Loans and Insurance

[mwinter]

I don't think a home equity loan is too bad if you're putting money into something that has some resale value. Home equity loans are no good if they go into buying something new (like a brand new trailer) that depreciates rapidly, because suddenly you're paying interest and making payments on something that has just lost 25% of it's value. For an older unit, you don't have to worry about a rapid decline in value.

But I'd recommend paying the loan off as quickly as possible. I'm not a big fan of debt.

M.W.

[2airishuman]

Originally Posted by mwinter

I don't think a home equity loan is too bad if you're putting money into something that has some resale value....

true but lets look at the cost/price/value/resale for the unit being purchased here...

a vintage airstream rehab'd by one of the TOP NAMES in this business...

-price to restore 30,000$ + just a short time ago...

-price to purchase now 17,500$ with a very happy buyer at that figure...

-loan amount 7,500$, so approximately 42% with the buyer covering 10k$...

-right or wrong not many banks will do even this much on a vintage unit...

-insured to 'agreed value' which will likely be current purchase price NOT the restoration costs...

now, IF the unit is wrecked or stolen or quickly beat up buy hail or a tree limb, what is it worth to the next buyer?

and IF steve recovered fully from insurance (15-17k$) could he be able to buy another one like this one?

'resale value' is wildly varied and ultimately whatever buyer/seller agree too...

but basically the current bank loan is close, and declining monthly at the restorated trailer is used/worn and so on.

it appears to be a fantasic unit (but without an air conditioner) and will bring much joy camping...

and it IS a head turner...

so as noted in one of your 'shopper threads' myra, rehab/restoration costs are like home improvements...

a value to the user but the costs are not recovered at resale...

and this buyer is full duty military so if/when his status changes quickly and without notice....

resale takes time....just look at the issue he currently has with a deadbeat repair shop that is holding his other unit as a hostage...

many in the service lose money and toys when their status changes...

lets hope soldiermedic steve and his soldiermedic wife and kiddos get to enjoy plenty of camping and soon!

cheers
2air'

[mwinter]

2air,

You might not recover all the restoration costs on a vintage but it does increase the value of the trailer. I think a vintage trailer in mint/working condition is always going to fetch a decent price. Good condition vintage units are only going to be in shorter supply over the years. And the smaller ones are more likely to maintain their value over time because of their flexibility and ease of storage and because gas prices are only going to go up. Compare that to a new 2007 Safari, which is just going to continue to decline in value. A vintage unit is not necessarily a good investment. You may not make money on it, but you won't lose as much either.

If you use a trailer for a work space, I wonder if you can write off the depreciation?

M.W.

[2airishuman]

Originally Posted by mwinter

. If you use a trailer for a work space, I wonder if you can write off the depreciation?M.W.

yes some of the office space deductions/depreciations can be used...

very limited and with caveats...

there are a few threads here on this topic...

and they are covered in the books i suggested 2 ya...have ya been book shopping?

cheers
2air'

[mwinter]

I'm trying to remember what books you suggested. Will you remind me again? I try and stuff all this info into my brain, but some of it falls out, and I have to stuff it back in again.

I'm packing my belongings in boxes tonight. I still have no trailer and nowhere to go. I need to get a trailer soon so I can join my people.

M.W.

[2airishuman]

Originally Posted by mwinter

I'm trying to remember what books you suggested.

here

http://www.airforums.com/forums/378971-post14.html

and here

http://www.airforums.com/forums/f314...=1#usercptools

many full times have written books too so search on amazon by topic/title and many will appear...

many are great rv travel full time in mexico, the baja or pacific northwest or panama via mexico...

the church/church books are very complete but don't offer much on 'selecting a unit'

Rolling Homes Press

while this site helps with rig selection and budgets...

Road Trip Planner


cheers
2air'

[mwinter]

Oh, no, not the "For Dummy" and "Idiot" books! Please 2air, please don't make me buy those. Going through the other suggested reading material now...

Thank you,

M.W.

[Jim Clark]

Originally Posted by soldiermedic

They will finance a NEW unit, but not a restored vintage trailer.

Steve

Steve, that is normal with cars, trailers, boats, what have you. They can take the unit back and get their money back, a used unit dose not have the value and is not worth the time to document unless you are in the vintage business. I purchased my unit new using 0 interest credit card loans, which is a game. I have some very high credit limits and receive offers daily. I have to move the loan every 6 to 12 months to a new card to keep the 0 interest as they are really teaser rates. Sometimes if I get a real low interest offer for life I will lock the loan at that rate.

Here are some issues, which you need to be aware of.

