Charter Boat Ownership and the Phase Out.

[belizesailor]

Originally Posted by Village Idiot

...

But anyway, it's not about the money, only this thread is, it's about living the dream baby, and that's priceless [emoji2]

Ha! Thats exactly what charter companies are selling! Its priceless...sign here, press hard. 🤣

In the end, it will probably be about break even financially, but you will hopefully have a lot of great experiences!

[danielamartindm]

Be aware that different charter companies of the same parent group have their own management and maintenance policies. With The Moorings, for example, a branch in St. Lucia might maintain its fleet better (or worse) than one in another location. Do some research and find out which outfit you want maintaining your yacht; and before sailing off when your contract is up, have a survey done to include standing rigging. Charter is hard on a vessel, a fact reflected in the resale values of chartered boats.

[belizesailor]

Originally Posted by cyan

Which refers to the order of the ups and downs. However, even with the "ups" safely on the front-end, there can be confusion...

I have $100 in the market.
The market goes up 10% this year.
I have $110 at year-end.
Next year the market goes down 10%.
I now have $99 left in the market.
Where did my $1 go?
To the Money Fairy??

I posed this riddle to the admiral. My angle was pointing out that the Money Fairy would eventually take our investment away, therefore we should just spend it on a boat before that happens.
(She said "ok" without hesitation)

I suppose you finance types have a name for this, such as improper base-mixing of periodic interest rates?

Speaking of the Money Fairy, not only did she just put that dollar back under my pillow, but a nice big wad of its bretheren too! I just netted 437% (yep, NET 4 3 7 %!) on a real estate deal. Yahoo! [emoji322][emoji322][emoji322]

I could do something silly, like buy a bigger fancier boat, but no...Im plowing it back into real estate...sustainable cruising ya know. [emoji41]

[GTom]

Originally Posted by belizesailor

In the end, it will probably be about break even financially, but you will hopefully have a lot of great experiences!

Break even would be perfect news, it means free sailing! Under real conditions, I'd expect about 10% of the boat value has to be put in the pot after the 5 year period (which is still less, than 5 years of mooring and maintenance costs).

[cyan]

Originally Posted by Village Idiot

The financial outcome of course wont be known till the end, but I am happy to keep a track of the whole thing on here should any folk be interested.

I would be VERY interested to watch the details of your journey!
Thanks for sharing.

[belizesailor]

Originally Posted by GTom

Break even would be perfect news, it means free sailing! Under real conditions, I'd expect about 10% of the boat value has to be put in the pot after the 5 year period (which is still less, than 5 years of mooring and maintenance costs).

Break even to small loss are the most common outcomes for charter boat owners if they include all expenses and market value loss.

Note that since the boat is being operated as a business, you can put it on a depreciation schedule for tax purposes (at least if you are USA). That can have a very nice positive impact on your taxes. Its an often overlooked upside to a boat as a business asset.

[Iaangus]

Originally Posted by belizesailor

Note that since the boat is being operated as a business, you can put it on a depreciation schedule for tax purposes (at least if you are USA). That can have a very nice positive impact on your taxes. Its an often overlooked upside to a boat as a business asset.

Correct me if I’m wrong but the depreciation can only be carried out with other passive income, (like investment income) not active income like wages, salary or profit from a business you run.

[belizesailor]

Originally Posted by Iaangus

Correct me if I’m wrong but the depreciation can only be carried out with other passive income, (like investment income) not active income like wages, salary or profit from a business you run.

You can depreciate a vessel in charter service, even in a business you run...been there done that, passed an IRS audit, though that was a number of years ago.

In the OPs case the boat will be managed by a charter company. I would consider that passive and think the IRS would too. No different than having a PM company manage a rental property.

As always, your situation may vary, so consult a tax professional: which I am not.

[Nils Gruttner]

Originally Posted by Village Idiot

It is clear the model where a punter finances half or all of a charter boat and cops the guaranteed depreciation and takes the boat off their hands at the end of it, is a good one from the charter companies' point of view.

