Thinking about a chartering business

[Uricanejack]

Simple Business Plan. By guy who know SFA about business.

By Boat and Charter it to cover some or all of the cost of bying and owning a boat.
Boat size I want a big shiny new one 44 ft give or take.
Cost of Boat? 300K ? Give or take.
Down payment if your luck 20% 60K
Finance 240 K.
Interest rate? It’s a boat not going to be like my house.
Local bank offering 2.96% 25 years monthly payment 1406.
Good luck getting anything close to this on a boat loan. But if you own a house and you are stupid enough to get a 2nd mortgage.
So expenses
Finance $ 1406 per month.
10 per ft per month moorage $440.
Insurance $ 100
1946 per monthly expenses.
12 months per year
Cost of owning $23 352
Obviously, I have forgotten a lot of things like fuel, maintenance. Ect. How about cleaning?
What kind of income can you expect.
Simple search of my local sailing area for charters.
Nice shiny boat about this size range.
Shoulder season $ 700 per day
Peak season $ 800 per day
or $4900 to $ 5400 per week.
You need to find 5 weeks charter income to cover costs.
Sounds easy.
Problems
Charter season temperate climate not Caribbean.
July august 8 to 9 weeks peak season.
May June 8 weeks
Sept 4 weeks
So 20 weeks being generous of possible charter income.
Subtract reasonable personal usage. 6 weeks?
Leaves 14 weeks.
Minimum break even is 5.
Can it be done?
DIY your own charter company? I am far from expert.
Or put boat into a local charter fleet?
Local Charter fleet. Will take approx. half income. Some might be 60 40.
Using 60 40.
Charter income per week drops to
$ 2900 Shoulder season $ 3240 peak season.
You now need 8 weeks charter out of a possible 14. To break even.
A nice shiny boat with a nice well reputed charter company should be able to come close.
This is missing all the miscellaneous expenses which come up to certify the boat.
If it really worked well we would all be doing it.
Why haven’t I. I don’t have 60 K and I cant afford another 2 k per month.
Without naming the charter company, I googled to get an idea about current rates.
Newest boat in size range is 2016. Oldest about 2006
The numbers I used are for a new boat. Subtract about 150 per day for older boat

The above numbers are my guess about bare boat chartering.

Skippered charter numbers?

Add cost of Skipper? Add cost of food etc..

[jmschmidt]

Get a copy of TAX GUIDE FOR BUSINESS YACHTSMEN by Mike Kimball, CPA. Its out of print but used copies are on Amazon. Forget about the charter business being a tax haven. If you do it right and legally you won't find much benefit unless it is nearly a your fulltime occupation.

I get between 8 and 10 thousand a week for my boat in the Caribbean, with 114 charter days booked for 2019 so far. Moorage and utilities $1,900 a month, insurance $1,000 a month. Maintenance out of this world. Cash on cash ROR about 6% before depreciation.

[ranger58sb]

Originally Posted by ranger42c

Do you have the USCG credentials?

Are you by nature a "social" sorta person?

Originally Posted by jmschmidt

Like someone asked, do you have a license? Because the lowest level of credential is a Six-Pack license which requires 360 documented sea days to even apply. A sea-day is generally four continuous hours per day underway. Sail for two hours, anchor for lunch, sail for two more hours, equals zero, doesn't count.

These are critical questions. It takes a license to be legal. It takes some social skills to avoid a train wreck.

All that business planning is beside the point if the answer to these two questions is "no."

?????

-Chris

[redneckrob]

Keep in mind you can't charter a vessel (except bareboat) in the U.S. if the boat was not made in the U.S. unless you get a MARAD waiver. So you might want to reconsider the French made boat you proposed, in favor of a Catalina or Hunter or similar. Not sure how heavily that's enforced, but probably one of those things that if you got caught doing one thing wrong you'd get that piled on and it might hurt quite a lot. And an arcane enough bit of info that it's not really common knowledge.

[leftbrainstuff]

Profitable charter companies have a fleet size sufficiently large that negates the impact of boats being out of service.

They also can amortise costs over the fleet.

There are very few boats or places that I could see a single boat charter business being profitable.

If you want this as a tax dodge then you could be subject to the relevant tax authorities categorizing you as a hobby.

[Medved]

Originally Posted by redneckrob

Keep in mind you can't charter a vessel (except bareboat) in the U.S. if the boat was not made in the U.S. unless you get a MARAD waiver. So you might want to reconsider the French made boat you proposed, in favor of a Catalina or Hunter or similar. Not sure how heavily that's enforced, but probably one of those things that if you got caught doing one thing wrong you'd get that piled on and it might hurt quite a lot. And an arcane enough bit of info that it's not really common knowledge.

Thank you for the tip. Jeannau is actually made in South Carolina now.

As to all others, appreciate your feedback. Will take it into consideration.

[SailFastTri]

Originally Posted by Medved

The reason why I want to do it is to offset the cost of boat ownership. I just cannot justify 300K + expenses hobby. In my research so far as long as there is intent to be profitable and active owner participation in the business IRS will allow 179 deduction, plus being in the red can be offset from my corporate income. Would you be willing to go through your numbers and steps in a private conversation? I wish I lived in FL so I can invite you out for dinner

A pleasure boat does not make financial sense so stop trying to justify it. Can you put a price on passion and joy?

