Buy a boat and then charter it?

[Neilos]

I'm planning to take the plunge and purchase my first yacht. I'm toying with leaving it with a charter company to either pay for up keep or provide me with some pocket money for sweets and comics!
Excuse naivety as this is me doing my research from day 1 as I've only just started looking into it. Questions I have to anybody with wisdom, opinions or possibly both.
Could I make money out of it?
Could I lose money out of it?
What size and type of boat would be best? I'm thinking along the lines of 25-30 feet as a boat that would be more popular to charter.
How much to get the boat registered..Coded...insured as a charter yacht assuming it hasnt had the relevant mods already?
Has anybody done this?
Any advice would be greatly recieved.

 

[johnwest]

Most charter yachts in my marina are 38' plus. though there are 2 at 33'

j

 

[jac]

Loads of people do it

You won't make much money.
25-30 feet is too small, think 32 foot as an absolute minimum, ideally 35-36 for family market, around 38-39 for groups.

You'll want to be able to pack them in so double stern cabins, whereas owners would want 1.

Will need to be in v good condition and well equipped - no-one really wants to rent a wreck.

Ideally would be from a well known maker and less than 3-4 years old

There are several companies who do it. Google yacht charter in the area that you want to base yours, and give them a ring. They will tell you what they can rent out.

If you go down that route, expect that they will take a large chunk of your fees, it will probably only go out for a handful of weeks in the summer and will get abused.

 

[Tranona]

I'm planning to take the plunge and purchase my first yacht. I'm toying with leaving it with a charter company to either pay for up keep or provide me with some pocket money for sweets and comics!
Excuse naivety as this is me doing my research from day 1 as I've only just started looking into it. Questions I have to anybody with wisdom, opinions or possibly both.
Could I make money out of it?
Could I lose money out of it?
What size and type of boat would be best? I'm thinking along the lines of 25-30 feet as a boat that would be more popular to charter.
How much to get the boat registered..Coded...insured as a charter yacht assuming it hasnt had the relevant mods already?
Has anybody done this?
Any advice would be greatly recieved.

The normal advice is to forget it. Certainly on a small boat as there is no demand. Most charter boats are 35'+ because charterers usually want to charter something they cannot afford to buy. They usually have the maximum number of berths that can be fitted in because sharing the cost with a bunch of mates, or a family reduces the cost per person.

The biggest difficulty with chartering is finding clients. There is a surplus of boats available and the ones that are successful are aggressively marketed, so the few private owners who enter the market seriously do so through an established management company. To operate legally the boat needs to be coded, which typically on a new production boat costs between £10-15k on top of the basic spec. You need to base the boat in a convenient marina with good service facilities to handle the turnaround and pay somebody to do it if you can't do it yourself.

If you are operating it as a business you need to deal with tax issues such as VAT and tax on your income. If you use your business asset (your boat) for private use then you may be taxed on benefit in kind.

There are structured purchase and management schemes available, more commonly abroad than in the UK which can be very attractive if they suit what your objectives are, but as with any business related venture the constraints on private use mean they are not the same as owning your own boat for your own personal use.

The best way to find out more information is to talk to the charter management companies. Most of those that advertise will be managing third party owned boats, so will talk you through the pros and cons.

 

[Deleted member 36384]

You have to be able to afford the yacht as a stand alone luxury item. If you are relying on charter income to fund the yacht you may struggle to keep up. About £10,000 to code a yacht from scratch. Look what is popular for chartering in the area and replicate that. Expect the maintenance bill to be higher because any jobs you are likely to have done yourself, say oil changing, will be done by a contractor. You may have the best of intentions to carry out certain maintenance tasks yourself but unless you live local to the boat and have time on your hands then it will not work out that way; so its labour charges.

A Bavaria 32 (I don't know the model) I know gets chartered quite regularly via a management contract. It's a small boat not to have too much of a financial overhead, is large enough down below for charterers, and sufficiently low charter cost that it gets hired out a lot. However high utilisation means more wear and tear. The main thing is that costs for yacht equipment and services above 35' LOA increase exponentially.

A small modern cruiser, that is nearly new, with a lot of kit, in good condition, ready to go, more or less, is what you are looking for.

 

[TQA]

In the Caribbean the demand seems to be moving to catamarans, judging by the lines of idle monohulls at the docks of the major companies.

So something like a newish Lagoon 46 might make you some money.

