Too good to be true? A fractional ownership for 2012 Lagoon 500

[AJ_n_Audrey]

I am currently in a fractional ownership arrangement on a new 2020 Leopard 45, primarily because my wife wants to sail on a cat. I don't like cats, and I own a monohull, but the arrangement has advantages:

With interest rates as low as they are, the guaranteed payment from the charter company completely pays the loan and then some, so we are increasing equity substantially through the 4.5 year term. Be aware that there is some room for negotiating terms in these agreements.

It is realistically conceivable that when we sell the boat back to the company, the whole thing will have cost less than $20K over the course of 4.5 years, so $5-6K per year. Depends on fair market value of the boat when we sell.

In our fractional ownership arrangement we pay nothing for use of the boat, though we may, depending on the base, have to pay a turn-around fee; it's a few hundred dollars, when we split it between owners. And of course, you have to book your sailing trips ahead of time - there is not infinite availability.

But ultimately, it's a lifestyle choice. This is a way to get my wife to go sailing when otherwise she would not. I am hopeful that after four years of sailing trips on the cat, she will warm to sailing in general, and will be more open to voyaging with me on my (much smaller) monohull. Also, we are good friends with the other owners, and we have mutual friends who like to sail. My sons and their significant others will go with us on some trips, so it becomes a family thing, too.

Depending on the company you go with, you can have the opportunity to sail in many locations, wherever the charter company has bases. That also a big draw, because without that, I would likely never sail in Australia, Polynesia, etc.

It's not a one-size-fits all solution, but it can be a good deal if all the other factors line up and make sense. I have no plans to sell my "real" boat, but I look forward to sailing the cat in exotic locations with family and friends.

[patrickbarbary]

It all depends about the management company. A friend of mine did that with the "Moorings" a few years ago, but not divided by 4, he went at it alone. He used his 5 yearly weeks all over the world. They did a good job maintaining the cat, and at the end of the 5 years, he took possession of the boat in Belize, and has used it regularly since. Very happy with the all concept.

[YachtBroker]

Originally Posted by Palarran

I didn't read the link but will comment that fractional ownership is a great option, just like fractional ownership of real estate. Time shares are completely different. If you can actually use the boat for 5 weeks per year, $5k is cheap per week - uber cheap. I would have loved to set up a fractional ownership deal with my cat many years ago but so many balk at the price. What I was looking at would have been similar for a 5 week period but if you used the boat 8 weeks, every week after 8 was only $2k.

On Edit:
I did read the sites quickly. I'll add, don't believe any of the "guarantees" and "estimates". If you expect them to be zero and they come in at half, that would be a bonus. Look at what Dream Yacht is doing to their "Guaranteed Income" partners right now. If the deal was actually a fractional ownership where all 4 partners carry the burden, it would be more guaranteed. Perhaps it would be better to look at seabatticals long term charter options.

By the way my understanding was dream yacht bailed on their guaranteed income plan one month after the Covid shut down last April 2020. That’s how fragile and money tight these charter programs run. Dozens of boat owners in the Caribbean have not been paid in months. Buyer beware.

[Palarran]

Originally Posted by riverwave

for the 5weeks your usage, caption is included, free.
you can sail it to BVI, USVI PR or other eastern islands

Got it. IMO though, there are no passages in this area that are actually offshore. Still, those are great areas to cruise as you get used to sailing.

[riverwave]

Originally Posted by jim King

It's not a bad deal but for you I might wait until I have my Bareboat license to make the plunge. It might be another year before you have completed your Bareboat and are ready to start using your 5 weeks of usage. You need more experience before you will feel comfortable on a 50' cat. The charter company you are signing up with will reap the rewards: being able to lease your cat at around $9,000 a week while paying you just $625 a month. Then, in two years, if you decide to sell your boat for $400,000, they will take $40,000 in commission. The carter companies are almost always a brokerage as well. I own a 45' Leopard currently in charter with Sunsail and paid $550,000 up front for it but get $5,000 per month for their use of my boat. I get up to 12 weeks a year of use (which I seldom completely use) and they get $10,000 a week for the use of my boat. Currently, because of Covid 19, no one is getting much use of their boat.
BVI isn't making it easy to get there and use your boat, so timing isn't good for you to be able to use your boat for probably another 6 months to a year.
I wouldn't make the plunge into this fractional ownership until you have your Bareboat license and the covid threat is gone.
jim

Hi Jim, the $625/month for the 1/4 ownership. Sorry, for a mistake in my post, the charter company is based on USVI, not BVI.

