Arbitrage opportunities

[goodlime]

As someone keen to get out on the water on a more extended, maybe even permanent basis, I am always looking for ways to accelerate this process. The ideal outcome is to achieve it in the most financially advantageous way possible (aka lose the least on resale, or maybe even profit?).


My goal is to circumnavigate, but I'm not set on some purist, all-in-one-go kinda way. I've heard that there are opportunities to buy a boat in one market and sail it to another reselling it for a profit. Having realized a new HR 40C is slightly out of my reach as it stands today, I'm trying to get creative with how I can springboard to my ultimate goal, while still getting to explore and build ocean miles along the way.



Given the volume of variables in play here, the core question I am looking to answer are the following:


1. Where these markets are (eg. buy in the Med, sail to NE USA sell there)


2. What types on boats work for this concept and which don't (eg. ex-charter Beneteau vs private owner Hallberg Rassy)


3. Price point and age (eg. <10 year old boats yes, 10+ year old no)


I'm curious to hear if anyone has any experience with this, or whether this idea is pure madness.

[dougweibel]

Probably madness, but maybe. For example many boats sail to the Caribbean from Europe. Sailing them back to Europe is a hassle so some get left there and sold, often at a reduced price due to the lack of a strong local market. You could buy a boat in Grenada and sail it to the US and make a profit.

With that said "arbitrage" strikes me more as something that might be a lucky outcome than an actual strategy when you are dealing with depreciating and expensive to maintain assets. It is something I'd consider as part of a bigger picture.

[goodlime]

Originally Posted by dougweibel

Probably madness, but maybe. For example many boats sail to the Caribbean from Europe. Sailing them back to Europe is a hassle so some get left there and sold, often at a reduced price due to the lack of a strong local market. You could buy a boat in Grenada and sail it to the US and make a profit.

With that said "arbitrage" strikes me more as something that might be a lucky outcome than an actual strategy when you are dealing with depreciating and expensive to maintain assets. It is something I'd consider as part of a bigger picture.

I should add, I'm not exactly looking to make a business out of it. More just take advantage of geographical market differences to maintain capital and/or turn a small profit.

Part of the strategy would be seeking out the value boats out there. For example, I had an offer accepted on a 1999 HR 36 MkII this year from a motivated seller for €75k in great condition, loaded and in need of little more than a good clean and some cosmetic touches. I could have turned around and sold that same boat for €20-30k more than I paid without ever moving it off the dock.

[Woodland Hills]

How will you deal with the different electrical systems and will that affect speed of sale and the price?

[goodlime]

Originally Posted by Woodland Hills

How will you deal with the different electrical systems and will that affect speed of sale and the price?

That would of course depend on the market you were buying/selling in. Outside the USA and Canada, almost the entire world uses 240v/50hz.


As someone who has lived in North America and Europe, I can say from experience that outside of things like hair dryers and curling irons, most electronics are now designed with switching transformers which handle both voltages. I would be more concerned with the quality of the inverter when not on shore power (pure sine vs modified) which actually can mess quite badly with sensitive electronics.


For me personally, my boat priorities lean more towards quality of life on the hook, not so much my power needs in a marina. You bring up a valid point though.


There's quite an extensive thread on this topic here: https://www.cruisersforum.com/forums...sing-4545.html

[goboatingnow]

You’ll have issues like RCD compliance , ABYC standards, VAT and import duties , income /capital gains taxes etc. Boats are “ wasting assets “ for good reasons

Best try being a broker instead.

[goodlime]

Originally Posted by goboatingnow

You’ll have issues like RCD compliance , ABYC standards, VAT and import duties , income /capital gains taxes etc. Boats are “ wasting assets “ for good reasons

Best try being a broker instead.

Whilst I appreciate the raw, unchecked pessimism, you failed to actually address any of the questions I posed. I'm not interested in hashing out details which may or may not be relevant in any given transaction. To address your points, which I think are mostly incorrect...

RCD Compliance/ABYC Standards - perhaps relevant if someone wants to import an obscure boat into the USA re-flagging it on the US registry, but not necessarily. According to the abycinc.org website, "90% of boats on the water are built to ABYC standards".

