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Old 15-02-2017, 11:41   #1
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Buying into a charter or fractional program

I know this has been addressed in various details elsewhere, including as to partnerships, incorporation, taxes, etc., but I'm looking for some more general advice here to start with:

My wife and I have spent the last two summers as members in our local Sailtime franchise (my first time sailing since I was a teenager, and her first time ever), and have loved the sailing aspect of it, but found the membership experience frustrating: a one-eighth share of a sailboat with (effectively) a four-month season means a very limited amount of time on the water, and as we both have very time-consuming, unpredictable jobs, trying to match up the boat's schedule with our own was really difficult this last year in particular. It would probably have worked great if we were retired and could use the boat during the week, but that's a good few decades away right now.

We want more, and naturally are thinking of buying, but neither of us knows a thing about boat maintenance beyond what we learned in our ASA classes, and ownership seems a bit terrifying. Hence, we're thinking of buying a boat and either sticking it into Sailtime but keeping half the memberships for ourselves, or putting it into a charter fleet for 6-8 weeks a summer and keeping it free the rest of the time.

Some pluses and minuses of the two approaches:

Sailtime:
+ We know and trust the base owner (he's a stickler for how the boats are kept, which is perfect from the perspective of an owner-member), and many of the members come from the sailing school we learned at
+ Great locations, one close to work and one close to home
+ The timeslot model means the boat is often available on weeknights for evening sails, or the occasional weekend on short notice; if we purposefully undersold the boat, she'd be free pretty regularly
- Not a fan of Hunters or Beneteaus
- Hard to put together longer blocks of time for, say, a week-long cruise

Charter program:
+ I much prefer the boats (Jeanneaus for the most part)
+ Easy to plan that week-long cruise
+ For the half the season she's not chartered, she'd be completely available
+ We could keep her wherever we wanted between charters (i.e. on a mooring at our local harbor rather than dockside in the city)
- We don't have any pre-existing relationship with the company we'd be entrusting our $200k asset to
- I worry more about the damage or neglect caused by bareboat charterers
- They've been vague on number so far, though the ballpark estimates I've received make it sound like the all-in net cost will be close to the Sailtime program (allegedly, 7 weeks of chartering would cover ~70% of annual costs, including P&I)
- Boat would be completely unavailable for weeks at a time

And, of course, there are minuses applicable to both programs:
- Would have to buy a new boat and take the depreciation hit; for the same money I'd spent on a new Jeanneau I could buy a used Saga 43, Sabre, Tartan, etc. (which is what I'd really want if we could)
- A lot of engine hours per year
- Tax implications are, shall we say, complicated

Basically, knowing that nothing in sailing is cheap or easy, we're trying to make it at least a little bit cheaper and easier by letting someone else take care of the maintenance and defray part of the costs. For comparison, two Sailtime shares a year (i.e. a quarter of the boat) projects to cost more than buying a boat, keeping her in Sailtime for five years and keeping _half_ the boat for ourselves.

Any advice would be appreciated. As you can surely tell, I'm not very far along in this process and have a lot of things swimming around in my head.

Thanks!

--Chris
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Old 15-02-2017, 12:24   #2
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Re: Buying into a charter or fractional program

"a four-month season means a very limited amount of time on the water, and as we both have very time-consuming, unpredictable jobs, trying to match up the boat's schedule with our own was really difficult this last year in particular. It would probably have worked great if we were retired and could use the boat during the week, but that's a good few decades away right now."

So what is going to change in this coming season that makes you think a charter ownership option might be better? With a short season and unpredictable work, your actual use of a boat, be it fraction, or owned but in a charter program, is going to remain pretty limited, right?

If you're not spending at least 21-28+ nights a year on your boat, stay away from anything resembling ownership (as many others have said on these forums as well). The risks and expenses can be high relative to the advantages of ownership.

