Questions About Putting a Boat Into Charter . . .

[nautical62]

I'd just like to second what Reality Check said as it's very important. With the Moorings, I can sail up to 9 weeks per year, but when it comes to trade time, I can only sail 2 weeks per year at any location and there are a few additional restrictions. It's best to get a boat where you wish to sail most frequently and in some locations that may mean waiting longer. As an American I was also unable to own a boat in French territories.

[Charlie]

I researched the same thing trying to use the section 179 deduction. Moorings had an actual letter from one of the big accounting firms that siad it did not qualify for a section 179 deduction b/c it was a passive activity. I would investigate carefully what is required to change the activity from passive to non-passive. That was the one hurdle that I couldn't get over. I was alreaady approved for a loan and had a boat picked out and everything.

[multihulls]

Nautical62, I came across this 2008 thread (and your contribution) and found it very useful, useful enough to join this forum!
So now you probably completed your contract with the lease company (moorings), so did it work out as you hoped? You mentioned you were hoping to hold on to the boat so may not be able to accurately say, but did the boat hold its value and would you have been able to sell at 40K, or closer to 67K? Any other costs you found out about at or around closing?
Any feedback would be great!

Paul

Originally Posted by nautical62

Rich, After owning two pocket cruisers, that I frequently sailed to the Bahamas, I now have a 33-foot Beneteau in charter with the moorings. After crunching the numbers, I decided that for the 4-7 weeks I typically cruised a year, owning a boat in charter was cheaper than either chartering for a similar amount of time or owning and sailing. I'm about half way through the contract and still believe this to be true.

The economic idea is simple: It's more cost-effective per day or week to have a boat used for much of the year than to be paying all the overhead for only 8 weeks of use. Insurance, dockage and to some maintenance costs are fixed and will cost the same whether you use a boat every day or never. Spreading these costs out over more days of use or more users brings the costs per use down.

In my case, I'm buying a boat that is more expensive than I otherwise would have purchased, but as you mentioned I'm getting almost half of that back in guaranteed income. I also have no insurance, no maintenance and no storage fees. As others have said, a boat coming out of the program will likely devalue more than a similar boat under private ownership. However, basic math will tell you that getting close to 50% of the boat price back and having no overhead far outweighs this difference.

Let's take my 120K 33 foot boat for example. I'll get about 53K in revenues for it over the contract period which brings the price I paid down to 67K. Now lets assume prices have really cratered and I only can get 1/3 of the initial price back: 40K. This brings down the cost of ownership to me to 27K. That's less than 5.5K/year for the 5-year contract time. (If I sell it for 60K which the guaranteed trade-in price, that number becomes less than 1.5K/year) Do you think you could charter 4 or more weeks a year for that price? Do you think the depreciation, insurance, storage, and maintenance on a boat in private ownership will be less than that? Also - what isn't factored into this is that you can sail anywhere there is a base, not just out of your home port. All your vacation time can be spent sailing, not working on your boat and of course the headache factor is much less.

What you need to do however, is crunch the numbers for how you would actually behave in each circumstance and weight the pros and cons that apply to you. Charter ownership does not allow you to: drive to the marina and take your boat out for an evening sail, make what ever modifications you want to the boat, keep your boat anywhere you want or cruise for more than 9 weeks per year. Of course, neither does chartering. What I also did not factor in above is the owner use fee which includes linens, boat items, dinghy rental, fuel, etc. Private purchase of these things would certainly be cheaper for most people. Another question to answer is: Will you split this fee with all on board or bare this cost yourself? When I have friends join me they are more than happy to split this cost since they are appreciative that this is so much cheaper than splitting a charter. Not even comparable. However, If I were to pay that all myself, that would add another 1.5 -2K to the yearly cost. (I recently booked 2 weeks exchange in the Abacos. My owner fee is $720. Chartering would have been $3,800)

If you would otherwise have purchased a boat, you must consider how much would you have spent on that boat and what costs would you have faced maintaining it? Also what would you have done with any difference in the money spent? Compared to the stock market, having money in my boat has been a great value lately.

Buying a charter a boat is certainly not an income producer, but I think it may offer a less expensive option than either chartering or owning. The question is - are you content with the limitations it has?

As for me, I'm currently looking at going back into having my own boat, not because I think charter management is a bad economic choice, but because I will have more than 9-weeks a year to sail. If I only had 4-7 weeks per year, I'd stay in the Moorings program for ever.


PS one more thought on how hard a charter boat gets used: It gets used hard, harder than a similar boat would likely get used. This is something you hear often and I agree with it. However, what you don't hear as often is that these boats are also maintained in a condition charter people are willing to pay thousands a week for. At the end of the program you are guaranteed, that while worn, things will be in operating condition. Compare this to a sea trail and survey I just finished on a private boat where every seacock is rotten and needs replacing, the cutlass bearing is shot, the engine is not aligned, the rig has been wrongly tuned, deck delamination has gone untreated, The wire/rope halyard is the wrong size, the holding tank bladder is broken, the settee is rotted through, most instruments don't work, it doesn't have self steering, GPS, etc, etc...

Feel free to send me a message if you'd like to talk more about what my experience has been.