From Beneteau's website: "Boats sold in the U.S. do not have to be CE rated, but rather, must only meet a few US Coast Guard regulations which address required safety items such as PFDs and flares, carrying capacity for boats under 26’ and level flotation if swamped for boats 20’ and under. America’s version of CE Standards and Recommendations have been promulgated by the American Boat and Yacht Council -- but they are strictly voluntary. Most critically, there are no ABYC design categories to differentiate between boats of different capabilities, a crucial distinction CE ratings and American NMMA certification, which itself only requires about 70% of the ABYC recommended standards. While most quality U.S. builders follow the ABYC standards and many exceed those required by the NMMA, they are not mandatory as the CE standards are in Europe."

I wouldn't buy or cross an ocean on anything less than a CE Ocean (A) rated boat.

VAT - responsibility of the buyer and avoidable if the boat does not stay in any specific jurisdiction

Income tax - not unless you are earning money operating the boat commercially

Capital gains - payable on any profit, which I would declare in any case. likely you could expense away any profit legally with a good CPA

Please correct me if I am wrong, but this is my understanding as a US taxpayer and someone who has lived on both sides of the pond.

[goboatingnow]

I presume you intend to buy boats on both sides of the pond

If you actually buy and sell them , as opposed to brokerage then

(A) for US imports , RCD compliance falls on u as the importer and remains with you

(B) vat is the responsibility of the seller in Europe , if you are not vat registered then you will be exporting vat paid boats to the US , this vat uplift can negate sales gains

If you are importing into Europe again you as the importer will have to pay vat

Capital gains or income tax. Revenue authorities rightly view boats as “ wasting assets “ and hence chargeable gains to not normally accrue. However since your stated intention is to actually make money then clearly you need to factor in the tax implications

I’ve been in US Europe import and export for 30 years so I have a bit of experience and lived in the US for several years

In order to protect yourself you are likely to want to form a company , ie incorporate , you need to factor in the overheads and implications there also

I know people that do make money out of bringing in US small powerboats. ( as the US is predominantly sports boat territory ) I don’t know anyone going it the other way

[Rucksta]

Buying a boat to sell at a profit is a justification we give ourselves, partners etc. to appear rational.

An accounting system that includes refit and upgrades yet excludes maintenance, your labour and the opportunity cost of what you would have earned in your day job makes a profit possible if the planets align.

Brush up on celestial navigation so you may more easily recognise the alignment.

Factor in the untold satisfaction of working on a boat and the joy sailing brings
and you life equity will outshine rubies, diamonds and gold.

[goodlime]

Originally Posted by goboatingnow

I presume you intend to buy boats on both sides of the pond

If you actually buy and sell them , as opposed to brokerage then

(A) for US imports , RCD compliance falls on u as the importer and remains with you

(B) vat is the responsibility of the seller in Europe , if you are not vat registered then you will be exporting vat paid boats to the US , this vat uplift can negate sales gains

If you are importing into Europe again you as the importer will have to pay vat

Capital gains or income tax. Revenue authorities rightly view boats as “ wasting assets “ and hence chargeable gains to not normally accrue. However since your stated intention is to actually make money then clearly you need to factor in the tax implications

I’ve been in US Europe import and export for 30 years so I have a bit of experience and lived in the US for several years

In order to protect yourself you are likely to want to form a company , ie incorporate , you need to factor in the overheads and implications there also

I know people that do make money out of bringing in US small powerboats. ( as the US is predominantly sports boat territory ) I don’t know anyone going it the other way

While I appreciate the value in your experience, you are missing the whole point of my post. The nitty-gritty details are important, but at this stage are pointless when considering a global market with hundreds of tax jurisdictions and nuances upon nuances within each and every one.

To reiterate, I am looking for insight only into what arbitrage opportunities exist. To give an example: a few years ago folks in England were putting caravans/campers/5th wheels/land yachts into shipping containers and sending them to Australia and New Zealand, where for whatever reason you could resell them for double or triple what was paid for them. I don't know the details, I just know that those market conditions existed, and people were capitalizing on it. Of course that would never happen in today's boating market, but a 10%, 20%, 30% difference in price could make the effort worthwhile in a bigger picture sense

I am not looking to make a business out of it, I make far more money building technology for the Fortune 500. However, being able to get out on the water and enjoy some extended sailing, it would be an attractive prospect knowing that if I set a destination of [insert country here] I can sell said boat for a reduced loss, break even, or possibly small gain. And as you state, factoring in the details at that point makes sense. And maybe at that point it makes more financial sense to buy the boat in the EU and sail it back to the EU to sell there for example. That's why I am asking.

