Gilford Yacht Club

[Tacit Blue]

I'm thinking of purchasing a slip at GYC, but have a few questions.
I think some forum members might be GYC members and might be able to help me out. Would there be a problem if I rented the slip out for a week during the Summer? (We usually trailer our boat to Champlain for the 1st week in July). Who repairs the docks if there is damage? Are the owners responsible or will the club take care of it? When was the club built? Someone said it was 1979, but I thought it was earlier than that. Are the slips that are on the other side of the narrow channel from GYC on Smith cove part of GYC? Any other comments would be welcome as well.

[secondcurve]

TB:

I hope you are getting a good deal because in my humble opinion the price of slips on the big lake are going down, down, down.

Let's do a little math. The average slip for a 25' boat costs about $80,000. Real estate taxes are roughly $1,000 a year and condo fees another $1,000 a year. Let's assume that a buyer puts down 20% and the interest rate to finance the slip is 8% over 20-years (I am not sure you can even get these terms nowadays). The P & I payment for the slip would be approx. $6,400.00 per year on top of $2,000 annually for taxes and condo fees. As a result, the carrying cost for an average slip is $8,400.00!!!!!!! In 2009 my guess is that you will be able to rent this slip for $2,500.00 to $3,000.00 anywhere on the lake. Why incur such enormous negative cash flow? And remember, this is after a down payment of $16,000.00!

[codeman671]

Originally Posted by Tacit Blue

I'm thinking of purchasing a slip at GYC, but have a few questions.
I think some forum members might be GYC members and might be able to help me out. Would there be a problem if I rented the slip out for a week during the Summer? (We usually trailer our boat to Champlain for the 1st week in July). Who repairs the docks if there is damage? Are the owners responsible or will the club take care of it? When was the club built? Someone said it was 1979, but I thought it was earlier than that. Are the slips that are on the other side of the narrow channel from GYC on Smith cove part of GYC? Any other comments would be welcome as well.

I have been a renter in GYC for 3 seasons. The slips on the left side of the channel are not related to the club. It is a private dock, I actually rented there for a season. There is no restriction to renting, it is yours and you can do with it what you choose. As far as repairs are concerned, I am not sure about physical dock damage/repairs. Dave does the overall maintenance and handles all the boat launching/removal with the lift. Club rules mandate that you must be out of the marina by Oct 31st each year. I have found that GYC is one of the earliest points on the lake to ice over, one year I had to break my way out when I stayed in 2 weeks late...

With the availability of cheap rentals all over the lake I have to agree with Secondcurve. Although the prices are cheap now to buy and there is so much available for rent that owning is not really an advantage. When slip space was hard to come by and everyone was at capacity with a waiting list many people bought to secure their spot. I don't see the advantage now, especially figuring that you have to pay $1700 in taxes and dues plus your electricty/cable for the season before you even get to the mortgage payment.

[jrc]

TB

Go to www.nhdeeds.com Belknap county, plan book 85 page 3.

The condominium entity was formed 1979, I don't know when the docks were built.

The condo has 64 units, including the units on the pier in Smith Cove and the units in the basin. You reach the basin by travelling through the channel next to the pier.

The basin units are visible from Route 11.

Normal repairs to the docks are made by the club. But in cases of carelessness, if you break it, you fix it.

SC

Your calculations do not include apreciation. Remember buy low, sell high.

[secondcurve]

Originally Posted by jrc

TB

Go to www.nhdeeds.com Belknap county, plan book 85 page 3.

The condominium entity was formed 1979, I don't know when the docks were built.

The condo has 64 units, including the units on the pier in Smith Cove and the units in the basin. You reach the basin by travelling through the channel next to the pier.

The basin units are visible from Route 11.

Normal repairs to the docks are made by the club. But in cases of carelessness, if you break it, you fix it.

SC

Your calculations do not include apreciation. Remember buy low, sell high.

JRC:

I didn't forget about the appreciation because there will be none. Assets with massively negative cash flow streams don't appreciate, they DEPRECIATE. There will be a time to buy low, but it won't be for a while. The commonly accepted belief that there wouldn't be slips available in the future in combination with readily available loose financing over the last 5 or 6 years resulted in grossly inflated slip values. Watch out below, it is about to get ugly on the big lake and slips won't be the only thing falling in value. The concept of reversion to the mean will be unsettling for many as this recession grinds on.

[brk-lnt]

Originally Posted by secondcurve

JRC:

I didn't forget about the appreciation because there will be none. Assets with massively negative cash flow streams don't appreciate, they DEPRECIATE. There will be a time to buy low, but it won't be for a while. The commonly accepted belief that there wouldn't be slips available in the future in combination with readily available loose financing over the last 5 or 6 years resulted in grossly inflated slip values. Watch out below, it is about to get ugly on the big lake and slips won't be the only thing falling in value. The concept of reversion to the mean will be unsettling for many as this recession grinds on.

FTR, I totally agree with you. I'm waiting to buy a slip myself, but planning to do so at a much lower cost than what things are currently going for.