I guess you have full ownership of your boat. I am wondering is the $5,000 per month Sunsail pay you, is it a guaranteed payment for each month of the year(12 payments a year)? Or only the month they use your boat?
You have 12 weeks of usage but you rarely use all of them. For the weeks you don't use, do they pay you $10,000/week?

[riverwave]

Originally Posted by jim King

I'm noticing that the charter company you are looking at has only larger fully crewed yachts. that might make it easier on you as you won't need the bareboat license. You will have a captain on board to do that work.
Do they charge you for your time on board? (turn around fee, park fees, fuel fees). It sounds like a good way to work your way into bareboating to have someone else on board to do the driving and maybe training you the ins and outs of your boat. BVI to Puerto Rico gives you a lot of area to enjoy in 2 years. The question at the end is will you really be able to sell this boat for $400,000? They probably won't want to sign you up again for 2 more years as they are always looking for younger boats.
When I have a crew of 8 on board my boat in the Caribbean I often think how nice it would be to have a licensed captain on board to worry about the anchor slipping in the middle of the night.

I don't need the bareboat license, they will always provide caption and crew in my usage, free.

[riverwave]

Originally Posted by AJ_n_Audrey

I am currently in a fractional ownership arrangement on a new 2020 Leopard 45, primarily because my wife wants to sail on a cat. I don't like cats, and I own a monohull, but the arrangement has advantages:

With interest rates as low as they are, the guaranteed payment from the charter company completely pays the loan and then some, so we are increasing equity substantially through the 4.5 year term. Be aware that there is some room for negotiating terms in these agreements.

It is realistically conceivable that when we sell the boat back to the company, the whole thing will have cost less than $20K over the course of 4.5 years, so $5-6K per year. Depends on fair market value of the boat when we sell.

In our fractional ownership arrangement we pay nothing for use of the boat, though we may, depending on the base, have to pay a turn-around fee; it's a few hundred dollars, when we split it between owners. And of course, you have to book your sailing trips ahead of time - there is not infinite availability.

But ultimately, it's a lifestyle choice. This is a way to get my wife to go sailing when otherwise she would not. I am hopeful that after four years of sailing trips on the cat, she will warm to sailing in general, and will be more open to voyaging with me on my (much smaller) monohull. Also, we are good friends with the other owners, and we have mutual friends who like to sail. My sons and their significant others will go with us on some trips, so it becomes a family thing, too.

Depending on the company you go with, you can have the opportunity to sail in many locations, wherever the charter company has bases. That also a big draw, because without that, I would likely never sail in Australia, Polynesia, etc.

It's not a one-size-fits all solution, but it can be a good deal if all the other factors line up and make sense. I have no plans to sell my "real" boat, but I look forward to sailing the cat in exotic locations with family and friends.

Very valuable and reliable input. Thanks for sharing it. I have the same kind of situation with you. My wife said she will sail with me, but knowing her, I don't want to scare her away with a mid size mono. I hope a nice Sail vacation in Caribbean with caption will increase her real interests.

With the help from your experience and Jim's, seems factional ownership isn't a very tricky thing with many traps. But for sure, I need to look into it on details, like other hidden fees, depreciation, and risks.

Thanks again for your input

[sailingchiro]

Partnerships are only as good as the partners. I have owned 1/4 of an airplane for about a decade. I used the plane alot and the partners were great. But a partner sold his share and has been a nightmare since.
The new member was scared to fly the plane if anything "could" be wrong. He would complain about everything. Suffice to say, our maintenance bills have gone out of sight-3x normal maintenance. He will also block others from using the plane by scheduling and then cancelling at the last minute due to maintenance issues. He will also plan maintenance service when a partner has reserved the plane. Plus "his" mechanics have broken more than they have repaired. It all started when they replaced a DG and broke the autopilot. Then they wanted $12,000 to repair the autopilot. I found the problem and repaired it, they pulled out the positive wire out and zipped tied it to another bundle of wires. Go figure. Job security.
As with planes and boats, they are NEVER perfect. Good luck. Ask the partners why the previous partner is leaving. You could ask for maintenance records and see if there are any spikes with partner additions.
I am selling my share of the plane. Anyone want to purchase 1/4 share of an airplane?

[barnakiel]

Is chartering NOT the less expensive proposition?

