Buy another home to buy a boat?

[Lonestaralaskan]

Originally Posted by S/V Illusion

Old school theory - if you need a loan to buy a boat (or any depreciating asset), you can’t afford the boat.

New school theory - just whip out the credit card/application

If you can make more money on investments than you pay in interest on your boat loan, doesn't it make sense to hold onto your cash and invest it rather than dump it all into the boat?

Interest rate arbitrage is a thing.

[belizesailor]

Originally Posted by Lonestaralaskan

If you can make more money on investments than you pay in interest on your boat loan, doesn't it make sense to hold onto your cash and invest it rather than dump it all into the boat?



Interest rate arbitrage is a thing.

Sounds good in theory, but of course reality doesnt always work out that way...no matter how fancy a name its given.

[DanielI]

I guarantee that Bill Gates and Warren Buffet are not liquidating assets to avoid taking a loan. Of course, for small potatoes items, there may be other reasons not to finance (where what constitutes small potatoes depends on a persons financial situation). And if it gives you peace of mind, you can decide what that is worth to you. But for a large ticket item, any good financial planner can run the numbers and will tell you when financing makes sense and when it doesn’t.

[belizesailor]

Originally Posted by DanielI

I guarantee that Bill Gates and Warren Buffet are not liquidating assets to avoid taking a loan. Of course, for small potatoes items, there may be other reasons not to finance (where what constitutes small potatoes depends on a persons financial situation). And if it gives you peace of mind, you can decide what that is worth to you. But for a large ticket item, any good financial planner can run the numbers and will tell you when financing makes sense and when it doesn’t.

In the end it does mostly come down to personal preference. Like many things, it is easy to make a case for either approach.

Personally, I dont like to finance non-essential, non-income producing, depreciating assets...like boats. If I cant easily pay cash for a toy then I dont need it. The only thing I generally finanance is income producing real estate. Its easy to make a solid financial case for that (esp if LTV is kept low).

Having a financed boat also comes with other restrictions like insurance requirements and operational limits. When I wanted to sail to Cuba in a previous boat my insurance company said they would not cover it...so what...it was a relatively inexpensive boat and had no mortgage. I went anyway and we had a glorious time. If I had lost the boat I would have still been happy. I really dont like underwriters and other faceless bean counters to be in control of my personal freedom.

No matter which approach is taken, a boat is guaranteed to ultimately be a bad financial decision regardless of how it is rationalized (which is really what this exercise is about). Making the case for one approach or another is a bit like rearranging the deck chairs on the Titanic. However, boat ownership does have other non-tangible benefits.

[kika]

Originally Posted by belizesailor

of course reality doesnt always work out that way...no matter how fancy a name its given.

Nothing works always. I know someone who shot himself in the head with a handgun and survived (and not a vegetable).
I want to buy a boat and I just found a boat that's great exactly what I want, rarity, it costs $500K. I have $50K savings and make just enough to be able to afford the loan.
But, I also have 100K stock options from my company at $2 a pop and the company is now trading at about $150 a pop. If I exercise my options I need to wait until August to be able to sell them.
What should I do? If I read you right, I need to wait till August hoping that the boat will be still in the market?

Money is the resource like anything else. And it's generally depreciating asset.

[belizesailor]

Originally Posted by kika

Nothing works always. I know someone who shot himself in the head with a handgun and survived (and not a vegetable).

I want to buy a boat and I just found a boat that's great exactly what I want, rarity, it costs $500K. I have $50K savings and make just enough to be able to afford the loan.

But, I also have 100K stock options from my company at $2 a pop and the company is now trading at about $150 a pop. If I exercise my options I need to wait until August to be able to sell them.

What should I do? If I read you right, I need to wait till August hoping that the boat will be still in the market?



Money is the resource like anything else. And it's generally depreciating asset.

Only you can answer that question.

Debt, exercising options to put in a depreciating asset...makes me uncomfortable just thinking about it, but thats me.

[Campfirekitten]

If I were in your position facing the decision I'd get the boat now--assuming this boat checks most of my boxes--knowing I'll soon have the cash in hand pay it off. YOLO. Don't do like I did and put it off until you're old, beaten down, stiff and sore most days ��

[Hardhead]

Originally Posted by Campfirekitten

.... YOLO. Don't do like I did and put it off until you're old, beaten down, stiff and sore most days ��

That's some damn good advice, IMO. There's always 2 realities... the money reality, and the real reality. The future is never guaranteed.

Earn as much money as can finance a modest version of the dream, and then live that dream. I've never heard complaints from those who have done that. In fact, nearly 100% of them have said they would do it all again.

[dfelsent]

Don’t for get the tax on those options.
And least in the past if you exercise and hold you owe the tax for that gain even if the stock drops. Talk to an accountant please.
I knew people who exercised and held and owed more tax than the value of the stock. Not pretty.
For me, a cashless exercise and sell was safer.

Again, see an accountant. I’m not one.

[belizesailor]

Originally Posted by dfelsent

Don’t for get the tax on those options.
And least in the past if you exercise and hold you owe the tax for that gain even if the stock drops. Talk to an accountant please.
I knew people who exercised and held and owed more tax than the value of the stock. Not pretty.
For me, a cashless exercise and sell was safer.

Again, see an accountant. I’m not one.

I know some folks who did that and got stuck w a massive tax liability and no resulting gain go pay it with...they just sailed away...still on the lamb as far as I know.