Can I give a loan to my buddy to buy a boat?

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bob60014
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Re: Can I give a loan to my buddy to buy a boat?

Post by bob60014 »

TomatoTomahto wrote: Tue Jun 09, 2020 12:59 pm Is this one of the few unanimous posts on BH’s?

Btw, what kind of boat sells for $30k? Is that usual and it’s the maintenance that’s expensive?
New fishing boats can easily sell for $30k.

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sailaway
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Re: Can I give a loan to my buddy to buy a boat?

Post by sailaway »

smitcat wrote: Tue Jun 09, 2020 3:48 pm
sailaway wrote: Tue Jun 09, 2020 3:42 pm
smitcat wrote: Tue Jun 09, 2020 3:35 pm
sailaway wrote: Tue Jun 09, 2020 1:03 pm
TomatoTomahto wrote: Tue Jun 09, 2020 12:59 pm Is this one of the few unanimous posts on BH’s?

Btw, what kind of boat sells for $30k? Is that usual and it’s the maintenance that’s expensive?
It depends on size and age. I can find you a new boat for less than $30k, especially if you are interested in a small sailboat.

I can also find you a big powerboat boat for $30k, but it is going to need some work.
Interesting - I have never seen a 'big powerboat' for $30K.
$30K typically buys a used single engine outboard or IO in the 24-16 foot range or so.
$30K new buys the same single engine boat at about 18-20 foot range.
"Needs some work" was the key there. And rather an understatement. But I have sold a 35' trawler with twin diesels in running order for $35k, so it does partly depend on your definition of big.
I gather it was 25+ years old and needed all kinds of work and perhaps would not pass a survey or qualify for a loan then?
Yes - those I am aware of, but I would not want these Bogles to think that boats that are 35' can be had for $30K.
With a new 35' boat the sales tax would likely exceed $30K.
Heck even many jet skis are now into 5 figures to purchase new.
FWIW - we have owned at least 10 powerboats of various sizes over the years.
You want really mind boggling? Our 30+ yo boat is worth almost exactly what it was worth when new in 1987 (I did a lot of research on its history when I bought it). And it doesn't even have air conditioning anymore!

Now, inflation means that the value of that number has changed in 30 years. And if we didn't keep it in pristine condition, that number could come down fast. And we have probably put that much again into it since we purchased. But I am still amused by the coincidence!
jibantik
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Re: Can I give a loan to my buddy to buy a boat?

Post by jibantik »

Wow what an amazing combinations of bad ideas rolled into one massively bad idea.
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arcticpineapplecorp.
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Re: Can I give a loan to my buddy to buy a boat?

Post by arcticpineapplecorp. »

Nicolas wrote: Tue Jun 09, 2020 3:38 pm Neither a borrower nor a lender be,
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.

Hamlet Act 1, scene 3, 75–77
but buying bonds which is loaning money to corporations (corporate bonds) or governments (gov bonds/treasuries, munis) is ok.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
smitcat
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Re: Can I give a loan to my buddy to buy a boat?

Post by smitcat »

sailaway wrote: Tue Jun 09, 2020 3:57 pm
smitcat wrote: Tue Jun 09, 2020 3:48 pm
sailaway wrote: Tue Jun 09, 2020 3:42 pm
smitcat wrote: Tue Jun 09, 2020 3:35 pm
sailaway wrote: Tue Jun 09, 2020 1:03 pm

It depends on size and age. I can find you a new boat for less than $30k, especially if you are interested in a small sailboat.