And please don't take the word of the charter company as to likely revenue you'll see under a non-guaranteed program. It's likely to be an overestimate. And an underestimate on the maintenance costs. Unless an existing charter owner in their program is willing to share their actual financials, you've got to be extremely conservative in your financial projections.

I'm not poo-pooing ownership of a boat in charter. I have one myself in a non-guaranteed plan at SWFYachts. And 18 months in, I finally have realistic expectations and have accounted for that accordingly. My use is right around 28 days and were it not for a unique tax situation I was in where I needed to use one of those highly complex tax loopholes you mentioned, I would go back to being just a customer, until the time I can move down to be near the boat, and than I would straight own it myself and not be involved in any program.
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Old 15-02-2017, 13:02   #3
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Re: Buying into a charter or fractional program

Thanks David. I considered a "please don't tell me not to buy at all" caveat on my original post, but I may as well do so here. I certainly understand that, measured by time on the boat, I'd be better off chartering, but my schedule is such that I usually don't know whether I'm free any given weekend until a couple of days out, and so while chartering might do for a week-long vacation once a year, that's about all we'd be able to do with it. Owning and putting the boat into one or the other program would mean that, for half the season if we put her in a charter program or for half of all weekend days through Sailtime, we'd be able to grab the boat on a summer weekend afternoon on relatively short notice. That's something that I can't really get by chartering, and something that I'm willing to pay (in cash and hassle) for by owning, even if it means taking a bigger hit. I'm just trying to figure out how not to get hit any worse than I have to, given those parameters.
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Old 15-02-2017, 13:28   #4
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Re: Buying into a charter or fractional program

Where are you? Where do you sail? Up here in the PNW most of the charter boats aren't new like in the Caribbean or Med. Take a look at a few compnaies in Washington and B.C. and you will see it would be quite possible to buy a used boat and still put it in charter. Here are just a few:

San Juan Sailing Charter Listings - Sail
Cooper Boating - Our Fleet
Boat Yacht Charter Fleets

Most of them will let you use the boat when you want although they will prefer you don't use too many of the peak weeks in July and August... And really, with a little hardiness, you can sail all year.

Just another option to consider.
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Old 15-02-2017, 13:35   #5
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Re: Buying into a charter or fractional program

We're in Boston and trying to stay within a radius of about an hour or so north or south of here. It's not a big charter market, but what's around here tends to be new boats (further up the coast in Maine you'll find a lot of bareboat charters with older Hinckleys and Hylases, but down here it's all newish plastic tubs).
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Old 15-02-2017, 14:22   #6
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Re: Buying into a charter or fractional program

Just the two of you? Why not look at a smaller older boat with simple and solid mechanical systems? There are a lot of them out there. Given your sailing season and schedule it makes sense to have your own boat.

What about the Boston Sailing Center? Memberships with a week or two of cruising plus access to smaller boats. My sailing instructor from BVIs is working there and had good things to say about their program.

We bought our first boat with a partner. Our partner is a marine mechanic and sails on weekends with his wife and friends, while running a charter fleet for a living. We sail one or two weeks at a time, so there is not much conflict. The boat is a Beneteau 40 that spent three years in charter in the BVIs. She was in better than average shape, but charter boats get used hard. The great thing for me is that my partner knows how to work on her. I have learned a lot and I am comfortable maintaining our new to us liveaboard, with the help of a good marine mechanic.

Cheers, RickG
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Old 15-02-2017, 15:11   #7
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Re: Buying into a charter or fractional program

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Originally Posted by RickG View Post
Just the two of you? Why not look at a smaller older boat with simple and solid mechanical systems? There are a lot of them out there. Given your sailing season and schedule it makes sense to have your own boat.
We've thought of that, but buying a 20- or 30-year-old boat strikes us as something that we'd want to do once we've had a chance to ease in to ownership on a newer boat. I suppose we could go significantly under our budget and buy an old boat knowing that we'll keep an open checkbook, but that sounds like an even bigger money pit unless I'm thinking about it wrong.

