Will You Go Broke On A Boat? - 1999 Viking 60 SportYatch

I hate to say it, but your just one break down from going broke. One serious break down from going bankrupt and still having a bank note.

DON'T DO IT!

Thank you for the patience, having access to the Freedo boat club sounds like the most reasonable first step. That way you can build up 100hrs of experience with a licensed captain for preparation in the insurance department.

That is an excellent idea. A great way to dip your toe in with no long term commit or huge up front investment.

READY said:

That is an excellent idea. A great way to dip your toe in with no long term commit or huge up front investment.

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Appreciate it, I would've never known the service existed, thank you all.

I would say don't do it. In every case, I would say don't buy a boat unless you can afford to pay cash for it. Also, you need to really drill down on what is available, and how much it will cost for insurance that covers Hurricanes on PR.

Snapdragon III said:

I would say don't do it. In every case, I would say don't buy a boat unless you can afford to pay cash for it. Also, you need to really drill down on what is available, and how much it will cost for insurance that covers Hurricanes on PR.

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Yes understood on the burden of just getting coverage and I need to a few years to work on that. But how do most yatch owners finance $2million dollar plus vessels? During low interest rates, they could just borrow against their assets, which made sense.

Doesn't it make theoretically more sense to get a loan, if you can write off the interest expense?

It will be achievable to have a monthly income to cover something like this, but to pay in one lump that could mean savings of 20 years? Is that really necessary if it was treated as the primary residency? That is another struggle to deal with.

There's an old saying that banks like to lend money to people who don't need it. A boat is lousy collateral and will result in an expensive loan with lousy terms if you can even find a lender.

While I know a lot of owners who would be hit hard if their boat was lost, I don't know anyone who's boat is their top asset. They have access to capital secured by other assets if desired.

Peter

El Dorado said:

Yes understood on the burden of just getting coverage and I need to a few years to work on that. But how do most yatch owners finance $2million dollar plus vessels? During low interest rates, they could just borrow against their assets, which made sense.

Doesn't it make theoretically more sense to get a loan, if you can write off the interest expense?

It will be achievable to have a monthly income to cover something like this, but to pay in one lump that could mean savings of 20 years? Is that really necessary if it was treated as the primary residency? That is another struggle to deal with.

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In my personal experience, everyone that I know that bought a 2 million dollar boat could easily afford to pay cash for it. They might not have due to some tax reason, or something, but it wasn't because they didn't have the cash. I had one friend with a boat that was valued right around 2 million, used (it was 3.5 new), and his insurance was $50K a year!

El Dorado said:

But how do most yacht owners finance $2million dollar plus vessels?

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As stated above. Wire transfer the CASH.

El Dorado said:

Doesn't it make theoretically more sense to get a loan, if you can write off the interest expense?

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A purchase of <$300,000 primary residence, sure. And that is how you are thinking about this purchase.
This isn't house with some added monthly expenses. This is more like a serious monthly or on going expense that happens to be relatively low cost to get into. A 25 year old yacht that has depreciated significantly in value. But the maintenance does not stop. It gets more expensive.

El Dorado said:

It will be achievable to have a monthly income to cover something like this, but to pay in one lump that could mean savings of 20 years? Is that really necessary if it was treated as the primary residency? That is another struggle to deal with.

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This is why it is necessary to have pre-purchase inspections. To know what is obvious to a trained eye that will be immediate problems to address.

This disclosure will keep me sleepless for the next week and it is not even my finances:

"Here’s the scary, but workable part. As people are well aware nowadays, most families don’t have $100k saved up in cash. Neither do we, so this was going to be approached from a rent to own and then to financing, until a down payment could be achieved. Which wouldn’t make the monthly payments too terrible (looking to be under $3,000 if interest rates come down)."

Admittedly, I am new to the forum and while owning boats for 40 years, none larger than 28'

But this seems like a very costly vessel --- where one should have several hundred thousand in cash, perhaps even $500k on hand, before taking the plunge?

we are very nervous about costs while considering something like an older Kha Shing 36' for $70,000 and popped onto this section to see about what we could be getting ourselves into!

tiltrider1 said:

We are talking about a boat that can do 22 kts if you can afford the 125 gallons per hour. Granted, you can slow down to 9kts and it’s probably a 1 gallon per nautical mile boat. I am assuming that you will still be in the MAN’s allowable operating window. Big diesels like these have minimum temperature and RPM requirements which some times doesn’t allow for economical running.

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This issue of fuel burn in my mind blows away any other concerns that have been raised. You would need a dedicated bank account just for fuel. If you compare to say a trawler, this thing could easily burn 40 times more fuel or worse...

sledge said:

This issue of fuel burn in my mind blows away any other concerns that have been raised. You would need a dedicated bank account just for fuel. If you compare to say a trawler, this thing could easily burn 40 times more fuel or worse...