[riverwave]

Originally Posted by sailingchiro

Partnerships are only as good as the partners. I have owned 1/4 of an airplane for about a decade. I used the plane alot and the partners were great. But a partner sold his share and has been a nightmare since.
The new member was scared to fly the plane if anything "could" be wrong. He would complain about everything. Suffice to say, our maintenance bills have gone out of sight-3x normal maintenance. He will also block others from using the plane by scheduling and then cancelling at the last minute due to maintenance issues. He will also plan maintenance service when a partner has reserved the plane. Plus "his" mechanics have broken more than they have repaired. It all started when they replaced a DG and broke the autopilot. Then they wanted $12,000 to repair the autopilot. I found the problem and repaired it, they pulled out the positive wire out and zipped tied it to another bundle of wires. Go figure. Job security.
As with planes and boats, they are NEVER perfect. Good luck. Ask the partners why the previous partner is leaving. You could ask for maintenance records and see if there are any spikes with partner additions.
I am selling my share of the plane. Anyone want to purchase 1/4 share of an airplane?

Wow, a perfect example of partnership. It can be sweet and it can be bitter.

For the case I am looking at, the good thing is the maintenance is taken cared by charter company at free cost. Less argument between partner.
It will be hard for you to sell your 1/4 share of the airplane here, after everyone listened your complain about your partner.

[riverwave]

Originally Posted by YachtBroker

By the way my understanding was dream yacht bailed on their guaranteed income plan one month after the Covid shut down last April 2020. That’s how fragile and money tight these charter programs run. Dozens of boat owners in the Caribbean have not been paid in months. Buyer beware.

NexGenYachting told me they didn't miss any payment in the last 2 years. I guess I have to ask them to provide formal written on their words

[riverwave]

Originally Posted by barnakiel

Is chartering NOT the less expensive proposition?

barnakiel, could you explain a bit more on why it is NOT the less expensive proposition? I mean Fractional Ownership + lend for Chartering?

[Narfi]

Something I don't understand are the supposed tax advantages, are those only for large businesses juggling between years?

I don't see the math adding up for a middle class family where writing off 100% the first year would be mostly lower tax brackets and selling at the end would push it up to a higher bracket offsetting any of the initial benefits.

Am I missing something?

[lvictorlucas]

Do Not do it unless you know ALL the others AND have an attorney review all the documents as you may become an unlimited partner with full legal and financial responsibility.

[makoman]

Originally Posted by riverwave

I am a newbie, mid 40, planning for full time sailing in 15 years.
Beside local club and sailing course, I am looking for other ways of getting sailing experience. For sure I am keeping my eyes on Crews sub-forum.

I am also checking fractional ownership, read almost all threads on this forum, most of them are outdated.

With the impression of fractional ownership is not as good as the seller tells you, is this ad on Craigslist too good to be true?

A 2012 Lagoon 500 is valued at 500k. 1/4 ownership at 125k.

I need to pay 25K down payment for 1/4 ownership, the rest(Mortgage and Upkeeping cost) is covered by the charter company. Ownership is in the form of share of a LLC holding the Lagoon.
https://miami.craigslist.org/mdc/bod...264535129.html

They projected the resale value of this lagoon is about 400k in 4 years.

the guaranteed payment amounts:
The Lagoon 500 is $625/month for 5 week's, $935/month for 2 weeks

If you choose mortgage, basically you pay 25k for 5-weeks usage each year for 4 years.

If you pay 125k, after 4 years, you got back 30k(guaranteed payment 625*12*4)+100k(resell price )= 130K. And you got 5 weeks usage each year. I was told the high season is Nov-Apr and low is May-Oct.

The company is https://nexgenyachting.com/

For the recent 5 years, I don't think I can spend more than 5 weeks on offshore sailing. that's why I am looking for fractional ownership. I am also checking other fractional membership or ownership like Sailtime.

Comments? What are the pitfalls in this ads? Is the company respectable? I was told it is a new company established 2 years ago.

I am a business consultant with heavy financial background who has been involved in several of these types of transactions over the past 4 decades.


What I can say GENERALLY is that the numbers generally make sense, but whether the deal is for you depends a lot on the specifics of the transaction. Who are your partners, how good are each of the various people in the yacht management company, what kind of person are you and how will you personally evaluate your experience, etc.


Off the top of my head, I can think of 2 such arrangements that worked very well, a couple more that were so so, and about 5 to 10 that were disasters.


Would be happy to discuss in detail with you if you want to send me a PM with your contact information.