But yes, if I had a friend who was a boat mechanic, I would be all over it. Unfortunately, most of our friends are graduate students and sailing isn't really on the horizon for them.
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Old 16-02-2017, 09:04   #8
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Re: Buying into a charter or fractional program

Consider the older boat again. Maintenance isn't as bad as you might fear.
Your financial model of keeping large blocks of time available for your own use will cost you dearly, eventually you WILL realize you pay the same rate as your renters when you schedule time. Yes, lost rent does indeed come out of your pocket. Most will only use the boat FAR off season.
Since you cant schedule your usage far in advance, even if you block time for you own use, your work schedule might not let you use it.
An older boat that has fully depreciated, could be available WHENEVER you are able to use it, and will cost FAR less than the 30% you are considering spending.

Option 2, If you can demonstrate considerable competance, you dont have to own a boat. You will always have a ride available. Areas to concentrate on,
Weather anaylsis
Sail trim
Maintenance/repairs
Navigation
Cooking aboard (includes washing dishes
Mooring (docking and and anchoring)

Get a reputaion for 2 or 3, you dont have to own a boat.
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Old 16-02-2017, 09:13   #9
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Re: Buying into a charter or fractional program

After years of chartering boats, I have recently purchased and put a new boat in to charter. As has been mentioned a lot of the analysis was figuring out a break even point based on days used and working through the tax implicationsis. But, for me, the final reason to do it was the ability to set up the boat as I wanted. I was frustrated with the limitations put in place by the chartering companies. Most important for me was having a full inventory of sails (gennaker and spinnaker). The gennaker is roller furling and I just love unrolling it and instantly picking up 2 to 3 plus knots. I t makes sailing all the better!
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Old 16-02-2017, 09:37   #10
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Re: Buying into a charter or fractional program

Thanks nextis. How have you found the experience of charter ownership, in terms of boat usage, care by charterers, management by the company, and financial returns vs. promises? This is really the info I'm hoping to get from my post.

Redpcx, I guess I've heard so many horror stories about the cost and maintenance involved in owning an older boat that it's made me gun-shy. Looking idly at new-vs.-used, I'd assumed that I'd end up spending as much on maintaining, say, a 1990 Sabre 38 mk II would end up at somewhere between 10-20% of the purchase price per year, which after five years would probably get me close to the depreciation on a new Jeanneau 349 (sailaway $165k, figure it would depreciate by ~40% over five years). If that's not the case based on experience, I'd be very curious to hear otherwise.
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Old 16-02-2017, 11:43   #11
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Re: Buying into a charter or fractional program

I'm a charter owner and it could not have been a better arrangement for me.
I own the boat 100% and I can have as little or as much owner charter as i like. I usually owner charter 3 to 6 months a year and in 4 years I have not made any money but the boat has not cost me anything in marina or maintenance either. In effect I have been sailing free all this time ..... perfect.
Also I was a bit of a newbie to sailing so having a professional charter company looking after the boat took a lot of responsibility off me and they were happy to pass on their knowledge about care and maintenance to me.

I am not in the position to sail all year round and prefer to be aboard in 1 to 3 month chunks. I just have to book myself in far enouğh ahead. Usually about 2 or 3 months ahead of time. I usually take her during low season as she has to earn her money during high season
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Old 16-02-2017, 12:28   #12
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Re: Buying into a charter or fractional program

It seems you have explored only two real options

1) spending $200k on a new boat and placing it in charter of some sort
2) buying a 20-30 year old boat and figuring it out.

My suggestion would be 3) buy a 8 year old boat in the $75k range and just own it. The maintenance tasks will be minor due to the relatively recent vintage, what's there won't have been worn out, and you can use it as you like. Take the excess and place it in a maintenance fund. If you are reasonably handy figure $7-8k in annual costs including escrows for long term big repairs (engine, rigging, and sails) should cover everything.