I can also find you a big powerboat boat for $30k, but it is going to need some work.
Interesting - I have never seen a 'big powerboat' for $30K.
$30K typically buys a used single engine outboard or IO in the 24-16 foot range or so.
$30K new buys the same single engine boat at about 18-20 foot range.
"Needs some work" was the key there. And rather an understatement. But I have sold a 35' trawler with twin diesels in running order for $35k, so it does partly depend on your definition of big.
I gather it was 25+ years old and needed all kinds of work and perhaps would not pass a survey or qualify for a loan then?
Yes - those I am aware of, but I would not want these Bogles to think that boats that are 35' can be had for $30K.
With a new 35' boat the sales tax would likely exceed $30K.
Heck even many jet skis are now into 5 figures to purchase new.
FWIW - we have owned at least 10 powerboats of various sizes over the years.
You want really mind boggling? Our 30+ yo boat is worth almost exactly what it was worth when new in 1987 (I did a lot of research on its history when I bought it). And it doesn't even have air conditioning anymore!

Now, inflation means that the value of that number has changed in 30 years. And if we didn't keep it in pristine condition, that number could come down fast. And we have probably put that much again into it since we purchased. But I am still amused by the coincidence!
"You want really mind boggling? Our 30+ yo boat is worth almost exactly what it was worth when new in 1987"
Just measuring the purchase and sales price we have sold 8 boats for more than what we paid for them.
Two of them we owned for less than 2 seasons and had a decent spread on the sale.
But I have no background or knowledge of sailboats other then a small Hobie cat.
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Re: Can I give a loan to my buddy to buy a boat?

Post by prairieman »

My read is that Buddy is a con artist.
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Watty
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Re: Can I give a loan to my buddy to buy a boat?

Post by Watty »

mcangelo4 wrote: Tue Jun 09, 2020 11:39 am Buddy wants to buy a boat for 30k.
He may need more than $30K.

He will need a large pickup or SUV to tow it with too if he does not already have one that is set up for towing.
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Re: Can I give a loan to my buddy to buy a boat?

Post by Grt2bOutdoors »

mcangelo4 wrote: Tue Jun 09, 2020 11:39 am Buddy wants to buy a boat for 30k. He wants to pay 10% interest lets say. How can we structure a deal where I have 0 liability if something happens to someone while on boat from insurance standpoint and the most efficient way from a tax perspective. The idea is if he defaults I can just take ownership of boat.
Great, let him get a loan from the bank! If the bank won’t give him the loan, why would you gift it to him? See the keyword “gift”? That’s what it will be if you give it to him.
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Re: Can I give a loan to my buddy to buy a boat?

Post by tashnewbie »

OP are you trolling the forum? Did you really think you'd get any responses other than the ones you've gotten? Of course you can loan money to your buddy to buy a boat. Should you? NO!! My question is why would you even consider making this loan? Unless you have beaucoup money where $30k is a drop in the bucket and you don't mind throwing it away. If I had that kind of money, I'd rather give it to a charitable cause.
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Re: Can I give a loan to my buddy to buy a boat?

Post by bikesandbeers »

I am not suprised at all the answers, but a little suprised by the volume of negativity of this.

I made a friend a $5k loan at 10% interest when his SBA line was going charge him 12%,l dont consider myself a loan shark, and I was prepared to loose the money.

That being said 30k is a lot more for a asset that opens up liability.

I have seen friends go in on partial ownership of a boat, and then buy out partners when someone needed to cash out.
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Doom&Gloom
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Re: Can I give a loan to my buddy to buy a boat?

Post by Doom&Gloom »

oldfort wrote: Tue Jun 09, 2020 12:12 pm You want to charge your buddy 10% interest? Are you planning on going into the loan shark business?
He's going to need a bigger boat.
TheDDC
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Re: Can I give a loan to my buddy to buy a boat?

Post by TheDDC »

I would approve of it, but since you are basically offering the same service as a high limit credit card, and to the same sort of clientele, I would ask for no less than 24% interest.

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tibbitts
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Re: Can I give a loan to my buddy to buy a boat?

Post by tibbitts »

mcangelo4 wrote: Tue Jun 09, 2020 11:39 am Buddy wants to buy a boat for 30k. He wants to pay 10% interest lets say. How can we structure a deal where I have 0 liability if something happens to someone while on boat from insurance standpoint and the most efficient way from a tax perspective. The idea is if he defaults I can just take ownership of boat.
Horrible idea in so many ways.
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Cam894
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Re: Can I give a loan to my buddy to buy a boat?

