Buying A Berth

[Assassin]

How many people pay rising marina charges to moor their craft? and how many have considered the cost of buying their own berth, which could actually work out cheaper in the long term.

Several years ago i took the plunge and bought my own, over the years it has worked out much more economical than paying marina charges, and i am not tied down by rules and regulations, some of which can be petty. More recently a few boating friends, all long term boaters did the same thing and worked out they would recoup their costs in around seven years, after then mooring their boats is free.

 

[AndieMac]

If you are well organised and know what you want as far as your boats location is concerned, buying a long term can be a very clever move.
I notice that jfm buys his berths in the SoF, which appear to be sensible acquisitions.

I can't see how having 'no rules' for some could make for a smooth operation for marina management?

 

[DAKA]

when you say buy do you mean long term lease ?
I have thought about investing in a berth but wasnt sure just how it works.......

If you 15 year lease a 50 ft hammer head on the south coast how much is the ground rent ?

I dont think the saving would be so great but would allow sub letting when you go away but I dont suppose that is really worth the aggravation for £200 for 2 weeks ?

what happens if the marina goes bust, do you still have the right for 15 years berth ?

 

[Deleted User YDKXO]

It depends where you buy the berth. You never actually buy the berth of course; you buy the remaining lease period on the berth. The cost of buying a lease on a berth in some of the Med hospots definitely exceeds the likely rental cost of the same berth for the same lease period so in straight financial terms, it often doesn't make sense. The major advantage of buying a berth is security of tenure. When you rent a berth, you have no security of tenure and can be moved about the marina or chucked out altogether on the whim of the marina management. There is talk that existing leaseholders in some marinas may get preferential terms for re-buying the new lease on their berth when the existing lease runs out but I've never seen any confirmation of that so I treat that with a pinch of salt
There have been issues in some places eg Spain with local authorities arbritrarily reducing the remaining lease periods on some berths thus reducing the value of the berth instantly but I think these cases are isolated. But you should remember that you are never buying the freehold of a berth, just the leasehold and circumstances can change.
Personally, I have looked at buying a berth both in Palma and SoF and I cant make the figures stack up financially. Basically you pay a premium for security of tenure in these places. In any case, I like to move around every few years to new cruising grounds so buying a lease on a berth would tie me down

 

[jfm]

The cost of buying a lease on a berth in some of the Med hospots definitely exceeds the likely rental cost of the same berth for the same lease period so in straight financial terms, it often doesn't make sense.

Deleted User that just isn't correct. You have completely ignored the receipt of a premium when you sell the berth which is always a significant part of the maths unless you choose to hold till end of term or near the end.

I bought my last berth in Antibes in 2003 for £161k. I sold it this year for about £265k - that's the number you ignore in your post. After selling agent commission I have £80k margin. My service charges annual fee was £2.5k per year and average interest rates on the £161k tied up were about 3% after tax so that is all still better than free berthing; there is a small profit left over. Lots on here buy their berth: nickh, tcm, magnum, EME, etc

 

[Deleted User YDKXO]

Deleted User that just isn't correct. You have completely ignored the receipt of a premium when you sell the berth which is always a significant part of the maths unless you choose to hold till end of term or near the end.

I bought my last berth in Antibes in 2003 for £161k. I sold it this year for about £265k - that's the number you ignore in your post. After selling agent commission I have £80k margin. My service charges annual fee was £2.5k per year and average interest rates on the £161k tied up were about 3% after tax so that is all still better than free berthing; there is a small profit left over. Lots on here buy their berth: nickh, tcm, magnum, EME, etc

Mmm, I've seen those numbers in a magazine before somewhere. The apparent 'profit' you made was to a significant extent based on the exchange rate differential and takes no account of the loss of interest on the initial investment

2003 rate €1.45/£

Cost of berth £161k x 1.45 = €233450

2010 rate €1.10/£

Sale of berth £265k x 1.10 = €291500 - 9% sales commision (24/265) = €265265

Notional profit €31815/1.1 = £28923

That doesn't include loss of interest over 7 yrs on the initial investment at say 5% (you'd surely make more than 3% 2003-2008) which is equivalent to about £65k compounded up

So the actual profit(loss) = (65000)-28923 = £(36077)

Not including any service charges to the marina 7 x 2500 = 17500

Total loss £(53577)

