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Old 05-08-2014, 16:03   #1
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Bareboats/Management Programs

Hi All,
I am new to this forum and would appreciate any and all feedback specific to Yacht Ownership Programs and the best boat options for BVI home base. My goals and ideas are as follows:

Tortola, BVI Based Bareboat Charter Program.
3-6 Year Program Term, then sell or keep in BVI depending on life changes.
Guaranteed Income or Shared Income (still analyzing both).
45-52' Catamaran (looking at Leopard 4800, Saba 50, Lagoon 450).
Budget is less than $1mil. fully optioned.

I have great experience with large motor yachts (Owned 46' Grand Banks, 55' Fleming), good experience with general sailing, and very limited experience with catamarans, (Skippered 1 week with Sunsail 444, and 1 week with Moorings 4800).

For a point of reference, I found the 444 to be "charter proof", but the heads are too small for my tastes after charter program ends. I also eliminated the L52 (too big, too expensive).

All input will be very helpful,
Thanks!
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Old 05-08-2014, 17:28   #2
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Re: Bareboats/Management Programs

Hi db

I looked into it a few years ago, I think a lot of the program's are well proven especially in the Bvi .
(I think ) it's down to what you hope to gain from owning a managed vessel.
Owners weeks work if you normally would have chartered.
Owning without the constant expense may work
Having the vessel you really like May not be an option, it's primary function is to earn money, so bums on seats limits your choices.
Personally I would finance rather than spend that sort of money on a vessel that is really not my own until the contract ends and really not what i want, we chartered a owners version for a month and felt it was worth the extra, but I think the market is limited.
Hope it helps... Just my thoughts


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Old 05-08-2014, 19:48   #3
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Re: Bareboats/Management Programs

Hoof,
Thanks for the quick reply. To clarify, the Lagoon and Saba can be customized somewhat, including owner's version. This will decrease the revenue slightly, say 20-22 weeks vs 28-30 weeks yr., but leave me with a less battered more custom boat after program end. The Leopard 4800 can not be customized (Moorings), and I most likely wouldn't keep that boat after program as a result. I am leaning Saba 50, with Maestro floor plan (4 cabin/4 bath).Hoping this board will shoot some holes at it before I see it in Annapolis and strike a deal.
Thanks again!
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Old 05-08-2014, 20:05   #4
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Re: Bareboats/Management Programs

I have run the math on these programs many ways. The thing that always scared me away was the possibility of any life change. This is a big liability should Murphy come knocking on the door.

I would like to pose a question. Why do you wish to own the boat during the charter. Why not just purchase one coming out of charter and avoid the charter headache completely?

Mostly curious.
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Old 05-08-2014, 20:42   #5
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Re: Bareboats/Management Programs

mcerdos,
To answer your question regarding the purchase of a used boat vs a new charter using approximate numbers, her are my rough thoughts (revenue share contract. Also, remember... I will most likely use the boat about 6-10 weeks per year. I am not looking to cruise, just sail BVI with family, friends and clients.

Used Boat Scenario = $600k Purchase Price. 20% down($120k) loan of $480k, payment of $5k mo., plus slip, maintenance, insurance, etc.
Let's call it $100k per yr to own/use the boat.

Shared Revenue Charter Scenario = $1mil. Purchase Price. 20% down($200k)
Revenue offsets all Expenses, and with boat in an LLC, Can depreciate boat and interest each year in Program.
Let's call it $40,000 per year to use the boat.

Does this make sense?
Thanks!
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Old 06-08-2014, 08:27   #6
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Re: Bareboats/Management Programs

Same conclusion I came up with, but it's down to the long term goals,
it's a great way to purchase beyond your limits.
It's all about what happens at the end of the contract, if life still means those 10 weeks of owner time are useable, then do you trade in for new again or if you have more free time the sums make it sense to pull it, plus there is a risk the boat has not performed in charter or devalued as more people are doing the same and flooding the market, it's like playing the stock market!
I think this is where the owners version starts to make sense as they are less available with more demand being sold out of charter.
Ps. I would go lagoon for the bvi, the Fp probs would be a nicer sail but less space, just opinion


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Old 06-08-2014, 08:54   #7
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Re: Bareboats/Management Programs

Hoofsmit,
Thanks. All good stuff to think about. I've owned 4 boats in my life and none of them had tremendously long lives with me for one reason or another, but a couple years later, I always seem to be back for another "perfect" boat. My initial feeling is that Bareboat ownership or outright ownership both give me an "out" if plans change. Bareboat just seems way less expensive through the first 5 years. I will look at the Lagoon harder.
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Old 06-08-2014, 11:34   #8
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Re: Bareboats/Management Programs

Quote:
Originally Posted by dbsuser View Post
mcerdos,
To answer your question regarding the purchase of a used boat vs a new charter using approximate numbers, her are my rough thoughts (revenue share contract. Also, remember... I will most likely use the boat about 6-10 weeks per year. I am not looking to cruise, just sail BVI with family, friends and clients.

Used Boat Scenario = $600k Purchase Price. 20% down($120k) loan of $480k, payment of $5k mo., plus slip, maintenance, insurance, etc.
Let's call it $100k per yr to own/use the boat.

Shared Revenue Charter Scenario = $1mil. Purchase Price. 20% down($200k)
Revenue offsets all Expenses, and with boat in an LLC, Can depreciate boat and interest each year in Program.
Let's call it $40,000 per year to use the boat.

Does this make sense?
Thanks!
Thank you for taking the time to answer this. But, the numbers still don't make complete sense to me.