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Yep.

Four decades ago, we stopped at the fuel dock with my dads sailboat. I think we filled up for $20-40. A sport fisher next to us spent $400. Diesel price back then was likely .50-.75 a gallon. I would bet it would cost around $2,500 for that sports fisher to buy the same amount of fuel at today's prices.

A distant relative lives in Jacksonville. Loves to fish.
He would tell me about trips he made with 4 to 5 other buddies out in his neighbor's sport fisher.
Dropping $500 each for fuel is what they do to get where they want and do what they want. Then get back in short order. It is a far far different use than going out on a sailboat.

They had the means and the desire. They just didn't have a lot of time. So they would do this kind of trip every 4 to 6 weeks.

El Dorado said:

Yes understood on the burden of just getting coverage and I need to a few years to work on that. But how do most yatch owners finance $2million dollar plus vessels? During low interest rates, they could just borrow against their assets, which made sense.

Doesn't it make theoretically more sense to get a loan, if you can write off the interest expense?

It will be achievable to have a monthly income to cover something like this, but to pay in one lump that could mean savings of 20 years? Is that really necessary if it was treated as the primary residency? That is another struggle to deal with.

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Interest on home loans is relatively low to start (say 6% now) , so with your tax write-off if you're in a high bracket, you can get that effective interest rate down to 3-4%, which is below even T-bill returns. So it can make sense to take out a home mortgage even if you have the means to buy with cash.

A boat loan, on the other hand, is probably going to be more like 8+% these days which makes the math tougher, particularly if you include the effect of taxes on the returns you're expecting.

Much much more importantly, as discussed, you don't have enough money to afford that boat. If you're looking for a liveaboard trawler for three people you should probably look for something in the 40' range where you can pay cash with repair funds in reserve. If I were in your situation I'd be looking for a good Taiwanese Trawler like the CHB 41 I have, or a Defever, Marine Trader, etc. for $50-75k. And I agree with the boat club idea as a good first step.

Fuel burn can be limited to a gallon a mile. Yes it can burn 40 Gallons an hour if you want it to. Still, fuel is not what will break the bank. Fuel will be one of the smaller expenses. Maintenance cost does not increase is a steady line as things get bigger. It’s much more of an exponential curve.

40’ cost double of 30’ but 50’ costs 10x of 40’.

tiltrider1 said:

Fuel burn can be limited to a gallon a mile. Yes it can burn 40 Gallons an hour if you want it to. Still, fuel is not what will break the bank. Fuel will be one of the smaller expenses. Maintenance cost does not increase is a steady line as things get bigger. It’s much more of an exponential curve.

40’ cost double of 30’ but 50’ costs 10x of 40’.

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I think that there are exceptions to this rule (i.e. a long skinny displacement trawler with simple systems that's kept on a mooring versus a smaller boat with huge engines and complex systems in a fancy marina), but it certainly can be true. And it certainly is with the boat in question (a big boat with very big engines and older complex systems).

I had the opportunity to take ownership (for free) of a family heirloom Hatteras that was about 70'LOA (a 10' factory cockpit added on a 53MY). It was mechanically pristine & had a great ownership history. I had to turn it down because (1) it was impossible to find a 70' slip in San Diego, and (2) my calculations showed that keeping it would cost approximately the purchase price of our current vessel, *per year*, which I could not justify with our current usage patterns.

Question: Will You Go Broke On A Boat?

El Dorado said:

..... before I send my significant other and the little one into financial peril.....

I heard the twin Man 2848LE403 do require a fair bit of maintenance and as the boat currently sits, it's approaching the maintenance needed at 4,000 hours.

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My neighbor with 2 Cummins QSM11's was quoted $10K each to do the 1,000 hr service. Another friend was quoted several thousand for a pair of intercoolers.

I have had several $10K bills over the years. So, I always advise when someone ask about the cost of ownership (which is, in itself, a bit like asking "How long is a piece of string").

"What happens if you're handed a $10 - 20K invoice? Do you roll your eyes, or throw up in your mouth a little bit."

Also, you mention a 'little one', which tells me your likely well below retirement age. Have you maxed out the limits for your retirement savings? That should come first.

Yes, I've been doing subsequent research and realize the fuel burn rate is something I really need to think about, given that I think the prices will surely rise.

Here are some more questions with the backstory:

1. If you were to theoretically keep a live aboard for the next 30 years and wouldn’t care about selling it for a profit in the future, should you save the headaches of a used boat and get one that is almost new but depreciated? Would you be able to get a lot more boat for like $400k plus retrofits?

2. You would think you could low ball all these boats, you see them sitting for years. I get negative feedback on that, but the ones sitting for years are sometimes completely retrofitted and beautiful ready to go. How much do you think you could argue on the purchase price of a used or new boat?

