Slip at Mountain View Auction

[pjard]

In case anyone is interested, slip F-6 sold today at auction for $37,000.00 I keep thinking about buying a slip but even at $37K it's still better to rent. Here's my logic....cost of money for $37K is $1,500, Taxes to Gilford $1,200, Association Fees $1,500...total cost to own is $4,200. Rents at MVYC including winter storage are $2,800 to $4,000....cheaper to rent! Someone please find the flaw in my logic...really.

[Descant]

Years ago, many island residents bought because they wanted an assurance that they could always have access to their island with a PREDICTABLE PRICE. Want to buy a new boat? You have to buy my brand to keep your rental slip. Got a lease at the marina? Not for multiple years, I bet. When will the rental price go up? Every year. After 10 years of boating, what's the value of your rent receipts? What's the value of the condo you own and can sell?

If you're short term, renting makes some sense. Try it out, see if you like this part of the lake, etc. If you're a long term boater and want something for future generations (many islanders are on 4-6 generations) it makes sense.

So you own a boat. Usually not a wise financial investment. It's a pleasure boat, right. Enjoy the pleasure of owning a slip with the same friends on the dock every year, a vote in how the condo is managed and what the fee structure will be. Or let the marina tell you where to go and what the price will be. $37,000 at MVYC is probably a huge bargain. What's the price of a private beach (2) on Lake Winnipesaukee?

[jrc]

Well the only flaw in your math is not taking into account capital appreciation. If the sell price of the slip increases by 3% a year, then the extra $1100 a year would cover the rent difference.

Then again if the value decreases, you are even worse off. There is a minimum value of lake front property, the trouble is that no one knows what it is.

[secondcurve]

Originally Posted by jrc

Well the only flaw in your math is not taking into account capital appreciation. If the sell price of the slip increases by 3% a year, then the extra $1100 a year would cover the rent difference.

Then again if the value decreases, you are even worse off. There is a minimum value of lake front property, the trouble is that no one knows what it is.

JRC the significant factor underpinning "capital appreciation" is interest rates. They have been on a 30-year downward trend (now basically zero). Anyone who bought assets in the past 30-years has done well due to the tailwind of the Fed's interest rate policy. The bottom line is this will not always be the case. Therefore, when making a discretionary purchase like a slip I wouldn't count on much "appreciation" to make the math work.

[jrc]

I meant capital appreciation in the value of the slip. Today at auction that slip is worth $37K. Next year if it is worth $38K, then leaving the rest of his example as is, buying is about equal to renting. He has interests rates in his example buried in the time value of $37K.

I don't think it all that clear that the capital appreciation of this specific asset is well correlated to the Fed's low interest rates. As a global effect, yes interest rates are a factor. but each asset stands on its own. Slips and other condos have depreciated more than over the last few years than the overall real estate market. They may appreciate more when things recover.

Then again sometimes a turd is a turd.

[pjard]

Capital appreciation? I don't see that happening anytime soon. There are LOTS of slips for sale/rent and many other alternatives like rack storage and morings. The inventory is much higher than the demand. Even at $37K my money is doing better at Fidelity. I agree that it sold for a bargain price but from an "investment" standpoint slips have to drop to the mid $20's before it makes sense. Now all things considered I do agree that "owning" your own is good peace of mind and that is a factor that you really can't put a price on. The other factor for me personally is that I live in Gilford and have access to the lake at 3 different locations (Gilford Town Beach, Gunstock Acres Beach, family member in West Alton). The club ammenities have almost $0 value to me. That's pretty important I guess in the big picture.

[codeman671]

The average selling price of slips in Gilford has dropped considerably in the last 10 years. I think that $37k however is a safe "buy" price. In Gilford Yacht Club slips that are $50k now used to sell between $75-100k. The larger, more rare slips that have unlimited length or beam are still a rarity and can command a larger price as for those that have a very large boat they just cannot be put anywhere.

Slips down in Minge Cove command a premium and have solid demand as they have a captive audience of islanders and not a lot of space available to rent. Minge Cove is a more ideal marina for islanders than WAM from what I have been told by islanders in the Alton area.

As far as the math goes, if you have cash to spend and don't mind tying it up buying is not a bad idea. If you have to finance the long term cost of ownership is not great.

[jrc]

We are still locked into a jobless recovery, so "fun" spending is depressed. Assuming we eventually recover from this recovery, demand will increase.

There will never be less people than there are today, and there will never be more shoreland.

[Taz]

I have done the math, I own a slip, your logic makes sense, I have thought the same as you, but when I bought it was less that what they cost now. Going strictly by math you are right. However, you can never recover what you spent on rent but if you buy you could potentially recover what you have spent and possibly make a profit, maybe. Also, you never have to worry about moving to another slip because the rent went up or someone sold it, you have the security of knowing where your boat will be docked every year. I know renters who have had bad dealings with owners they are renting from because they wanted to go up on the rent so if you don't like it you move but maybe not to a slip you desire or on a differnt dock after you have many friends at a dock you like. Just saying there may be other considerations than just the math. Its all preference. I do not regret buying.

[TiltonBB]

Originally Posted by pjard

In case anyone is interested, slip F-6 sold today at auction for $37,000.00 I keep thinking about buying a slip but even at $37K it's still better to rent. Here's my logic....cost of money for $37K is $1,500, Taxes to Gilford $1,200, Association Fees $1,500...total cost to own is $4,200. Rents at MVYC including winter storage are $2,800 to $4,000....cheaper to rent! Someone please find the flaw in my logic...really.

Well.............If you financed the purchase with a tax deductible home equity loan your interest rate would probably be below 3% and depending on your tax bracket there would be some savings there with the interest deduction.

Your Gilford taxes would be also be deductible so there would be some savings there.

I think that there will be some appreciation going forward because as the area continues to grow more people will want access to boats and need docks on the lake. The law of supply and demand will certainly factor in.

As others have said, you will also have the security of knowing where your boat will be each year and have some reasonable idea of the cost. The friendships you will make with the people on your dock will stay with you for a long time. You can't put a price on that.

At this time over half of the 284 slips at MVYC are not used by the owners. There have been many years that there was a waiting list for rental slips at MVYC. Owning a slip eliminates that issue for you.

I have owned a slip at MVYC since 1996 and I have seen many changes in the slip prices over the past 18 years. I have never regretted buying it even though I keep my boat elsewhere and no longer use the slip. As a rental the return is not great but it is nice to know it is there if it is needed in the future.

[BroadHopper]

Total cost to own a slip is $4200. Total cost to rent a year round covered slip. (The boat is hoisted out of the water in the slip during the winter month) is $3000. I will stick to renting.