Charter Boat Ownership and the Phase Out.

[dasha]

Hi,
I am looking at buying a catamaran through Dream Yacht Charter on a one off payment scheme. I will have to pay 56% of the value of a FP Lipari 41 and it is put into charter for 6 Mediterranean seasons in either Greece, Croatia or Turkey. These are the 3 countries in this region where you don’t have to pay the VAT while it is in charter. The idea is at the end of the charter period, my wife and 3 kids will take a sabbatical year or so and sail the boat back to Australia.

I am a fairly novice sailor. I did do a lot of sailing on my Dad’s 30 foot yacht growing up and I have a lot of offshore sea time on naval/commercial ships and fishing boats. However, none as skipper.

I have read a lot about the horror stories of putting boats into charter on this forum, but I have also read a lot about the benefits. The ones which apply to me are,

• Buying the boat now using mainly Australian dollars which buys a lot of Euros.
  
• Being able to use the boat 2-3 peak weeks per year. We will be limited to school holiday time and the cost of doing this by chartering would be very expensive.
  
• Explore different areas by using a sister boat in a number of world wide destinations.
  
• Will learn and increase my skills over the 6 year charter period and become familiar with the boat.
  
• I will not have to pay VAT on the boat as a non EU resident. I will pay the Australian GST only when I return to Aus.
  
• Having (hopefully) a boat in full working order at the end. I plan to be there for the phase out and spare no expense for the survey.
  
• Having a boat that is worth at least the same if not more in Australia (although I am not in it for this reason)

If anyone has any experience with charter ownership (particularly in the Med) I would appreciate any constructive comments or advice you may have. Specifically I am after others experiences/advice with some specific areas which I am struggling to find information on;

1. Has anyone had experiences with charter ownership with Dream Yacht Charters? The things I read are that they are a lot better than the other Big companies. They are also a lot more flexible on the Specifications of the boat. Where can I speak to people in the scheme?
   
2. The charter company has to give the boat back to you with only fair wear and tear. I will have a solicitor look over the contract, but is this a fairly loose term? Is fair and tear based on a boat that has been in charter for six seasons or of a typical boat after six years? Can the charter company get away with giving the boat back to you ‘in working condition’ but with almost knackered sails, rigging and engines?
   
3. Will the major parts of the boat (ie. Engines, rigging, sails, batteries) be fit enough to sail half way around the world? Would there be any other major maintenance, overhaul or replacement of parts to be done? The company says that they will typically charter the boat for around 25 weeks/year in the Med and the engines will typically do 2700 hours each over the charter period. Is this about right? How much life is left in the engines after these hours? They say they change oil/filters every 100 hours.

Thanks for any help you can give.

[GordMay]

Greetings and welcome aboard the CF, dasha.

Wouldn’t travel from Australia to Greece, Croatia or Turkey make for a VERY expensive holiday?

[Kevin84]

Regardless of what condition the charter company returns the boat to you in, I would highly recomend you do a complete refit on her prior to sailing her from the Med to Aus. Far too much can go wrong on a voyage of that length. Have the boat hauled out and surveyed from her keel up to the mast head. Have the sails either restitched or replaced completely, replace her running rigging, inspect and tune her standing riging (including turnbuckels and chain plates). Get the engine overhauled, esp if its racked up a lot of hours over those six year (which it probably will being used as a charter and not as a boat that gets used once a month or so). Basically, have a professional (and preferably NOT one recomended by the charter company) go over her with a fine tooth comb.

[WebWench]

I would do some thorough research on the charter company....make sure they have been in business for awhile and have good credit and reputation, etc.
Ask for references....the names of others who currently charter with them as well as people that have phased out.
Ask what would happen if they went out of business in a year or two....what happens to your boat at that point. What happens if they don't do the maintenance or let the insurance lapse? Make sure you cover all the what if's and then still feel that this is a good option for you and your family.

[carstenb]

Generally charter companies buy 5 year sails, meaning the sails are cheap and worn out at the end of 5 years. This company will be no different, since charter guests typically can't sail for sh*t and even if you bought great sails they would be ruined after charter

2700 hours will not ruin diesels unless they have not be maintained adequately. Get a detailed maintenance schedule from the company before you sign. Make sure they adhere to it.

Other than that it can be good deal, especially if the charter company does what it promises.

Pay what it costs to have prof survey done

[dasha]

Thanks for the replies so far.

Regarding Dream Yacht Charter, I believe they are a fairly large and solid company. I guess if they were to go under the boat may be at risk, as it is in their name until the end of the charter period. I think that is why I would prefer to go with a big company. That is a good idea WebWench about asking for references from the company. They shouldn’t be afraid to supply that information. Although, for a completely independent view, I was hoping that there might be a few people on this forum who have used/using them and have experience with the phase out and handover?

