Putting a Boat in Charter

[Tscott8201]

I've been reading about putting a boat in charter and though the articles usually explain the process, most are pretty short on hard numbers. In general, what can one expect to save by putting a boat in charter? In my case it would be a catamaran around the 40' range.

Tom

[nautical62]

I had a sailboat in charter with the Moorings for about 5 years and then another 2 with Footloose.

With the Moorings, I received a monthly guaranteed income which totaled over 40% of the price of the boat. With Footloose I got a straight percentage of charter income. Between the two, over half the boat was paid for by charter income. In addition they paid all dockage, maintenance and insurance. They do charge an owner's turn around fee which for a boat in my price range was something like $250 which included dingy and outboard use, fuel, and boat cleaning at the end of use. That arrangement gave me 4-9 weeks of use per year on my boat or to trade on other boats at other locations.

I felt the boat was fairly well taken care of.

[maytrix]

Lots of variables.. Like nautical above, I own a boat in moorings. It's typically a 5 year contract with guaranteed revenue and no other costs aside from an owners fee when using your time. There's also the benefit of multiple locations and using other boats. In the end you can end up with a 5 year old boat, lots of charter time used and 1/3 or more of the boat paid off based on the financing.

Other companies handle things differently - some take new boats and some take older boats. With older boats, its not guaranteed revenue and you pay for everything - dockage, repairs..etc. This tends to work out great for some and not so great for others from stories I've seen. This is why we decided on moorings, since it was guaranteed and no other costs. We didn't want any surprises.

So unfortunately I don't think there is a hard answer to your question. Only solid answer would be if you were to go with a guaranteed program - you'd know all the numbers that way. With non-guaranteed, you'd know what they might project, but damage caused by charterers is often just billed as a repair to the owner from what I've read.

[nautical62]

I second what Maytrix said about the guaranteed income and having them cover expenses.

I've read many stories about smaller companies that "put a boat in charter" which basically means they have guaranteed dockage income from the owner, with no obligation to ever charter the boat, provide the owner any income, or cover any costs. Often in such situations the small income earned does not cover the increased insurance costs, dockage and boat fixes, the "company" insists the owner must pay for.

[Sun and Moon]

What kind of value did your boats have at the end of the charter period? As the owner, you say you got about half the cost of the boat back in income. Was the boat worth half the purchase price at the end?

[nautical62]

Originally Posted by Sun and Moon

What kind of value did your boats have at the end of the charter period? As the owner, you say you got about half the cost of the boat back in income. Was the boat worth half the purchase price at the end?

Certainly charter boats get some hard use, but they also are maintained to be charter ready. Most boats I've seen for sale by owner have been much more neglected than boats just out of charter.

Still, I think the fact my boat was in charter hurt resale a little. However this small depreciation was nothing compared to the guaranteed income and money saved (guaranteed income) with free dockage and free insurance.

My boat was a 32.5, bought in 2006 for 119K. For the next 7 years I paid nothing other than the turn over / owner's fee. About half the cost was paid for by guaranteed income, leaving about 60K out of pocket. I sailed the boat back to Florida from the BVIs and sold it a year later in the upper 40s.

I've owned boats in charter and not in charter. Each has it's pluses and minuses. For me, owning a boat in charter has been the cheapest, most stress free way to own a boat, but it also comes with limitations. You can't just do a cruising sabbatical for 6 months. and you can't just wander down to your boat on a Saturday to enjoy being on it. (Living in Iowa, that wasn't possible for me anyways) You are limited to charter locations, but can trade for other locations without having to sail there, which was a big plus for me.

[jtsailjt]

Originally Posted by nautical62

Still, I think the fact my boat was in charter hurt resale a little. However this small depreciation was nothing compared to the guaranteed income and money saved (guaranteed income) with free dockage and free insurance.

My boat was a 32.5, bought in 2006 for 119K. For the next 7 years I paid nothing other than the turn over / owner's fee. About half the cost was paid for by guaranteed income, leaving about 60K out of pocket. I sailed the boat back to Florida from the BVIs and sold it a year later in the upper 40s.

I've owned boats in charter and not in charter. Each has it's pluses and minuses. For me, owning a boat in charter has been the cheapest, most stress free way to own a boat, but it also comes with limitations. You can't just do a cruising sabbatical for 6 months. and you can't just wander down to your boat on a Saturday to enjoy being on it. (Living in Iowa, that wasn't possible for me anyways) You are limited to charter locations, but can trade for other locations without having to sail there, which was a big plus for me.

I think you've pretty well summed up the charter owner experience. Essentially, though you "owned" the boat, you didn't own it in the sense that most cruisers think of owning their own boat. You basically had a connection to a boat that you could use for several weeks each year but you couldn't really personalize it use it and care for it the way most of us like to in order to make it feel like it's really ours. Then, once the charter period was over, you owed $60K on a boat that was worth 20% less than that. So, your net cost was that 20% and in return you got to sail a charter boat in various locations where that charter company had a base. That's not a bad deal paying only about the equivalent cost of about 4 weeks charter fees in order to have at least that many weeks available to you each year for seven years! I guess I can see how it makes sense for some people who like to charter a lot and for people who don't live near the ocean, but I don't think I'd ever feel like the boat was truly mine in a situation like this. It seems sort of like owning a few time share weeks at a resort instead of owning your own vacation home.

