buying my new boat by refinancing two of the rental properties, with mortgages so cheap that the payments are the same. So the boat is basically free, although it costs a good fraction of a million dollars. The property went up and down in value over the years, and it was a lot of hard work at first keeping them in repair and catering to the whims of tenants, but in the long run the mortgages got paid down, the value increased, and a substantial amount of equity was generated.

Take it from me -- now is a great time to buy a house, as long as it doesn't cost you too much to earn the money you need to buy it. It's not worth killing your soul in some awful job. But if you've got a job you like, then it's not at all a bad life decision.

Originally Posted by keelbolts

Drop, from your mind, what you've been told about real estate and ask yourself this simple question: Of everything you own or have owned, what can you buy and sell for more later? Your car? No. Your shoes, pants, and shirt? No. Your TV? No. Your lawnmower? No. I don't think I need to go on, do I? You generally can't sell used stuff for more than it cost new. Their are select things that, usually thru supply & demand do appreciate, but I bet I can name twenty-five things that don't for every one you can name that does. If you have a beautiful house on a point of land jutting out into the bay, S&D will probably push the value of your house up. If you live in one of 50 matching home models in Shady Acres, why would the value of you house go up as you wear it out using it?

Nobody said that the right way to invest in real estate is to just buy the first thing you see on the market. Real estate is all about location. A nice mass production-built house in a distant new suburb is in most cases the worst house from an investment point of view. The best residential real estate investment rule that you can sum up in one sentence is buy the crappiest house on the best street you can afford. That house will go up in value much more, as a proportion of its cost, than the other houses in the neighborhood. The house is a commodity; it can always be fixed up, remodeled, or even torn down. It's the location -- and the land which captures that location -- which is unique and creates the value over time. A price of a new house in the suburbs consists mostly of house; the land is dirt cheap because it was a cornfield yesterday. So you are mostly paying for a thing which depreciates as it is used; the thing which appreciates -- the land -- is a small part of the price, so even if it is going up in value at a healthy rate in a good market, it is not adding so much to the total value of your property in absolute terms. The crappy house on a great street, on the other hand, probably has little or no value -- the price is almost all land. That's good -- you will have much better chances of making money that way.

Another rule: don't buy an apartment, townhouse, or a condo, if you can buy a single-family house in one of the best locations of your city (obviously this does not apply in New York City or in London). Again -- no matter how sh***y the house is, it doesn't matter (as long as the price reflects its sh****iness, of course). It's amazing what rich people do with crappy little cardboard-box houses, when they are in a really desirable neighborhood on a nice piece of land. In most cities on the East Coast, "really desirable neighborhoods" rarely includes those which were built later than the 1940's, and usually earlier than that. The West Coast has its own rules.

Good luck, whatever you decide.

[Ex-Calif]

I think a lot of what has been said is about paradigms and paradigm shifting.

Speaking for mostly the Americans, we are trained from birth to want more and have the most. Keeping up with the Jones' is a disease. How many people post on here that the tough thing is the 6 months it takes to get rid of "stuff" and the stuff that can't be lived without has to be stored.

The 4,000+ sqare foot house has become a benchmark for many. I was there. I owned the big house. Forget the taxes, write offs etc, etc. I had $4,000 worth of yard care crap. I had $10,000 worth of tools that I had to have to fix my house myself. I spent $2,000 or whatever, every spring to do the mulching and the plantings not to mention fall. Oh, and did I mention it's time for new drapes, carpet, paint, furnace, etc. etc. etc...

For valid reasons I dumped the house and withdrew the equity, which was largely what I actually put into it in the first place. I downsized to an 1,800 square foot apartment. I sold all the yard care crap and the garage full of powertools and started paying $1,100 bucks a month in rent. The utility bill was 1/3 that of the house (shoulda bought $20,000 worth of new windows - LOL) And I can't remember ever having to fix a furnace, roof, air conditioner, reseal a driveway, replace carpets or drapes and was banking a significant part of my earnings.

For me the right answer is get 50+% of the equity for a boat. Get the boat payment down to a liveable number and then move aboard. You won't make money on the boat and depending on how long you live aboard and how well you care for the baot you may lose a fair bit of equity. However when you get to the point you can't live on the boat, cash the equity out and move into a 1 BR apartment somewhere. At that point you won't need much space at all.

[keelbolts]

As a hedge against inflation, I guess a house would work. As an investment? Think tulips. Dutch tulips. I think the economy is done, so I have no idea what I would recommend as an investment. Gold is a hedge. I guess that's where I'd go. I have kids, grandkids, and a house so I'd rather be wrong than right on this one, but I don't see it.

