Author Topic: Purchasing a house to save for a Sailboat?  (Read 698 times)

Tacopwr

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Purchasing a house to save for a Sailboat?
« on: October 15, 2018, 07:46:45 AM »
Hello All,

I am deliberating on whether I should buy a house with my girlfriend.

The long term plan is for us to save from our current jobs for 2-3 years and then purchase a sailboat to live on until we are either sustainable or sell and return back to normal life.


We currently live in a nice duplex in a quiet neighborhood. Rent is $1200 a month plus utilities (about $250 a month).

I make $36,000 a year, hopefully getting a pay raise in the next few weeks but that amount is currently unknown.
I only put 5% of my pay into my 401K until my credit cards are paid off, and then I am returning to 20% plus my employers 5% match.

DEBT:
$6000 car loan, car is only worth $3000 :[
$1500 credit card @ 9% (hoping to have this paid off by the end of the year)
$2400 credit card (interest free for another 12 months)


Girlfriend just started a new job with a pay cut down to $72,000 a year.
She is putting 10% into her 401k, plus a 5% employer match.

DEBT:
$13,000 student debt, average 6%
$2500 boat loan @ 4%
$1800 motorcycle loan @ 5%
$1000 orthodontic bill @ 0%
$Credit card is about to be paid off this month. (I'm so proud!)




We currently live in one of the cheapest real estate markets in the United states. I watched houses liquidate for hundreds of dollars back in 2008-2009, and I still see over 200 listings in my town for under $50,000. Property taxes hover around $2000 a year.

I have looked at a few flips that were purchased for under $30,000 and then list for 60,000 a few years later.
 

Reasons for wanting a house:

We live on the west side, my girlfriend works downtown, and I work on the east side, technically the next town over.

My commute to work is the most stressful route in town, and about 12 miles each way. Biking it is about 10 miles, which I try to do when its nice out, but it is an hour of hard work and I may or may not have vomited a couple times after getting to the office. lol

If we purchased a home closer to down town, my girlfriend and I would be more likely to bike, saving a few dollars here and there, but drastically improving our health.

I am a mechanic and an efficiency nut. I have craved building a self sustaining (or at least solar powered and energy efficient) home since I took related courses in college a decade ago. However since we rent, we cannot make any changes to the property.
We also have a one car garage which cannot hold all of my tools, projects, motorcycles, bicycles, winter tires, workbench, etc.
Having a big two+ car garage would increase my quality of life drastically.

I would like to place our "rent" budget into the equity of a home rather than give it to a landlord. Property values are increasing around these parts as the town becomes more gentrified and amenities keep popping up downtown.
Currently we blow $14,400 a year on rent. Placing that money into any of these homes would mean we would be half way paid off in two years. At which point, whenever we cut the cord and buy the boat and move, we can either rent out the home with low mortgage overhead, or sell it for hopefully a profit and retain that equity to use on the Boat life and savings.


What do you Mustachians think? Am I way over simplifying things? Is this an impossible dream?









Sugaree

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Re: Purchasing a house to save for a Sailboat?
« Reply #1 on: October 15, 2018, 08:20:30 AM »
A sailboat is a hole in the water that you throw money into.  They are at least twice the maintenance of a motorboat (because they have all the sails and rigging plus most have a motor for auxiliary power). 


ETA:  I re-read this and realized that wasn't exactly a helpful answer.   I guess I should have asked how much experience you have with boats/sailing/maintenance and whether you and she have spent a considerable length of time living on a boat together.  It's kind of like living in a tiny house with the added issue of limited headroom.  You are constantly having to angle each other.  It's fun for a day or two, but after that it can get old quick.  I'd absolutely recommend that you try it out before committing to it. 
« Last Edit: October 15, 2018, 08:41:37 AM by Sugaree »

YttriumNitrate

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Re: Purchasing a house to save for a Sailboat?
« Reply #2 on: October 15, 2018, 08:34:52 AM »
Currently we blow $14,400 a year on rent. Placing that money into any of these homes would mean we would be half way paid off in two years. At which point, whenever we cut the cord and buy the boat and move, we can either rent out the home with low mortgage overhead, or sell it for hopefully a profit and retain that equity to use on the Boat life and savings.
If your plan is to buy a house for just two years chances are pretty good you'll blow close to that $14,400 in transaction fees. Don't forget to account for: A) the cost of obtaining a loan for the house, B) the cost of buying the house [inspections, etc.], C) your time spent buying the house, D) the cost of moving, E) realtor fees when you sell, F) vacant times [utilities/insurance/etc.] when you are trying to sell the house and are living on the boat, and G) your time spent selling the house.
« Last Edit: October 15, 2018, 08:36:45 AM by YttriumNitrate »

Uturn

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Re: Purchasing a house to save for a Sailboat?
« Reply #3 on: October 15, 2018, 11:05:48 AM »
My advice is no, for a few reasons.

