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Old 04-06-2008, 19:37   #1
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Rent or Buy for One Year Cruise?

Hello all,

Iím in the initial planning phase for a year long cruising venture in the Caribbean.

We have much to plan. But to get things started I need some advice on securing a vessel and best cost options.

Do you think opportunities exist to charter a boat for one year? Is this a better idea than trying to buy and sell a boat.

Would boat owners feel comfortable chartering to a crew without official certifications? (cpt. License, ect)

Our crew can bring the following background:
Ownership of the following boats, Melges 24, Wavelength 24, Thistle, and Geary 18.
Over 50 years of combined sailboat racing experience
Some short course ocean racing

The buying and selling process could cause substantial cost, but it may be risky/expensive to charter boat for an extended period of time.

Thanks in advance for your insight.
Tim


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Old 04-06-2008, 20:43   #2
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Do you think opportunities exist to charter a boat for one year? Is this a better idea than trying to buy and sell a boat.
Charter for a year might get a bit spendy. The system is really set up for maybe two weeks. There may be creative ways to make it work but conventional systems just are not in favor of a one year charter. On a private one on one deal direct with an owner maybe. It's just hard to handle a boat gone for a whole year and then deal with insurance and all the rest of the issues that come to mind.

Purchasing a new boat on credit then selling in one year might just be the best financial arrangement. You still take a big hit but you have perhaps more equity left. A one year old boat sounds better to sell, but it has a lot of use.

You need to make the money work. Buy cheap enough to walk away at the end and take what you get or buy high, pay insurance, and get more back. Your finances do dictate your options more than not.

Last numbers I heard were folks that sail off into the sunset stay out about 3 years on average.
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Old 04-06-2008, 22:59   #3
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Cost of chartering?

Have you costed out what charter for a year might cost.

Three quotes would give a good idea.
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Old 05-06-2008, 07:42   #4
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Mainly, Iím trying to gauge the appetite of private owner for chartering there boat for a year. I havenít costed a commercial charter.

If, for some reason a private owner canít use their boat for a year, chartering to a responsible party would be a good way to make some money, and differ insurance, and moorage costs.

Comparing the expense of buying, financing and selling a $200K boat all in one year seems to open the door for better options.
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Old 05-06-2008, 07:51   #5
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If you're going to live on a boat for a year you want it set up the way you like it. Most charter boats will not suit your purposes if you could get a long term charter. I have seen charter companies renting their boats for a couple of months but not much longer. In these charters the sailing area was rather restrictive, e.g. just the waters of the BVI. A private owner would be very reluctant to charter his/her vessel to a stranger who would sail off into the sunset. What sort of deposit would you have to make to ensure you'd return? Plus there's all the insurance worries, most private boat insurance is invalid if the boat is chartered. Your best bet, buy something a bit older, fit it out nicely,sell it at the same price or a bit of a loss when you return.

Looking at your previous boat ownership it seems that they have all been "small" boats without the complexity of systems that a larger cruising boat would have. You may have a good "sailing" resume but how good are you at maintenance. Can you maintain the vessel as many things will surely go in a year. I am not trying to rain on your parade but you'd be a lot better off buying and learning all about your boat then taking off.
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Old 05-06-2008, 13:47   #6
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I know that this kind of long-term lease/charter setup is quite common in France from reading the english version of the multihull magazine, called Multihulls world.

There have been a couple of articles about families who do the Atlantic circuit for a year.

It might be cheaper than handling everything yourself, but with the price levels on the east coast of the USA being very low at present, and a good chance of the dollar appreciating, it might be a reasonable gamle to buy ia boat there, maybe finish off by sailing it to Europe and selling there??

Regards

Alan
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Old 05-06-2008, 18:17   #7
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Projected real cost...

My ownership costings consistently come in at 30+% of boat value p.a. plus mooring.

Your $200,000 boat would need to return $60+k for a years charter. Are you thinking of spending this much money? The owner needs to show a profit and to cover their risk.

Buying a boat, then selling after a year you may be looking at $60+k plus 10% brokerage. If the boat does not sell right away then this figure increases greatly.

