Liveaboard Financing Quandary

[ssullivan]

Originally Posted by GDFL

From talking to other owners and reading posts, it is possible to get comprehensive insurance even living on the coast of Florida full time. It's not as easy as a new boat, but it is possible.

Some people have given you good advice here. Of everyone on this board, I understand what you are trying to do and the logic behind it the most. Why?

I'm doing the exact same thing and my wife and I are the same age or so.

We refuse to pay these over-inflated prices for real estate and that's also why we live aboard. If you calculate it all out, taking into account the drop in incomes relative to the rise in real estate costs as well as income taxes, you have to work your entire life to pay for the house, taxes, interest, etc... on a house.

It wasn't for us either. We will *never* buy a house. Well... maybe after the baby boomers are gone and there are tons floating around (many of them have more than one - my mother has 3!!), but not in the near future while they are overpriced.

As I said in a thread about my own financial issues somewhere, it would be less money to go and cut down trees and build a house (log cabin style) than it would be to buy one. That's when you know something is overpriced.

Anyway you are on the right path. We are doing well now, other than our mistake of buying a boat we can't (more like don't want to) afford. After we rid ourselves of this loan, all income becomes savings.

It's funny how all the modern rich guys promote spending and taking out loans as a method to making tons of money. They're wrong. Listen to what these modern guys' parents (the Silent Generation) said: Save money and buy everything without a loan. They had it right. They created an amazing country that allowed the current generation in charge to enjoy the lavish lifestyle they are now living. This was all created through the thrift and hard work of the Silent Generation through WW2 and after. The boomers didn't create it. It was given to them, they squandered it, and now we have very little left since they did not care about the future, as their parents did. (as evidenced by all those "I'm spending my child's inheritance" stickers, outsourcing, etc...)

So, stick to your guns and keep following the plan you shared here. You're on the right track. You just have unrealistic expectations of how long it will take to change your life from how it is today to the right way of living. Your unrealistic expectations were created by the "have it now" culture. The more you can avoid the "have it now" urges and take things much MUCH more slowly, the better you'll be able to follow the plan you have laid out.

Definitely unload that house before you get the boat.

[chris_gee]

"This has been a real eye opener to the liveaboard boating community. I didn't realize that liveaboards were all members of a white collar society that only those in the absolute best of financial situations could enter. It's quite a contrast to everything else I read about simplified and layed back lifestyles."

You have a plan. You put it up. You asked for comments. You got some. What's the problem? You do it or you don't - no-one cares.
Being laidback means you can take what comes in your stride. Sailors come in many degrees of affluence. Good ones have a common attribute - prudence. You took a hit and may even come out of the house owing money. Okay maybe like many you expected to make money as many did. Frustrating and disappointing but you are young with good earning capacity and have a plan to improve your lot. Next time maybe you won't buy at the top and sell at the bottom.

How it all works out depends somewhat on the time perspective you take. In ten years things change. Your boat may cover the deposit for a house, your partner may change her mind about kids. Does it matter? That's up to how you feel at the time - it doesn't to me and probably most others.

[Boracay]

It took me 20 years of planning, saving, working and a## l*****ng to get the broken rusting heap of s@@@ that I have now.

But you have my sympathy.

[GDFL]

Why can't people seem to understand. I never asked anyone to comment on my choice of boat and it's sailing ability. I never complained about buying at the wrong time in the market. I asked a simple question about getting a boat loan based on my current situation. 99% of the answers were centered around how I was rushing things and I should wait to pay cash for a boat. This makes absolutely no sense to me.

Pretend that I was in a 300k house and I asked for advice on how to work through getting a loan to downgrade to a 150k house instead because that's where I could save more money and be more happy. I doubt that one single person would have half the negativity that most of you have shown. Why is it any different just because my downgrade happens to be a boat?
"Next time maybe you won't buy at the top and sell at the bottom."???
I DID NOT BUY AT THE TOP AND I AM NOT SELLING AT THE BOTTOM. I NEVER EXPECTED TO MAKE ANY MONEY BY BUYING THE HOUSE. IT WAS PURCHASED AS A PLACE TO LIVE, NOT A MAGIC BULLET FOR INCREDIBLE WEALTH. How are so many people more knowledgable than myself on a house that I own? Despite what many of you assume to know about my particular real estate situation, I am in the second smallest/least expensive house in a relatively new and growing desireable high end neighborhood. There have been enough new sales and resales to tell me that I can sell my house and at most I will owe a couple grand, which is less than one month's mortgage payment. This is my third house and will be the first that I didn't make a pretty decent amount of money on. I'm not the next real estate pro, but I'm also not a real estate retard as many of you seem to assume.

