Boat Slip Financing

[secondcurve]

Originally Posted by Lakesrider

Yeah, owning a condo slip is a terrible idea. I mean I was an idiot and bought one for $52,000.00 and sold it for $89,000.

I own another now. Bought it for $82,000 and was offered $95,000.
We are looking for $109,000. Boat included.

I am such a putz!

When owning you don't have to look around for a slip to rent every year.

When you own, you can easily rent out your slip to pay for the mortgage if you don't want to use it. You also make friends that you get used to every year. They will check your boat for you if you are not around some weekends. Renters don't always get that kind of camaraderie. Check with the association though. Just because you own does not mean you can just put any size boat in the slip. Own it or not most have a beam and length limit.

Lakesrider:

Birchhaven is correct that buying a boat slip at this point is not a smart investment. The numbers simply don't work as there is tons of negative cash flow associated with the average slip purchase these days. Many people made gobs of money buying and selling houses, but guess what that doesn't work too well now. Unless you plan on owning your slip for a longtime or you subscribe to the greater fool theory I would be careful.

[Irish mist]

If you are in a credit union that might be the most easy way to get a loan these days for something like this.

[jrc]

Buy low, sell high, do you expect the overall real estate market to go any lower? Be warned, there are still a lot of overpriced properties out there.

With all the shoreland and wetland rules, do you expect many more condo marinas on the lake?

A growing population and a limited resource, usually means higher cost, just have to wait out the economy.

This is not meant to be investment advice.

[ishoot308]

I guess if anyone was going to buy a slip, now would in fact be the time to buy!!

Dan

[Lakesrider]

Originally Posted by secondcurve

Lakesrider:

Birchhaven is correct that buying a boat slip at this point is not a smart investment. The numbers simply don't work as there is tons of negative cash flow associated with the average slip purchase these days. Many people made gobs of money buying and selling houses, but guess what that doesn't work too well now. Unless you plan on owning your slip for a longtime or you subscribe to the greater fool theory I would be careful.

Oky Doky.
Maybe my first reply was a bit on the snide side. Not completely meant to be rude. So I apologize for that and being taken so.

I guess then we need to look at the original post. The person is interested in buying/financing a slip. He must have a reason for wanting to buy. Just as I did. If he does his research, as I did, he will make the decision to buy or not to buy. Buying does not always have to be about smart or not. It is about how he/she will use or not use the slip. If they are going to use it regularly it is a good investment to them. If they enjoy it...good investment. Have friends and family come to visit and enjoy the lake....good investment. If it is going to sit there with no use...bad investment. Thinking you are going to make a real estate bonanza when you go to sell....bad investment. Investment is not always about money. This is why I bought my slip. My investment is in how much I enjoy my marina, my boat, not having to trailer, etc. BTW He did not ask our opinion on whether or not we would buy. I bought my first slip years ago. The price went up when I sold the first one. Bad decision? Not for me unless you call making over $30K a bad decision. I bought my present slip 5 years ago, no intent to sell unless I can get my asking price. I have it and my boat in this sites classifieds before, so obviously I would sell if I did get my price. Right now I realize the market is not great. So I keep the slip. Big deal. It is all good for me. Maybe I am the greater fool. But there seem to be quite a few of us fools out there, because all of my slip mates own their slips. Hmmm...Does everyone there feel they made a bad investment? Maybe, but we all have fun with it. The poster of this thread needs ask himself the same questions I did. Is the marina a good one. Had any financial troubles? Is it a viable marina? What are the advantages and disadvantages of having your slip there? Amenities? People, noise, etc. Price to me is not an end all to owning. If you only plan to have your boat for a few years...rent. Mine is a 1986. I choose to own. I did not have to finance. Good decision for me.
I don't appreciate people suggesting that I am not sure of myself. So far I made two good choices for my slips that I use regularly and enjoy owning.
So to the original poster...If it is good for you listen to your heart, but use your brain.

Hopefully I explained myself, and you understand why I purchased, do not rent, and my apology will be accepted. I will try not to be so sarcastic in the future.

[secondcurve]

Originally Posted by Lakesrider

Oky Doky.
Maybe my first reply was a bit on the snide side. Not completely meant to be rude. So I apologize for that and being taken so.