I suggest looking for an owner who has no plans for their boat for a year. Do a deal where you buy the boat and sell it back at the end of a year.

The same sort of deal may be done with a charter company.

The most cost effective way might be to buy in one of the countries bordering the Caribbean and then sail back to Florida to sell the boat.

Talking with brokers may give an idea of what the market is like.
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Old 05-06-2008, 21:16   #8
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I'd go along the lines Boracay suggests. Find a charter company, first or second tier, and tell them you are looking for a boat that they would normally be dropping from their fleet. Do they have any owners interested in a one year lease or buy-back program, to put the boat in service with you for the extra year. You'll need to look into the insurance situation, and having some disinterested party make the decisions about final value and what is normal wear, versus what needs to be repaired or replaced. All in all--it could get complicated and might be easier if you found a broker and said "Look, we want to buy a boat this year and sell it again next year, will you take a split commission if we buy it from you AND sell it with you at the end of the year? Then you don't worry about damages, estimates, and third parties, you just assume all the risk that there will still be a market for your boat. (You'd probably want to buy whatever resells quickly--not necessarily the boat that interests you the most.)
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Old 05-06-2008, 21:24   #9
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The basis of my calculations...

When I suggest that boat cost is 30% of real value I am basing this on:
-12% loss of investment opportunity - this is what the money would have earned if advantage had been taken of naturally occurring opportunities.
It is greater than the interest rate on borrowed money as borrowing money to buy a boat has a degree of risk to the borrower.
-7% depreciation
-6% repair and maintenance
Note that this does not include berthing/mooring charges or insurance.

These figures are based on my personal observations and may have no basis in reality!
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Old 06-06-2008, 00:44   #10
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12% investment op?

While I tend to agree with what your saying Boracay, I think your numbers might be high. The real number may still be too high to make it reasonable.

By the way please point me to the naturally occuring investment ops resulting in a 12% return.

Others have suggested a more used boat may be a better option which could substantially bring the numbers down.

Mitch
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Old 06-06-2008, 01:19   #11
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By the way please point me to the naturally occuring investment ops resulting in a 12% return.

Mitch

Take a look at emerging market bonds from countries like Turkey, Brazil, Sout Africa. 12 - 16% p/a nominal interest. Primarily dollar sensitive, but thŠt's not likely to go much lower......

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Old 06-06-2008, 02:52   #12
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12+% investments...

1) Your own home (5+% rental, 4% appreciation, 3+% pleasure...)
2) A reliable car (Say $15,000 as opposed to a clunker-$3,000 + $1200+p.a. to fix + time wasted)
3) An established fully owned business (do the math)
4) Improving your qualifications...
5) Buying at the supermarket instead of the corner store
6) A well equiped kitchen
7) A good wife (priceless...)
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Old 06-06-2008, 03:39   #13
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Thanks

I learned something tonight!

My wife and I have actually been discussing over the last few days life and how we choose to live it.

I'm not trying to be a smart A**. Do you really think I could get a 12% yearly return on $400k with a minimal risk?

It is interesting to me hearing other's opinions especially outside the U.S. as I think many times we put the blinders on.

Mitch
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Old 06-06-2008, 13:58   #14
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"minimal risk" is the key term. I doubt you will get more than 6-8% government insured (by a government that you can feel sure will be around) regardless of the tax status (tax exempt or not). that's based on 60 days ago and I know in the US, 8% is no longer likely and 6% damned hard to find now, in things like insured long-term CD's.

Some people choose to live three generations in one bedroom, and live on rice with a taste of something else in it, in order to accumulate capital. That's a valid choice for some. One could argue that spending anything more on anything else (house, boat, groceries) is just a waste of money. But why waste money on a room and rice when there's always a monestary....
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Old 06-06-2008, 16:55   #15
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Investments are risky...

I'm not suggesting that 12% can be had with no risk.

Bitter experience makes me very careful.

I would be very wary of placing a large amount into a single investment or manager.

As we seem to be on a downswing of the economic cycle at the moment the best returns may come from having cash available and looking for bargains as the dust settles.
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