However this isn't a zero sum game, (where their gain = my loss) , because there is a 3rd party pumping money into our little system (the charterers), so its quite possible it can be a good deal from both the punter's point of view and the charter company.

Because it's not a zero sum game, I dont have to care whether it's a good deal from their point of view, i only have to care whether, for my specific circumstances, it's better deal than the alternatives, (assuming I am willing to spend some money going sailing , which I am - nobody disputes the cheapest option is to not go sailing at all ).

Re the down and dirty maths put forward by Gtom, the main issue I would take with that is the charter costs in the model - 3 weeks low season in october is not what you get under this deal, nor would I ever book - what I do get, and I do want, and will use, is 2 weeks high + 2 weeks low season, which eg gives me the whole of June. Since I am going to do this next year one way or another, I have obtained many real actual quotes for it. The lowest, which was for a 2009 Lagoon 38, was 12k Euros.

If you plug that figure in to Gtom's calcs, charter the equiv amount is now 60k over the 5 years, up there with owning the (much older) boat

And that is without counting anything for the walk on weeks all over the world, which will have some value

i am not sure I could buy a 6 year old lagoon 38 for 130k either (cheapest asking price just now for similar is about 180k), but assuming it was the realistic price, this model is still half the cost of either outright owning or outright chartering the same thing.

In reality i have a slightly more detailed model that includes financing costs for all options but the result is pretty much the same.

VI, I really like your "Zero Sum" thoughts. This is exactly what went through my head. It's never just one or the other .

[Nils Gruttner]

Originally Posted by Village Idiot

Drinking red wine makes no financial sense either, but i still get through enough of the stuff ...

[emoji1] [emoji1] [emoji1] Couldn't have said it better myself .

[slo007]

Originally Posted by Village Idiot

So anyway I signed up for this charter deal with DYC in the end, with a 2017 Lagoon 380 based in Dubrovnik, and at the moment we are gearing up for the first trip on it - 6 weeks starting end June during which we are intending to sail down to Greece and back.

That's what I have been considering doing... in the same location, no less.


I'm chartering a Jeanneau 41 in May from Split for one week as a trial. If I like the concept, I'll look for a small cat to put in charter. Shame the 380 is no longer sold.

[TriggerHappy]

the original poster mentioned they wanted to do a sabbatical essentially from Greece to Australia. I wonder if Dream Yacht Charters' new Sabbatical long term rental program would fit?

I know I am dreaming of one day giving up sailing a desk and sailing a real cruiser in some tropical paradise! I wonder how it would work?

https://www.dreamyachtcharter.com/ch...ical-charters/

[Village Idiot]

A recent contact reminded me of this thread in which I said I would keep a track of the whole thing, financial and otherwise, so why not ?

By way of a recap, I signed up for a Lagoon 380, based in Dubrovnik, in the DYC "Dream Easy' program. We inked the deal in December 2017 for a Lagoon that had been launched in April 2017 and had already done 1 season of its 6 year term, so I was signing up for the remaining 5 years. Our boat comes out of the program in November 2022, at which point I intend to use it ourselves.

The guts of this deal is I pay 60% of the cost of the 'new' price in total, in 2 instalments - 35% up front , which I have obv already paid, and 25% in Nov 2022 when it becomes ours. In the meantime I don’t get any income, just owners weeks use up to 6 weeks per year, but I don't get any bills either. For context the initial payment was about 92k euros. My expectation is that at the end of the program it will be worth very roughly the 60% of new that we are paying for it but if it is worth something less that won’t invalidate the model.

So after a year or so in, how's it going? Pretty well really.

