Another tip I've found very helpful (from Brian King I think) - when you mask the waterline, first mask to the wrong side of the line. Then play with the tape line (remove, reapply etc) until you're happy it's spot on. Finally apply your masking tape on the correct side, using the existing tape as a guide, and then remove the 'guide' tape.
The advantage of this is that it's much easier to lay tape accurately against the tape edge than a pencil line, and also you're using a fresh piece of tape to get a sharper edge.