3. For anyone who works on a live aboard, they had issues with service in the past and doing Zoom. But with Starlink it looks like that can be used anywhere without a problem.

4. Besides Freedom Boating Club, Boaters University, American Sailing for weather routing. Would you suggest any other resources to learn?

I currently live in Fajardo, Puerto Rico and plan on being in Puerto Rico for a minimum of 12 if not nearly 30 more years. I work remotely from home and so does my fiancee, we have a young one that has 5 years left with us. We currently make over $200k per year, and my goal is to increase my income each year for the foreseeable future by 10-25% a year. My fixed expenses would be $50k a year, before the expenses of a boat.

Yes you can tell me I can get a weekend cruiser and visit the nearby islands, however, I ran into issues with this scenario. My fiancees father has a well craft 290 or 355 and has had terrible experiences cruising from Puerto Rico to USVI/BVI. Also my fiancee hates the shower situation on the swim deck. Usually these cruisers also couldn’t make all of the legs in the Caribbean if we wanted to 500 nautical miles.

I figured, why don’t we just move down to the marina, which is less than a ten minute drive and do a live aboard situation. Enjoy local cruising and work our way up to cruising in the Caribbean. The timeline to do this is hopefully, step onto an owned boat by the end of 5 -7 years.

For liveaboards, I have two options. Somehow finance a bluewater worthy trawler or retrofit and redo an old trawler. However, I would need to hire skilled labor to restore a boat, at least there is a full functioning dockyard with those services here. It looks like the option going the new route would either be a Selene 49 or the North Pacific 59. If I go the retrofitting a used trawler, it would probably be a 52 Jefferson Marquessa, 1999 Navigator 5300. Lastly, I could just look for a used Selene or Marlow 48E, but that is still nearly $1 - $1.5M.

Shrew said:

Question: Will You Go Broke On A Boat?


My neighbor with 2 Cummins QSM11's was quoted $10K each to do the 1,000 hr service. Another friend was quoted several thousand for a pair of intercoolers.

I have had several $10K bills over the years. So, I always advise when someone ask about the cost of ownership (which is, in itself, a bit like asking "How long is a piece of string").

"What happens if you're handed a $10 - 20K invoice? Do you roll your eyes, or throw up in your mouth a little bit."

Also, you mention a 'little one', which tells me your likely well below retirement age. Have you maxed out the limits for your retirement savings? That should come first.

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Yes Retirement and Business Coach first and foremost, also I understand my income projections can vary, but I'm taking into account a recession and or depression.

Right the $10k invoices over the period of say 3 months doesn't scare me as much as saving $1.5million in cash.

I guess no-one has done an engine swap on an old viking either to make it more fuel efficient.

Your desire to live aboard at the nearby marina may be a reasonable possibility.
Make sure you find out about the liveaboard rules and any extra fees too. That
specific boat may not be the right choice, though. Maybe there's a better option.

El Dorado said:

Yes, I've been doing subsequent research and realize the fuel burn rate is something I really need to think about, given that I think the prices will surely rise.

Here are some more questions with the backstory:

1. If you were to theoretically keep a live aboard for the next 30 years and wouldn’t care about selling it for a profit in the future, should you save the headaches of a used boat and get one that is almost new but depreciated? Would you be able to get a lot more boat for like $400k plus retrofits?

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Complicated question. First, newer boats aren't necessarily problem-free. Second, prices vary by year, model, size, shape, etc... but also by condition... so a used but well-maintained boat at appropriate price could well be less expensive (better value) in the long run than to a newer boat that turns out to have some issues needing correction. Almost need specific boats for specific comparison...

El Dorado said:

2. You would think you could low ball all these boats, you see them sitting for years. I get negative feedback on that, but the ones sitting for years are sometimes completely retrofitted and beautiful ready to go. How much do you think you could argue on the purchase price of a used or new boat?

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Another "it depends." Sales of comps can be useful info... when you can find it. "Sitting for years" and "completely retrofitted and beautiful ready to go" might exist somewhere... Heaven, probably, if you subscribe to that.

El Dorado said:

4. Besides Freedom Boating Club, Boaters University, American Sailing for weather routing. Would you suggest any other resources to learn?

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Local yacht club, USCG Auxiliary, America's Boating Club (nee US Power Squadron) - if they have all those there -- general books like Chapman's, more fix-it books like Nigel Calders....

El Dorado said:

I figured, why don’t we just move down to the marina, which is less than a ten minute drive and do a live aboard situation. Enjoy local cruising and work our way up to cruising in the Caribbean. The timeline to do this is hopefully, step onto an owned boat by the end of 5 -7 years.