"In ten years things change. Your boat may cover the deposit for a house, your partner may change her mind about kids."
As I stated earlier, kids won't be a factor after Friday. If my wife wants kids in 10 years, it'll have to happen with a new husband and it won't be my problem.

I'm sorry that I am not mid, late, or post career as many of you are. I'm trying to move aboard a boat at a different time in my life than most all of you did. I guess you can't relate and for some reason you think that I shouldn't do it unless I meet some kind of secret financial criteria or wait until I'm the same age and financial position as you when you did it.

I can't wait to meet so many of you nice, caring people when I finally do get out there I'll be the guy in the boat that can't sail with his shoes untied because I'm too stupid to tie them.

Originally Posted by chris_gee

"This has been a real eye opener to the liveaboard boating community. I didn't realize that liveaboards were all members of a white collar society that only those in the absolute best of financial situations could enter. It's quite a contrast to everything else I read about simplified and layed back lifestyles."

You have a plan. You put it up. You asked for comments. You got some. What's the problem? You do it or you don't - no-one cares.
Being laidback means you can take what comes in your stride. Sailors come in many degrees of affluence. Good ones have a common attribute - prudence. You took a hit and may even come out of the house owing money. Okay maybe like many you expected to make money as many did. Frustrating and disappointing but you are young with good earning capacity and have a plan to improve your lot. Next time maybe you won't buy at the top and sell at the bottom.



How it all works out depends somewhat on the time perspective you take. In ten years things change. Your boat may cover the deposit for a house, your partner may change her mind about kids. Does it matter? That's up to how you feel at the time - it doesn't to me and probably most others.

[camaraderie]

GDFL...I agree that you have gotten a lot of unsolicited advise! Fairly tyical for internet forums. Unfortunately I don't think your original question has an answer other than to see "Vinny the Nose" for the cash you need or wiat a bit till the market turns or you save enough. Good luck to ya anyway!

[elf]

Just one thing that struck me in reading your original plan and how much you can save living aboard vs. staying in your house: Did you take the tax savings you receive from your home's mortgage interest deduction into account?

I'm not saying you won't save money being a liveaboard vs. staying in your house with high mortgage payments, but just make sure that you have really added up the expenses (and rewards) of each honestly and thoroughly. I don't even have a boat yet, but from everything I read, keeping a boat can be more of a money pit than a lot of folks initially assume.

I have also read that getting boat insurance on boats > 20 years old can be difficult. You say it can be done, and if so, that's great. I'd make absolutely sure of that instead of making an assumption, though, if having insurance is important to you.

I wish you the best of luck -- there's certainly nothing wrong with your liveaboard dream, but make sure you balance your youthful exuberance with realism. Would love a later report to hear how it works out.

elf

[jackiepitts]

I know exactly what you are trying to accomplish by downsizing both in complication of lifestyle and finances and hope that all of this does not discourage you. We sold our home in So. Cal. last year for some of the same reasons as you have stated and have not regreted it.
As a suggestion I would like to mention that boats in the size category you are looking at often spend many years on the market before selling and it is quite common for the owners to finance a large portion of the price of the boat. You may want to look into that as a option.
Good luck,
Jackie

[TaoJones]

I think you'll be fine, GDFL, because you clearly plan ahead. It seems to me that you've already anticipated potential future issues (like the "permanent address" thing) and have thought of options to cope with them. In my experience, most people get themselves into trouble because they won't or can't anticipate what they may be confronted with down the road.

Even if selling your present home results in a loss of some amount, I wouldn't let it stop me from pursuing my dream. At your age (just coming into your prime earning years), you will recoup the loss quickly - and if there is no loss, so much the better.