I guess then we need to look at the original post. The person is interested in buying/financing a slip. He must have a reason for wanting to buy. Just as I did. If he does his research, as I did, he will make the decision to buy or not to buy. Buying does not always have to be about smart or not. It is about how he/she will use or not use the slip. If they are going to use it regularly it is a good investment to them. If they enjoy it...good investment. Have friends and family come to visit and enjoy the lake....good investment. If it is going to sit there with no use...bad investment. Thinking you are going to make a real estate bonanza when you go to sell....bad investment. Investment is not always about money. This is why I bought my slip. My investment is in how much I enjoy my marina, my boat, not having to trailer, etc. BTW He did not ask our opinion on whether or not we would buy. I bought my first slip years ago. The price went up when I sold the first one. Bad decision? Not for me unless you call making over $30K a bad decision. I bought my present slip 5 years ago, no intent to sell unless I can get my asking price. I have it and my boat in this sites classifieds before, so obviously I would sell if I did get my price. Right now I realize the market is not great. So I keep the slip. Big deal. It is all good for me. Maybe I am the greater fool. But there seem to be quite a few of us fools out there, because all of my slip mates own their slips. Hmmm...Does everyone there feel they made a bad investment? Maybe, but we all have fun with it. The poster of this thread needs ask himself the same questions I did. Is the marina a good one. Had any financial troubles? Is it a viable marina? What are the advantages and disadvantages of having your slip there? Amenities? People, noise, etc. Price to me is not an end all to owning. If you only plan to have your boat for a few years...rent. Mine is a 1986. I choose to own. I did not have to finance. Good decision for me.
I don't appreciate people suggesting that I am not sure of myself. So far I made two good choices for my slips that I use regularly and enjoy owning.
So to the original poster...If it is good for you listen to your heart, but use your brain.

Hopefully I explained myself, and you understand why I purchased, do not rent, and my apology will be accepted. I will try not to be so sarcastic in the future.

Lakesrider thanks for the clarification. If boating is your thing I can understand wanting to acquire a slip at what I believe are currently astronomical prices. However, Taking the emotions out of the equation here is a quick example of what a typical transaction looks like on Lake Winnipesaukee and why it doesn't make sense from an economic perspective: $100,000 purchase price, $20,000 down payment, 7% interest rate, 20-year amortization, $2,000 in annual property taxes and $700 in annual condo fees. Let's do the math: The monthly payment to own the slip is $617.00. Adding in the annual condo fees and property taxes the annual carrying cost for this typical slip is $10,104 and that doesn't even factor in the $20,000 down payment! The rental cost of a slip like this is running around $2,500 per year so each and every year I would have $7,604 of negative cash flow if I bought this slip. With this type of negative cash flow I am fairly certain boat slips on Winnipesaukee are going to depreciate for many years into the future. I could be wrong but I am fairly certain I am not.

[NoRegrets]

When you pay off the slip (or pay cash) you have a capital asset that can be a part of ones net worth. After 20 years of renting or leasing all you have is the fond memories. There is an emotional value to owership and a sense that you can control your destiny. If the payments don't impact lifestyle or future obligations then I would think the purchase makes sense.

[Mink Islander]

If you took that $7604 of annual negative cash flow and invested it in montlhly installments (i.e. $634/month), you would have a tidy sum of $$ at the end of 20 years. For example, if you invested it at a paltry 2% per annum, you'd have nearly $187K, at 5%, over $260K and at 8% (a common long term equity return assumption), you'd have over $373K. So if you buy the condo slip, (all the intangibles aside -- which are real but very subjective considerations) you are making an implicit bet that the slip will appreciate in value more than if you had invested the money elsewhere. And by comparison, the sum of the interest, taxes and condo fees plus your $100K investment will total $223K ($69K of interest, $54,000 of property taxes and condo fees plus your $100K investment) over those 20 years. So if you're making this as an investment, you really need to think hard about where you believe values will go over the long term. Single asset risk too. On any risk-adjusted basis, I think it's tough to argue condon slips are good investments unless you really truly believe you've bought at a very low point in the cycle. Just my 2 cents (with a little help from my HP 19B II calculator!)

[jrc]

I don't have the time to run this but think about two 10 year scenarios.

1) Rent. You pay an average $3500 a year to rent a slip and $500 a year to store your boat for the winter. You take $50,000 and invest it in a safe investment.