Regarding the condition of items upon handover, this is where I think there is a grey area. Carstenb mentioned that these companies only use 5 year sails. Surely they would be in breach of their contract if the sails/rigging/engine were not in fair working order upon return? If the sails have had it after 5 years then they need to replace them. If the engines were at the point where they needed a full overhaul, surely they will have to do this? At what point do engines need a full overhaul? If they are properly maintained is it 5000 hours, 10000 hours? Is there anyone who has had disputes over items at phaseout and handover?

I guess at the end of the day it will be about communication and negotiation with the company and not accepting the boat until the surveyor and I are satisfied with its condition. I want to go into this with armed with all the information I can get. I will not skimp on the survey and getting legal advice about the contract.

I can’t afford a new boat, so this is a way of getting a boat which, if the contract is as good as it looks, is in very good working order when I finally get it.

[carstenb]

Dasha,

Generally charter companies use 5 year sails. This is because most of their customers have no idea of how to sail and treat the sails badly. If they bought expensive sails, they would still be worn out after 5 years du to poor sail handling. So 5 year sails make sense - both for you and for them. Just figure it as an expense you will need to bear.

Regarding engine overhauls - lots of mercedes diesel cars have over 1 million miles on them without a major overhaul. It all depends on how the engine is treated. REgular oil changes (a must), sufficient cooling water, staying at 1800/2000 rpms will generally mean the engine will practically last forever. Charter guests, however, have a tendency to rev the engine high (2500 to 3000 rpm or more) and to rip the engine from forward to reverse in one motion, without giving the gearbox a chance to stop (this is really bad news).

But a competent survey should catch any really excess wear on engine/gearbox.

I would probably also think you are going to have to replace a lot of halyards etc. Charter companies generally don't de-rig during winter and eventually the combination of weather/sun take their toll.

The above are part of the reason you can get the boat cheap at the end of the period. "Reasonable" wear and tear is a fluid concept. Best get it nailed down as tight as you can.

[tomcat1]

Hi dasha,
I have considered this option as a way to buy a boat. The most important risk of course is the survival of the charter company.
The rest is in the fine print: Do you pay a defined amount of money and get the boat after 5 years? Or do you get a percentage of their take, which means that you share the risk of the charter-market? Who pays the rest of the price: is a bank involved? If it is, they will have waterproof security that they will own the boat (and not you) if the company goes broke. Who is the legal owner of the boat: The charter company? You? If it’s the charter company it might get part of an insolvency estate which means you loose it.
I would not speculate too much about the condition in which you will receive the boat. You will get what you have signed for, not what you hope for. If you have a contract saying you will get the boat after 5 years with new sails chances are, you will get it. If the contract doesn’t say it, you will have to be content with the old sails. I think that after 5 years you will be happy if the charter company survived and take the boat “as is”. Just save some money for those new sails.
It’s a risky model, but is saving your money at a bank really save?
Martin

[WebWench]

You said:

"I can’t afford a new boat, so this is a way of getting a boat which, if the contract is as good as it looks, is in very good working order when I finally get it."

Actually most boats that come off of charter are not going to be anywhere near new condition.....actually when the charter companies have them for sale they are often discounted because they have endured the rough charter life.

At one time we had considered doing the charter thing also but after looking at what the boats cost new and what they sell for after the charter we realized we would not be getting anything close to new by the time it would become ours.

Boats used in charters are also not really equiped for long term cruising. They only have the minimum equipment for the area they will be used in. If you add up what you will need to add to the boat after the charter as well as what it will cost to get the rigging, sails, engine etc up to long term cruising or ocean passage making condition, you could probably buy a boat that is a bit older but in close to ready to go condition for much less!

We ended up buying a boat with a quality reputation that was maintained in Bristol condition and has all the extras....like wind and solar generators, water maker, extra battery bank, etc. for less than what it would have cost us to buy a used charter boat. The boat is older but I would rather compromise on age than condition. But in the end it is up to you....you need to figure out what would work best for you and your family.

[Kevin84]

Originally Posted by WebWench

You said:

"I can’t afford a new boat, so this is a way of getting a boat which, if the contract is as good as it looks, is in very good working order when I finally get it."

Actually most boats that come off of charter are not going to be anywhere near new condition.....actually when the charter companies have them for sale they are often discounted because they have endured the rough charter life.

At one time we had considered doing the charter thing also but after looking at what the boats cost new and what they sell for after the charter we realized we would not be getting anything close to new by the time it would become ours.

Boats used in charters are also not really equiped for long term cruising. They only have the minimum equipment for the area they will be used in. If you add up what you will need to add to the boat after the charter as well as what it will cost to get the rigging, sails, engine etc up to long term cruising or ocean passage making condition, you could probably buy a boat that is a bit older but in close to ready to go condition for much less!

We ended up buying a boat with a quality reputation that was maintained in Bristol condition and has all the extras....like wind and solar generators, water maker, extra battery bank, etc. for less than what it would have cost us to buy a used charter boat. The boat is older but I would rather compromise on age than condition. But in the end it is up to you....you need to figure out what would work best for you and your family.

