Long Term Boat Retirement Plan - Are These Numbers Right?

[skipmac]

Originally Posted by BlueBuddha

I assume it is because the charting companies and boat owners have different objectives, and they are not necessarily incompatible.

Of course. One wants to make money, the other wants to go sailing. Sometimes the two goals coincide.

For a charting company, the objective is to maximize cashflow and reduce capital expenditures. This is a must-do approach in this type of businesses.

Unless the capital expenditure produced a significant return on investment. If it did then the charter companies would own the boats. Since is doesn't they want to use someone else's money.

Their objective is NOT to go on vacations as cheaply as possible (that's the objective of the boat owner). The company's objective is to avoid having capital tied into their assets. In this case, an asset that depreciations a lot and over a fairly short time. So having other people put the capital makes perfect sense.

For the owner of the charter boat, one objective may be to charter as cheaply as possible. And for a customer that spends a lot of money on a regular basis chartering this can be a factor that might make the investment more cost effective. In fact, I think this would be the primary benefit to the plan. The question as to whether the charter program helps achieve this objective is an important one, but it is unrelated to the issue as to whether or not the program benefits the charter company. It is not a zero sum game.

I did more or less address this in an earlier post but that has gotten lost in the thread I'm sure. In my case I was looking at options to buy a boat for less money. I had very little interest in chartering so that aspect was not of interest for me. The other potential benefits for taxes or financing did not apply.

So just to buy a boat this plan for me was not beneficial. For others with different needs and circumstances it could make sense.

[Jim Krause]

I'm 54 and on my 3rd boat, which was purchased with the help of our home equity line of credit. This was much cheaper (about 3 percent) than the best "boat loan" available, or buying into a charter. We live on her during the summer and like being able to return to our home on dry land for the off season.

A few suggestions: Charter lots of different boats to get a feel for what you like and are comfortable maintaining. We sailed some really nice boats (Island Packets, Sabres, Shannons, etc.) but ended up with a Bavaria as they go fast in light winds and are a breeze to work on & maintain (for now- knock on wood). Ditto on the "don't buy a new boat" advice. Your first major boat purchase will likely not be your last. You might want a shallow draft cat now for cruising in the Caribbean/Bahamas, but may fall in love with other destinations more suitable for other types of boats.

Good luck and have fun planning/obsessing- as sometimes this is half the fun.

[Neeltje]

Buddha,

No offense, but people who plan as far ahead and in such detail as you have are either delirious, fixated, or incredibly optimistic. This I know because I used to be one of them. My redeeming quality was the ability to wait until I could pay cash for my dreams. Try it, you'll like it.

Jacques

[BlueBuddha]

Originally Posted by Neeltje

Buddha,

No offense, but people who plan as far ahead and in such detail as you have are either delirious, fixated, or incredibly optimistic. This I know because I used to be one of them. My redeeming quality was the ability to wait until I could pay cash for my dreams. Try it, you'll like it.

Jacques

I know. That's the same thing I was told when I was 15 boy, living in a 3rd world country, and making plans on how to become a doctor and emigrate legally to the USA. Good thing I didn't listen to them or I never would have had the change to buy the boat I want.

Planning far ahead, and in such detailed way, is why I have the life I have; and believe me, is quite a good one.

And no offense, but you may want to read more carefully next time. Who is talking about not waiting? My entire post and conversations that followed were about how to make the most financially sound long term plan, including paying cash for my dream, which is what I intend to do.

[brownoarsman]

You could spend the next ten years chartering the worst possible boats for the least amount of money. Then, when you're ready to buy, anything will seem great!

The way I understand the owned-chartering program is that the cost of capital for the company is usually 10%+. For a five year time frame, the individual investor probably shouldn't be in the stock market to a large degree, so their cost of capital is closer to a 5-year bond rate or CD, generally 2-3% if I remember correctly. Using those cost of capital numbers, the programs likely make much more sense.


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