How to Finance a One-off Custom Boat?

[skipmac]

Originally Posted by TacomaSailor

The boat was designed in France

The boat, the last of four, was built in Belgium in 2003

The yard that built the boat went bankrupt after building a lot of other boats. The yard did have a good reputation but, apparently, were not good business people.

The boat was fitted out in the US

Only one of the four boats (identical hulls and cabin but each has a custom rig and interior) has been resold - therefore ESSEX and the other lenders claim their are no comps available

We like the boat because of it's sailing and motoring performance, galley, and well designed and installed systems.

So you have only one example of the boat to show the bank(s). And showing them examples of boats of the same length, same construction IE glass or steel or Al, isn't good enough?

What if you show the bank a long list of boats of a similar length, construction and age, from low end production boats to semi-custom high end boats and let them choose the value of the least expensive as the benchmark? Certainly if they can see a large cross section of cheapest to most expensive that would give them something to put in the appropriate blanks in their form.

[ErikFinn]

Having owned a custom built yacht in the past I'd just like to say don't do it.
We fall in love with some whatever things about these boats and don't realize the issues they have are often multiplied compared to production boats. If it's quality of construction, resale value, factory support, documentation, export/import, maintenance, U name it, every bloody item tends to get more difficult and more costly and less good. If money and time doesn't matter then forget about what I said.

[HappyMdRSailor]

I GOT this man!

Buy and finance a couple of high end production boats that need a complete refit...

Turn around and sell them after refitting for a profit...

Use the profit for funding the impossible to finance boat...

Foolproof no???

[rwidman]

Originally Posted by TacomaSailor

.......... How does one find comparable sales for a custom boat?

One doesn't and that's the problem. The value of a boat (or anything for that matter) is what folks are willing to pay for it. Since this is a one of a kind boat, there is no set value for it. You might be willing to pay $XXX for it but would someone else be willing to pay the same? Nobody knows. A bank is unlikely to loan you $XXX to buy it because if you default on the loan they have no assurance that they can sell it for what you still owe on it.

Here's something to think about - When it comes time to sell this boat, how are you going to assess it's value? How are you going to justify this price to a potential buyer?

You might be better off buying a production boat with an established value. Certainly there are a few that will meet your needs.

[tdoster]

Boat lending has become really tough in the past few years with even the best lenders like USAA taking a much harder stance on underwriting. Remember when times get tough, it is the first thing many people quit paying and maintaining so it is a big risk to the "front-line" lenders.

The first question is why this boat? Do you plan on it being the last boat you buy and keeping it for the rest of your life?

If you plan to cruise for a few years to indefinitely, you have to weigh the options. What happens if you hate it after a year or two? What happens if you get sick and have to sell the boat?

Look at Yachtworld or sailboatlistings for a few months and you will find some truly spectacular boats at awesome prices that have been for sale for months and years because they hit that sore point of not being a boat someone with cash would go after and not being a loan candidate for the average Joe's like us.

Look at production boats that just hit the cutoff for age for financing and they are 20-50% less than the same boat in half the condition a year newer. The ability to finance the boat is HUGE in resale.

The funny thing is the bank rules also affect the bank rules. IE, the value is based upon what they will loan and established through NADA in the US. Used to primarily be BUC. NADA uses a depreciation formula that is flawed in the true value of the boat, but sides towards the bank. You may find a bank that loans to 100% of NADA, but NADA is 30% below comps. NADA also does a poor job at valuing equipment as each boat uses the same factor. BUC does a far better job in looking at comps, hull value, and condition score. I can't prove it, but I would also bet the algorithm takes into account total sales much like it does cars. Sorry NADA, airplanes and boats are not consumables that can use the same factors as production cars.

If you love the boat and are going to be buried in it, find a good creative financial adviser as there are ways. But keep in mind that if you ever plan to sell it, the next person is going to be up against the same issues.

For whomever said the marinas require 300K liability but don't check. If that requirement is in writing and part of the contract you signed, they don't have to check. The onus is on you and their insurance company will sobrogate against you if any damage is done. After which, the marina's insurance goes up, and the rest of us pay in increased slip fees. The marina can go after you for something as small as a little oil in the bilge being pumped out that can turn into thousands in remediation.

[skipmac]

Originally Posted by HappyMdRSailor

I GOT this man!

Buy and finance a couple of high end production boats that need a complete refit...

Turn around and sell them after refitting for a profit...

Use the profit for funding the impossible to finance boat...

Foolproof no???

Hey Happy,

I think you posted this in the wrong section. The joke section is in the Off Topic forum.

[TacomaSailor]

HEY!

If I had wanted all this sensible and well thought out advice about why NOT to buy the custom boat I would have listened to my wife!

Her primary thoughts are:

- Why should we buy the boat if no one else has bought the boat in the three years it has been for sale?

- What does the following sales history tell you about our odds of getting rid of this monster when it is time to move ashore?

3rd boat (sistership) sold for less than 1/2 of original sale price just seven years after it was built

This boat boat sold for less than 40% of original sale price four years after it was built

The list price on this boat has dropped by 35% in the three years it has been for sale

The only offer to purchase on this boat was 1/2 of the asking price three years ago

Well - my wife may be sensible and the mortgage brokers may be giving me a clear message about the value of the boat but a true sailor ignores all those FACTS and rational thoughts when it comes time to buy the boat of their dreams!

