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Old 14-01-2017, 15:56   #1
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Housing and life post Sailing

Seems strange to be planning on life post sailing but please just bear with me for a minute.
We are getting closer to launching and starting our new sailing life. We are doing the big pack up and selling everything up and heading off over the next six months or so. I am being a bit of a stress head re the future - post sailing. We are 59 and 63 and all going well intend to sail for a number of years. How long is a piece of string? What are people planning to do about a house/cars and old age when you come back from sailing? Do people have investment properties to keep a foot in the real estate market? Are you just going to wing it when the time comes, sell your boat and with whatever $$$ you have left buy a house. We need to sell our current home as it's on acreage and just not practical to rent out for years to come and due to circumstances we have eaten into some our $$$ more than we had budgeted. So I would love to hear your thoughts and ideas so I can stop being stressed and just get out there and enjoy the sailing and exploring part. Hope this makes sense!!! Thanks heaps Gaye
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Old 14-01-2017, 16:28   #2
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Re: Housing and life post Sailing

1. Can you buy a house with your house proceeds that can be rented until you are ready for it? In the US if you sell the house and don't buy another, you're going to pay capital gains on your sale.
2, How much can you leave in investments to use for retirement income?
3. What is your income while cruising?
4. Figure out what your income and your capital is likely to be if you bail out of cruising after five and ten years, and if one of you dies.
5. Find a professional to help you with all this - it's too individual and too complicated for you to rely on advice from the forum alone.
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Old 14-01-2017, 16:44   #3
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Re: Housing and life post Sailing

property is really bad investment, made look good by perpetual money creation.

government/banks are easing lending policies to create fresh cash and use property as a vehicle.

As unimproved properties appreciate 4% pa, 2-3% after costs + 3% rent which totals 5-6 %, this is comparing risk and hassle free term deposit of 3%. While this trend in place, banks appreciate 20 % p/a.

That is where real money lies.

If you can swallow market gyrations investing in productive entities will reward you much more, but you must not sell at next market 'world is coming to an end' scenario. That is when you actually need to buy.
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Old 14-01-2017, 16:54   #4
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Re: Housing and life post Sailing

Just thought I'd correct this statement:
> In the US if you sell the house and don't buy another, you're going to pay capital gains on your sale.

Actually the first $250k (for a single) or $500k (for a married couple) of capital gains is not taxed. That is per property sale for a primary residence. Used to be it was a $500k lifetime, but several years back it was changed to be per property sale.

The main qualification is that you must have owned and lived in it for 2 of the 5 years before selling it.

Here is the relevant info straight from the IRS:
https://www.irs.gov/taxtopics/tc701.html
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic 409 covers general capital gain and loss information.

Just wanted to get that straight right off the bat.

Cheers,
Joe
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Old 14-01-2017, 17:20   #5
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Re: Housing and life post Sailing

Quote:
Originally Posted by WildFireAus View Post
Seems strange to be planning on life post sailing but please just bear with me for a minute.
We are getting closer to launching and starting our new sailing life. We are doing the big pack up and selling everything up and heading off over the next six months or so. I am being a bit of a stress head re the future - post sailing. We are 59 and 63 and all going well intend to sail for a number of years. How long is a piece of string? What are people planning to do about a house/cars and old age when you come back from sailing? Do people have investment properties to keep a foot in the real estate market? Are you just going to wing it when the time comes, sell your boat and with whatever $$$ you have left buy a house. We need to sell our current home as it's on acreage and just not practical to rent out for years to come and due to circumstances we have eaten into some our $$$ more than we had budgeted. So I would love to hear your thoughts and ideas so I can stop being stressed and just get out there and enjoy the sailing and exploring part. Hope this makes sense!!! Thanks heaps Gaye

We've kept our house and rented it out. It's not ideal, rents aren't great in that area, sometimes it's a PITA, but we feel that at least we still have a foot in the real estate market, so if prices rise dramatically (it's happened before, we hope it might happen again) we won't end up shut out for good.

Our block is also approved to subdivide, so our tentative plan when we give up cruising (subject to change) is to split our block, sell the existing house, the boat (that's going to hurt) and build a new house on the other half of the block.