The goal is to enjoy sailing the oceans of the world without having to wait for the available capital to get into the boat I really want long-term. Or maybe it makes sense to buy something 20 years old, sail it for 3 years and take the inevitable hit on resale. If that's the case, buying a $50k boat makes more sense than a $200k boat to minimize depreciation. It more about preserving as much capital as possible, while enjoying the boat for a year or two before moving up.

It's not entirely clear to me your claims on the VAT issue. Maybe there are nuances with regards to boats that I am unaware of. Having been VAT registered in the UK and current owner of businesses in the USA, I don't follow how a non-VAT registered, private owner of a boat could be liable for the payment of VAT upon it's sale. The taxable event would be the re-registration of the vessel. Depending on the jurisdiction, I could see that creating a VAT liability, but that would depend entirely on the buyer, their tax residence, use/location of the vessel, and the flagging of the vessel in question. The buyer's payment of VAT on the purchase would of course affect whether the boat was an attractive option. Similarly it would make little sense to sell a VAT paid boat in a different jurisdiction whereby a new taxable event would be created.

I know I could buy an ex-charter boat in Croatia, for example, which is not VAT paid. I would only have to pay VAT on that boat if I was going to keep it (as a private owner) in the EU. If I flagged said boat with a Red Ensign, but never entered British waters, AND took the boat out of the EU for enough of the year as would be required by tax law, I'd never have to pay any VAT on it. Upon sale to another party, the same principle would apply. VAT could be payable (again depending on circumstances), but the buyer would be paying it (although the seller might collect it), and I assume the mechanism for paying it would be linked to the registration process. The logistics of it wouldn't work any other way if neither party were VAT registered. That's my understanding at least from all the brokers and 'experts' I have consulted.

[mvweebles]

In theory, this is easy. To buy, target locations that are known graveyards of cruising dreams. Rio Dulce Guatemala may be ground zero. Sell in markers where dreams are given birth - US, only 800 nms away, being a great one. A bit of spit and polish and you're in business. Just need to be capitalized to pay transaction and holding costs - which is where the theory bumps into reality.

[ol1970]

I think it’s theoretically possible to do this if you are a professional and can do a lot of work yourself. I don’t think there would be a profit, but possibly you could break even and have a nice adventure along the way. If you plan requires making $20-$30k on the deal I think might be a tad unrealistic when all of the costs are truly added up. Good luck though!

[Pete7]

Good luck and if we do ever meet, can I go through customs first, only you might be there much longer than me .

I think you need to look at the bottle necks which are the Indian Ocean with no easy passage back to Europe or the US for those boats which have crossed the Pacific. So yachts for sale in the S Pacific or Aisa.

The other location is the Caribbean for boats that have crossed to the carib and are now stuck in central america.

Finally how about fresh water yachts in the Canadian Great Lakes being moved to Europe. You need European models from the big French, German and Scandinavian manufacturers really.

You could also investigate Dutch and German yachts to the med, they seem to store inside during the winter and seem higher quality. Whether a Northern European yacht makes a good boat for the med is a different question though but you are only interested in moving and selling them.

Have you done any big trips btw?

Pete

[hpeer]

It is an interesting question.

There are some places where a boat can get “stuck.” Greenland comes to mind. Someone gets there and then doesn't want to face the prospect of the trip back, storage is VERY expensive, no viable local buyers.

In todays Covid crazy there are artificial restraints to travel. Boats are “stuck” in places and cant move, Owners cant get to them, no place to go to. Recently a couple with a boat in Trinidad out it up for sale because they could not get to it. A fellow bought an expensive expedition boat in NZ, wants to move it to Canada. Covid.

What ever the reason for the price imbalance you need to figure out FIRST where you can travel to-from. Then look in those places. If you can develop some greater freedom of movement, either because if your passport or simple tenacity in dealing with bureaucracy, you may have an opportunity.

[cdy]

the scheme makes sense if the idea is to buy a boat cheap somewhere and sail somewhere else as an adventure and then sell it - you might recoup your investment - for example - buying cheaply in Rio Dulce or maybe Florida - sailing through Caribbean / Bahamas to maybe NE US -but expecting to make money - that would be a stretch unless you are buying high end rare sailboats that have a dedicated following and limited supply. I would not compare buying campers and shipping in a container to Australia anything close to the same process.