Just to expand on what WebWench said, just becuase a boat is older doesn't mean its ready to be junked. My boat is 49 years old, and is in better condition and will out sail half the boats in the marina I'm at. And I got her for a song and a dance. Instead of forking out the cash for a new boat and putting her in charter and getting a worn out and minimally equiped boat back, I would recomend looking around for a used boat that is equiped the exact way you want it and buy that. Don't put a ton of stock into whether or not a boat is new. You might be surprised, but a lot of older boats are better built and will last longer than most new boats. The best description I've ever heard is this: A wooden boat will eventually die of natural causes. An old fiberglass boat, on the other hand, will have to be shot to be put out of its missery.

[dasha]

More good points thanks Carstenb. I fully expect to spend some money on the boat at the end of charter and will certainly set aside a good budget to fit it out for ocean cruising. New sails/ running rigging is acceptable. Overhauling engines and/or new standing rigging is not. Like you say, a good surveyor will hopefully pick up engine abuse. I hope the company should fix most problems rather than argue too much. The cost of negative publicity would be far greater than the cost of fixing problems in their own bases at cost price using their own mechanics/repairers.

Did you go with a program then Tomcat1?? You are right in a lot of respects in that it is a risky business model. That is why I am going on the reputation of a large company like DYC rather than the smaller higher risk operators. But would I eliminate that risk if I purchased the boat outright? If the company does fold, the boat still belongs to me. I suppose if I had the cash already for the 56% and then borrowed the rest from a bank in the UK, then maybe the guaranteed charter income would cover the repayments. More food for thought!!! Otherwise I’ll just have to hope that DYC don’t go bust in 5 years time!

[Kevin84]

Dasha, I just looked at the cost of the Lipari 41, and for the amount you'd have to come up with to buy it for the charter company (294,000 USD) you could buy outright a brand new Beneteau. Or get one HECK of used boat. If you've got nearly 300k USD to spend outright on this boat, you've got a ton of options for a killer used boat.

[dasha]

Originally Posted by WebWench

You said:

"I can’t afford a new boat, so this is a way of getting a boat which, if the contract is as good as it looks, is in very good working order when I finally get it."

Actually most boats that come off of charter are not going to be anywhere near new condition.....actually when the charter companies have them for sale they are often discounted because they have endured the rough charter life.

At one time we had considered doing the charter thing also but after looking at what the boats cost new and what they sell for after the charter we realized we would not be getting anything close to new by the time it would become ours.

Boats used in charters are also not really equiped for long term cruising. They only have the minimum equipment for the area they will be used in. If you add up what you will need to add to the boat after the charter as well as what it will cost to get the rigging, sails, engine etc up to long term cruising or ocean passage making condition, you could probably buy a boat that is a bit older but in close to ready to go condition for much less!

We ended up buying a boat with a quality reputation that was maintained in Bristol condition and has all the extras....like wind and solar generators, water maker, extra battery bank, etc. for less than what it would have cost us to buy a used charter boat. The boat is older but I would rather compromise on age than condition. But in the end it is up to you....you need to figure out what would work best for you and your family.

I'm not expecting the boat to be in next to new condition. I understand it will be subjected to heavy use while in charter. But I am only paying 56% of the new price. If I were to buy a 6 year old charter boat now, I would exect to pay at least 50% of the new price. Yet I wouldn't know what sort of phase out it had and how thorough the survey and repairs were.

If I purchase a boat through this program, I will oversee (with a good surveyor) a full phase out program before handover. Then, in theory, if the Hull is good, and the engines/rigging/everything else is good then I have a a used boat in good condition at the end. This is why I am keen to hear from people who know how the phase out program actually works in reality.

I'll have to equip it some more for long distance cruising, but it does have some good starter kit like solar panels, water maker, extra battery.

I could wait and buy a non charter boat in 6 years time, but I won't get the benefit of owners usage. This would add up to at least £30k over the 6 seasons.

[dasha]

Originally Posted by Kevin84

Dasha, I just looked at the cost of the Lipari 41, and for the amount you'd have to come up with to buy it for the charter company (294,000 USD) you could buy outright a brand new Beneteau. Or get one HECK of used boat. If you've got nearly 300k USD to spend outright on this boat, you've got a ton of options for a killer used boat.

I've worked it out at $240k USD. And I want a Catamaran, not a monohull. Big difference in price I know

[Kevin84]

Originally Posted by dasha

I've worked it out at $240k USD. And I want a Catamaran, not a monohull. Big difference in price I know

I got the number I used by figuring 56% of the list price of $525,000. Instead of focusing soley on charter vessels, check these out. I did a search on yachtworld.com for cats up to $300,000 and this is what turned up. Another example, the marina I'm at just had a 1998 Manta Cat for sale, and it sold for only $195,000. It was a 38' cat, roughly the same size you were looking for and it was extremely well equiped, wind and solar, watermaker, etc, etc. Anyway, here's the link for you to take a look at. I think you might be surprised.
(Sail) Catamaran Boats For Sale=