[OldFrog75]

Originally Posted by nautical62

My boat was a 32.5, bought in 2006 for 119K. For the next 7 years I paid nothing other than the turn over / owner's fee. About half the cost was paid for by guaranteed income, leaving about 60K out of pocket. I sailed the boat back to Florida from the BVIs and sold it a year later in the upper 40s.

8 years of ownership for $20,000 sounds pretty sweet...even if you add back in the travel expenses to the BVI everytime you wanted to sail.



If you don't mind my asking, how many days did you actually sail your boat while you owned it?

[maytrix]

Originally Posted by Sun and Moon

What kind of value did your boats have at the end of the charter period? As the owner, you say you got about half the cost of the boat back in income. Was the boat worth half the purchase price at the end?

There is another factor to consider as well. For us, we'll be keeping our boat and using it at least 7-8 months a year full time. But even if we weren't, we've already used over $150k worth of charter time in 4 years of ownership. So there's that value to consider as well. Never would have had these experiences otherwise and that $150k might have cost us $15k in fees at most which was split amongst friends that came with us anyway. And we still have time left.

So when our boat comes out of charter, we'll make even more us of her and have received great value while in the program, making the value of the boat less important.

[barnakiel]

I think you can save on:

- berthing costs,
- running/periodic maintenance costs.

A well run charter business will generate at least the above then possibly maybe some income, if it it run in the right place and is managed with adequate marketing energy.

If your captain is a good guy, you will also save on the boat losing her value slower than when she sits at the dock. Sitting at the dock unused can be very bad for a boat.

So plenty depends on the captain you chose or the company you agree with.

b.

[Tscott8201]

Great information everyone. If I were to do this, I would put the boat in charter for the initial term and then after the term ended the plan would be to move aboard pretty much full time. I would use the charter service as a way to effectively reduce the cost of the boat, which sounds like it might be possible from some of the above comments. The Moorings would be an attractive option because we want a catamaran around the 40' range and we like the leopards at the Annapolis boat show last year. I'd be willing sacrifice 5 years of convenient boat access in order to but the cost of an essentially new cat by 40% or so. Assuming the maintenance is kept up with as it should be then a 5 year old cat is basically brand new in the grand scheme of things.

Tom

[barnakiel]

Financial mathematics of this case escapes me.

Why buy a new boat now and have it for 5 years to use it later?

Why not buy the boat in 5 years then?

We know that within a 6 year period boats, cars and other such likes seem to lose give or take 50% of their market (resale) value. In broad terms.

e.g.

A: buy today @ 100 and start using in 5 years @ resale value = 50, use then.

B: invest 45 today to arrive at 50 in 5 years, buy and use.

So, in broad terms I think you are buying an 45 of worth paying 100 for it.

Q: Is the benefit of having but not using the boat over 5 years worth 55 ?

If so, what do you derive the 55 from?

Not from charter profits (?) Not from using it.

Do you expect charter profits of 55 from an investment of 100? This would be very very high profits, I think. Everybody else would immediately step into such deals and their high profitability now would quickly get leveled out.

Just asking. I might be missing something or a lot.

Cheers,
b.

[DanDanDan]

I agree that it doesn't seem to make any financial sense, but boats often don't.

You could take a new $400k cat, put it in charter for 5 years to pay off half then have a 5 year old boat with $200k left to pay.

Or, you could buy a 5 year old cat today for $200k and actually own it use it and enjoy it today.

Or you could invest your $200k, buy a 5 year old boat in 5 years for $200k and you'll have more money from the investments to pay for additional equipment or to leave in the bank.

Your wants and needs may change in 5 years and by not buying your future used boat now you'll be able to shop around when you are actually ready to start using the boat. The idea of being locked in to an individual boat 5 years before you can really use it feels strange.

Would you buy a new car today for $40k and then give it to Hertz to rent for 5 years with the agreement that they'll pay you $20k and change the oil regularly? Seems like it would make more sense to wait 5 years, see where you are in life, and go to Carmax to look for a nice used car in the $20k range.

In my opinion the idea of buying a new boat only to hand over the keys for 5 years only even begins to make any sense at all if you are SURE that you'll be able to spend many weeks per year chartering during the 5 year term. Even then it's probably smarter to just pay for a charter when you want. You can buy owners time from other folks now and buy a used boat when you're ready.


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[Nalu]

Do any owners have experience with Horizon (HYC) I am considering having a cat in their charter program. Thanks

[TOYOTA61384]

I think the one factor/variable the last few financial responses are missing is the usage of the vessel over those 5 years (and use in other locations and over seas!).

If you are a consumer that would pay for charters multiple weeks out of the year for those 5 years, then that is where the justification can come into play.

If you would not use it at all for the first 5 years then I agree it makes no sense at all.

Just a thought....