For new boaters it is critical you understand that boats depreciate like cars, though over a slightly longer period, not appreciate like houses. Massive depreciation occurs in the first five years after which condition becomes paramount. Somewhere around year 7-8 is when I think you get the best mix of deferred maintenance and price.

I would also suggest trying to keep the boat as close to home as possible. Being able to be on the boat in a few minutes instead of an hour greatly increases the likelyhood of simple daysails, and reduces overhead for small repairs. For my wife and I one of great pleasures is getting home, realizing it's a great sailing day and going to watch the sunset, but this in only possible because we live 5 minutes from the boat.
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Old 17-02-2017, 14:01   #13
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Re: Buying into a charter or fractional program

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Thanks nextis. How have you found the experience of charter ownership, in terms of boat usage, care by charterers, management by the company, and financial returns vs. promises? This is really the info I'm hoping to get from my post.

Redpcx, I guess I've heard so many horror stories about the cost and maintenance involved in owning an older boat that it's made me gun-shy. Looking idly at new-vs.-used, I'd assumed that I'd end up spending as much on maintaining, say, a 1990 Sabre 38 mk II would end up at somewhere between 10-20% of the purchase price per year, which after five years would probably get me close to the depreciation on a new Jeanneau 349 (sailaway $165k, figure it would depreciate by ~40% over five years). If that's not the case based on experience, I'd be very curious to hear otherwise.
The boat has been in charter a limited time so my data is somewhat limited. But, based on the actual and booked reservations I believe expectations will be met. In my due diligence I did get data on the number of days boats were being chartered and spoke to owners who had boats in the club, so no "promises" were made but reasonable expectations can be set. It is a new boat so repairs and maintenance should not be far from expectations and all other costs are fixed in nature. Short of a major smash up, which are expected to be covered by the charterer and if not by charterer then by insurance (hopefully I won't have to test this assumption) what could go wrong!

As far as the management and care, I am extremely happy that I have the boat in charter. I'm fairly handy, but I don't have extensive experience with boats and I very much value having experts (with a vested interest) I can just call for help. And the fact that they are always there just watching over the boat is comforting.

No problems so far with the charters. But, I think you need to have reasonable expectations. I know that I will have more repairs to make given the boat is in charter. I did look at purchasing boats that were coming out of charter after and privately owned boats. Yes, the charter boats had more use, but also were well maintained. The cosmetic stuff can be fixed easily enough. You will spend more on maintenance but you will have revenue coming in.

Usage has not been a big problem. I can't always take the boat out on a whim during high season, but I'm also not looking to do that very often. I'm in Southern California and just had a great sail last weekend, so low season still provides for time on the water!
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Old 25-02-2017, 05:22   #14
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Re: Buying into a charter or fractional program

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Originally Posted by mausgras View Post
I'm a charter owner and it could not have been a better arrangement for me.
I own the boat 100% and I can have as little or as much owner charter as i like. I usually owner charter 3 to 6 months a year and in 4 years I have not made any money but the boat has not cost me anything in marina or maintenance either. In effect I have been sailing free all this time ..... perfect.
Also I was a bit of a newbie to sailing so having a professional charter company looking after the boat took a lot of responsibility off me and they were happy to pass on their knowledge about care and maintenance to me.

I am not in the position to sail all year round and prefer to be aboard in 1 to 3 month chunks. I just have to book myself in far enouğh ahead. Usually about 2 or 3 months ahead of time. I usually take her during low season as she has to earn her money during high season
Would you mind revealing which charter company you are with? And what kind of boat do you have and where do you sail? Caribbean? Have you taken weeks further out?
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Old 25-02-2017, 05:29   #15
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Re: Buying into a charter or fractional program

Sure no Problem .... I leave the boat with "Elite Yachts Charter" in Phuket. But I believe they are part of wider franchise around the world. I have a Bavaria 37 ft.
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