For liveaboards, I have two options. Somehow finance a bluewater worthy trawler or retrofit and redo an old trawler. However, I would need to hire skilled labor to restore a boat, at least there is a full functioning dockyard with those services here. It looks like the option going the new route would either be a Selene 49 or the North Pacific 59. If I go the retrofitting a used trawler, it would probably be a 52 Jefferson Marquessa, 1999 Navigator 5300. Lastly, I could just look for a used Selene or Marlow 48E, but that is still nearly $1 - $1.5M.

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Depends on your outlook about money management, but there is such a thing as boat loans. That is NOT/NOT a recommendation, and for many, a boat loan is completely backwards... aka dumb... given boats depreciate, unlike houses which can (usually) appreciate. OTOH, that could conceivably accelerate your timetable if you haven't already taken that into account. (NEW would be way outa my league...)

Not sure, but sounds like you're thinking all used boats need restoration? Not. Can be lots of maintenance (repair/replace), routine service, etc.... but a 1999 Navigator (for example) that surveys well could easily be in usable shape as is. Maybe only another $100K to get it suitable.

Labor costs where you are might be lower than here. Ours generally run in the neighborhood of $65-85/hour for yard muscle, $90-135/hour for hands-on systems experience, more like $150/hour for specialized stuff (like specific engines). Plus travel time. Full job means plus parts, of course. And taxes and environmental fees. Argues for building your own skills... at least gradually, as you can. It'd cut into your day job time... or make your days longer... or both... but doing your own labor can be almost like paying yourself... sorta...

-Chris

There's lots of good advice on here, including spot on estimates for 1,000 hour service on QSM11s - my 1,000 hour service was $23k, including having a radiator shop rebuild the aftercoolers. Everyone's experience is different, but I have a (more than) full time job and outsourced all but basic maintenance. I average more than 10% of my purchase price annually in expenses, which I'm fine with. But you do need to know what you're getting into.

That all said, my primary reason to chime in is that interest rates on boat loans are not necessarily that much different than primary mortgages. I have had two boat loans, and in both cases the interest was .5-.75% more than a mortgage. Admittedly, I didn't need the loan, so that factors in to the pricing, but for someone with good credit and sufficient income, decent interest rates are available.

BroadCove said:

There's lots of good advice on here, including spot on estimates for 1,000 hour service on QSM11s - my 1,000 hour service was $23k, including having a radiator shop rebuild the aftercoolers. Everyone's experience is different, but I have a (more than) full time job and outsourced all but basic maintenance. I average more than 10% of my purchase price annually in expenses, which I'm fine with. But you do need to know what you're getting into.

That all said, my primary reason to chime in is that interest rates on boat loans are not necessarily that much different than primary mortgages. I have had two boat loans, and in both cases the interest was .5-.75% more than a mortgage. Admittedly, I didn't need the loan, so that factors in to the pricing, but for someone with good credit and sufficient income, decent interest rates are available.

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That's good intel!

One other thing I think about often that might be relevant if you're looking at decades of living on the water versus on land: my mooring neighbors here in San Diego lived aboard in America's Cup Harbor for over 40 years. They actually paid *zero* mooring fees (long story), so they lived for free, in one of the highest housing cost areas in the US, for four decades. Great deal right?

When we spoke a few months ago they were realizing they were too old to keep living on the water. Their old boat is worth *maybe* $20k if they can sell it. If they'd bought a piece of real estate rather than the boat 40 years ago it'd be worth a million or more now. As it stands, they can't afford to rent or buy locally - they are in a tough spot. Decades of compounding versus decades of depreciation makes a massive difference over that kind of time frame. Fine if you've got the resources and can invest sufficiently, but needs to be part of the equation.

socalrider, I'm not sure it's easy to compare the two lifestyle approaches.
Living on the hook all that time would have allowed the opportunity to invest that
capital that would have been tied up in mortgage, utilities and property taxes.
With an average income that could represent a million or more by now. Then again,
your neighbors may have opted to travel, create or volunteer more instead of save.
They probably had more opportunities to try different alternative lifestyles. JMHO.

KnotYet said:

socalrider, I'm not sure it's easy to compare the two lifestyle approaches.
Living on the hook all that time would have allowed the opportunity to invest that
capital that would have been tied up in mortgage, utilities and property taxes.
With an average income that could represent a million or more by now. Then again,
your neighbors may have opted to travel, create or volunteer more instead of save.
They probably had more opportunities to try different alternative lifestyles. JMHO.

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Yes, fair enough. If you're disciplined enough to *actually* save and invest the money you save on your mortgage that can work, or if you willingly opt not to save in favor of the YOLO theory of planning ahead. I guess all I'm saying is that a lot of us benefit from the forced savings & investment via home equity so opting for another path should be done with eyes open.

I agree that the last 40 years were pretty good for those of us in a position to own
our homes, as well as anyone able to invest in other markets. Timing is everything.