Economics of putting your cat in Charter?

[hellosailor]

"the 500K is put into in a CD yielding 5.25% "
Oh heck, Limpet, that's chump change. You can get 5% almost on savings accounts these days, an easy 7-8% in notes, and of course if you look at larger investments or what 500k can do in real estate...<G>...
That's the wonderful thing about accounting and numbers, you can make them add up in so many contrary ways. Each one percent is five grand, right? So you can do a nice one week charter, including airfare and food, for each one percent on the money. And, never have to paint your bottom.<G>
And the rest is all the magic of accounting.

[Jeannius]

Each one percent is five grand, right? So you can do a nice one week charter, including airfare and food

That won't even get you my boat in the low season, never mind airfare and food.

[Jeff]

Jeannius,

how have you found the quality and cost of maintenance. I've heard nothing but positive things from TMM but that's been from the charterer's perspective.

thanks for sharing this

PS Happy New Year

[Jeannius]

Jeff...

My only real complaint about TMM is that I seem to end up paying for things that should have been paid for by the charterer that broke/lost things.

As I think I said in an earlier post, this is common to all charter boat owners regardless of which charter company the boat is with. It is understandable when you think about it... The boat owner is in it for the long run and can't easily move to another charter company. The charterer can easily charter with a another company next time. So which do you risk upsetting? Obvious really.

TMM in the BVI ( no experience of other bases) are an excellent outfit. You very rarely hear of a charterer having a bad experience. Boat owners are also generally happy ( except of course for those who are never happy ). I believe one guy actually has 3 boats of varying age in the fleet so he must be a happy man!

[hellosailor]

"That won't even get you my boat in the low season,"
Well, Mike, a four cabin cat is a bit larger than MOST charter boats, and $5000 is almost the $5800 you want in low season, so I'll stick by my numbers as proving my point well enough. Especially since the difference is, what, a whole 0.16% of interest on the principle, when we've already established that a good investor could get a whole lot more interest than that?
Five grand, seven grand, all the same really when you consider that I can invest a half million and get back 25% annual ROR instead of 5-8%, just by sticking it in real estate or other markets. Quibbling over 0.16% is just a way of saying you're missing the point: That chartering may or may not actually be the path to wealth. I'll accept that for your finances, it makes sense for you.

[GordMay]

Charter Boat Maintenance Standards:
Take a look at several 3 to 5 year old charter boats, comparing any general differences between potential companies.
Also compare the end-of-contract language. In what condition do they “promise” (or how do they describe it) to turn the boat back to you.

[jzk]

Originally Posted by hellosailor

"the 500K is put into in a CD yielding 5.25% "
Oh heck, Limpet, that's chump change. You can get 5% almost on savings accounts these days, an easy 7-8% in notes, and of course if you look at larger investments or what 500k can do in real estate...<G>...
That's the wonderful thing about accounting and numbers, you can make them add up in so many contrary ways. Each one percent is five grand, right? So you can do a nice one week charter, including airfare and food, for each one percent on the money. And, never have to paint your bottom.<G>
And the rest is all the magic of accounting.

The main problem with putting a boat in a charter program is that boats depreciate. Better to invest in something that has the potential to appreciate, like real estate.

Run away as fast as you can from putting your boat into a charter program.

[hellosailor]

I once spoke to a respected builder because I'd found the gooseneck pin, the pin securing the boom to the gooseneck fitting, had worn through more than halfway and I wanted to replace it.

He said things like "You what? It what? How old is this boat? OH, you're from WHERE???" Where being a club that kept the boats in use more than half the day every day of the week during the season.

"You guys put ten years worth of wear on those boats for every year you have them." is how he summed it up. Fortunately, the pin was softer than the fittings, which would have cost a heck of a lot more to replace. But that's a down side to charter service, if it is successful, it can put 5-10 years worth of wear on a boat for every year of real age. The payback has to accomodate the refit costs, too.

[ess105]

Originally Posted by jzk

Better to invest in something that has the potential to appreciate, like real estate.

