On Thu, 25 Oct 2007 17:00:54 -0400, Chuck Cox wrote:
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.
Better buy a Hatteras
Lessee (ha!) now, $1M cost, $200K down, the rest flushes out Monthly.
Your boat is worth $700K net at term end, you have a $600K residual,
leaves $100K +/-
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.
A couple of things. I assume all operating costs are split fairly.
You have a considerable loss of present value money in the equity
investment. $200K over 5 years less the FV of the equity drives a new
look at the equation.
For e.g. if you put in $200,000 for your 20%, you would lose the minimum
of 3% per year ($6K Year One then compounded), a typical savings acct
(more or less). Very roughly, that's 40K (app. the FV of the compounded
income stream with 60n as term), near equal to half of your return of
10% on this $1M boat. And everything has to go well, no large claims,
great maintenance, etc.
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.
But higher maintenance, again, boat dependent.
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
my email is politician-proof, just remove the PORK
I've run these numbers myself, I can't disagree with much but there is
considerable "play" and most of that is downsided.
Albeit, it may be the best *cheapest) proposition for what you are tryig
to accomplish.
The other issue is the financing as the weak credit dog will tend to
diminish the others and drive rates up. 7% on a 15 amort is kow level
costing I would think (factory buydowns not included).
--
That's *COX* not *COCKS* as in εγΩ