# Taking the initial steps....



## bdkorth (Jun 4, 2002)

Hi, a note from the landlocked sailors to be from Idaho. First major steps towards working into being financially able to cruise in a few years are currently being taken. A bit overwhelming to start selling off the things that I have worked so hard to purchase over the years, all in the interest of lowering payments per month. The expensive house is next to go for one cheap enough to be able to rent out while cruising. Any advice from anyone that has gone through this? Any good books written by folks about going through this? What experiences have folks had regarding dumping their ''big home'' stuff and switching over to ''small home'' stuff that fits on a boat in 3 years. I am probably just looking to see if this sounds as crazy as all of the landlocked, never sailed before people here in Idaho say this is....
Thanks for any input.


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## DuaneIsing (Jul 10, 2001)

This is just second-hand information, but may still be helpful. As I have done my research to date, I have come across hundreds of anecdotes from folks who have adopted the cruising life. Most of them said they were glad they had greatly simplified their lives; that in itself reaped many rewards. Some did it in measured stages; others did it quickly at the end.

Of course, there are a lot of folks who find that cruising (or living aboard) really isn''t for them, or they eventually get into a health situation where they give it up. At that point, you need to transition back to a land-based life, so you either have to plan in advance for how to do that, or you just cross that bridge when you come to it. Only you will know how you like to approach "problems" like that.

Hopefully, someone else will have better info for you as far as good books to read on the subject. Best of luck to you.

Duane


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## rookie00 (Sep 12, 2002)

Several resources are available to you. I suggest you continue using the resources availble on sailnet.com. Once you have read all the good stuff here, goto www.cruisenews.net. this site has an abundance of useful information and first-hand accounts of people who have made the decision to change their life, for the better, and how they did it. Also, there you will find websites of cruisers who maintain, current, journals of their adventures.


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## bdkorth (Jun 4, 2002)

Thanks for the input. I really appreciate it. I will always use sailnet, it is invaluable, in my opinion. Thanks for referring me to cruisenews. It is a great site to fuel the dream. 

Again, thank you. Nice to hear from people that think along the same dreamlines that we do.

Brad


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## sail1dzn (May 18, 2001)

BD:

I am reading an EXCELLENT reference right now on this subject, and recommend it highly. It is "The Crusing Life" by Jim Trefethen. What I like most about it is that it does not try to teach you how to sail, navigate, choose ground tackle, shorten sail in a storm, blah, blah, blah. All good stuff, mind you, but this book is written about the LIFESTYLE, and speaks to the questions - do I DO this, and if so, HOW?

Once you get through this book, if you are still up to the challenge, the next one to read is Beth Leonard''s "The Voyager''s Handbook." This is the first book you want to read to learn the "WHAT I need to know" before you set out on a boat and try to "wing it." I''ve seen enough bad weather on boats (without having serious blue water experience) to know there''s a whole lot of respect owed to the seas... I got caught in a serious Gale in the BVI last December, and without my boat handling skills, I could have been in some pretty serious trouble. Not tooting my own horn here, but I was VERY happy that when put to the test I didn''t have to think too much.

After you get through Beth''s book, then move on to Jimmy Cornell - "The Cruiser''s Handbook" and "World Cruising Routes." I haven''t gotten this far yet myself, but I''ve heard from more than one source that these are must-read''s in the planning stages.

Also on my reading list will be one of Lyn and Larry Pardee''s books because I think the minimalist approach is the best way to do it and I understand that''s their philosophy as well.

Hope these recommendations give you some confidence in these resources. There''s a lot to read, and if you''re like me you hate wasting your time and money on books that are all a bunch of fluff.

As for selling off your stuff... Just do it. I left a 2,700 sqf home and now live in a small, 3 br, rented house paying 1/3 the housing expense. I have 1/2 as much stuff, and am "that much closer" to the water. Let me tell you something... It feels great!

Good luck!


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## jack_patricia (May 20, 2001)

Brad, you''re asking for input on what for some is a critical issue re: shoving off and going cruising. It''s easy & inviting to just jump over to the ''sell it all'' choice but, in reality, there''s a mix of financial & personal issues that can influence this decision in multiple ways.