There are many investment strategies that will bring you greater net asset appreciation than investing in a charter programme. If that was ones sole objective then I concur with you. I suspect that many, like us, perceive other benefits than just net growth of your total assets. Sailing your own boat is a big plus for some. Having a boat you can move onto at a time of your own convenience is a benefit to others. Others I know mix it about. They cruise for a year - put the boat in charter for a couple of years - then cruise again. It can work, depending on your individual needs and goals.

Steve

[jzk]

Originally Posted by ess105

There are many investment strategies that will bring you greater net asset appreciation than investing in a charter programme. If that was ones sole objective then I concur with you. I suspect that many, like us, perceive other benefits than just net growth of your total assets. Sailing your own boat is a big plus for some. Having a boat you can move onto at a time of your own convenience is a benefit to others. Others I know mix it about. They cruise for a year - put the boat in charter for a couple of years - then cruise again. It can work, depending on your individual needs and goals.

Steve

The problem is that it is sold at the boatshows as an investment. Better to invest elsewhere and use the fruits for your sailing dream.

[patsan]

I take jzk's side in this. this is not an investment, unless you consider your sanity as one. I'm doing the same thing, buying a bigger boat, putting it in charter for a couple of years, then moving onto the boat.

Have a good attorney look over the contract, then have the attorney fight for things that need to be replaced/fixed at the end of the contract, Make lots of noise (remember the squeaky wheel gets the grease) and enjoy your boat.

[schoonerdog]

Like a car, depreciation is the highest costs. A 2001 lagoon ex charter right now is selling for 248k. Assume the buyer negotiates 10% off that price to 228k and brokerage fees are the standard 10% so the owner would get around 208k. A new lagoon 410 is listed for 459k. It seems like a generally good rule of thumb that a charter boat will drop by about half of it's value over 5 years. A non charter boat also of the same year is being offered for around 50k more, which might be a bit more than she's worth. If you want a bargain boat, get an excharter and budget for new sails and overhauled engines (around 10k) and then another 20k for replacing lights, flooring, upholstery, upgrading electronics, replacing the bimini, installing a water maker, etc. Any way you look at it, boats are incredibly expensive propositions.

[Limpet]

One theme I picked up here is that some use chartering as a means to an end. The end being to have the boat they wanted, at the end of a charter term, and the ability to use it while it is in charter. The down side is the wear and abuse that occurs and the unforseen and undeterministic damage and costs presented to you by the charter company.

Perhaps the alternative is to go in on the boat you want with a few others and keep it out of charter. Let's say you go in with two others, this instantly cuts all the costs by 2/3rds. You get the cat you want at 1/3 the cost. A $600K boat is now $200K. Instead of new buy a boat that is about 5 years old that has never been in Charter. If such a boat is $300K, your portion is now only $100K!

Of course the down side is dealing with partners, but the simple fix for that is to put every thing in writing. Don't assume anything, put it in writing.
The difficult part of this approach might be getting concensus on the "right" boat and working out the use schedule. These seem like better problems to have

There is a lot to consider in such an arrangement, such as what if a partner whats to sell his portion, or a partner wants to take it on a passage for a year, or a partner just stops paying for his half of the storage and up keep. Also, someone must be designated as the point man. All the burden of dealing with the maintainance, storage, problems, logistics, etc. go through the point man. The others are just consulted and billed.

[bvimatelot]

I'm a charter skipper in BVI, amongst other things and have just come back off a New Year's charter with some charming guests.

Mike, by the way, saw Jeannius several times during the week; she was being treated nicely (as far as I could see) and the charterers seemed to be enjoying themselves.

Somewhere back in this thread, someone said - rough quote "....and a skipper who doesn't give a rat's a$$$..." I cannot (0bviously!) agree with this, particularly in the BVI. If you are a crass skipper, the buzz gets around the charter companies rapidly and you wont hear your phone ringing very much.

Meanwhile I'm recovering from a disastrous defeat in the Ashes...!!! Tony

[jzk]

To anyone considering doing the charter deal, run the numbers first. Look the cost of purchasing the boat in the charter program and the value of your using it over the charter period.

Compare that to just chartering a boat when you want to sail over the years. Then look at the cost of purchasing a boat out of charter when you are ready to own a boat full time. I suspect you will be ahead doing the latter.