Join Date: Feb 2010
Location: Narragansett Bay
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Re: Boat slip value?
Mathematically, it is a comparison of the net present value of cash. You take paying rent every month, into perpetuity, and compare it against paying an upfront purchase price and a smaller amount each month or year for maintenance, insurance or whatever else. You discount the cash back to today's dollars, and the upfront cash that breaks-even is theoretically the value. Its get squishy when you have to pick a discount rate, which is arguably very low in the near term (raising the breakeven), but should normalize over the long term.
But there is another intangible. Owner occupied homes, for example, typically sell for more than the above math would suggest. Why? Because there is an emotional attachment to them, people need a place to live and the convenience of a particular home to their work or being in a desire school district have incremental value. The math can also be impacted by a disconnect in the supply and demand of renting vs. owning. If more people want to own, the cost to buy will be higher than the break-even to renting and vice versa. A boat slip would be impacted by similar intangibles.
Clear as mud?
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