[tdoster]

Originally Posted by TacomaSailor

HEY!

If I had wanted all this sensible and well thought out advice about why NOT to buy the custom boat I would have listened to my wife!

That changes everything. Walk away from this boat.

Men who buy boats without 100% buy in from the Admiral are men who lose everything a few short years later in divorce court - except the boat he can't sell which he is making payments to the lender AND his ex-wife.

You need to first take the ABA Class titled - "How to manipulate your spouse into making your dream boat purchase his/her idea"

And follow it up with - "You are finally the Capt of your own boat - She is still the Admiral"

[BandB]

Originally Posted by TacomaSailor

HEY!

If I had wanted all this sensible and well thought out advice about why NOT to buy the custom boat I would have listened to my wife!

Her primary thoughts are:

- Why should we buy the boat if no one else has bought the boat in the three years it has been for sale?

- What does the following sales history tell you about our odds of getting rid of this monster when it is time to move ashore?

3rd boat (sistership) sold for less than 1/2 of original sale price just seven years after it was built

This boat boat sold for less than 40% of original sale price four years after it was built

The list price on this boat has dropped by 35% in the three years it has been for sale

The only offer to purchase on this boat was 1/2 of the asking price three years ago

Well - my wife may be sensible and the mortgage brokers may be giving me a clear message about the value of the boat but a true sailor ignores all those FACTS and rational thoughts when it comes time to buy the boat of their dreams!

Actually the mortgage brokers may have saved you. When mortgages are loose then people get into trouble. When tightened up, then mortgage brokers look much more carefully at what they could sell it for if they had to.

The price is dropping because it's not yet hit the market value. It's like a nice house in a very bad neighborhood. Looks under priced if you see it online. You wonder why so cheap. You go look and see why it was reduced but then you think about the paper factory across the street and the foul odor if the wind blows your way. Or the Walmart the house backs up to.

There are so many unknowns on a boat like that. How will it perform. The equipment. It's new but it's old. I'd even wonder if the engines and generator are close to the same year as the boat. Perhaps they were sitting around before they made it in to it. I can just imagine wanting warranty service on the radar which is now 4 years old.

I will say this. At best the value of this boat is the value of an unknown brand equivalent used boat three years old. Is the builder even still in business? I don't mean will he take an order if you force it into his hands but has anyone ordered and he built a boat the past three years. Why a new three year old custom boat? The buyer backed out? Why? Didn't pass survey? Sounds like a bad mess to get tied up in.

[skipmac]

Originally Posted by TacomaSailor

HEY!

If I had wanted all this sensible and well thought out advice about why NOT to buy the custom boat I would have listened to my wife!

Her primary thoughts are:

- Why should we buy the boat if no one else has bought the boat in the three years it has been for sale?

- What does the following sales history tell you about our odds of getting rid of this monster when it is time to move ashore?

3rd boat (sistership) sold for less than 1/2 of original sale price just seven years after it was built

This boat boat sold for less than 40% of original sale price four years after it was built

The list price on this boat has dropped by 35% in the three years it has been for sale

The only offer to purchase on this boat was 1/2 of the asking price three years ago

Well - my wife may be sensible and the mortgage brokers may be giving me a clear message about the value of the boat but a true sailor ignores all those FACTS and rational thoughts when it comes time to buy the boat of their dreams!

If owning a boat and sailing was based on logic, good sense, economics and general practicality, every member of this forum would be living on land and commuting to an office 9-5 (or maybe living on a farm in Kansas)

Have to admit your wife does ask some interesting and pertinent questions. Being a typical left-brained male, exacerbated by a background in engineering I would extrapolate from her questions to ask some of my own.

The price drops, length of time on the market, lack of offers, etc all generate the question of why. My focus on the why would be is there something seriously, structurally wrong with the boat? Was it made from the infamous fire retardant resin or some kind of inferior material? Was it built too lightly and it will break apart the first time the wind tops 25 kts? Have you crawled through the bilges and lockers to see what it looks like?

[Scot McPherson]

Seriously dude, even if you got your 4 CMA they wouldn't lend you the money. They are just using that as an excuse so they don't have to say "we don't want to" they know you can't get them. I went through this for some funding years ago for an unusual business. For 1 and a half years I jumped through all their hoops with flying colors and they finally said, "look, we just don't want to lens you the money for this"

[ssanzone]

idk if this will work but...

you should be able to mortgage n$ based on the 'stock' verion of your new boat with 15-20% down and then user the remaining 25-25% to pay for the custom work.

once she is built you can use the bill of sale and results from a survey to have her insured for the full replacement value.

this is, of course, predicated on the assumption that the builder offers a 'stock' version of the boat and / or there are other comps available.

gl.

-steve

[Cadence]

I might look at a production boat. Insurance is going to pose the same issue. If something unforeseen should arise and you need to sell you will take a blood bath since a potential buyer will have the same problem.

[valhalla360]

The bank is doing you a huge favor.

They don't want to invest in it for the same reason you don't want to...it's a bad investment likely to lose a lot of money. They just haven't fallen in love with the boat.

[weavis]

You know why McDonalds works? People know what they are getting and they know the value.

Doesnt mean its the best. BUt the line is outside of McDs and not Freds Gourmet burgers.

Why not purchase a stock boat and upgrade mightily........ It will have a resale value and be a good one with the additions...