As one example, we''re currently at the dock of friends who are facing this issue. The man is all gung ho despite not having done any long-term cruising. The couple don''t have enough $$ to cruise indefinitely, which means returning to work at some point. Where will they do that? Well, most of their professional contacts and future employment network is right here. Moreover, the wife is keen to go cruising ''to see what she thinks'' but it''s a huge leap for her to sign up indefinitely for something she''s never done. How will she like it? How much will it cost, which in turn will affect how long they stay away? Where will they go? And she''s not sure she wants to give up the choice of returning to her home if cruising disappoints. These are all unknowns to them. They have waterfront property that they will likely never again be able to afford if buying from scratch. (See how complex this becomes?) Beyond these personal issues is the alleged/possible/likely (take your pick) ''real estate bubble'' that may/may not pop; do they lose equity if not selling?

As they puzzle their way thru this (no firm conclusion yet), they find it easy to identify a financial and emotional rationale for each of the following choices:
1. Sell now, move stuff into a small condo that''s easily managed while they''re away, and a ''home'' they can always return to when/if a break from cruising is needed.
2. Rent for a year (they''re next to a local college; ''good'' renters looking for upscale property shouldn''t be that hard to find), see how it goes, and make this decision when more knowledge is in-hand.
3. Rent long-term, enjoy the huge positive cash flow which will fund cruising substantially, save all the decisions for the next phase of their lives, and deal with the cost/complexity/logistics that rental property brings with it.

None of these choices are perfect. They all have tax implications. They are all related to investment assumptions the couple are making. What should they do? Well, whatever it is...it will be a very personal choice and it can''t be easily generalized.

A final thought: I really agree with the referral to Beth Leonard''s book, most especially the financial planning segment up front. Because of her & Evans consulting background, she approaches financial planning re: cruising in very clear, building-block manner and I think her approach is ''real'' and worth considering. It should play into your real estate decision to some extent.

Good luck; tough issue.

Jack


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## bdkorth (Jun 4, 2002)

Wow, lots of input. I sure do appreciate it. This is a spooky place in transition. We spend our whole lives building ''stability'' and buying our dream houses, competing with the ''Joneses'' etc... It is spooky to entirely change outlooks, dump what all the relatives and friends call success, and move on.

By the way. We just bumped up from our Reinell 22'' to a Catalina 25'' modified fin keel. What a difference!

Thanks again for all the input.


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## TSOJOURNER (Dec 16, 1999)

Well, here''s my view on going "there".
We''ve had the boat for 2 years with moving on the plan, in 9 more months. We plan on selling the house, cars, and all and putting it in a conservative income producing fund.
We''ll use this to move back on land when the time comes, and if needed, supplement monthly expenses. We really don''t want to settle where we are now (orlando) so that''s part of why we''re selling. Also, posessions are a hodge podge of mine and my noew bride''s. This way, we get to build something together.

RIck


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## TSOJOURNER (Dec 16, 1999)

Great to see that you''re prepared to "live the dream". As you already know there are many tough decisions you must make before moving aboard and shove off. One of the biggest problem for most cruisers is the ability to finance the lifestyle. It''s fine to sell off everything in order to cruise but what if you don''t like it or what happens when you come back? Will you have to go back to work to be able to afford to live ashore once again? The best way around this is to have some way to make an income while afloat. My wife and I have been looking for a way to return to the Bahama''s for quite a while and think we have finally discovered how to do it without having to give everything up at the same time. To find out more about this go to our Sailnet Personal Page or to www.unitoday.net/cirka . Hope this helps.
As Mark Twain wrote: Twenty years from now you will be more dissapointed in the things you didn''t do than the ones you did do. So throw off the bowlines. Sail away from the safe harbour. Catch the trade winds in your sails. Explore. Dream. Discover.

Todd and Lisa Cirka
Live Your Dreams


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## TSOJOURNER (Dec 16, 1999)

Brad,

Everyone approaches the barriers to cruising with different needs and different solutions. If you ask your neighbors or co-workers what they think of your plan, they are sure to tell you - in detail - just how crazy your dreams are. We used those people as fuel for our cruising dreams, determined to prove them wrong. 

My wife and I, like you, spent almost three years downsizing our possessions before going cruising. We kept our large home until we sold it just before casting off, but held yearly yard sales to whittle down the things we owned. It seemed less painful to clear things out over time. After more than two years of cruising, we can''t think of anything we miss owning - the trade of ''stuff'' in favor of cruising has been a good one for us. 

