remote workers financing a live aboard

[aybabtme]

Friends have had this idea of financing their next boat. My default is to only pay cash for boats/cars/etc, since it's a depreciating asset. But their argument is that they would use it as a primary residence. Here's the rundown:

They're a couple in their 30s who live nomad lifestyles and work remotely (from wherever they're located) in the tech industry, bringing home tech industry average salaries 150k/y each and more with equity grants (I'm not privy to how much), and have been for years. Their income is steadily growing year over year. They have no debt, they max out their 401K, etc...

They're currently in short-term rentals moving from cities to cities, spending seasons in different part of the world from time to time. They're uninterested in buying a house and staying put. They'd like to continue being nomad but with a boat, to avoid paying rent. They have boating experience; they know they want to live aboard. They'd like to get a newer, bigger sized boat than the day-sailer they have right now, which they find is too cramped to live on. They think they could better spend their rent money on a marine mortgage. They think they can afford payments on a 400 to 500k$ boat. They don't have the cash to buy outright, but can afford a 20% down payment.

Would it make sense for these people to get financing?

Like I said in the preface, I'm feeling pretty icky about their situation. My default position is that they should wait and save money until they can buy it outright. Their counter argument is that while they wait, they're throwing the same amount of money at a rent for a place they don't own, and that financing a depreciating asset is better than throwing money at their landlords. Their argument gives me pause, and I'm not sure how I feel about it. In a way, it makes sense, but at the same time, it feels wrong for some reason. Maybe I'm too conservative?

[Mook1e]

It depends on a lot of things.
How stable are their current jobs?
What is their spending like?
If they've both been making $200 to $300k a year for multiple years and haven't saved enough for a $500k yacht (or can't in 1 or 2 years), they're probably spending more than they should. They supposedly have no debt, so that's good, but why don't they have more money saved? Or do they have more and they want to keep those savings for their kitty and emergency funds?

If they make $300k/year and live digital nomad lives, they should have a huge bank roll somewhere if they aren't spending money like water. Just look to Vagabond budda/awake blog to see how cheap it is to live such a lifestyle around the world.

Anywho, I can't really judge or advise based on experience because I'm honestly in a similar situation, except I've already retired from one career and have a substantial pension. That said, I'm very interested in other advice about this question. I have enough for a similar down payment for a similar priced yacht, and I'm trying to decide if I should finance or wait a few years and pay cash for a liveaboard.

[ol1970]

I agree this is a b.s. post. If it is not and they really make over $300k a year and don’t have the cash to buy a boat outright, they are a disaster waiting to happen. People who don’t have the foresight to plan for their financial future are not a good match for the discipline it takes to be a full time live aboard.

[ranger58sb]

Depends.

If they mortgage a liveaboard boat, the mortage interest can be deductible from taxes... if they can itemize taxes.

Building equity in a boat, even as a depreciating asset, can compare favorably to no equity at all because of renting.

Several other factors to consider. Their money, their call.

-Chris

[contrail]

They may not have saved because of other interests...we know nothing of their financial habits. As to the actual question, I did exactly that almost forty years ago, and my income was way less, but here I am having enjoyed living aboard, and sailing around, ever since. I always said that the only way owning a boat made any financial sense (as opposed to something one simply had to have, which is OK!) was to live aboard, to charter it, or to be in a partnership. What they are discussing makes total financial sense to me, having actually done it. My question to them would be the same if they were thinking of buying a house: how stable are their jobs and income, and do they have a back-up for if they are out of work, for awhile?

[slug]

Originally Posted by aybabtme

Friends have had this idea of financing their next boat. My default is to only pay cash for boats/cars/etc, since it's a depreciating asset. But their argument is that they would use it as a primary residence. Here's the rundown:

They're a couple in their 30s who live nomad lifestyles and work remotely (from wherever they're located) in the tech industry, bringing home tech industry average salaries 150k/y each and more with equity grants (I'm not privy to how much), and have been for years. Their income is steadily growing year over year. They have no debt, they max out their 401K, etc...

They're currently in short-term rentals moving from cities to cities, spending seasons in different part of the world from time to time. They're uninterested in buying a house and staying put. They'd like to continue being nomad but with a boat, to avoid paying rent. They have boating experience; they know they want to live aboard. They'd like to get a newer, bigger sized boat than the day-sailer they have right now, which they find is too cramped to live on. They think they could better spend their rent money on a marine mortgage. They think they can afford payments on a 400 to 500k$ boat. They don't have the cash to buy outright, but can afford a 20% down payment.

Would it make sense for these people to get financing?

Like I said in the preface, I'm feeling pretty icky about their situation. My default position is that they should wait and save money until they can buy it outright. Their counter argument is that while they wait, they're throwing the same amount of money at a rent for a place they don't own, and that financing a depreciating asset is better than throwing money at their landlords. Their argument gives me pause, and I'm not sure how I feel about it. In a way, it makes sense, but at the same time, it feels wrong for some reason. Maybe I'm too conservative?