What would (IMO) have worked better for us may have been to subdivide, sell the house and the block, and buy more than one rental property in areas with better rental returns.
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Old 14-01-2017, 17:20   #6
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Re: Housing and life post Sailing

> What are people planning to do about a house/cars and old age when you come back from sailing?

> Do people have investment properties to keep a foot in the real estate market?

Real estate rental property is our plan both for cash flow and to keep money in real estate as an investment. We're currently a couple years away from retirement and buying a boat, but have a few rental houses. Will use property managers while out sailing. $20-$30k net income cash flow from each house once the mortgage is paid off. That should be plenty.

At the end of sailing, we'll live in one of the rentals for two years and fix it up so we can sell it without a capital gains hit. You can also avoid capital gains on sale of a rental property by buying another rental property (a 1031 like kind exchange) so we might do that too.


I'd suggest selling your property since you said it will be difficult to rent it out. No sense keeping it if it's not producing income. The question then is where to invest the proceeds while you're out sailing. Putting it into real estate isn't liquid and will tie up your funds so you won't be able to get to the equity if you need to. I don't generally buy real estate unless I'm holding it for at least 5 years. The cost to sell (6% commission, taxes, etc) is a big hit against any appreciation. Managing a rental means a property manager and maintenance expense. Our experience with rental property has been that you incur a lot of maintenance during the early years of owning the property, until things are under control.

My suggestion would be sell now, park the money in stocks and bonds, sail and enjoy life, then buy a property when you return to land. The other thing is that sailing to new places may gave you new ideas of where you want to resume your life on land, so having flexibility in where you purchase post sailing will be a good thing.


> property is really bad investment, made look good by perpetual money creation.

I seriously don't know where people come up with this stuff. My (real) experience is completely the opposite.


Cheers,
Joe
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Old 14-01-2017, 17:37   #7
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Re: Housing and life post Sailing

I'm just a little behind you in the process, but have many of the same worries. Mostly if housing appreciates and the boat depreciates how bad will the spread be? My wife and I are both going to retire early at 57. Instead of acreage we have rural lake front property. Possibly rentable, but not VRBO vacation rentable.

I have to decide next year if I sell the home and pay cash for the boat, or rent the house and borrow money for the boat.

Some Ideas:

Renting mostly comes down to Who. Is there someone I trust to rent? Management companies take a big bite, but provide needed services. Interest rates take their share, will the appreciation make up for the expense and hassle?

Selling the house is a hassle also. Will I get the price I need in time? How much work and time will I need to put in to sell at that price?

Transaction costs can kill. I was a stock broker for a while and understand both the need for real estate and boat brokers and also transaction costs. I would use brokers for both real estate and the boat, but..... 10% to sell house, 10% to buy boat, 10% to sell boat, 10% to buy next home, :face palm: a killer.

I have no good solutions, only the same questions.

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Old 14-01-2017, 17:37   #8
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Re: Housing and life post Sailing

WildFireAus,

Just noticed you're Australia based, not US. So you can disregard the US tax specific stuff in my previous replies.

We have a couple of rentals on the Gold Coast. Cash flow positive from day one. And that area is unlikely to see values go down. Buying a rental there wouldn't be a bad idea. But do it soon - Commonwealth Games will be there in 2018 and are likely to drive up prices.

Cheers,
Joe
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Old 14-01-2017, 18:52   #9
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Re: Housing and life post Sailing

We sold off the house (also on acreage), cars, whatever we could get rid of. We're fit, healthy, and have no plans to move back ashore until we get put in a senior care facility or something. Our boat is comfortable in addition to sailing well, so we'll continue to live aboard and sail locally after our voyaging days come to an end. We're early 70s now and hope for another 10 or 15 years. Of course plans can and do change suddenly. We'll deal with that at the time.

There are a number of sailors on this forum older than we are that seem to be managing quite well. If your health continues to be good and you enjoy what you're doing, no need to stop.