2) Buy. You buy a slip for $50,000. You pay $1200 a year in taxes (which you deduct from federal). You pay $750 a year in condo fees. You sell the slip for $100,000 at year 10.

Which one leaves me better off in 2020?

[Mink Islander]

Doubling your money in 10 years is a CAGR of 7.2%. Expecting value to increase at a rate much higher than inflation indefinitely is a bold assumption. Not saying it couldn't happen, but you're making a significant bet that demand for condo slips will continue to grow strong enough to drive prices significantly higher in real terms over a 10 year time horizon. Back to one of my original points that your views on slip ownership will be highly influenced by your views on expected appreciation in value and your assessment of opportunity cost (what else could I do with the money).

And the interest is a federal tax deduction so your after tax rate is lower, but it's not zero.

If you have a condo slip your storage is included in the condo fee? You didn't assume any storage costs if you own a slip? Just curious.

[Lakesrider]

Well some might have to or want to store their boats and pay a fee. many simply trailer them home or to a friends house for the winter.
If you look at global warming, or the supposed global warming factor. NH will have the same temps as Florida does now in no time. So more people will be moving here, as is the case already. Less develop-able (Is that a word?) land
So technically a slip should be a good thing to buy now. Hand it down to his kids for their inheritance.
In theory. I believe the slip values will remain or get higher. However the economy is taking a huge toll on slips. My other theory is if you can afford a slip there is no real danger to you. Sure invest and not buy. But then his original post becomes a moot point. But I keep going back to the fact that the person is looking to buy...not rent. Investment of a slip is truly not practical....right now. But practicality aside there are other advantages of owning other than price as I mentioned before. So let him decide on the practicality for himself. He may be in a good position to afford a slip. Yes? No? I have no idea.

BTW. Safe investment? What is that these days?

I am so confused. I am going to get an ice cream...............................

[braunbayboater]

This thread is exactly why I do not post on this forum. The question was quite simple - how to finance a boat slip. The comments were not helpful (I must admit I did not read them all) abd they did not offer helpful info. The post asked for help since he had already made the decision to buy - it is not you place to lecture him on how bad his decision might be.

[jrc]

bbb, this thread has been civil and only a little tangent off the original topic. Do you really think cm671 has been offended by the banter? I meant no ill will to anyone, no investment advice is absolute, so there are always opinions. Compared to some threads this one is very tame.

[codeman671]

Originally Posted by jrc

bbb, this thread has been civil and only a little tangent off the original topic. Do you really think cm671 has been offended by the banter? I meant no ill will to anyone, no investment advice is absolute, so there are always opinions. Compared to some threads this one is very tame.

I am certainly not offended, no reason to be.

I've decided to hold off for now on the slips. The price is fair, certainly WELL below $100k (each) that a few have mentioned as examples. The math is not great however the location is. Being islanders we keep two slips on shore, just a few spaces apart. The thought of having 2 side by side is great, but not at the expense it will cost.

With taxes in the $2k range and $1200 in club fees for the pair plus insurance and principal/interest payments of $716 (assuming a 20 year at 6%, which may be low figuring that this type of mortgage is higher and shorter than a conventional home purchase) we'd be pushing $12k+ annually for both assuming 20% down and a $100k note. I could pay cash or use a home equity line but think that I'd rather keep my money where it is. The price is fair for them, but the money is not burning a whole in my pocket enough to suck up an annual nut like that.

$1500 a year in club fees for MVYC? That is crazy.

[birchhaven]

I asked a friend about the marina I thought was doing the perpetual lease, I was wrong or sort of right, it turns out if you buy some land it comes with the perpetual right to lease a slip at a locked in rate. So I guess it is kinda what I thought it was, but you still have to shell out some cash, +-150k for the land and then you get to lease the slip for as long as you own the land. So I guess it depend on your mental state, you get a slip and land for a little more money. I guess it beats buying land and then buying a slip on top of it.

[laketrout]

I agree with others that renting a slip for the year might be financially wise. That said is buying a boat money smart? Many know the answer to that question, Not really. There are many good deals out there right now on docks and properties and yes some are still over priced whilst others are at a great discount. If you have the money go for it and buy it. As for financing a dock you can do a home equity and or a loan at one of the local banks who will be more than glad to provide you with a loan if you have OK credit.
It is not whats right but whats right for you.