 

[MissFitz]

If you're interested in going down the managed line in the UK might be worth talking to Hamble School of Yachting - they have a managed fleet & as one of the most reputable schools/charterers their boats get plenty of use, as well as getting very well looked after (by the company at least, can't answer for the charterers/students......).

Details here http://www.hamble.co.uk/yacht-management/ - & no connection, other than as an extremely satisfied customer over several years.

ps they are also very friendly, helpful & approachable, one of the reasons I went with them in the first place.

 

[Tranona]

In the Caribbean the demand seems to be moving to catamarans, judging by the lines of idle monohulls at the docks of the major companies.

So something like a newish Lagoon 46 might make you some money.

Cats are not so popular this side of the pond as their big selling points of space are not so desirable. Add that to the high cost of both purchase and particularly berthing and they are simply not competitive with monos. Some take up in the Med, but again high costs are against them.

 

[jwilson]

I'm planning to take the plunge and purchase my first yacht. I'm toying with leaving it with a charter company to either pay for up keep or provide me with some pocket money for sweets and comics!
Excuse naivety as this is me doing my research from day 1 as I've only just started looking into it. Questions I have to anybody with wisdom, opinions or possibly both.
Could I make money out of it?
Could I lose money out of it?
What size and type of boat would be best? I'm thinking along the lines of 25-30 feet as a boat that would be more popular to charter.
How much to get the boat registered..Coded...insured as a charter yacht assuming it hasnt had the relevant mods already?
Has anybody done this?
Any advice would be greatly recieved.

There is a market for small boats for charter, and the buying price/charter fee ratio can be quite good. You do however have to have boat 'systems' as simple, reliable and close to idiot-proof as possible, which is not always the case on older small boats.

For example, charters WILL try to turn off the engine by turning off the starter key. This will happen every few days. On many boats this will wreck a £200 alternator.

They WILL flatten the domestic batteries and if on a 0-1-2 switch the engine battery as well. Hence the engine battery must be on a split-charge system rather than the usual 0-1-2.

Coding is not as expensive as others have said if the design is one that has been coded before (hence stability assessments already done) and you do some of the alterations and buying and fitting of extra kit yourself.

Talk to a charter management company, and don't try to do it on the cheap - the boat itself needs to be attractive to customers, well equipped, clean, easy to run. It will also get some stupid but annoying bits of wear and tear - the one that annoys me on my own (coded and chartered) boat is people dragging rusty mooring chains through the satin finish alloy bow fairleads instead of over the bow roller that is made for the job.

It is not a real money-making operation, but it may allow you to keep a bigger boat than you could otherwise afford.

 

[Sailfree]

If you're interested in going down the managed line in the UK might be worth talking to Hamble School of Yachting - they have a managed fleet & as one of the most reputable schools/charterers their boats get plenty of use, as well as getting very well looked after (by the company at least, can't answer for the charterers/students......).

We had our first boat with Hamble School. It was heavily used and even used as a dormatory for classroom students when not out sailing for which we were never paid. It was heavily used and the school paid a day rate. The problem comes with faults, if its a students fault then the repair should be paid for by the school but guess what? By putting it with a school it cost the insurance premium for school work and the berthing fee where the school is based. eg for a 43' boat at MDL Marina Hamble Point its £11,000pa (Hamble School are based at Mercury that is slightly cheaper).

The one advantage of a school boat is that the majority of charters are skippered so you can claim your losses (and you will be making losses) against your tax paid on other income. Basically if bareboat charter tax refunds are limited to operating losses as boat is classed as an asset for hire if skippered charters you can also increase your losses by boat depreciation as it is then classed as a service.

After the heavy use at a sailing school my next two boats I put on bare boat charter. The change in tax status (asset for hire) was not advised by my accountant but luckily!!!! the IR discovered it on a limited enquiry (limited so that the insurance the accountants sell you is not valid as it only covers the cost of a full Tax Investigation -the IR are not silly) and I could rectify the situation and it only cost me £10,000 with interest!!

At this stage I realised that you cannot make any money our of chartering only losses and you are effectively subsidising a boat for the charter company to make money out of. You cannot avoid the extra costs of the charter coding or extra insurance £2,500 for a 43' boat. However if you had chosen to be in that marina instead of a cheaper one or a mooring then you may overall make a small contribution to your berthing fees. If you go with a charter company that also owns some of the boats (they will be the ones without all the extras) then guess which boats get booked uo first.