- Dave

[nautical62]

Originally Posted by multihulls

Nautical62, I came across this 2008 thread (and your contribution) and found it very useful, useful enough to join this forum!
So now you probably completed your contract with the lease company (moorings), so did it work out as you hoped? You mentioned you were hoping to hold on to the boat so may not be able to accurately say, but did the boat hold its value and would you have been able to sell at 40K, or closer to 67K? Any other costs you found out about at or around closing?
Any feedback would be great!

Paul

Sorry for the delayed response. Just came across this now. Wow - where the time goes.

My boat just finished it's Moorings contract and will be in Footloose for a year. I have absolutely no regrets. Since I haven't yet sold it, I still can't speak accurately to finances, but what I will say is that even if I were to give it away, it will be one of the cheapest boats I've owned. An income of about 45% of purchase price, free dockage, free maintenance and free insurance make even tens of percents difference in the selling price almost meaningless in comparison.

I was on the boat the last week in contract and overall, I thought they did a great job of upkeep. The maintenance logs made me realize how much they really did, that I didn't have to think about. No doubt it did show some wear, but it was in much better working order than most boats I've looked at for sale by owner.

If you like chartering, and would like to do it more often, I think owning a charter managed boat is worth considering. Obviously, it's not a good option for those who want to cruise for 3 or more months per year.

I would like to qualify my statement by saying how good a deal it is, depends on the boat you want and what you would otherwise do. I think it's clearly much cheaper and much easier than purchasing a similar boat for a similar price that you would only use 3-8 weeks per years. The question though is: Is that what you would otherwise do?

The issue I've run into is that I bought their smallest boat 5 years ago for 119K. Since then they've started phasing out their smaller boats, so now their more entry-level boats are more in the 180K range. That's a notable increase for features and size that don't mean a lot to me. If I wanted a boat in the 38+ foot range, I'd buy another Moorings boat without hesitation. In my situation however, at that price, for my needs privately owning a used 30 footer for 25K and accepting the maintenance, insurance and storage makes more sense.

As with most things in life there are trade-offs and the balance of those trade-offs will vary from person to person.

Feel free to send me a message if you have any further questions. I'm not the best at keeping up on all my posts.

Fair winds.....

[nigellongland]

I can be honest and say I have done the charter thing with the Moorings. Bottem line - if you just want to sail in different areas 3-4 weeks a year, given you will do it with friends who split the cost- it is better to just charter. If you buy a boat in a program and then after your 4-5 years keep it and sail from where it is- this is the way you make money. ie you keep your boat and sail it for 3 months - this is where you really make money. There is no way you could have a good boat, working well, solid and one you know well in an exotic location without spending a ton of money. I sailed mine from Belize to Honduras, then to Mexico and up to Florida and took 4 months to do that. Sold her in Florida over a 3 month period for the same that I would have sold her when taken out of the Moorings fleet. That time alone was likely worth about $50,000 of charter time. I recommend charter ownership only if you are going to keep the boat after the charter time is over nigel longland hood river oregon

[multihulls]

Sure appreciate your logical posts and reply!
Was getting into Footloose a given, if you request it?
I am thinking of requesting a docking in Annacortes WA, closer to home for more frequent use and easier to bring home if I did decide to keep the boat on, but that would exclude Footloose option. I have a feeling that the benefit is greater as the boat gets older and depreciates less... depends if Footloose still pays a decent amount I suppose.
Is the boat registered in the country of the owner? At purchase of the new boat with The Moorings, are sales taxes paid on top of purchase price (BVI, or US)?
Because there is income (never mind the up-front investment), do you now have to justify to local or to your countries tax authorities why it should not add up to your personal income / pay taxes on that income?
And here for the icing... are you aware if there is a guaranteed buyout price option, with the Moorings or other management company?
I will be asking these questions of The Moorings too but would not mind your insights. As popular as the program is, it seems like there is a bit of a vail on all the details (against competition I suppose).

Thanks again for any of your thoughts!

[nautical62]

Multihulls: Very good questions. I'll give my impression, but these are questions anyone considering buying a charter yacht should ask the company.

My purchase price included all taxes, license, detailing and accessories. It's registered in my home country (U.S.).

The Footloose program was an option often available, not required and not guaranteed. I think overall, it makes more sense to either trade up or sell the boat before in depreciates more. With the economy down, Selling a smaller boat in Tortola wasn't feasible and I didn't have the time to sail it back, so putting it in Footloose, was basically a way to buy me another year without having to pay storage, insurance, etc. Also the standard of receiving the boat at the end of a Footloose contract is different - it needs to be in charter ready condition only.

I do declare the income on my taxes, but for me at least, that's almost exactly a trade off with claimed depreciation.

I had a guaranteed trade in price, not a guaranteed buy out price. However, I think that is no longer offered. You'd need to check on that one.

Like any business trying to sell you something, they certainly put a positive spin on things, but in my experience they have been straight forward and didn't hide anything.

One thing, related to what I said earlier, is that for comparison purposes, they usually compare their program to owning an identical boat out of charter. I think that's necessary for a fair comparison, but again, in the real world, you might buy a smaller used boat, might want to sail more or sail less. Crunch the numbers against what you would otherwise do, not just their comparison.