[Amgine]

Originally Posted by keelbolts

As a hedge against inflation, I guess a house would work. As an investment? Think tulips. Dutch tulips.

Pointless comparison. You can't over-produce land; although the Dutch *did* manage to create some, it's not usually possible to do so at all.

Anything which will always be worth itself is called a 'hedge' in financial terms. Gold, incidentally, is a mildly risky hedge as it is a traded commodity. Land will always be worth land. Buildings on land may depreciate, as may the utility services to the land, but the land will retain its intrinsic value no matter. But the land will only be useful as an investment if you make money with it while retaining that intrinsic value - for example renting it, raising crops on it, or using it in the production of a product.

(Which is a roundabout argument about dividend-earning, or not, stocks)

[Kiteboarder]

Guys, I haven't bought yet. Not a boat, not a house. This is too big of a decision to take it lightly. I'm in no hurry. The housing market began turning a few months ago here in San Diego and good deals on houses have become somewhat hard to find. My boss has been searching to buy a house too, with little luck getting what he wants. He's not interested in a boat though

I'm going back and reviewing carefully some of the latest post made. I appreciate all your comments and suggestions. I'll comment once I read carefully through the latest comments...

Best regards, Danny Cruz

[TaoJones]

Interestingly enough, you may all be right! Keelbolts is right that a house should not increase in value because it's just another tangible asset subject to depreciation - that is, it's being "used up." But Dockhead is right, as well, because this may be a good time to buy a house - a tidal wave of price inflation waits out there over the horizon, but how quickly we get there is currently uncertain.

Amgine is right that land has an intrinsic value, but as with most things, there's land and there's land. There's plenty of land, so supply isn't an issue, but the most desirable land is much less abundant. There's only so much land in Manhattan or Paris or Beverly Hills / Brentwood / Pacific Palisades (or, for Kiteboarder, La Jolla). A restricted supply facing undiminished demand means, ipso facto, the price remains very well supported.

And how much is land "worth?" Well, to a sailor out in the middle of the ocean who's vessel is in the process of burning to the waterline, the answer is priceless!

Incidentally, the tulip bulb mania mentioned above is an interesting case: Most people assume there were little Dutchmen in their wooden shoes throwing fists full of cash at sellers of tulip bulbs. It was nothing like that.

It was actually very much like what is infecting the leading western economies today - it was derivatives (i.e. futures) trading on tulip bulbs that got out of hand. Bulbs are just bulbs, and they knew that, but when speculation went wild and some thought that in future bulbs would sell for much more, the game went into high gear.

When people don't care how much they pay for something because they are convinced that someone else will later pay much more for it, the game is afoot. It was the basis for the Tulip bubble, the South Seas bubble, the Mississippi bubble, the late real estate bubble and the current cancer, the Derivatives bubble.

TaoJones

[keelbolts]

Well said. Nothing to argue with there.

...and I think Kiteboarder has had enough.

[TaoJones]

Originally Posted by keelbolts

Well said. Nothing to argue with there.

...and I think Kiteboarder has had enough.

That may well be, keelbolts. But there are probably dozens, if not hundreds of people who are torn between buying a boat and a house.

Some are torn between occasional sailing and long-distance cruising; trailer-sailor or dock queen; monohull or multi - you know the whole endless list.

Those who opt for land-side digs face other choices: more house on more land for less money but further out; better location, but smaller, more run-down house; buy or rent - again, the list is virtually endless.

Then there's the mother-of-all-choices: She wants a house and a cat; He wants a boat and a dog.

Anyway, I think the continuation of this thread could be useful to others in Kiteboarder's situation, or similar.

TaoJones

[Maren]

Originally Posted by Kiteboarder

Guys, I haven't bought yet. Not a boat, not a house. This is too big of a decision to take it lightly. I'm in no hurry. The housing market began turning a few months ago here in San Diego and good deals on houses have become somewhat hard to find. My boss has been searching to buy a house too, with little luck getting what he wants. He's not interested in a boat though

I'm going back and reviewing carefully some of the latest post made. I appreciate all your comments and suggestions. I'll comment once I read carefully through the latest comments...

To a certain extent, taking your time is good call. So long as you don't miss the boat, so to speak. But while you are reviewing all this, help us out and tell us what you and your wife (either separately or together) want. I think once the two of you are clear on the dream and can give it a timeline, you’ll find the path is easier.