Post by Cam894 »

There is probably a reason he can't get a 5-6% loan from a credit union or bank.......
Mordoch
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Re: Can I give a loan to my buddy to buy a boat?

Post by Mordoch »

bikesandbeers wrote: Tue Jun 09, 2020 6:35 pm I am not suprised at all the answers, but a little suprised by the volume of negativity of this.

I made a friend a $5k loan at 10% interest when his SBA line was going charge him 12%,l dont consider myself a loan shark, and I was prepared to loose the money.
A huge difference is you were at least loaning the money for his business operations, while unless we are missing a key detail this is a recreational purchase which will not be bringing in money.

It very much is a case where among other things its worrying that the buddy does not have the money for this already on his own, because there are of course additional costs on top of mere ownership for owning and operating a boat which makes it allot more questionable if the buddy will be able to pay the loan back plus that interest rate even if he intends to. (Or even if he does do so the odds he will be so resentful on the ultimate financial impact upon him that it will end their friendship is very high.) On top of the presumably loss of friendship, there are also issues with respect to things like the condition of the boat if the buddy defaults and simply all the potential legal complications in terms of properly taking ownership of the boat since its not like the OP is experienced in doing this like a car dealership (or their loan provider) generally would effectively be.

At least in the case of shared ownership of a boat presumably both parties are making use of it and this will be helped by generally presumably neither individual wanting to use the boat all the time. In this case its not even 100% clear if the OP actually likes boating as far as I can tell, and more to the point he would presumably have no actual legal right to use the boat at all when he is just loaning the money, which makes things far trickier if any dispute comes up with in practice the buddy having a perfect right to block the OP from any access to the boat until the buddy actually legally loses ownership of it.
Last edited by Mordoch on Tue Jun 09, 2020 10:12 pm, edited 2 times in total.
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Re: Can I give a loan to my buddy to buy a boat?

Post by Sandtrap »

It would make sense to loan the money with the right legal loan documents and the Hold Title to the boat in your name until the boat is paid off.
Banks do it this way for good reason.
It would seem very reasonable to make this a must have even between buddies.

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sailaway
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Re: Can I give a loan to my buddy to buy a boat?

Post by sailaway »

bikesandbeers wrote: Tue Jun 09, 2020 6:35 pm I am not suprised at all the answers, but a little suprised by the volume of negativity of this.

I made a friend a $5k loan at 10% interest when his SBA line was going charge him 12%,l dont consider myself a loan shark, and I was prepared to loose the money.

That being said 30k is a lot more for a asset that opens up liability.

I have seen friends go in on partial ownership of a boat, and then buy out partners when someone needed to cash out.
This hits two angles at once: don't borrow money for a toy and don't loan money to a friend.
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gr7070
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Re: Can I give a loan to my buddy to buy a boat?

Post by gr7070 »

oldfort wrote: Tue Jun 09, 2020 12:12 pm You want to charge your buddy 10% interest?
This was my first reaction. *You* are not much of a buddy.

The problem I have with lending anyone money I know personally, is that I'd only be comfortable lending money to someone who wouldn't actually need the loan.

I'd have zero concerns lending my siblings money, but I suspect (aside from them being my siblings) that is because they have enough money to replay a loan.
Last edited by gr7070 on Wed Jun 10, 2020 12:07 am, edited 1 time in total.
BillWalters
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Re: Can I give a loan to my buddy to buy a boat?

Post by BillWalters »

What could go wrong?
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FrugalInvestor
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Re: Can I give a loan to my buddy to buy a boat?

Post by FrugalInvestor »

If you're going to loan money to friends or family just assume that you're giving it to them and won't get it back. That way if you do you're happy and if you don't you're not disappointed.
Have a plan, stay the course and simplify. Then ignore the noise!
kiwi123
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Re: Can I give a loan to my buddy to buy a boat?