Keep those things that are sentimental to you and bring some with you. My wife refused to go ''camping'' on a boat. She brought our crystal decanters, four place settings of china and real glasses for wine, among other things. 12,000 offshore miles later and we haven''t broken a single item and they''ve made daily life aboard more special. The rest of our important items were left in storage with our families. We''ve began sorting through those items on a recent trip home and found that 50% of those items hold no value for us anymore. I guess our values have changed by virute of our cruising life.

Our experiences and personal needs might not mirror your own, but we''ve tried to capture and share our cruising decisions and adventures on our website at:

www.SailCharbonneau.com

Others have found the information useful. If it helps, great. If it stimulates more discussion or questions, just drop us an email. We''ll answer you from wherever we''re anchored that day.

We''ll hope to share an anchorage with you in the future. You won''t be the only people to escape Idaho for a life on the water. And no, you''re not crazy.

All our best,

Blaine, Janet, Max & Bailey Parks
http://www.SailCharbonneau.com


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## bdkorth (Jun 4, 2002)

Charbonneau,

Thanks for the time you spent answering my questions. You are right, in everybodies minds, we are either crazy, or a very few are envious of us. Not too many cruisers in Idaho!

I look forward to looking at your website, as any knowledge is good knowledge. We are putting our big house up for sale now, and buying an older one that can be paid for in 7 years, to allow us to be totally debt free and earning income on our house as a rental.

I also hope to share an anchorage, as it will mean we have accomplished our dreams. How long do you plan on cruising? A number of years, or indefinitely?

Thanks again, for all the input from Charbonneau and others.


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## rogerleslie (Apr 15, 2001)

I''d recommend reading "Changing Course" by Debra Ann Cantrell (especially for your wife). It seemed to answer alot of questions for my wife and helped her form a more clear vision of what lies ahead.

rl


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## bdkorth (Jun 4, 2002)

Thanks RL,

I keep getting things for myself to read, but I seldom think to get stuff specifically for my wife. Kind of skipping half of the quotient, aren''t I? Thank you again, both for the recommendation and the reminder that I am not alone in this.

Brad


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## TSOJOURNER (Dec 16, 1999)

Well its clear that we all are either dreaming or living the cruising lifestyle. That is something to be celebrated in and of itself. 

We too are in the pre-cruise mode, getting all of our ducks in a row so that we will not have to come back and start our careers over. Our goal is to get financially set enough to comfortably live in a 2nd or 3rd world country post cruising life. We are not independently wealthy or and we weren''t fortunate enough to have fabulous stock options, but rather saved enough for our boat and are in process of saving for our cushion account. 

As far as another idea for passive income, We refinanced our home and bought an apartment building which conservatively kicks out appx. $3000/mo. cashflow after all expenses. From what we''ve read & heard, depending on your lifestyle $1000-$4000/mo is realistic. We feel our everyday cruising expenses plus emergencies, should be OK. 

The not so easy part is how to deal with our home that we love but is a serious anchor with a mortgage that current market rents would not support. Rent it out and pay the negative, keep that option of going back, not losing out on the real estate market if it should continue to increase or Sell it, eliminate the "woulda shoulda coulda" if the market dumps, but risk not be able to get back into this location should we desire to come back.

So, bottom line is, this is a major thing!

Between the initial steps( which is where we are right now) of organizing the financial side, making the boat "cruise" ready, and most importantly learning our boat inside and out and doing many many shakedown cruises. To.. continuing to make the boat crusie ready, the process of jumping off the "system", figuring out how to amongst other things train my dog not to cry when left alone on the boat, eliminating the paperwork and simplifying down to a backpack, moving out and packing up, selling all the unimportant gobbligook, cars and all, doing some longer shakedown cruises... To, finally breathing and being close to nature, meeting and enjoying people, emmersing ourselves in other cultures, following our bliss.

I know it will be worth all the "sacrafice" to actually live. As mentioned above, I''d rather regret doing something than regret not doing something.


May we all make our dreams come true!

Pamela
s/v Cassiopeia
San Diego


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## bdkorth (Jun 4, 2002)

Pamela,

We envy you being in San Diego. What a wonderful sailing location it must be. We are forced to settle for 6-7 months per year in a mountain lake with finicky winds. We enjoy every moment on the water, but certainly long for bigger bodies of water with more reliable winds. Winter just kills us, not able to sail on frozen lakes with negative temperatures. I am doing alot of reading to fuel the dream with the boat on a trailer. We only have a Catalina 25'', but it is a place to start. Good luck on pursuing your dream, it sounds mighty familiar. Thanks for the response.