• This is considered an unsecured loan; it can have an adverse impact on your credit score.
• Do to the fact it is an unsecured loan you do not have to carry insurance as you would on a standard mortgage type loan. You will have the responsibility to cover your property.
• Due to the credit card companies carrying the loan as a teaser the penalties if you are late are miss a payment can be severe.
• You need a large credit line on several cards to move the money as necessary. Must be from different banks not just cards with different names.
• You have to stay aware of the balance of the loan and the length remaining on the tease rate.
• Yes if you do inure interest expense you can call it a second home.
• You often get a free month when you move the loan to another card if you plan carefully.
• The home equity loan line of credit is an attempt to paint debt as housing debt by banks giving the impression to the consumer the interest expense is deductible in an effort to boost the amount of loans written, in most cases the interest expense is not deductible due to the type of good purchased with the loan, that is another story. Read the disclosure on any home equity loan very carefully. A trailer qualify as a second home no matter the type of loan and the interest expense would be deductible.
• I am not an Accountant so verify all the above information with a professional, I have no clue as to the validity of my own statements.

[nohillgrish]

For what it's worth, numerous Credit Bureau searches (which are normally done each time you activate, or apply to) by credit providers also negatively impact your credit score. The rating system will often assume: 1) a lot of searches means there may be a lot of unused credit capacity out there, or 2) a lot of searches must mean applicant has a lot of credit denials--Either assumption negatively impacts your score. I take corrections well, but it is my understanding that unsecured credit is considered consumer debt no matter what the purpose of loan was for, and therefore interest is not deductable. If loan is secured with a trailer that meets second home criteria, it of course would be. Varied opinions is why there are so many accountants and lawyers.

[Jim Clark]

I believe you are correct. A quick search turned this up.
"Home mortgage interest is interest you pay on a loan secured by your main home or a second home. The loan may be a mortgage to buy your home, a second mortgage, a home equity loan, or a line of credit."

Tax Topics - Topic 505 Interest Expense

[nohillgrish]

Thanks Jim--I appreciate you checking into this further. We've just got to figure out how to help our buddy Steve acquire that great looking trailer. My experience has been that you soon forget the first cost if you really like what you've purchased and it meets your needs. By the way, I have some kin folk in your fine state around Shrevport, Bossier City, Oil City & Vivian. Their testimony is that Louisana has some of the finest fishing waters in the country. Based on the quality and quanity of a few fish fry's I've enjoyed in the "Bayou" state, I tend to agree.

[golddigger]

Originally Posted by mwinter

For an older unit, you don't have to worry about a rapid decline in value.

There is one caveat with that statement: fair market value. If you pay more than fmv for a used unit you can be sure it'll depreciate the moment you lay your hands on it. There is not enough information to determine if $17K is fmv.

[mwinter]

Found this online:

Write Off Interest Paid on a New Boat or RV. If you're buying a boat or an RV this summer, the interest you pay may be tax deductible. The National Association of Enrolled Agents (NAEA) offers the following strategies to qualify for tax-deductible financing:

1. Finance your purchase through a home-equity loan. According to IRS Publication 936, in most cases, regardless of what the loan proceeds are used for, homeowners can deduct the interest on a home equity loan of up to $100,000.

2. Qualify your purchase as a second home. If the boat or RV has sleeping, cooking, and toilet amenities, it may qualify as a second home, thus making the interest on the loan deductible. Just make sure that you pledge the boat or the RV as security for the loan to qualify for mortgage interest deductions.

M.W.

[mwinter]

Originally Posted by golddigger

There is one caveat with that statement: fair market value. If you pay more than fmv for a used unit you can be sure it'll depreciate the moment you lay your hands on it. There is not enough information to determine if $17K is fmv.

Well, I guess I'll just have to continue my research so I know a good deal when it finally comes along!

M.W.

[soldiermedic]

The issue is time. I do not have the 3 weeks to allow for a Home equity loan to be processed. I COULD however take the personal loan, and then pay it off with a home equity loan later. This would allow intrest deduction, and provide a lower rate.

Steve

[mwinter]

Originally Posted by soldiermedic

The issue is time. I do not have the 3 weeks to allow for a Home equity loan to be processed. I COULD however take the personal loan, and then pay it off with a home equity loan later. This would allow intrest deduction, and provide a lower rate.

Steve

Steve,

Sounds like a good plan to take the personal loan now and pay it off with the home equity loan later. What are you buying, by the way? I seem to have missed that part somehow.

M.W.

[soldiermedic]

I am purchasing a completely refurbished 1956 Caravanner.

See link here:

56 Caravanner

[mwinter]

Well, I am trying to be happy for you, but it's not easy with I'm this sick with jealousy. I WANT ONE LIKE THAT!!

It isn't fair!!!!

M.W.

[mwinter]

It's gorgeous, Steve. A unit like that will definitely hold it's value. If you ever need the money back, you can probably get it. I would love to have something that beautiful. Well done.

M.W.