[secondcurve]

Originally Posted by braunbayboater

This thread is exactly why I do not post on this forum. The question was quite simple - how to finance a boat slip. The comments were not helpful (I must admit I did not read them all) abd they did not offer helpful info. The post asked for help since he had already made the decision to buy - it is not you place to lecture him on how bad his decision might be.

I must ask the question, who is lecturing who?

[chunt]

Try a second morgage on your house. You can deduct the interest paymnents on your taxes. If you get a morgage for the slip, you will not be able to deduct the taxes. Slips at MVYC in gilford, on average, are taxed at $1300 per year with a tax rate off $17 per $1000. Condo fee is $1500 per year.

[secondcurve]

If the price increase of Winnipesaukee slips over the past 10-years was supported by fundamentals, wouldn't the rental cost of slips have increased at a similar rate? Prices of slips exploded in the past 10-years, but the cost to rent never increased at anywhere near the same rate. This is an important factor in my thesis that the price of the average slip on Winnipesaukee is only underpinned by the greater fool theory.

[This'nThat]

See here. This is what they say on their web site: Our loan experts are well trained and extremely knowledgeable on all the nuances of borrowing for the vehicle you seek. We even have financing solutions to help you secure boat slips. Loan terms range from 12 months to 120 months (for certain boat loans) and feature competitive rates.

[Mink Islander]

I hardly think walking through the math on buying slips is "not helpful". Often a specific question leads to a broader discussion that everyone finds useful.

Usually, it's when people go negative or criticize each other that threads go downhill. Hey wait......

[birchhaven]

I am lucky enough to own a house on the shore so I have my own dock. What I am wondering is? Is the biggest con to renting a slip, the unknown? As in not know whether or not you can rent it year after year? Making one of the biggest benefits to owning a slip the knowing?
I only ask because I heard discussion of one marina offer a perpetual lease, that seems like it might be the best of both worlds. I don't know all the details but I can look into it if those are the reasons for not liking renting?

[secondcurve]

Originally Posted by birchhaven

I am lucky enough to own a house on the shore so I have my own dock. What I am wondering is? Is the biggest con to renting a slip, the unknown? As in not know whether or not you can rent it year after year? Making one of the biggest benefits to owning a slip the knowing?
I only ask because I heard discussion of one marina offer a perpetual lease, that seems like it might be the best of both worlds. I don't know all the details but I can look into it if those are the reasons for not liking renting?

Birchhaven:

I believe that is the case. Fear of being without a slip in combination with declining interest rates over a number of years resulted in the price of slips being bid up substantially. Increasing slip prices in turn supported the notion that a boater could be caught without a slip and also the idea that slip prices could never fall. Clearly there is a finite number of slips on Winnipesaukee and this supply won't increase much, if at all, in the years to come. However, I'm not sure this dynamic supports the current average slip pricing on the lake.

[VtSteve]

Originally Posted by secondcurve

Birchhaven:

I believe that is the case. Fear of being without a slip in combination with declining interest rates over a number of years resulted in the price of slips being bid up substantially. Increasing slip prices in turn supported the notion that a boater could be caught without a slip and also the idea that slip prices could never fall. Clearly there is a finite number of slips on Winnipesaukee and this supply won't increase much, if at all, in the years to come. However, I'm not sure this dynamic supports the current average slip pricing on the lake.

It might not, it takes time to steady out from economic fallout of paying whatever for whatever. Boat slips become like gold, scarce and sought after. Expansion of marinas is looked at like a giant, lake-eating fungus, so I doubt that will happen.

I'd have to think there is future value in owning a slip, while there is no value in renting one, except it's year to year. Most excluded this aspect of the comparisons, which also makes the slip collateral for a bank. Good selling point also if you ever sell a place on an island, include the slips.

Is MVYC a club with nice facilities?

[DRH]

We own a slip in Minge Cove and the total annual assessment is less than $900, most of which represents town property tax which is deductible.

[TomC]

Originally Posted by secondcurve

$100,000 purchase price ... snip... $2,000 in annual property taxes ...

A $2K tax bill seems high. does any town (with dockominiums) have a $20 mil rate?