Brad
s/v Serendipity
Nampa


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## TSOJOURNER (Dec 16, 1999)

You wrote: "The expensive house is next to go for one cheap enough to be able to rent out while cruising. Any advice from anyone that has gone through this?"

Who can tell what lies beyond the horizon? If it is the sale of the house that is going to finance your adventure, then read no further.

On the other hand, if you are selling for the sole purpose of ridding yourself of it, consider for a moment, the benefit of keeping it and renting or leasing it. Rentals, except in rare instances pay for themselves and most often generate some additional income. If, after a reasonable time as a live-aboard, you find that there is, indeed, salt water in your veins, you can sell the house; probably at a higher price. Should the opposite turn out to be the case, you can return to your house.

Oftentimes, persons who have sold a house are saddened to learn that, after a year or two, when they would like to return to the old neighborhood, they are unable to do so because the prices have climbed out of their reach.


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## TSOJOURNER (Dec 16, 1999)

Hi again,

We made the decision to sell our house. Although how we feel and what we decide to do tomorrow is yet to be determined. 

The options that keep us undecided are what if we decide to come, back? We will most definitely be priced out of the market if we sell. On the other hand, if or more like when we do come back to land do we really want to move back here? We''ve thought of renting our house out, but even with it rented our negative cash flow would still be more than we''d like. Is it worth it to keep that option open. 

The topic of stuff is interesting. Naturally we are doing the same thing. A friend of ours just finished 10 years of cruising and is now back on land and firmly implanted in the system again. Anyway, something they mentioned was that for all of those years they kept a portion what was at one time very important in a rented storage unit. $1200/yr for 10 years. That buys a lot of new stuff! Their comment was that 1st of all they''d forgotten about half the stuff, most of it they weren''t interested in anymore, and after 10 years there tastes, and priorities had changed.

So, our thought is to divide into piles and either give away to friends & family with the hitch that it might be temporary, give away completely, store the absolutely pricelss stuff, sell, charity or trash what''s left. 

Isn''t this fun!! I love it.

Pamela


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## River (Sep 23, 2002)

Just wondering, are you retired or will all this effect your careers in a bad way? I''m 28 and own a home business, I''ve been thinking of doing the same thing. I hate to see people wait to long and not have the strength, time, or energy to do all the trips they want. Also if someone could save more money if one waited and worked longed, would that let someone have more freedom?


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## TSOJOURNER (Dec 16, 1999)

Some General thoughts on real estate for the board. I know this is a digression from our usual discussions - but this might be helpful to some of you. This is LONG -

I''ve had some experience with this. Everyone''s personal financial situation varies, so you obviously need to take your own circumstances into consideration.

In your rent vs. sell decision one should consider post tax return on your equity (this is the same for any investment). 

You may be much better off from a financial perspective by renting. This may give you monthly positive cash flow AND get you tax savings at the end of the year. From a (simplified) tax standpoint the rent you receive becomes income and your mortgage payment becomes and expense. But at the end of the year when you do your taxes you''ll also be able to take a relatively large depreciation expense on your property. Depreciation is a non-cash expense - so, according to Uncle Sam - your rental may be operating at a LOSS, thereby reducing your overall tax liability even though the rent you receive on a monthly basis more than covers the mortgage, maintenance, etc. You can also expense (I think) 2 trips per year back home to "check out" your property. Some play numbers:

Value of your house: $100,000
Equity in your house: $10,000
Monthly Rent: $1,200
Monthly Mortgage: $900
Monthly Maintainance: $100
Monthly Depreciation (determined from annual figure based on schedule from the IRS): $300

In this case you will have positive cash flow of $200 per month. From a tax perspective you will have a monthly loss on your rental of $100 ($1,200 - ($900 + $100 + $300)) = -$100

The (annualized) return on equity is calculated as follows:

From your cash flow: $200 x 12 = $2,400

Your tax savings from the loss generated on your rental for tax purpose (varies based on your tax bracket - but assume for example you are in the 15% bracket): -$1,200 comes off your tax liability at the end of the year - you SAVE $1,200 x 15% = $180

So - the $10,000 you have in your house generated $2,580 during the year, or 25.8%.

If you sold your house and stuck the $10,000 in a money market account at 5%, you would have made $425 at the end of the year after taxes or 4.25%

Another factor is the appreciation of your property. Generally speaking - over time - your property is appreciating. So chances are you are making ADDITIONAL unrealized return on your property if you own it. However, maybe you''ve owned your house for a long time and in selling it you will recognize a significant gain - that''s not a bad thing to do either.