They should go for it , consumption is good for the economy

Many yacht brokers are in distress.

If something doesn’t change soon these brokers will either be forced to get a job or starve

Your mates should buy now , spread some money around , be a true patriot

[hamburking]

A boat is going to cost a lot more than rent.

[AndyEss]

Totally do-able if they drop the stupid attitude of financing as much as you think can afford. $400-$500k is an awful lot of money for a couple who currently just own a daysailor.

If I were a loan officer, I would look with extreme suspicion at nomads who earned as much as they have and not invested in at least some real estate, as part of a diversified investment strategy.

Once that $500k boat sails over the horizon, just what indemnifies the financing company from substantial loss? Insurance is expensive, boats are relatively fragile things unless they are dockqueens or landlubbers.

[contrail]

Originally Posted by AndyEss

Totally do-able if they drop the stupid attitude of financing as much as you think can afford. $400-$500k is an awful lot of money for a couple who currently just own a daysailor.

If I were a loan officer, I would look with extreme suspicion at nomads who earned as much as they have and not invested in at least some real estate, as part of a diversified investment strategy.

Once that $500k boat sails over the horizon, just what indemnifies the financing company from substantial loss? Insurance is expensive, boats are relatively fragile things unless they are dockqueens or landlubbers.

Lots of liveaboards have mortgages. Get that first, then think of moving the boat, later. They may have to get it documented to get the loan, however,

[Hardhead]

Originally Posted by AndyEss

Totally do-able if they drop the stupid attitude of financing as much as you think can afford. $400-$500k is an awful lot of money for a couple who currently just own a daysailor.

If I were a loan officer, I would look with extreme suspicion at nomads who earned as much as they have and not invested in at least some real estate, as part of a diversified investment strategy.

Once that $500k boat sails over the horizon, just what indemnifies the financing company from substantial loss? Insurance is expensive, boats are relatively fragile things unless they are dockqueens or landlubbers.

I know nothing of boat mortgages, but if I was a bank - I would not think a security interest - in a world cruising sailboat, mobile across multiple jurisdictions - would be easily collected.

[gwbull]

I know where these guys can find a 52 ft staysail schooner (fiberglass dry weight 30 tons), well equipped, needs a few things but functional, and the seller needs to unload it ASAP. Located New England. Could work well for these guys. Might be able to buy it outright.

[ArmyDaveNY]

There are a lot of great comments, but one thing we need to remember is that they are not living on $300K per year once you figure in taxes. When you factor in Federal, state, any local tax, sales tax, and all the other taxes, plus rent, insurance, etc. they will be luck if they hake home half of that, especially if they are in CA with the OP.

[Mook1e]

Originally Posted by ArmyDaveNY

There are a lot of great comments, but one thing we need to remember is that they are not living on $300K per year once you figure in taxes. When you factor in Federal, state, any local tax, sales tax, and all the other taxes, plus rent, insurance, etc. they will be luck if they hake home half of that, especially if they are in CA with the OP.

True, but as nomads, they should be able to reduce a lot of those taxes through itemized business expenses working from "home." Also, as nomads, they probably don't pay state tax (or they shouldn't, if they're smart)
I'm definitely not discouraging them, I just think more info would help in giving any advice.
Again, I'm thinking about doing something similar, but I'm currently working from Europe and my retirement (pension) is already secured. If/when my wife and I move, it will probably be to Asia for another govvie position. If not that, a contract position which allows for the first $106K earned outside the USA to be tax free. As I said, if they're working remotely as nomads, they should know these things and should be leveraging them to minimize their tax burden.

[TravelinLight]

My question would be more on the need for constant HIGH SPEED internet connectivity as well as the ability to possibly have multiple conference calls going at the same time.

As someone in the technology field and familiar with folks who float the contract or start up gig the number one item is reliable high speed internet, then ability to get on a plane if a customer meeting or investor / board meeting is required, and then I would say power for the devices.

The financing is up to them.

[ArmyDaveNY]

Originally Posted by Mook1e

True, but as nomads, they should be able to reduce a lot of those taxes through itemized business expenses working from "home." Also, as nomads, they probably don't pay state tax (or they shouldn't, if they're smart)
I'm definitely not discouraging them, I just think more info would help in giving any advice.
Again, I'm thinking about doing something similar, but I'm currently working from Europe and my retirement (pension) is already secured. If/when my wife and I move, it will probably be to Asia for another govvie position. If not that, a contract position which allows for the first $106K earned outside the USA to be tax free. As I said, if they're working remotely as nomads, they should know these things and should be leveraging them to minimize their tax burden.

I agree and indeed, more info would be very helpful.