On Thu, 25 Oct 2007 13:42:59 -0400, Adam Cox "
wrote:

On Wed, 24 Oct 2007 11:17:03 -0400, Chuck Cox wrote:

For the last couple of months, my sailing club has been trying to get
me to buy a new 35' cruising boat to lease back to them. As a result,
I've researched sailboat purchasing, operating expenses, taxes,
financing and depreciation. After reviewing their offer as well as
lease-back programs at SailTime and Sunsail, I've come to the
conclusion that a shared ownership would provide significantly more
sailing time for my money, assuming I can find appropriate and
sufficient co-owners.

Would you share the calculations, in brief?

In a typical 5 year lease-back scenario, you would buy a boat with 20%
down and a 15 year 7% loan. The lease payments would just cover the
loan payments. At the end of the lease the loan balance would be
about 60% of the original boat cost. Supposedly the boat will have
depreciated 30%, leaving you with 10% equity.

For your initial investment of 20% of the boat price, you get 5 years
of sailing privileges plus supposed tax breaks and 10% equity. My
fairly conservative accountant disagrees with most of the tax break
claims. You may recover that equity if you sell, but there is also
risk of loss, especially if you have to pay brokerage or docking fees.

The sailing time works out to about 1/8 of the available time and
retails for roughly 3.5% of the original boat cost per year. So the
retail value of 5 years of sailing is about 18% of the original boat
cost.

If 4 people bought a similar boat with the same financing, they would
each pay 5% down and about 4% per year to own and operate it in
Boston. In reality, you would probably pay more down and buy a used
boat, resulting in even lower annual costs.

The one tax break I do intend to take advantage of is the interest
deduction for the first $100k of home equity I use to buy a boat.
Depending on your tax bracket and credit rating, your effective
interest rate should be significantly lower than a typical boat loan.

Chuck Cox
SynchroSystems - embedded computer design - http://synchro.com

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