Reddit mentions of Inspecting the Aging Sailboat

Don't sweat the growth below the waterline. Heck that happens to boats that are underway.

You'll probably have a hard time getting insurance, in part because of the age of the boat and in part because you haven't owned a boat before. You may have to "self insure", which will limit your moorage options as some marina require insurance. Insurance companies will also require a survey, usually from a list of surveyors that they work with.

To find moorage, just walk or drive around the likely areas and look for "moorage available" signs and start calling. Some cities and other quasi-government agencies have marinas (e.g. the Port of Seattle), which can sometimes be a great deal. Finally, ask the people that are auctioning the boat, as they will obviously have a slip available, and will have a working relationship with some of the other marina owners nearby.

Haul outs always include the power wash AFAIK. Haul outs aren't that expensive; in my neck of the woods they're about $400. Call some nearby yards. Alternatively, for a lot less you can hire a diver to get the worst of it off of the bottom, check the hull for damage (blistering, grounding, etc.), etc.

I don't think that $5k is nearly the worst you can expect for an engine. It's unlikely given the current owner's work on the boat, but if you have to repower then it will cost a lot more than $5k. Chances are, it'll just need an oil change, fuel filters and fresh fuel.

An acquaintance of mine just spent $15k on new sails for his Baba 35. He got a ton of new sails, but you may want to up your estimate there if you're sure you want new sails.

You can get a once over from a surveyor for a few hundred dollars. They won't have time for much of a check, but you'll get an idea of the structure and the rig, and possibly of the diesel. More importantly, the surveyor will also be able to ballpark the boat's value, which will be invaluable (ha!) during the auction.

Pro tip: Go back to the marina, sit on the dock in front of the boat, and just look at it for a while. Is this the boat that meets your needs? 39' and 10 tons is pretty big for day sailing and weekend trips, and will be more expensive to maintain and moor, but then again maybe you want experience with heavy, long keel boats. Mentally work through the rigging, talk through raising the sails, see if there's anything crazy about it. When other people from the marina walk by, ask them about it, some may have been aboard. That hour on the dock may save you the cost of the mini-survey.

If you decide to go ahead, read this book three times: Inspecting the Aging Sailboat. Go in with a checklist.

P.S. Please post with the auction results. I hope this works out for you.

Edit: Are you guys in Seattle? If so, I might have seen this boat. Is it Lucky Lindy, over at Shilshole?