[jrc]

I'm not going to argue that we are at the bottom. But there has been a serious depreciation in slip prices already. Slips in GYC are selling for around half their highs, when they sell.

When the economy recovers slip prices will rebound. If you can wait it out it can be a decent investment. But I'm not giving investment advice, but I wouldn't use cash flow to understand the real-estate value of a limited resource. If you have to finance an investment at 8%, then don't buy it in this market.

[secondcurve]

JRC:

What has the price range of slips been at Gilford? Have any traded recently? How many do you think will be available for rent in the spring and at what price? Finally, do you, or anyone out there, know what the bank's are offering for financing on Winnipesaukee slips these days? I'd be curious how much they require to be put down. Thanks.

[jrc]

There is a 12 x 38 foot slip at GYC in the forum classifieds for around $65K, possibly that price is negotiatable. Last year a slip like that rented for $4000. Who knows what this year will bring.

If you dig through the nhdeeds or call a friendly realator, you can find recent transactions.

The condo fees are $600 and the taxes are $1100. I don't know what rates you would get through a bank. It's an unusual purchase for them.

All I'm saying is that you can't judge the value of a slip on cash flow. With any luck, three years from now, all the slips will be filled up and supply and demand will work the prices back up. It's very hard to build new slip on the lake.

The prices of slips took a long time to come down. Many slips are owned by old money and they are in no hurry to sell. That's why you still see some really out-of-whack prices. These people have no need to sell. If they can get a good price they sell otherwise they hold. Now there are people that need to sell, they are hit by the recession or otherwise need to liquidate. They set the real current value. I think most current transactions are the latter.

[codeman671]

Last season my rental was $4200, this year after renegotiating it dropped to $3300. We also picked up a second slip last season at the end of June for the remainder of the season for $2k, 4 spots down. There was a lot of turnover last season and I am told from my "slip neighbor" that some people dumped their rentals as low as $2500 for the full season just to get them occupied.

[secondcurve]

Originally Posted by jrc

There is a 12 x 38 foot slip at GYC in the forum classifieds for around $65K, possibly that price is negotiatable. Last year a slip like that rented for $4000. Who knows what this year will bring.

If you dig through the nhdeeds or call a friendly realator, you can find recent transactions.

The condo fees are $600 and the taxes are $1100. I don't know what rates you would get through a bank. It's an unusual purchase for them.

All I'm saying is that you can't judge the value of a slip on cash flow. With any luck, three years from now, all the slips will be filled up and supply and demand will work the prices back up. It's very hard to build new slip on the lake.

The prices of slips took a long time to come down. Many slips are owned by old money and they are in no hurry to sell. That's why you still see some really out-of-whack prices. These people have no need to sell. If they can get a good price they sell otherwise they hold. Now there are people that need to sell, they are hit by the recession or otherwise need to liquidate. They set the real current value. I think most current transactions are the latter.

Thanks JRC. At $65,000 things are moving in the correct direction. That being said, at a $4,000 rental there still is an annual $3,000 negative cash flow after a 20% down payment, assuming a $65,000 purchase price. I disagree with your point about cash flows not being important. Yes, in a credit fueled rip roaring economy like the one we have been in for 7 or so years, you are correct that asset values depart from cash flow streams (see Florida housing, Winnipesaukee slips, etc.) However, when credit dries up and the economy swoons asset values begin to behave much differently. Yes, there will always be folks with money, but the value of assets like homes and slips are determined by the marginal seller. Unfortunately, we are starting to see, and the process will accelerate in my opinion, lots of high-end folks lose their jobs. And guess what, if you are a hot shot attorney or mutual fund manager you will likely be out of work for a long time. As a result, there will be lots of sellers and many of them will be folks that appeared to have lots of money.

The real question is are we at an economic bottom? If we are and things start to turn up in a year or two then you will be correct in your thinking. My fear is that after a short pop in the economy (maybe through mid to late 2009) driven by heavy government spending the economy will tank again due to the realization that the US can't spend its way out of this mess. Time will tell. In the meantime, stay cautious and remember cash flow absolutely matters when determining asset values; I think the norm that everyone got used to for the past number of years will ultimately be determined to be the outlier. I hope I'm wrong, but I don't think so.

[secondcurve]

Originally Posted by codeman671

Last season my rental was $4200, this year after renegotiating it dropped to $3300. We also picked up a second slip last season at the end of June for the remainder of the season for $2k, 4 spots down. There was a lot of turnover last season and I am told from my "slip neighbor" that some people dumped their rentals as low as $2500 for the full season just to get them occupied.

Codeman good point. That is the other key point I meant to mention. As the economy weakens, cash flow streams decline thus putting further pressure on asset values. I wouldn't buy a slip a this point unless I was so rich that I could afford to heat my home with twenty dollar bills. Also remember that most rich people got that way because they are smart so I wouldn't count on them to keep over paying for inflated assets as the economy tanks.

[jrc]

SC,

I guess we will have to just agree to have different investment strategies. I just don't know how many investments there are that have a positive cash flow when you borrow money to make the investment at 8%. I guess you don't buy many stocks.