80-100k boat purchase??

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
hotscot
Posts: 430
Joined: Wed Feb 01, 2012 10:05 am

Re: 80-100k boat purchase??

Post by hotscot »

I posted it as a question.

Feel free to PM me if you want to spend time being critical over minutia.

If I offended you, my apologies. Are you a moderator?
Carnut
Posts: 37
Joined: Thu Oct 19, 2017 11:09 am

Re: 80-100k boat purchase??

Post by Carnut »

Hi Tarheel, i am guessing you are on one of the beautiful lakes in NC. We owned a home on Lake Gaston, NC for 11 years and made some wonderful memories with the family on the water in ski boats. Boating is one of those things that doesn't make a lot of financial sense but there is nothing like having your family out on a lake. Teaching your kids how to ski, wake board, or wake surfing is incredibly rewarding. It also provides great exercise, relaxation, and is good for your mental health. Ski boats/tow boats like Mastercraft (your pics) are expensive but fantastic boats. I visited the Mastercraft and Malibu boat factories and they are made incredibly well. It appears that you may be looking at direct drive tow boats which are my favorite for driving (unbelievable handling) and I owned 1 of those. However, you may want to consider a V-drive as they are generally more comfortable for families and the kids are doing more wake surfing and wake boarding rather than slalom skiing these days. My advice would be to upgrade your boat and enjoy this investment in your family!
JackoC
Posts: 4714
Joined: Sun Aug 12, 2018 11:14 am

Re: 80-100k boat purchase??

Post by JackoC »

bluebolt wrote: Tue Sep 14, 2021 8:05 pm
HomerJ wrote: Fri Sep 10, 2021 7:51 pm
Andymoler58 wrote: Fri Sep 10, 2021 7:41 pm I bought a 65k boat last year and got a 20 yr loan at 4.5% from bank of the west.

I def don’t think you should pay cash if you can get those terms.
Paying off that loan is a guaranteed 4.5% return. There are currently no guaranteed returns that high in CDs or bonds.
Stocks are likely to beat it, but there's no guarantee. Are you 100% stocks?

20-year loan? :shock:
SJNK
1. 1 year return is 14.93%
3 year return is 5.94%
5 year return is 6.11%
Yes it's not "guaranteed," but that's a pretty decent 5 year return for a bond ETF.

2. Since 1919, the worst 20 year annualized return for the S&P 500 was 3.1% and the best was 17.1%.
https://www.crestmontresearch.com/docs/ ... eturns.pdf
1. Past returns of bonds are irrelevant to future expected returns which are best estimated by looking at yields now. Anything can happen but if the 50-50 over/under on a low risk bond fund's return for the next 20 yrs was anything 6%, what idiot would lock in treasury yields to 20 yrs at 1.8%? That being the 'idiots' in one of the world's most liquid and often thought of as most efficient markets, for US govt bonds.

2. This isn't *as* irrelevant but the fact that you could finance stocks at 0.5% (with the futures, though short term) forget 4.5% has presumably pushed stock prices up and pushed expected returns down from historical average which includes all levels of financing rates and stock valuation not just low/high respectively ones like the starting point now. I'd put the expected return of stocks now as maybe 5-6% nominal (1/CAPE as estimate of the real expected return ~2.6%, inflation 2.5%, but on an optimistic forum such as this let's call it 6%).

Which would still have> 50-50 shot of beating 4.5%. So that works...if you are indifferent enough to risk, and degree of risk tolerance is the big question for leveraging rather than a simple function of rates applying equally to everyone. That's why it has no single answer. The problem with 4.5% is how high it is relative to other rates now. Futures implied financing rate ~0.5%, best margin borrowing rate ~1.5%, both short term, but 4% points :shock: or even 3% is heck of lot to pay to lock in the rate longer based on the yield curve. Home mortgages around 3%. OP said they had a 4.75% commercial loan against a rental property, but that's different than a loan to buy a discretionary consumption item. The property presumably has a cap rate which justifies 4.75% borrowing and that might have been the only way to buy it, and perhaps it could be refinanced lower but that's a tangent. A 4.5% boat loan taken out now is a lot more questionable IMO. I thought it might be a parody to say that's a low rate. I could refuse that very easily. :happy
bluebolt
Posts: 2137
Joined: Sat Jan 14, 2017 8:01 am

Re: 80-100k boat purchase??

Post by bluebolt »

JackoC wrote: Thu Sep 16, 2021 12:16 pm
bluebolt wrote: Tue Sep 14, 2021 8:05 pm
HomerJ wrote: Fri Sep 10, 2021 7:51 pm Paying off that loan is a guaranteed 4.5% return. There are currently no guaranteed returns that high in CDs or bonds.
Stocks are likely to beat it, but there's no guarantee. Are you 100% stocks?

20-year loan? :shock:
SJNK
1. 1 year return is 14.93%
3 year return is 5.94%
5 year return is 6.11%
Yes it's not "guaranteed," but that's a pretty decent 5 year return for a bond ETF.

2. Since 1919, the worst 20 year annualized return for the S&P 500 was 3.1% and the best was 17.1%.
https://www.crestmontresearch.com/docs/ ... eturns.pdf
1. Past returns of bonds are irrelevant to future expected returns which are best estimated by looking at yields now. Anything can happen but if the 50-50 over/under on a low risk bond fund's return for the next 20 yrs was anything 6%, what idiot would lock in treasury yields to 20 yrs at 1.8%? That being the 'idiots' in one of the world's most liquid and often thought of as most efficient markets, for US govt bonds.

2. This isn't *as* irrelevant but the fact that you could finance stocks at 0.5% (with the futures, though short term) forget 4.5% has presumably pushed stock prices up and pushed expected returns down from historical average which includes all levels of financing rates and stock valuation not just low/high respectively ones like the starting point now. I'd put the expected return of stocks now as maybe 5-6% nominal (1/CAPE as estimate of the real expected return ~2.6%, inflation 2.5%, but on an optimistic forum such as this let's call it 6%).

Which would still have> 50-50 shot of beating 4.5%. So that works...if you are indifferent enough to risk, and degree of risk tolerance is the big question for leveraging rather than a simple function of rates applying equally to everyone. That's why it has no single answer. The problem with 4.5% is how high it is relative to other rates now. Futures implied financing rate ~0.5%, best margin borrowing rate ~1.5%, both short term, but 4% points :shock: or even 3% is heck of lot to pay to lock in the rate longer based on the yield curve. Home mortgages around 3%. OP said they had a 4.75% commercial loan against a rental property, but that's different than a loan to buy a discretionary consumption item. The property presumably has a cap rate which justifies 4.75% borrowing and that might have been the only way to buy it, and perhaps it could be refinanced lower but that's a tangent. A 4.5% boat loan taken out now is a lot more questionable IMO. I thought it might be a parody to say that's a low rate. I could refuse that very easily. :happy
I think we are in agreement. I was just pointing out in response to HomerJ that while there were no guaranteed returns that high, there were certainly reasonable low/moderate risk returns that were that high. And, the 20 year return on equities (historically) is a lot less risky than HomerJ implied. With someone with a love of boating, enough assets, and the right risk profile, there are worse things to do with your money.
Topic Author
TarHeel2002
Posts: 429
Joined: Sun Jun 17, 2012 2:14 pm

Re: 80-100k boat purchase??

Post by TarHeel2002 »

Thank you for all of the responses. The business building loan interest rate was readjusted last year from 4.75% to 3.8%. I have just under 10 years remaining on that note with a principal balance of 151k. The payment is $1544 per month. The rent I pay myself from the business is $2150 per month (which is part of my overall income)
Post Reply