In the scenario you give above, the used boat payment of $5k/mth on a loan of $480k means the loan is about 4.5% over 10 years. If the same loan terms were applied to the new charter boat for the $800k the payment would be about $8300 per month. Annualized, the used boat would cost about $40k less per year. If the boat were not charted the insurance rate would be considerably less. Also, the vessel could be stored on the hard when not in use saving both maintenance and slip fees. This should be more than enough to offset the expenses covered by the charter fleet to equalize the annual cost of the boat. In addition, you are not locked into a massive payment, charter contracts, would have unlimited use of the vessel, and could relocate the vessel to any port of your choosing.

I guess I could never fully answer the question; if the company chartering the boats can make the owners money, then why are they not putting their own boats into the fleet or why is there not a line of people wanting to do this for a solid ROI?

As I said, I have struggle with this concept for years. We very seriously considered doing this about 10 years ago. I am so glad we opted not to because when the economy tanked, the charter company had trouble fulfilling their promises and the charter market rapidly shrunk. All of a sudden there were an abundance of vessels on the market and panic pricing went into high gear.

The charter concept works very well for some people. Perhaps you are one of those people.

Again, thanks for the thoughts and taking the time to reply.
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Old 06-08-2014, 12:23   #9
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Re: Bareboats/Management Programs

Check with your accountant on the depreciation deduction. May not be allowed if your arrangement is deemed a "lease" or passive income. I believe you must be actively managing your business.


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Old 06-08-2014, 13:51   #10
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Re: Bareboats/Management Programs

mbuckely,
Yes, I agree. I have always understood this scenario to be passive income. Apparently, several charter companies have modified their management scope and language to qualify the program as an active income ownership program. Obviously, with the establishment of an appropriate LLC. My accountant immediately said passive, then read the structure and agreed to sponsor it as active.

I would love to hear from anyone that has an active income structure with a charter company to understand that better.
Thanks!
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Old 06-08-2014, 15:23   #11
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Re: Bareboats/Management Programs

Everytime I've looked at these I come to the conclusion that they only make sense if you are SURE you would use all of the free time. All it takes is a slight change in personal or family circumstances to cause you to leave free time on the table. While you can sometimes sell the free time, this is a pain in the neck for relatively short dollars.

I think this has a far better financial outcome:

1: Invest the money in the S&P500 for 5 years

2: Negotiate hard for good prices on BVI charters (very easy if you are flexible and can do it somewhat last minute (except for a few weeks a year there are always boats at the dock earning nothing)

3: At the end of 5 years, buy a boat coming off charter (or a privately owned boat). Negotiate hard on purchase price. What you want in a boat five years later may have changed too.
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Old 06-08-2014, 16:24   #12
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Re: Bareboats/Management Programs

CarlF,
That is indeed the safe and practical solution. Unfortunately, I am old, risky and impractical. I believe (only my opinion) charter ownership has become very popular for guys like me. I'm not really deciding if I should charter own or not. I am really just trying to better understand the different types of charter ownership, and the best boat selections for them whether I keep or sell after the program. The days that boats made good financial sense to own were over a long time ago for me. I am thinking less about a good deal, and more about a good life.

So far I have ruled out;

Guaranteed Program - Forced boat brands and options, strict ownership use.
Cats under 45' - too small to entertain groups of 8 or more.
Cats over 50' - too big to double hand when stuff goes wrong.
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Old 07-08-2014, 05:48   #13
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Re: Bareboats/Management Programs

To the OP, getting the Saba 4 cabin version would be my pick as well if I was going to own and live/cruise on the boat (and I had that kind of disposable income!!!!). To charter,I think that's a mistake because it comes down to cost per cabin. If you have 6 cabins on that platform, the cost per cabin gets pretty reasonable and competes favorably with the 58' and 60' cats others have out there. Boats with more cabins in the same model, 4 cabin vs 3 cabin owner's versions, always charter more weeks per year. I can't see why that would be different on a Saba. Also, there is a bunch of pre-sold Sabas on order. I'd be really curious how you could get one in even a year, ready for charter, for just $1mill. After the great success of the Lipari it appears the Saba will be very popular too. Good luck with your search.


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Old 07-08-2014, 06:23   #14
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Re: Bareboats/Management Programs

Rubikoop,
I agree, fewer cabins = less charter revenue. But I also believe fewer cabins = better post charter liveaboard and post charter resale value. The used market could potentially be flooded with 6 cabin boats in a few years.

As far as availability goes, Iv'e been told March 2015, and July 2015 production models are available for spec and purchase.
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Old 07-08-2014, 06:32   #15
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Re: Bareboats/Management Programs

Quote:
Originally Posted by CarlF View Post
Everytime I've looked at these I come to the conclusion that they only make sense if you are SURE you would use all of the free time.
Agreed. And this is what the people that I have talked to, who have had a boat in charter, have all confirmed.

The other thing that I have found, in talking to people who have a boat in charter, is that they never seem to change their lifestyle as much as they plan to. That is, they charter maybe one or two weeks every year or two. They plan to buy a boat and put it into charter and then use their 10 weeks of owner's time every year. Only they don't. They end up maybe going from one or two weeks a year, to two or three weeks a year. They don't triple the amount of time that they spend chartering, like they hoped to when they were trying to justify the purchase to themselves.

The folks for whom this turns out to be a good deal almost always ALREADY charter a lot--like, 4-6 weeks every year, if not more. For them, using all of the owners time is, at most, a slight increase in their usage.

But, I readily admit that this is second hand knowledge. I have never had a boat in charter. I have only thought about it a lot, spent a lot of time researching the pros and cons, and taken every opportunity that presented itself to talk with someone who had a boat in charter. Every person is different, and no one is "average."

Still, these are the general conclusions that I've come to over the years:
1. For it to work you have to use all of your owner's time.
2. You need to be absolutely, brutally honest with yourself about how much of that owner's time you will really use. Not how much you HOPE to use, but how much you will REALLY use.

Good luck.
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