[Medved]

Originally Posted by SailFastTri

A pleasure boat does not make financial sense so stop trying to justify it. Can you put a price on passion and joy?

In case this will be useful for anyone else considering this option, IRS 179 is not the best option anymore after I did some digging. Depending on other income streams either MACRS or bonus depreciation are valid options. Again, the point being that this is not a hobby, but a legitimate small business that is formed with intent for profit.

[Uricanejack]

Originally Posted by leftbrainstuff

Profitable charter companies have a fleet size sufficiently large that negates the impact of boats being out of service.

They also can amortise costs over the fleet.

There are very few boats or places that I could see a single boat charter business being profitable.

If you want this as a tax dodge then you could be subject to the relevant tax authorities categorizing you as a hobby.

Most of the Boat charter business I have a connection with are "single boat" operations.

Even the fleet opperations are a collection of "single boat charter companies"

The choice is to go it alone or to put in with a fleet of manged charter operators. I suspect the fleet ends up being a better option most of the time.

[Medved]

Originally Posted by Uricanejack

Most of the Boat charter business I have a connection with are "single boat" operations.

Even the fleet opperations are a collection of "single boat charter companies"

The choice is to go it alone or to put in with a fleet of manged charter operators. I suspect the fleet ends up being a better option most of the time.

I am seeing that as well, so reached out to few fleet companies that also sell boats to work out a "package deal". I realize that they will take a cut of the booking price, but until I build my own customer base it seems to make the most sense. Will also advertise on my own to get some number of them without the fee. The only tricky part for me so far is most of them offer bareboat charters, and I do not want to do that.

[jmschmidt]

And your MARAD waiver for a foreign built boat cost $500 the last time I check. To get one you have to demonstrate a need that you can't realistically meet with a comparable US made boat or boats or the are unavailable in your area of operation.

An MARAD waiver is issued for a designated geographical location. If you get one for the Chesapeake you can't use it in cape Cod or San Francisco Bay and they are not transferable to a new owner.

[Medved]

Originally Posted by jmschmidt

And your MARAD waiver for a foreign built boat cost $500 the last time I check. To get one you have to demonstrate a need that you can't realistically meet with a comparable US made boat or boats or the are unavailable in your area of operation.

An MARAD waiver is issued for a designated geographical location. If you get one for the Chesapeake you can't use it in cape Cod or San Francisco Bay and they are not transferable to a new owner.

Again, Jeannau is built in US down in South Carolina. That said, there are plenty of foreign built boats in charter on Chesapeake.

[Sailor 99]

The best deal I know of is chartering in the Caribbean. 8k-10k a week all inclusive. Pretty much tax free and all you got to do is put up with the folks. I know a couple of boats doing it and they like it.



Not sure if it's for me. In fact... it's not for me.

[Medved]

Originally Posted by Dark Horse

The best deal I know of is chartering in the Caribbean. 8k-10k a week all inclusive. Pretty much tax free and all you got to do is put up with the folks. I know a couple of boats doing it and they like it.



Not sure if it's for me. In fact... it's not for me.

I still have well paying corporate job, which I am planning to keep for another 15 years. So this will be business on the side and not a primary source of income. Something to do on weekends and vacations. Also, if I play this right I will have a nice 10 year old Lagoon 46 to go cruise when I retire that is paid for by this chartering

[Uricanejack]

Originally Posted by Medved

I am seeing that as well, so reached out to few fleet companies that also sell boats to work out a "package deal". I realize that they will take a cut of the booking price, but until I build my own customer base it seems to make the most sense. Will also advertise on my own to get some number of them without the fee. The only tricky part for me so far is most of them offer bareboat charters, and I do not want to do that.

They offer mostly bareboat for a simple reason. It's the main demand.
The primary advantages of putting a boat into a charter fleet is the marketing and managing bookings.
They take a big cut. 60% of X is better than 100% of 0.

To maximise your potential income best to be available for the greatest amount of opportunities.

So School, Bare boat Charters and Skippered Charters.

Many if not most Charter companies also have sailing schools. making the boat available for sailing school.
Generates income early in the season, Many newer boat owners don't want students bumping their boat so prefer not to charter to the sailing school.

I contemplated putting a boat into a fleet with the intent to offer instruction as an instructor on my own boat for the sailing school.
I was already an instructor and had a relationship with sailing school. and Charter company.
It required me to set up a small company of my own. Basically the boat and me.
Simple set up. Boat gets Charter share for sailing course. Plus I get instructor fee as independent contractor.
School provides the business.
If I am not available boat still gets the owners portion of charter fee. Sailing school provides the instructor.

The sailing school provides a significant portion of Charter company charterers.

Its still a plan at the back of my mind for when I am tiered of my day job.
My main problem.
I have a boat. Its probably to old. I would have to upgrade my boat. to a newer more popular designe.

Or I could hang out a shingle on my own.

Uricanejacks, Slightly Leaky, Not to smelly. Cheep and cheerful a sailing school.
Boat probably seaworthy. Insured for pleasure use only.
Barter system only. One bottle nice Malt whisky per lesson recommended.
No Cheques, cash, debit or credit accepted.
Sailing certification provided by Uricanejack, as per the power vested in him by Neptune, Poseidon and any other deighties he chooses.

Excellent location though.
Southern Gulf Islands

I wonder how it would do