Financing via a charter company?

[gittist]

We went to the Annapolis 2016 Spring Sailboat and came home with some brochures about buying a sailboat for what amounted to 55 cents on the dollar. Essentially the program is to put 35% down and 5 years later there is a 25% balloon payment. While the boat in in the charter program you can sail 'your' boat for 12 weeks a year (the weeks no one else wants?) and the charter company maintains the boat, pays all dockage fees and repairs...

Has anyone done this? If so can you confirm the following and provide any addition information?

- I assume that there is a loan document registered somewhere for at least 65% of the price in your name and that the income from chartering will pay down 'your' loan.

- There will be a clause that stipulates that all disputes will be settled in a certain jurisdiction. The jurisdiction is probably in one that is convenient/friendly to the either the charter company or the finance company.

- A clause that stipulates that the charter company will do it's best to secure charters to pay the loan and other expenses, but in the event that it doesn't, you have to make good on the loan.

In short is a program where they use OPM/C (Other people's money/credit) to finance their operation? I'm not making a case for or against, I simply want to know.

I can envision many other scenarios but answers to the above will help.

Thanks and sorry for the long winded question.

[nautical62]

I owned a boat in charter with The Moorings/Footloose for 7 years. I have absolutely no regrets. My biggest advice is to crunch the numbers objectively and compare how owning a charter boat compares to chartering or owning a non-charter boat for your desired use.

In my case, I ended up using the boat for about 5 weeks per year for about the same cost as 2 weeks of chartering per year would have cost.

Having owned 3 non-charter boats as well, I also found a lot of value in not having deal with maintenance issues. I sometimes spent weeks doing work on my non-charter boat. With my charter boat, I just flew down and was out causing the next morning. I also liked the ability to trade time of other boats in other locations.


Here's a few things to give some though to:

Compare the cost of owning to chartering for whatever boat you are considering.

Will it drive you nuts thinking about other people using your boat? My solution to this was to think of it as buying into a program, more than buying a boat.

Talk to you tax person about the tax consequences of charter income and being able to write off boat depreciation, that's the big thing none of the literature from the company mentioned. In my case those two things were about wash.

I think owning a boat in charter management was a great deal compared to either chartering the same boat for the same time or owning the same boat and using it the same time. The question is however: Is that what you would otherwise do? Buying a Beneteau 33 at 55% cost was clearly better deal than buying one 5 years old at the same cost. However, as I now look at Cats, I could buy a used one I might by happy with for maybe 20% of the cost of a new charter cat. That changes everything.

Another thing to consider is if you charter instead, would you be sharing the charter costs with others (friends) or paying all the costs yourself (family). Owning my be cheaper overall, but if I'd otherwise be paying just 1/6 of a charter, for me, that might make chartering cheaper.

One of the biggest criticisms I hear here about buying a boat in charter, is that newbies will be using it and beat it all up. This criticism is often made by people who have never actually owned a boat in charter and are also not looking at the bigger financial picture. in my experience the company did a much better job maintaining the boat than I've seen of most private owners.

If you like chartering and want to spend more weeks per year at the same price, I think it's worth considering buying a charter managed boat. You can't take it and go spend 3 months cruising the Bahamas while it's in the program of course.

They often give an example of buying a boat with a 15 year loan and 25% down with the idea that will even generate a small monthly profit and at the end the boat will be worth more than the balance on the loan. - Well, that may or may not be true. I much prefer to structure the loan so that I own the boat outright at the end of the charter contract. Which is another thing to consider: What are you going to do with the boat when the contract is done? If you want to sell it on site, you may be paying dockage, some maintenance and a broker fee. I ended up sailing mine from the BVIs back to the states to sell.

[gittist]

Thank you for the info.

[lokityler]

That was a great response. I too went to the spring boat show. Specifically, for the charter information. I thought the Bali boat was terrific and the woman there was rude, ended up walking away.
Then I went over to the sail away co. They were very nice, wanted to sell the new boat coming out.
We are set to charter but need more info.
I've been a captain for 9 years and have been on water since a child. My wife is a culinary chef. we would like to crew our own boat.

[hellosailor]

Gittist-
If you can't afford a CPA and an attorney to go over the offering and your finances with you, then you can't afford the deal. If chartering was a guaranteed deal, the charter companies would get bank loans and own their own boats, instead of having all those messy charter owners cluttering up the docks.
And, if the boat doesn't bring enough income and you can't make the 25% balloon payment (which charter companies never used to have, that's new to me) then guess who will wind up owning the boat? Right, they will own the boat, you'll be out ducking the salary liens.


Attorney & CPA, or someone who is both. Could be well worth the investment, it might be a good deal. Or not.