Unfortunately the IR enquiry occurred after I had bought and commissioned my 3rd boat.

Boats are in better condition from being regularly used than only occassionally used. They are also properly maintained (at your expense though).

Anyone who says they are making money chartering either have the boat abroad where there is a longer charter season or is not being honest with the taxman and fear a knock on their door.

I will not replace my boat with a new boat for charter and the fleet I am with have had no new boats for 3 yrs now.

I am sure any charter company will welcome you with open arms if you are buying any new boat from 32' upwards. Providing income exceeds the extra costs imposed by chartering you will have a small contribtion towards your running costs like berthing etc and the only downside is that you cannot leave any personal belongings on the boat and only use it when you book it (for which you must invoice yourself).

Hope the above is useful.
Good Luck

 

[Zagato]

There is a successful business based in Falmouth that charters Shrimpers and a Crabber26

http://www.cornishbluesailing.co.uk/bareboathire.html

It's a bit different to chartering a 30' AWB though! Maybe like hiring a Morgan whereas a Ford wouldn't be so appealing...

Or success could be due to the price, £250 for a Crabber26 seems a bargain to me... £60 each for a fun day out!

Trouble is with chartering do you really want some numpty damaging your boat?

 

[Sailfree]

Trouble is with chartering do you really want some numpty damaging your boat?

I have single line reefing to keep thing simple, The first charterer, after I replaced the main with a fully batttened main, put in a extra unnecessary reef in the middle of the sail (not necessary as also got new lazy jacks and stack pack).

Forgot to undo reef and ripped middle of new sail 1st time in use!! Yes they paid for the repair out of their deposit but sailmaker insisted that a repair patch would be stonger as replacing whole panel would result in a line of stitch holes acting as perferations ready to tear!

Straight away a new patched main!!

 

[Boat44]

- Can I make money out of it? You'll be lucky.
- Can I loose money? Ohh yeah! But then you'll own a boat and be loosing money anyway!!
- What size/type of boat: This is an interesting question. Presumably you want to use it yourself? Personally I would go niche; dont bother trying to compete with the likes of Sunsail/Fairview etc as you wont be able to. Offer something different. I actaully think there could be a good market in the Solent for something around the 28-32 foot. There are some lovely boats in that range; particulalry the older stuff.
- Coding and insurance isnt too bad, contrary to what others have said. We charter our 44 footer and it cost around £4k-£5k to code in the first year, with annual reoccurring costs of £1k -£1.5 k; insurance is about that as well. The majority of the annual costs is in lifejacket services and annual lifreaft rental. Get a copy of MGN 280 off the www, and cost up everything you will need, then add some as you'll miss something!
- Lots of people do this, with varying degrees of success, from small RIBS to superyachts and everything inbetween.

We have been chartering for 6 years now. It is a pile of hassle, you cant keep personnal effects onboard, and somebody will ding your boat for you; but, it does help cover some of the running costs and makes you ensure your boat is always close to 100% working order.

We market through two companies that specialise in our type of boat and word of mouth of course. We have built up a stedy repeat stream of clients now, and as we are a bit niche, dont get the typical idiot "bumper boat" charterer!!!

Depending on what you want to do, call up the charter companies etc and have a chat to see what they say, e.g what yachts charters well and why, what does it really cost, what will I get back, what sort of clients do they have (you can restrict its use, and we certainly do not allow teaching onboard). If you have the time go see the companies and speak to them face to face.

For what you are thinking about I would start with somebody like Hamble Point Charters (no connection at all, although I chartered a Najad with them years ago), they seem to have an interesting mix of yachts.

What ever you do, enjoy and make sure you get to go for a sail from time to time.

 

[Dab]

Sailfree

I have been looking at this way of boat purchase as well, so I am very interested in your actual experience.

Unless I have misread you posts you suggest that the best you can hope for from charter management for a bareboat yacht is a small contribution towards the extra costs of marina fees for the sort of marina you need your boat in for the whole thing to work.

The example linked to by MissFitz suggests that the income from a Sun Odyssey 37 covers all the berthing fees, insurance and maintenance plus a little bit left over.

On the Hamble Point Yacht Charter site for a different Sun Odyssey 37 again all the costs are covered with a bit left over.