Cheers,
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Old 15-01-2017, 04:56   #10
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Re: Housing and life post Sailing

Forty-five years ago my wife and I moved aboard a thirty foot sailboat and headed south out of the Chesapeake. We had few anxieties, but planned our budget carefully while adventuring into the unknown life of liveaboard cruising.

Forty-five years later my wife and I are preparing to sell our boat and move ashore. We have few anxieties, but we are planning our budget carefully while adventuring into the unknown life of living ashore.

We've discovered that beds ashore come in a ridiculous number of layers that don't seem to have any function other than raising the mattress higher and vacuum cleaners are huge, loud and the about the size of a binnacle.

The adventure continues!
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Old 15-01-2017, 05:41   #11
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Re: Housing and life post Sailing

Thanks for the feedback guys. Sorry should have mentioned that we are Aussie based.
All going well the plan is to buy an investment property. However having said that the financial advisor suggests keeping everything in superannuatation.
However I did like your suggestion AQuadreams (Joe) to invest for awhile and then you can access more readily, when you have found the solution. Like you we have also had quite positive returns on realestate, but I can understand that for Arsenelupiga that the market can be fickle in Sydney.
HAd thought of the Gold Coast so thanks for the heads up on Commonwealth Games as well Joe.
44'cruisingcat we had an agent suggest the same thing - sell out place and buy two new places and get more return than you would on one. ITs certainly an option worth exploring.
How brave are you guys jdazey!! Best of luck!
If you find the answer Kentm let me know please. Sometimes life throws us a few curve balls Hudson Force an no matter how careful or accurate your planning is some damn thing comes along and can stuff everything up. All the best with your transistioning to shore.
Cheers
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Old 15-01-2017, 10:06   #12
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Re: Housing and life post Sailing

The tax laws have changed in the US. You do not pay taxes on $500,000 gain (couple, $250,000 single file) if you held the property for at least 2 years. You must live in the house 3 out of the past 5 years if you rent it to avoid capital gains tax.
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Old 15-01-2017, 10:22   #13
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Re: Housing and life post Sailing

Been there done that. My feeling is that boats depreciate while houses can appreciate. Therefore a lot of the proceeds from selling the house should go into investments NOT the new boat. Of course it all depends on your other assets but it's reasonable to assume that when you sell your boat you will not generate enough to buy a house that you want.
If your home is your primary asset I would try to invest something north of 67% of the proceeds and budget the rest for boat purchase and fitting out. Just some rough numbers, your $200k house will probably cost $300 or a lot more to duplicate in 10 years while your $100k boat will probably be worth less than $50.
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Old 15-01-2017, 10:22   #14
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Re: Housing and life post Sailing

We rented out the house which was free and clear and sailed around the world in the early eighties. This was our 2nd extended voyage. It was great to have a home to return to. 75% or more of our close cruising friends divorced soon after returning to land which is beside the point.

After our 3rd extended voyage of six years, having lived for so many years without all the "stuff" most of which was used to maintain all the other stuff, we were happy to downsize into a resort condo complex next to a great ski area where others deal with all the maintenance and we are free to spend our summers sailing the PNW.
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Old 15-01-2017, 11:02   #15
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Re: Housing and life post Sailing

Quote:
Originally Posted by aquadreams View Post
Just thought I'd correct this statement:
> In the US if you sell the house and don't buy another, you're going to pay capital gains on your sale.

Actually the first $250k (for a single) or $500k (for a married couple) of capital gains is not taxed. That is per property sale for a primary residence. Used to be it was a $500k lifetime, but several years back it was changed to be per property sale.

The main qualification is that you must have owned and lived in it for 2 of the 5 years before selling it.

Here is the relevant info straight from the IRS:
https://www.irs.gov/taxtopics/tc701.html
If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income. You may qualify to exclude up to $500,000 of that gain if you file a joint return with your spouse. Publication 523, Selling Your Home, provides rules and worksheets. Topic 409 covers general capital gain and loss information.

Just wanted to get that straight right off the bat.

Cheers,
Joe
Good information Joe but they are in Australia. My question is, in California is there a law about no capital gains on a house at all if you are over 55?
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