Yes you can break even or make money in real estate short term, but you have to look at all the numbers as an investor, not just a couple buying a house to live in.  Transaction fees are huge.  I chuckled at your statement of long term and two years.  For that reason, I am guessing that you are in your 20's.  Two years is short term.  I am about 2-3 years away from pulling up anchor and seeing the world myself.  I have no debt and enough money to pay cash for just about any house I would want.  I just this year moved across country to get nearer to an ocean, and I would not dream of buying a house for those 2-3 years.  I have other things to worry about such as finding the boat and getting it ready for offshore sailing and being lived in full time. 

Financing items that depreciate is a terrible thing to do to your future self, and you seem to be ok with financing based on your stated debt.  You need to work on getting rid of that debt and change your views of debt asap!  Don't get me wrong, I am not saying your house will depreciate, I'm saying you have too many things financed that are not going to show any return.  One of the best life lessons that I have figured out is life will throw you curveballs, and those curveballs cost money.  The people that come out of those times are the ones who prepare for them in advance.  Having your wants financed is not going to prepare you for life's obstacles. 

Did your duplex keep you warm and dry?  If so, it did its job and the money was not blown.  However, $1200/mo sounds a bit steep for "one of the cheapest real estate markets in the US."  Again, this sounds like you have some money management skills to sharpen. 

Finding a better location for you and your girl to live is a wonderful idea.  But I just don't think you are in a spot to buy.

ixtap

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Re: Purchasing a house to save for a Sailboat?
« Reply #4 on: October 15, 2018, 03:00:01 PM »
Generally, buying a house breaks even at about 5 years. That is longer than your current plan. Flipping houses costs money, you can't just compare purchase price to selling price. Interest early on in a mortgage, plus taxes and maintenance can easily add up to rent, leaving little for actual added equity, with likely a lot more work than renting.

Why are you paying $1200 rent in LCOL?

If you consider a bigger garage an increase in quality of life, you may not be a good candidate for living on a sailboat. If you think you will enjoy living on a sailboat, find a smaller place to rent. My 39' sailboat has roughly 250 sq ft of living space. Less actually, when you consider that you can't live or store anything back by the rudder post and it isn't a perfect triangle, as it starts narrowing again just aft of midships. And I have to store engine parts, plumbing supplies, tools, kayak gear, etc. within that space. It can be impossible to find an apartment as well laid out as a good sailboat, but going smaller will give you an idea of where you are heading.

Wait....your girlfriend already has a boat? What size is that? How far from work is it kept?


Tacopwr

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Re: Purchasing a house to save for a Sailboat?
« Reply #5 on: October 15, 2018, 06:59:10 PM »
Thanks for the replies everyone.

To ixtap
I enjoy working on things. I drive a massive pile of crap car that needs constant repair. I used to have a racecar And a rented shop which charged $200 a month. i just recently sold the car and canceled the shop lease. A garage would be used for home improvement projects mostly, obviously a sailboat would not have a garage and thus work is done on the boat or at a marina.
For reference the boat in question that we are saving for is a Gemini 105 which is a catamaran so it has a decent amount of room for two people. This sailing obsession has been going for a couple years now.

Our current boat is a little jetboat we use on weekends. We pull it with my little crappy car all over the state and then stay in a tent in a campground.

Obviously before we buy the boat we wil be selling off all our possesions.

To uturn:

Yes you are correct we are in our late twenties. $1200 is fair for a three bedroom “house” with a yard and garage around here. Unfortunately, we were asked to leave our last place suddenly due to a massive rent increase and this location was the only place we could secure after over 20 showings.
I would love to spend tons of time and money to move to a cheaper place, but Realistically it would be incredibly hard to find something better than what we have. Our landlord is quite personable as well which makes the decision even harder.


It seems that buying a house and paying triple the mortgage to pay it down quickly still would’nt make sense according to the maths in this thread. I guess we will continue to rent until the time comes. Thanks everyone.

ixtap

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Re: Purchasing a house to save for a Sailboat?
« Reply #6 on: October 15, 2018, 07:14:21 PM »

 
For reference the boat in question that we are saving for is a Gemini 105 which is a catamaran so it has a decent amount of room for two people. This sailing obsession has been going for a couple years now.



I hope you aren't planning on living on the hook with a Gemini. The underside isn't shaped properly, so they are infamous for the slap and riding poorly at anchor.

However, the real point is that if you are considering selling everything for a change in two years, now is the time to start thinking about getting rid of stuff, not getting more stuff.