I spent December-May living in my travel trailer in Florida, and thorougly enjoyed it. Of course, I was there during peak season, so the cost of renting a space in a very nice RV park reflected that. Had I chosen to stay through the summer and fall, the rate would have been significantly less, but even during the "high-dollar" time, it was less than $1200/month in the nicest RV park I've stayed in.

I kinow it can be frustrating to ask a simple question and receive input that bears no clear relation to what you asked. You sound like a person who is thoughtful to me, and who has his feet solidly on the ground, and though your plans may need to adapt to unanticipated events over time, I'll wager that it will work out well for you and your wife. I'll bet, as well, that you will be an equally thoughtful and competent sailor, and I look forward to crossing wakes with you somewhere, sometime.

TaoJones

[GDFL]

Thanks for the positive responses. I too will probably be living in an RV during peak season. The nice full hookup park down the road is only $470 per month elec. included and it borders the St. Johns River. Once the house is sold and we have an RV to live in, I will start looking at boats and I'll definitely ask about owner financing (with full legal documentation of course). I talked to my first choice of marinas again and they do still allow liveaboards. I was just talking to the wrong person. That's only going to run $480/mo for the most expensive dock.

I have considered the taxes and mortgage interest issue when doing financial planning. I haven't run the exact numbers, but I will lose a little there. I really don't mind that because I don't like the math behind spending xxxx dollars in property taxes and interest to save xxx dollars in income taxes.

Thanks for all the good advice. It has been helpful.

[Tspringer]

I have not read every post in this thread so someone else may have suggested this.....


Sell the house (sell it by owner if you can... at least try first) and in the sales contract specify that you want to complete the sale ASAP but that the buyer must agree to rent the house back to you at a sent monthly rental rate for 3 months. That then gives you time to get the deal done on buying a boat and moving and such. The mortgage will be paid off and thus not showing on credit and the short term nature of the rental agreement will prevent the rent payment from being factored into your debt to income ratio when qualifying for a boat loan.

Having the house seller rent the home back from the buyer for an initial period is not at all uncommon and is often not difficult at all to negotiate.



Terry

[Ex-Calif]

Once again I will caveat my comments with, "I am not judging or trying to offend you."

However - It seems that you are very frustrated with everyone who is trying to help you. Whether that help is directly related to your question - i.e. "See Vinne the Nose" or trying to help you understand your situation - "Basically very few options"

I will say that you didn't post a simple question - You posted a lot of detail about your frustration with home ownership, disagreeable loan officers and the fact you have no cash and a huge sunk mortgage.

A simple question would be - "Does anyone know where I can get 100% boat financing on an ~$80k 30 year old boat with no collateral other than the boat?"

Or maybe - "Here is my plan. If you agree it is a good one please post encouraging words. Otherwise don't respond."

Everything else you have posted just begs commentary in response and this is the internet so you get it. BTW the answer to the first simple question is easy - No one knows where to get 100% financing on a 30 year old $80k boat except a loan shark or selling an organ.

Sorry to stay in lecturing mode but I was where you were 3 years ago. I had a 300k mortgage on a 340k house, 70k in credit card debt, 20k in a personal loan, 30k in car loans and probably 50k in retirement savings. We still spent money like we had some. I lived paycheck to paycheck paying interest and felt absolutely trapped. I have a great income and my wife was also making a good wage. Add it up and we were like -50k in net worth. Our creditors loved us.

We sold the house, sold the cars, changed jobs, went overseas and in three years I am happily debt free - ok about 10k in credit card debt but based on cash flow it's peanuts and should be zero in a few months. Our net worth just went over 100k positive for the first time in 10 years.

I paid cash for my boat and pay cash for anything I can. I have learned my lesson completely. I agree with much of the sentiment about home ownership. I won't own another "big" house. We just did a deal on a 2 room condo with a boat dock and plan to make it home base for our eventual cruising in Asia. It is small but just what we need.

I am sure you are a smart guy and you get all this so again sorry for the lecture. Your plan to minimize costs put together a war chest and buy a boat sounds great. I encourage you to stick to it and keep us posted.

BTW - I know you don't want to hear this but you might consider a little more research into annual liveaboard costs including boat maintenance. Sean offers excellent advice regarding buying before you can afford to.

If I was in the US I would be all over buying his boat. It is excellent.

