There are a few ways of sealing a shaft to prevent water ingress.
You can stuff the tube with grease. Many kit manufacturers do this like Robbe. Unfortunately water pressure tends to force the grease out, plus it eventually emulsifies with the water. Therefore this method is really only suitable for subs that operate in shallow waters (i.e. a couple of feet), plus you have the unpleasant chore of regularly filling the tubes with fresh grease.
You can fit an o-ring, with some form of adjustment to squeeze it up onto the shaft (like a compression joint). This works well, but an o-ring isn't really designed for dynamic shaft sealing, therefore the profile of the o-ring is not optimal and the result is greater friction. In practice this isn't as big an issue as people think.
You can fit a small oil seal or cup seal. These are available for shaft sizes down to 3mm diameter. This is the most professional solution, as the seal is optimised for dynamic shaft sealing and presents minimal friction. At the same time the seal will squeeze tighter around the shaft as the boat dives deeper by nature of it's design. The trade name for these small oil seals is 'Simmerring', and they're made my a company called Freudenberg.
Here is an image of a shaft set-up for a model submarine-
Another method is to fit a small piece of silicone tubing over the end of the stern tube. The space between the stern tube and the propshaft should be filled with silicone grease. This is a cheap and cheerful way of sealing the shaft, but it is very effective and handy for those who don't have access to a workshop to make a glanded fitting.
Other methods include using a magnetic coupling (Neodymium magnets) and running the motor in the wet, the latter method is popular with smaller models, but it can result in reduced motor life and I'm not a fan of this method personally.
All seals need to be greased. For this I use silicone grease, as it doesn't harm the seals and doesn't emulsify in water.
Ready made units are readily available from various places, and represent good value for money-
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