A Different Take on Fractional Ownership

[sail2wind]

We have a unique take on fractional ownership. Three couples (maybe 4) buy a 40-45' Cat in the $225-$275 price range. We put her in a second tier charter company in BVI or USVI, like CYOA or Pro Valor. As owners our usage would be based on availability. Major Holidays should be blocked off for quests, highest revenue weeks which book well in advance. A little about us, we are business owners in our mid fifties, not ready to retire, fortunately we can get a month + off a year, not taken at the same time. We have been researching and a 42 Leopard last year netted 12K. This is doable if we can form a LLC and make an agreeable contract. Think about the possibilities and make some suggestions. I am sure there are some working slobs like me in the same boat, pardon the pun (LOL)

Evan coevan@gmail.com, or PM me, would love to talk.

[Jeannius]

You can do just a bit better than break even putting an older cat into charter in the BVI. You can also do a lot worse. I know someone with a very nice, older Privilege, which only booked out I think 6 times last season.

Buy a simple boat. Replacement of a generator or air-conditioning unit costs just as much on a 10 year old boat as a 2-3 year old boat but your rental income will be considerably lower.

[Vasco]

sail2wind,

I don't understand why you would do this? To get "free" sailing? You'd be better off saving your money from the purchase and just chartering. Especially now, the charter business is in a major downturn.

[sail2wind]

Rick,
Chartering for 2-3 weeks at a time is very expensive, 10-15K. we also want the freedom to go down island, which you can not do on charter. Two or three couple would defer the expenses. The larger charter companies are definitely slower, but some second tier companies in BVI are doing quite well.

[nautical62]

I think the first thing you need to do is talk to the charter companies you are interested in having your boat with and finding out what boats they accept under what conditions. I think you will find most don't just take what ever boats people want to put into charter. They have certain boats they want to carry and want to make available for certain amounts of time.

Some companies offer a guaranteed income from charter, others give you a percent. Going with a percent may allow you to actually make a profit, but you may also loose money if it's not rented as much as you hope, especially if you are responsible for slip fees, maintenance, etc. You mentioned one boat that made a net profit, but I've read reports of many people who hoped to make a profit and lost as much as well under percentage programs.

I think your idea of sharing the costs of boat ownership is a sound one. If you only use a boat one month a year, divides the costs much more than it creates additional costs at little increased cost. This is same strategy that makes charter management work.

Realize that many of the charter companies offer fractional ownership packages and have already worked the logistics and legalities out. I currently have a boat in charter management. It's much cheaper than owning it outright myself. It's also much, much cheaper than chartering. I figure I use my boat about 5 weeks per year for the cost of a 7-10 day charter. The advantage compared to fractional ownership is that I don't have to fight with anyone else over time use. I get it when ever I want. The advantage of going 100% with fractional ownership is you don't have Joe Public using your boat.

If you go about it yourself with friends think carefully about what you will do when someone wants to leave the partnership and also the finances in the end. I think it's the issues associated with the sale in the end that can make all the difference.

[Cheechako]

at one time there was a limit of time you could use the boat and still claim it as a business on your income tax.... 2 weeks...?

[sail2wind]

Nautical, Very good points, an I want out scenario is the most problematic. We have a charter company we are already working with. We have been sailing with them for years and trust their judgement and have seen spread sheets of similar boats. Fractional ownership is not an option, as it is an expense and not "real" ownership. We have agreed on forming an LLC with specifics as to selling a portion, buying out, and we will try to address as many options as possible, but sh** happens.

[nautical62]

The tax implications Cheechako mentioned are worth considering. I have to report income from my boat in charter management, but in my case it's almost exactly a wash with boat depreciation.

[SearenitySail]

There is an article about fractional ownership in the May-June 2009 issue of Multihulls Magazine. I believe it is written by a Catamaran Company broker, and profiles a big Lagoon.

[sailvi767]

This is not really a fractional ownership setup. It is simply a charter boat owned in a partnership. This is a excellent way to own a boat in charter. I would have taken a partner in my boat had the right one been available. It can get complicated when you add 3 or 4 partners but is still doable if you all have a exact understanding of what the expectations are and how both use and expensese will be divided.