Post by kiwi123 »

And if you loan the money we'll eagerly be looking for updates on what went wrong :-)
... maintenance, storage fees, broken engine, club fees, missed payments, no insurance, lost job, etc. etc. etc.
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Re: Can I give a loan to my buddy to buy a boat?

Post by geerhardusvos »

mcangelo4 wrote: Tue Jun 09, 2020 11:39 am Buddy wants to buy a boat for 30k. He wants to pay 10% interest lets say. How can we structure a deal where I have 0 liability if something happens to someone while on boat from insurance standpoint and the most efficient way from a tax perspective. The idea is if he defaults I can just take ownership of boat.
Can I get 30k too plz for my bunker improvement project?

Don’t do this
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sergeant
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Re: Can I give a loan to my buddy to buy a boat?

Post by sergeant »

Doom&Gloom wrote: Tue Jun 09, 2020 7:35 pm
oldfort wrote: Tue Jun 09, 2020 12:12 pm You want to charge your buddy 10% interest? Are you planning on going into the loan shark business?
He's going to need a bigger boat.
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Re: Can I give a loan to my buddy to buy a boat?

Post by barberakb »

livesoft wrote: Tue Jun 09, 2020 11:43 am Let me try to be the first to write that this is an insane idea. I know of absolutely no one that has every loan money to a friend for such a frivolous purpose and have it turn out well.

Full disclosure: My brother-in-laws (who don't know each other) have owned boat-building companies in Maine and North Carolina.
It happens... I once loaned $ to a good friend in the military to buy a Monster truck. Turned out just fine. He paid me back and I got to enjoy the use of
his truck quite a bit. Win Win
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Re: Can I give a loan to my buddy to buy a boat?

Post by neverpanic »

HomerJ wrote: Tue Jun 09, 2020 11:54 am
mcangelo4 wrote: Tue Jun 09, 2020 11:39 am Buddy wants to buy a boat for 30k. He wants to pay 10% interest lets say. How can we structure a deal where I have 0 liability if something happens to someone while on boat from insurance standpoint and the most efficient way from a tax perspective. The idea is if he defaults I can just take ownership of boat.
If he can't pay cash for a boat, he can't afford a boat.

It's that easy.
He's a bad friend for asking. You're a worse friend if you agree to it. There are things I might enjoy that are beyond my ability to afford them. Some people call that "life".
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wander
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Re: Can I give a loan to my buddy to buy a boat?

Post by wander »

This kind of loan, with high interest, sounds similar to many old ponzi schemes.
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Re: Can I give a loan to my buddy to buy a boat?

Post by sd323232 »

mcangelo4 wrote: Tue Jun 09, 2020 11:39 am Buddy wants to buy a boat for 30k. He wants to pay 10% interest lets say. How can we structure a deal where I have 0 liability if something happens to someone while on boat from insurance standpoint and the most efficient way from a tax perspective. The idea is if he defaults I can just take ownership of boat.
Dont do it. It is a train-wreck in making.
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Re: Can I give a loan to my buddy to buy a boat?

Post by chipperd »

This has to be a troll question. There is no way this transaction, as outlined, should occur.
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StevieG72
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Re: Can I give a loan to my buddy to buy a boat?

Post by StevieG72 »

NO! You can NOT give a loan to your buddy to by a boat!

Bogleheads have spoken, you have been warned!

While you may have warm and fuzzy feelings about boating with your buddy and earning 10% interest, the sinking feeling of making a big mistake will linger much longer once the deal goes south, and it will go south.
Fools think their own way is right, but the wise listen to others.
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Re: Can I give a loan to my buddy to buy a boat?

Post by FI4LIFE »

CardioMD wrote: Tue Jun 09, 2020 11:58 am This is a train wreck waiting to happen.
Or boat wreck.

To the OP:
Perhaps he could offer up something else as collateral and you can call it a personal loan?
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Re: Can I give a loan to my buddy to buy a boat?

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Re: Can I give a loan to my buddy to buy a boat?

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