The income tax one must pay on income is one factor that can be easy to overlook - again, in my case depreciation about equals that.

Owner time or turn around time is another - most companies charge the owner a fee to use the boat which often includes services like outfitting, cleaning up, dinghy use, maybe fuel, water, etc. Be sure know what this fee is and what it does and does not cover. Last time I checked, Sunsail had a lower fee, but it did not include fuel. Be sure to include that in any comparison with other options.

Now that Sunsail and the Moorings are both owned by Tui Marine, one can often do trade time between the two which is a nice bonus.

Trade time - check on the ability to trade time against other boats and what limitations there may be on this.

Solo sailing - some companies have rules against going out on your own.

Nigel brings up a good point about friends and chartering worth considering. Charter with friends and it's usually clear everyone splits the charter. Owning a boat may be cheaper per use on average, but you are now inviting people onto your own boat. Again, I think the degree to which this matters depends on what you would otherwise do. Cruising mostly with a spouse vs. cruising with 5 people that otherwise would have contributed to a charter are very different situations.

As for me, I have a smaller boat and didn't give up a group of people who previously contributed to a charter, so that wasn't a factor. Owning a boat allows me to invite people I enjoy sailing with that probably would not have split a charter. I should add, it lets me invite people for short cruises without the worries I've had with pulling a personal boat out of 9 months of storage. I know my charter managed boat will be ready to go.

The companies usually compare to owning, but it's even easier to compare owning a boat to chartering. Compare the cost of chartering say 5 weeks a year to what you would have to sell your boat for to average the same.

In my case, after subtracting guaranteed income my charter boat cost me about 59K. Chartering a similar boat for 5 weeks per year for 4.5 years at $2,500 per charter would have cost $56,250. Even factoring in the owner's time it's easy to see I could sell the boat for almost nothing and still break even with what chartering would have cost. Again, as Nigel pointed out if I had normally had other people contributing to a charter, that would change things, but that wasn't my case.

[Doodles]

I thought I'd resurrect this thread since it relates to my questions. I'm giving some thought to putting a boat in charter in Thailand (Phuket/Andaman Sea area) in about a year or so. I'll of course be discussing this with all the major players in this area (Moorings, Sunsail and some other more local outfits) to get their numbers and opinions, but I'm wondering what people here think. What do you think will in demand in the near future?

1. Mono vs multi?

2. Size ... 38' - 43" (I don't think I can swing anything bigger financially)?

3. Big charter company or local guy?

Let me hear your pros and cons or whaterver.

[RickH]

Rich: have you checked the website sailonline.com? Created by the former president/commodore/head pooh bah of the Moorings owners Group while we were in the program (2000--2005), it covers everything you'll ever need to know about charter boat ownership, including spreadsheets for calculating costs. See if that doesn't address some of your questions.
Cheers,
Rick

[Doodles]

Originally Posted by RickH

Rich: have you checked the website sailonline.com? Created by the former president/commodore/head pooh bah of the Moorings owners Group while we were in the program (2000--2005), it covers everything you'll ever need to know about charter boat ownership, including spreadsheets for calculating costs. See if that doesn't address some of your questions.
Cheers,
Rick

Thanks Rich, I'll check it out. By the way, how was your experience with Moorings? What did you have and where?

[RickH]

We owned a B362 (2-cabin) in Tortola, BVI.

We loved our time with the Moorings!

We joined because we wanted to cruise in exotic locations w/o having to get the boat from points A to B.

In order to fully enjoy the generous owner's time, we chartered 2 weeks/year in BVI and 2 weeks/year in an other base.

At the end of our 5-year contract, we sold the boat for approx. 50% of the original purchase price. If memory serves, purchase price was #145K, sale price $73K.

We were so impressed with the quality of maintenance to our boat, several years later we purchased a 2002 B393 from the Moorings in Tortola.

[Doodles]

Originally Posted by RickH

We owned a B362 (2-cabin) in Tortola, BVI.

We loved our time with the Moorings!

We joined because we wanted to cruise in exotic locations w/o having to get the boat from points A to B.

In order to fully enjoy the generous owner's time, we chartered 2 weeks/year in BVI and 2 weeks/year in an other base.

At the end of our 5-year contract, we sold the boat for approx. 50% of the original purchase price. If memory serves, purchase price was #145K, sale price $73K.

We were so impressed with the quality of maintenance to our boat, several years later we purchased a 2002 B393 from the Moorings in Tortola.

Nice to hear someone with a good experience.

Multhull vs mono ... what do you think? Any advantage of one over the other for the charter owner?

[RickH]

Doodles:
RE: Mono- or multi-; I'd base the decision on what type of boat YOU like to sail. Remember, you'll (hopefully) be maximizing your owner charter time, both at your home base and at reciprocal bases. So, you'll want to be sailing the type of boat you're most comfortable with. The other consideration is whether or not you'll be sharing your charters with friends. If so, should those you invite to join you be non- or novice sailors, you might want to consider a multi-hull for its ease of sailing & creature comforts.
Hope this helps. Cheers, RickH.