Clearly this does not cover the full cost of the yacht (which includes depreciation and either loan interest or the cost of capital for the purchase price), but it does suggest that it is possible to fully offset the running costs.

Your experience seems much more pessimistic. Do you think the charter management companies are being selective in the examples they use or does the way your boat is managed change the balance of costs and income for some reason?

Dab

 

[vjmehra]

I looked into this earlier this year, albeit I was wondering about keeping the yacht in Turkey with The Moorings, at face value you don't make money, but you don't lose it either, so if you were definitely buying a particular boat it may make sense.

If you PM me your e-mail address I can send over the pdf's with the example costs they gave me.

 

[neil1967]

Abroad is a different issue. I have had a Jeanneau 36i in charter in Turkey with a smaller charter company for 5 years now. She is more than covering her costs - and is being maintained to a far higher standard than the larger charter companies manage. Whether she returns a profit in the long term will largely depend on what we manage to sell her for, but on current returns I am reasonably optimistic - and that is not taking into account the value of the 2-3 weeks each year we use her. Happy to PM further details if anyone is interested.

Neil

 

[Tranona]

Sailfree

I have been looking at this way of boat purchase as well, so I am very interested in your actual experience.

Unless I have misread you posts you suggest that the best you can hope for from charter management for a bareboat yacht is a small contribution towards the extra costs of marina fees for the sort of marina you need your boat in for the whole thing to work.

The example linked to by MissFitz suggests that the income from a Sun Odyssey 37 covers all the berthing fees, insurance and maintenance plus a little bit left over.

On the Hamble Point Yacht Charter site for a different Sun Odyssey 37 again all the costs are covered with a bit left over.

Clearly this does not cover the full cost of the yacht (which includes depreciation and either loan interest or the cost of capital for the purchase price), but it does suggest that it is possible to fully offset the running costs.

Your experience seems much more pessimistic. Do you think the charter management companies are being selective in the examples they use or does the way your boat is managed change the balance of costs and income for some reason?

Dab

You need to look at the assumptions they make, particularly the level of expected usage. The costs are essentially fixed - berth, insurance, maintenance, but the income is highly variable. Work out the break even point - that is the number of weeks needed to cover the fixed costs. The contribution of a week is around 70% of the charter income, so around £1k a week. Fixed costs if you are in a high cost Solent marina are close to £10k pa, so you need a minimum of 10 weeks a year. These are just ball park figures, but give you an idea what to look at.

Boats in warmer climates are potentially more profitable, because you have much higher usage - typically 20 weeks a year in the Med, more in the tropics. However when I chartered my boat in the Med with a very high usage and paying for everything I cleared just over 4K euros in the last year.

Against that you have to add the value of your private usage, but if you are doing it as a business this is not "free" as you are potentially taxed for benefit in kind.

Clearly some people see it as a worthwhile activity, but you need to be very clear that it is not a moneymaking activity and there can be significant negative aspects as others have indicated.

 

[Sailfree]

Sailfree

I have been looking at this way of boat purchase as well, so I am very interested in your actual experience.

Unless I have misread you posts you suggest that the best you can hope for from charter management for a bareboat yacht is a small contribution towards the extra costs of marina fees for the sort of marina you need your boat in for the whole thing to work.

The example linked to by MissFitz suggests that the income from a Sun Odyssey 37 covers all the berthing fees, insurance and maintenance plus a little bit left over.

On the Hamble Point Yacht Charter site for a different Sun Odyssey 37 again all the costs are covered with a bit left over.

Clearly this does not cover the full cost of the yacht (which includes depreciation and either loan interest or the cost of capital for the purchase price), but it does suggest that it is possible to fully offset the running costs.

Your experience seems much more pessimistic. Do you think the charter management companies are being selective in the examples they use or does the way your boat is managed change the balance of costs and income for some reason?

Dab

Reading the posts I think if I was starting now I would try what Neil 1967 is doing but accepting that you are investing lots of money in what might be just 2 holidays a year for yourself.

The reality is that if it was so profitable the charter companies would not share it with owners they would own all the boats themselves like Sailing holidays do in Greece!