I caution everyone - the numbers above are completely fictitious and everyone should look at their own personal financial situation. I have found though that holding on to property gets a better return then selling and sticking the $$$ in some account.

And - before everyone comments - I did not go into every permutation of taxes and real estate investment here - so please don''t make a huge issue that I didn''t elaborate on ______ (fill in the blank). The above post illustrates a CONCEPT.

Just my 2 cents. Hope this is of help to some of you.


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## DuaneIsing (Jul 10, 2001)

Stormer,

Thanks for sharing all that info to show a "generalized concept." I had to laugh at your disclaimer at the end, since you could write books on all the nuances and details that you didn''t (rightfully) include.

I agree that in many cases, if you structure it right, going into a rental situation can be a better financial move. One of the chief reasons for not doing it might be the "absent landlord" problem. It may be worth having a good property manager to ensure that your property is still appreciating instead of being trashed by the renters. Of course, paying for that service cuts into the cashflow.

The more I think about it, either choice (sell or rent) could turn out to be the best depending on your exact circumstances and how things go. But my vote is for the rental scenario; just go into it well informed, make good choices, then hope for a little luck to boot.

Thanks again, Stormer.

Duane


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## bdkorth (Jun 4, 2002)

I sure do appreciate all the input. We have put our big house up for sale and are going to buy an older, also ''big'' house, then live in it while digging out of all residual debt, which will allow us to build up a savings account, our cruising kitty. We then hope to cast off the lines, and rent out the older house. Since it will be paid off at that point, any money is income. Perhaps we shouldn''t pay it off, for tax purposes? Anyway, then we still have a place to come ''home'' to, or to sell if we decide that the sea suits us better. Currently we are being lake sailors on our Catalina 25 and will take bareboat certification classes in San Diego the beginning of March. Little steps..... One at a time towards our dream.

Thanks again,
Brad


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## TSOJOURNER (Dec 16, 1999)

Again - your decision to pay off your house depends on how you can earn the best return on your money and your personal financial situation.

The general scenario is this:

If you have a $200,000 house that you can get $2,000 a month rent (let''s assume that''s net - pre tax) and your mortgage is a 7% 30 yr on $160,000 (that means you have $40,000 of equity in the house):

If it''s paid off and you are in the (low) 15% tax bracket, your after-tax return on your capital is:

($24,000/$200,000) * (1.00 - .15) = 10.2%

If you have an 80% mortgage your post tax return is:

(($24,000 - 13,200)/$40,000) * (1.00 - .15)= 23%

The 13,200 is the estimated monthly mortgage payment of $1,100 x 12.

Note: Numbers above are completely fake - just pulled numbers to illustrate a concept.



I didn''t include a depreciation figure here because it effects each scenario the same way - so the relative difference would remain the same (though your absolute return in each situation would be greater).

The concept here is: using someone elses money (the bank''s in the form of a mortgage) will get you a better return on the money you put down. So what do you do with the $160,000 you don''t have in the house? It''s your choice - maybe put some of it in another house that you can rent with a positive cash flow and where the return numbers justify. If you like liquidity put it in bonds or stocks (return not likely to be as good - and you know what the stock market has been doing the last few years!) Again - what you do should depend on your own particular financial situation.

Just a few thoughts...hope it helps.

Stormer.


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## bob-m (Oct 30, 2002)

Stormer

There is one major flaw with keeping a home with a mortgage. If your tenants do not pay their rent, it can take 6 months to have them evicted. Tenants have all the rights, not the landlord!!! During this time your mortgage payments must still be made. Being an absentee landlord is like begging for trouble. 

If you are considering rental property as a source of income, the property must be paid for or you need multiple pieces of propery so that you are not relying on one source.

My wife and I own 4 rentals and they are a "royal pain". Over the last 12 years we have evicted 3 tenants and had numerous other become several months delinquent before they moved. Fortunately the property is paid for and we do not have the monthly mortgage obligation to meet.

My advise would be to sell any property that is not paid for and look for other avenues of income.

bob


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## TSOJOURNER (Dec 16, 1999)

Bob -

You raise a good point. I''ve always been fortunate with my tennants. Nevertheless - as an absentee landlord it is critical to have a property manager who can deal with tenant/maintenance issues. This is an additional expense that has worked for me and I''ve still been able to maintain positive cash flow.

Regards.


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