Seattle Bubble

I have been in a position to buy a house in Seattle since 2005, but I have resisted for many of the reasons that the readers of this site understand. Everyone here also understands the years of being lectured by friends and being seen as the poor rube that "just doesn't get it." Well here I am with no debt, enough for 20% down on any house in my price range, a good job, and absolutely NO desire to get into this housing market for a while. The government really wants me to get out there and buy a house, and they are willing to give me $8K to do it (for which I just qualify under the AGI limits). I still say no.
Well, kinda. I am going to buy something... just not a house. Turns out that I can get the full first-time home buyer's credit when buying a boat on which to live. Instead of the $8K being a spit in the bucket for a Seattle house, it will serve as ~7% for a 44' yacht. Considering moorage, maintenance, and depreciation, it still loses out financially to renting for 3 more years... but it is close. And the only way that buying a $500K house competes over the next 3 years is if it goes up in value 2-3% per year AND I rent out a room for $700/month. I am willing to bet my 20% down payment money that housing will be flat for the next 3 years at best.
I am already getting some of the looks from my friends that have bought houses in the last few years. They can't believe that I would compound my stupidity by buying a depreciating asset instead of investing in a house. Oh well... it isn't my job to explain to people how much interest on a $400-500K house is really costing them. Not to mention losing principle.
Buying a boat to liveaboard is far from just a financial decision. It is something that I have always wanted to do, and I am in a place in my life to do it. It is also the best way that I have found to get a 2BR/2BA place on the water... living a life that people pay $800K+ to watch from a hill. At some point I will commute to work during the week by walking, paddling, biking, boating, and swimming. That, and I won't owe a dime to a bank.

Wanderer,
Congratulations on being able to do what you've wanted to do for a long time.
Some people want to own houses. Some people want to rent an apartment. Some people want to live on the water, on a 44 ft yacht. Whatever floats your boat:)

Would you be willing to share some of the numbers for buying a boat to live on?

Does moorage include a water supply and sewage disposal?

Sure, Alan. But first, let me say that it can't be just about the numbers. In fact, if it was just about the dollars, renting comes out ahead (for the price range I will discuss) and isn't subject to risk of large expenditures. The first time homebuyer's credit helps for the boat case, but it doesn't get down to renting at $1150/mo. And if a house purchase results in significant appreciation, then it will beat out a depreciating boa. You have to really WANT to live on a boat and enjoy staying up on the maintenance of it. Here is a great forum for anyone who is interested. http://www.livingaboard.com/cgi-bin/ultimatebb.cgi.

Some thoughts:

• The discussion is relative to fairly high end living on a 44' motoryacht for $100K (to keep the numbers simple). 2BR/2BA with a decent galley, main salon, 2 engines, generator, electronics, electric and diesel heat... pretty well appointed. Now, many many liveaboards are happy with much less... you could never get them out of their 27' sailboat. It is just a question of what you want on a boat... and how much you are willing to spend.
• Be honest with the cost of losing the cash you use for a down payment. While renting, what ROI would you get with that cash instead? I assume a $500/month charge for this loss of interest income.
• Interest: if you have to finance, this is an obvious cost. As with a house, it is tax deductible, but that really just amounts to a reduction in the effective interest rate. I love it when home owners talk about the tax benefit of owning a home... spend $2000/mo on interest for the privilege of saving $600/mo in taxes.
• Depreciation and Maintenance: The thumbrule is to account for 5-10% per year in a combination of the two. If you don't do maintenance, you will see steeper depreciation. I am looking at 1977-1982 boats because the depreciation curve is pretty flat by now. A well maintained boat could go up in value, but never count on it. A 1992 boat is going to depreciate and there is nothing you can do about it. Fortunately for me, I much prefer the older boats in good condition. They don't make 'em like they used to.
• Moorage: I am looking in Lake Union and will pay ~$600/mo for liveaboard. You can get cheaper for sure... ~$12/ft. I work on the cut so I plan to make a fun week where I will get to work 5 different ways: walk, bike, boat, kayak, and swim. Note that finding a liveaboard moorage in Seattle is normally very difficult since there are limits on the % allowed in marinas.
• Insurance: lots of variables here, but I am planning for $1600/yr.

So, crunch all those numbers together and you will find... it is a bad financial move. My out of pocket expense will be ~$1000/month, but the real cost will be ~$1700/month. I plan on reflecting on the merits of the decision when eating dungeness crab off Blake Island and while cruising in the San Juans for a week (and not while changing out the mascerator pump). Hope that helps... let me know if you want any other info.

and not while changing out the mascerator pump)

I assume you're talking about the on board treatment of human solid waste?

That's right... plumbing is a little more personal on a boat. Most people are blissfully unaware of their waste after it goes behind the walls, but the moving parts and hoses in a marine sanitation system demand a little more attention every couple years. It's the "con" side of the equation that balances out being rocked to sleep. Treat a marine toilet like a salad... a little oil and vinegar goes a long way.

That is sweet. Congrats.

If I could ever convince my wife to go for it, I think that's something I could really go for. The only thing I'd really miss would be my garden. I imagine it would be difficult to grow fresh raspberries on a boat.

Yeah, having a garden can be kinda tough aboard... but not impossible. There are plenty of liveaboards that have plants all over them and become floating condos. They just don't get underway very often, if at all. One gets the best use out of their boat in different ways... there isn't a single path. Boats don't tend to like sitting stationary for long periods, but it can be managed.
I was talking with a broker who owns a boat and he mentioned that his wife really loves plants. He told her that she could have as many plants as she wanted aboard... so long as they didn't have dirt.
Community pea patches are also great.

Wanderer, what sort of boat are you looking at (or if you don't mind sharing, do you have a specific one in mind)?

WSBilly,
Sure... http://tinyurl.com/lto968. It is a 44' Atlantic built in 1977.

One importnat addendum to my numbers above. I forgot to list sales tax which is 8.5-9.5% depending on where you buy/keep your boat in Washington. That is tax deductible, but it is still quite a significant cost. It was a rookie mistake to leave that out... but it doesn't change my plan.

"This boat may not be available for sale to US citizens while in US waters, please check with broker"

Heh if I wasn't forced to entertain, and have small children over I would be in the slip right next to you.

Do you find it funny that the galley on that boat as been "flipped"? Faux granite with stainless steel appliances, I guess you cannot escape them even by sea.

How much does it cost you in fuel to run up to the San Juans for a week?

How much does it cost to run out and back to someplace closer, like Possession point?

I've heard that there is an abundance of boats available on the market right now. It is probably a very wise time to buy a boat if you are in that market.

I've been thinking about getting my boating license so I can rent boats on the occassional weekend. I doubt I would ever use a boat enought to justify buying one. Although the idea of using it as my living quarters seems very appealing in a idealistic romantic way.