[Zingaro]

I'm sorry if this sounds harsh, but if you are on your third home and you have not built any equity you have been making money for the realtors. Selling the home is another way to loose money but they'll be happy to do it again.
You can rent the home and even if the rent covers only interest and taxes you are ahead of the game. You'll still have to make up the difference (principal) but consider that forced savings which will pay handsomely in a few years. That will be your nest egg. In the meantime get a cheap apartment and start saving. Unless you know where to find some serious cash that's the only way to start a plan. It won't happen overnight.

[GDFL]

I did make money selling the first two, but it wasn't a ton. I pocketed about 20% selling the first one without a realtor and our second house that we had built was sold a year and a half later to move to Florida. We only made about 10% after realtor fees on the second house, but the move came much earlier than anticipated due to career changes. The first house was a starter house that I bought the day I turned 21. The second house was to be our home for many years until life happend. Now that I've had a somewhat full sampling of starter, middle of the road, and higher end houses, I can honestly say that I sometimes miss my first house and the mortgage that went with it. It wasn't very big, but it was more than enough. Expensive houses aren't worth it. I'm trying to get out of that game and I'm willing to forego any possible future real estate gains to do it.

Originally Posted by Zingaro

I'm sorry if this sounds harsh, but if you are on your third home and you have not built any equity you have been making money for the realtors. Selling the home is another way to loose money but they'll be happy to do it again.
You can rent the home and even if the rent covers only interest and taxes you are ahead of the game. You'll still have to make up the difference (principal) but consider that forced savings which will pay handsomely in a few years. That will be your nest egg. In the meantime get a cheap apartment and start saving. Unless you know where to find some serious cash that's the only way to start a plan. It won't happen overnight.

[Zingaro]

Originally Posted by GDFL

I did make money selling the first two, but it wasn't a ton. I pocketed about 20% selling the first one without a realtor and our second house that we had built was sold a year and a half later to move to Florida. We only made about 10% after realtor fees on the second house, but the move came much earlier than anticipated due to career changes. The first house was a starter house that I bought the day I turned 21. The second house was to be our home for many years until life happend. Now that I've had a somewhat full sampling of starter, middle of the road, and higher end houses, I can honestly say that I sometimes miss my first house and the mortgage that went with it. It wasn't very big, but it was more than enough. Expensive houses aren't worth it. I'm trying to get out of that game and I'm willing to forego any possible future real estate gains to do it.

Whatever happend in the past six years you ended up with no equity. What you need to do now is plan ahead so that from now on you slowly build equity or savings. I tell you, when you are 27 and penniless it's not a big deal. Twenty years from now it's a different story.
Let's say you get rid of the house and get your boat. Now you have something that will not appreciate in value and require plenty of maintenance. Will you be able to set aside money every month?
Owning this home forces you to put money in it. If you rent it out in five years time, with inflation and continued pressure from a growing population, the payments will be easier and the rent will grow.
I don't see how by selling the home you gain anything. The pain you feel now is because the mortgage is a big leverage to your invesment. When the property goes down your losses are large, but when it goes up, your gains are also very high. Unless your equity turns negative you should not sell. Meantime you pay for your consumption. If you stay in the house it will cost you. If you rent it and move to a cheap apartment, you take a lifestyle hit and cash in the difference. With those savings you soon have a down payment for a boat. Unfortunately you have to be patient if you don't have the cash. take your time and look at boats so that when you are ready you will know what is a good deal.

[Ex-Calif]

"Whatever happend in the past six years you ended up with no equity."

This is a really key statement and GDFL already understands this. Basically in 3 purchases his real estate income has been zero. He is fed up with ownership as making money at it seems impossible.

However the rest of your advice reads like the American dream. Buy a house pay for it for 20-30 years and then finance what you want with the equity and appreciation you realize.

I have owned 3 homes and have a "modern" mobile job. The idea to buy and hold is a baby boomer mentality. I have lived in 3 different cities and 2 countries in the last 8 years. I am a very bad market timer and my sell timing is always based on my job. I have made 3% or so on real estate by buying in stable established neighborhoods with good school districts, basically preserving equity and realizing very modest growth.

I added up the costs of ownership, maintenance, taxes etc. on a purchased house vs. renting. Based on selling a home every 3-5 years it is cheaper for me to rent.

Owning isn't for everyone.