I do not think my experience is completely untypical. I discovered in 1998 that the Volvo folding propellor did not last longer than 550hrs which on a charter boat is less than 1yr. They replaced the prop twice but never the cost the loss of charters nor the lift out costs. Volvo attitude was a bit of well you used it! I did not learn my lesson and bought another Dufour with Volvo bits. The engine failed at 471hrs 13 months old. Volvo did not want to know. Again loss of income and lift out cost. 2yrs later the gearbox went and Volvo insisted it was the feathering prop not reversing. Bought a folding prop and sent the feathering prop back to Germany with a stinking letter as it had hardly done any hrs. Boat launched and same problem. This time Volvo admitted that the clutch had gone. Could not guarantee replacement clutch and convinced me to pay for replacement gearbox. Next year kept finding saildrive leg with water in oil. Volvo replaced seals twice. Sold boat in what I believed excellent working order to be informed saildrive leg broke off completely! New owner had more sense than me and replaced complete engine/gearbox/saildrive unit with Yanmar equivalent. Been excellent ever since. New boat I was determined only Yanmar bits and at 2700 hrs, 7 yrs later no probs. So message is ONLY buy a boat that it and its mechanical bits are v reliable.

I think if boat is fully used/chartered you may cover running costs. 60% charter income to you but you also pay all running expenses (paying for the cooking gaz refils every month annoys me when I have not used the boat at all)and 40% to charter company to cover advertising/exhibitions/staff to answer telephones all working hrs/handovers and checking in (often until 21.00 on Fri night) and office costs. At 40% they are not ripping you off. The fact is in the current economic climate in the UK there is not sufficient money to go round.

One yr a competing boat (better than ours) had a multitude of mechanical probs and nearly sunk twice! all the charters were transferred to mine. That yr we made a profit over running costs but all the upholstery needed recovering and sails were limp hankies and needed replacing - same end result usual loss over operating expenses!!

VAT is now also very difficult to register for as IR know they will be giving more VAT back than they collect. For this reason I sold 2nd boat as a going concern with VAT registration.

If you accept that you will cover only a % of your operating costs but it enables you to own a better boat than you could otherwise afford then OK.

Accept though that ALL problems are yours and only buy a boat that has the best chance of withstanding the rigours of the charter market and ONLY if you can afford it IF or perhaps WHEN it goes wrong and needs the extra lift out.

In conclusion look on it as a timeshare if renting them out was so good they would want them for themselves and not sell some to you to take a % of a certain earner!! I respectfully suggest that Miss Fitz has not got the 15yrs actual/practical experience I have - the first 3 yrs with Hamble School!

In my experience the UK marine industy are selling dreams and companies that offer to charter boats on your behalf are joining in this dream but are avoiding telling you the nightmare that it can easily become.

Sorry to bring some reality to some peoples dreams!!

 

[Doug_Stormforce]

I'm planning to take the plunge and purchase my first yacht. I'm toying with leaving it with a charter company to either pay for up keep or provide me with some pocket money for sweets and comics!
Excuse naivety as this is me doing my research from day 1 as I've only just started looking into it. Questions I have to anybody with wisdom, opinions or possibly both.
Could I make money out of it?
Could I lose money out of it?
What size and type of boat would be best? I'm thinking along the lines of 25-30 feet as a boat that would be more popular to charter.
How much to get the boat registered..Coded...insured as a charter yacht assuming it hasnt had the relevant mods already?
Has anybody done this?
Any advice would be greatly recieved.

I can only speak from my experience but I own a few yachts and as a company manage a few more.

Sub 32' is too small for us and sub. 36' has limited attraction.37-42' is ideal

The owners of our managed boats have all outgoings covered (berthing, insurance, maintenance, servicing etc). If they sign up for a longer package then they will also benefit from sail replacement etc as well. However they will not actually see a cash return, Depreciation and finance are their costs. The owners all look at this the same way. The yacht would cost £10,000- £12,000/yr to run before they use it (these costs go up with usage) but that is all recovered by the management programme.

This is not for everyone and in fact it's it not right for some people at all. In answer to your questions
will you make money, No.
Will you loose money, No, not if it's done properly.
Wil you save money, Yes

If Greece or Southampton interests you as somewhere to keep your yacht, I would be happy to talk you through the economics, but this only works if you plan to get usage from the yacht. it is not on it's own a good investment if you are simply looking for a financial return.

 

[neil1967]

If chartering abroad you also need to factor in the risk/opportunity of currency fluctuations - by good luck rather than judgement when we bought our yacht, in Euros, the pound was strong and thus the cost of the yacht to us was relatively less. Now the pound is weaker, we benefit as our income is in euros. this has bought out some of our depreciation.

Neil