Putting boat in 2nd Tier Charter service

[bluebox3000]

I have been looking upgrade my sailing game and put a boat into 2nd tier charter in BVI. I'm thinking about purchasing a 40-42 ft sailboat out of the 1st tier fleet, typically 2010-2012 year model Jeanneau monohull for around $100K.

For a performance based charter, I'm struggling with how much one could estimate the charter could net on an annual basis towards interests and payments on the mortgage (if at all...). What would a typical charter utilization be in the BVI on such a boat, how many weeks a year, etc?

My thinking is to leave it in charter for 3-4 years and then keep it and continue with personal use after that. I would only expect to use it for personal use 2-4 weeks a year during the charter period.

So what is the experience with the 2nd tier charting companies from a money perspective? Does this make sense or is it all a hoax?

[seanmc30]

It’s disappointing you didn’t get an answer on this. I just asked a similar question and I was hoping for some lively discussion.

[bluebox3000]

Yes, it would be interesting to learn more about people's experience with 2nd tier charter companies. Especially now, after Irma. One would think Irma changed everything for this segment of the charter business as well the 1st tier, but perhaps in a different way....

For me, it put me back a year at least as I think the industry needs to stabilize more before entering.

[soares29]

Very interesting question!!!! Blue box!!! My understanding is that charter boats at the BVIs are booked heavily. Been there recently, sure they will be back to “normal” in 1-2 years. I actually prefer how it is now... not as crowded.

[james247]

Originally Posted by soares29

Very interesting question!!!! Blue box!!! My understanding is that charter boats at the BVIs are booked heavily. Been there recently, sure they will be back to “normal” in 1-2 years. I actually prefer how it is now... not as crowded.

The people who buy yachts to charter them as bareboat are not like us they are investors hoping to make money. If owning a boat is about loving a boat then putting a boat into bareboat charter is akin to selling your first borne child.

[bluebox3000]

The way I´m looking at the 2nd tier charter option, is for me to afford a "better" boat than I could otherwise by having the charter pay for a part of the price. There is a huge difference between a 2010 Jeanneau and a 20 year older boat design wise. That represents a lot of value, where the"cost" is that one will have to share the boat with other people for some time until paid off.

[soares29]

Agree. Makes sense to me also. I think depends on your level of em emotional attachment. For me a car or a boat is just a craft that takes me places and makes me happy. I definitely also agree that if there is passion you should try to get it new and avoid sharing.

[Snore]

Be very very careful. Since this is an older boat it will need more maintenance. Check to see who does the maintenance and the mark-up.

I “rescued” a larger powerboat from a 2nd tier charter company in FL.... all I will say it was way south of Tampa. Charter firm was screwing the owners on parts, labor and general upkeep. So I got hired to go there the night before with the owner (yes he provided ownership to me) to bring the boat to Tampa, with the owner as crew.

On arrival I found each engine about a gallon low on oil. There was no spare oil aboard. The interior needed a good cleaning. Neither turbocharger worked and the fuel filters for both engines needed changing. Entering the boat it smelled moldy, apparently the charter firm didn’t run the AC, even on dehumidify mode.

I do charter work for a top shelf firm where they treat the boats like they owned them. If the firm I saw is an example of tier2 it would be foolish to do this.

[bluebox3000]

I agree, one has to be careful about who one does business with.

For conversation, my main question about the metrics still stands unanswered:

For a performance based charter, I'm struggling with how much one could estimate the charter could net on an annual basis towards interests and payments on the mortgage (if at all...). What would a typical charter utilization be in the BVI on such a boat, how many weeks a year, etc?

The math needs to make sense before one goes out and sign's the dotted line for boat and charter.

[soares29]

Makes total sense in my opinion. In pretty much every machine, good preventive maintenance is “everything”...

[Snore]

Originally Posted by bluebox3000

I agree, one has to be careful about who one does business with.

For conversation, my main question about the metrics still stands unanswered:

For a performance based charter, I'm struggling with how much one could estimate the charter could net on an annual basis towards interests and payments on the mortgage (if at all...). What would a typical charter utilization be in the BVI on such a boat, how many weeks a year, etc?

The math needs to make sense before one goes out and sign's the dotted line for boat and charter.

If they answer that question run away.

Net available for P&I is gross revenue, less charter firm take, less dockage, less REPAIRS and maintenance. There is now way of forecasting the repair bill for an older charter boat. A new boat placed in charter will not need running rigging replaced, or any number of routine things an older boat will need. Also the likelihood of big things, like a transmission, breaking goes up with an older boat.

It could work—- or it could be a @#$ show. Do they do “captain only” boats? That should reduce the odds of things breaking.

[bluebox3000]

Originally Posted by Snore

If they answer that question run away.

Net available for P&I is gross revenue, less charter firm take, less dockage, less REPAIRS and maintenance. There is now way of forecasting the repair bill for an older charter boat. A new boat placed in charter will not need running rigging replaced, or any number of routine things an older boat will need. Also the likelihood of big things, like a transmission, breaking goes up with an older boat.

It could work—- or it could be a @#$ show. Do they do “captain only” boats? That should reduce the odds of things breaking.

Agree, there are things one can forecast and there are things it is impossible to forecast, that is the risk one needs to be willing to take.

Breaking it down, one of the largest variables one should be able to forecast is the expected revenue, that is rate and utilization. One can find the rates readily available. It seems to be harder to find the utilization factor for BVI charters...

The utilization drives the turnaround fees, the gross income drives the charter fees, insurance is know, payments will be known etc.

So, yes, maintenance is a very large piece of the math, but if the other numbers can be estimated, it will be much easier to assess the risk of the maintenance variable risk one would enter..

[Woodland Hills]

And when you are done you will have a 20 year old, very worn out ex-charter boat that is set up for lots of people to stay aboard for two weeks at the maximum. Is this your goal?

[bluebox3000]

Originally Posted by Woodland Hills

And when you are done you will have a 20 year old, very worn out ex-charter boat that is set up for lots of people to stay aboard for two weeks at the maximum. Is this your goal?

Most of the 1st tier charter boats are decommissioned 5-7 year old and the idea was to keep it in 2nd tier for 3-4 years, so it should not be more than 10 year +/- when it would be out of the 2nd tier.

As a simple example, let's say it is $100,000 purchase, 20% down $80,000 mortgage. If the boat can over four years contribute $10,000 towards principal, the remaining balance will be $40,000 at the end of the four years.

I will then have a 10 year old 40 foot sailboat at the cost of $60,000. I think many people would think that would be a good deal, even if the boat had been heavily used.

Plus I get to use it free of charge for a few weeks a year for the charter period....

[belizesailor]

Originally Posted by james247

The people who buy yachts to charter them as bareboat are not like us they are investors hoping to make money. If owning a boat is about loving a boat then putting a boat into bareboat charter is akin to selling your first borne child.

Anyone who views a boat as an "investment" knows nothing of boats or the charter biz...and likely not much about investing either.