So far I have done two owner use charters . The first was on our 'own' yacht out of Dubrovnik , for 6 weeks in July and August 2018, and we sailed it down to Greece (as far as Kephalonia) and back. Was it awesome? Yes it bloody was. I was also really stoked with the boat, and the condition it was in, (remembering it was around 1.3 seasons old at this time). I have no complaints about the way it was being looked after, up until the time I last saw it anyway. I wrote a bit of a blog on this trip , from an owners point of view, on a website set up by a fellow DYC owner Nils, at

https://noshoes-resoled.com/submit-p...ht-in-charter/

For the record, when I left the boat it had done about 1.5 seasons out of 6, there were about 1100 hours on the engines. The sails were like new, although I think this might be peculiar to Croatia – there doesn’t seem to be much wind there , at least in summer. Overall it still presented like new, although there was minor cosmetic damage inside, eg some cuts on the benchtops, some chips to cabinetry, but not worse than I expected, and if I get away with 4 times the existing knocks by the end of it I will be quite happy.

The '6 week in a row all in high season' trip is not in the standard conditions at all - that was special deal agreed on before signing up, when I had some leverage, (I was only going to sign up if this trip was part of the deal)! To do that they allowed me to pull forward some weeks from future years, but I am ok with that as it’s from years when my son will be in his final years of high school anyway. In future years I also will be restricted to the standard contract terms, which do make it harder to utilise.

For each charter, DYC produce the same charter contract as they would for any other punter, stating the cost of the charter including any early booking or long term charter discounts , before then discounting it to nil for ‘owner use’ . The contract value of this trip before zeroing it for owner use was 33668 euros.

Even after this trip, I still had my 2 weeks ‘short notice’ weeks to use up, and I managed to squeeze in a 9 day charter on a Lagoon 400 in Thailand in December 2018 just before I lost them. The weather on this trip was perhaps a little short of what it should be in December (it was in 'high season'), but was still well worth doing. The charter invoice value of this trip was 9900 euros.

For this year , I have my 2 weeks high season booked on a Lagoon 380 out of Athens in July (8772 euros) , and am juggling a few ideas for the short notice and low season weeks. Thinking about Thailand next month. Thinking about taking pot luck on a short notice week or two somewhere in Greece in June. To be honest I am finding it a challenge using up all of my allowances, especially if you live in Perth where it is a minimum of 2 flights to get to any DYC base. And your family have other work and school commitments that restrict their time available. However it’s not a challenge I mind having. I’ll give it a good crack and if I don’t use all the weeks up so be it.

Others have said on here that it might work out if only you would have chartered for 6 weeks a year anyway, but I tend to disagree. Would I have chartered for 6 weeks a year for 5 years in a row if I hadn’t signed up for this? No I wouldn’t have, because my budget for sailing holidays doesn’t run to that much money. The result of having the 6 weeks a year on a ‘use it or lose it’ basis is actually that it will force me to go on more sailing holidays to more places than I otherwise would have, for a lot less money.

Would I have chartered for 6 weeks in Greece in 2018? Maybe, that was what started this whole thing off, but that would have been a one off.

Would I have paid 9900 euros for 9 days on a Lagoon 400 in Thailand with only my 15 yr old son and one of his mates on board? Not on your life! But for free and I’ll take it, and that’s a trip with my son I wouldn’t otherwise have had, that we’ll both remember.

I probably won’t end up using the full 6 weeks every year, but the success or otherwise of this for me doesn’t rely on using up every available week.

Since I intended to keep a financial record of the whole thing as well as the charters, total charter value of all charters booked to date ; 52340 euros.

In summary, so far this thing works for me. It might not for other circumstances, but it does for mine. And now excuse me but I’ve got to get back to planning the next trip….

[Iaangus]

Thanks so much for the update, it’s all very helpful. I would like to hear your opinions on the fixed income versus the performance based income now that you have an owners perspective. It sounds like there is a small amount of flexibility with DYC in the owners use part of the program how about the financing part as far as percent down or initial value of yacht. Thanks and good luck.

[Village Idiot]

To be honest ... I have no idea which sort of income model might be better as I dont have either of them. I cant see the point of paying the full price for the boat only to have roughly what you are losing in depreciation and extra financing costs returned to you as 'income'. Even if depn fully offsets the 'income' so it doesnt cost you tax , it just adds unnecessary complication. There might be some advantage and I guess it s all down to personal use requirements and circumstances.