OK you can argue about the 5% loss of interest

If the exchange rate had moved against you, you would have been sitting on a bigger loss. Also you owned your berth during a big economic boom period. Who knows whats going to happen to berth values in the next few years especially if local authorities start messing around with lease periods. Past performance is no indicator of future results as my financial advisor keeps telling me

In your case it was still cheaper than renting but IMHO Antibes is probably a special case because Mole Sud is so sought after. Certainly in Club de Mar, Palma, berth leasehold prices in € never increased by the same amount over the 5yrs I was there. In any case, I understand berths were changing hands there at prices substantially lower than asking price in the last 2 yrs as owners were forced to bail out due to the recession. It really is difficult to get a handle on actual berth values at the moment

I suspect that actual berth selling prices in less sought after areas, eg Spanish costas, have crashed recently so I guess in a way now might be a good time to buy but if the Euro falls out of bed in the next few years, it could still be a lousy investment in Sterling terms. Yup, I can understand the security of tenure argument certainly in Antibes but in other areas, I dont think buying a lease on a berth stacks up which is why I rent

 

[jfm]

Well if you're going to go "notional" you can cut the numbers any way you like. Fact is i have more cash at end than when i started.

You wouldn't make 5% interest risk free after 40% tax, over that period. If you do insist on counting lost interest on capital (which to my mind is flawed logic becuase if you never deploy your capital other than placing it on deposit the benfit is zero) you'd also need to factor in the lost interest on the cash used to pay £11k pa in marina fees if the berth had been rented. The first £11k is lost for 7 years; the second £11k is lost for 6 years; and so on. Also, every night I'm away crusing in the summer i collect €70 rent, as the marina automatically rents the berth to the big queue of berth-seekers, takes its commission, and credits me the 70 or so. However you cut it, and even stripping out FX, it has been cheaper than renting

 

[EME]

Deleted User No doubting that you have managed to secure tenure for yourself over the years without buying -- I think that is very impressive. Seems ncreasingly difficult in the South of France despite the recession.

Someone approached me & offered me x2.1 what I paid for my La Rague berth last summer ( not for sale!) . I bought in 2001. That was in local currency so no ER effect. I make that compound appreciation of 8.6% pa ....

The rental income has also stacked up very well against bank interest rates ( and I have to pay 15% commission) .... I rent on a monthly basis

 

[Deleted User YDKXO]

Well if you're going to go "notional" you can cut the numbers any way you like. Fact is i have more cash at end than when i started.

You wouldn't make 5% interest risk free after 40% tax, over that period. If you do insist on counting lost interest on capital (which to my mind is flawed logic becuase if you never deploy your capital other than placing it on deposit the benfit is zero) you'd also need to factor in the lost interest on the cash used to pay £11k pa in marina fees if the berth had been rented. The first £11k is lost for 7 years; the second £11k is lost for 6 years; and so on. Also, every night I'm away crusing in the summer i collect €70 rent, as the marina automatically rents the berth to the big queue of berth-seekers, takes it's commission, and credits me the 70 or so. However you cut it, and even stripping out FX, it has been cheaper than renting

The exchange rates are real, not notional, so unless you were able to buy and sell Euros at more advantageous rates than I've given, my calc is real. And of course you have to take account of loss of interest on the original investment otherwise the calc doesn't stack up. Yup, agreed though that getting a 5% return after tax would have been difficult
I cant be arsed to do the comparison with renting not least because I'd have to look up x-rates for the individual years and do a more complex compund interest calc but I dont doubt that in your case, renting would have been more expensive. All I'm saying is that one example of one particular berth transaction at particular x-rates over a particular time period does not in any way make the universal case for buying a lease on a berth

 

[Deleted User YDKXO]

Deleted User No doubting that you have managed to secure tenure for yourself over the years without buying -- I think that is very impressive. Seems ncreasingly difficult in the South of France despite the recession.

Someone approached me & offered me x2.1 what I paid for my La Rague berth last summer ( not for sale!) . I bought in 2001. That was in local currency so no ER effect. I make that compound appreciation of 8.6% pa ....

The rental income has also stacked up very well against bank interest rates ( and I have to pay 15% commission) .... I rent on a monthly basis

EME I dont doubt your figures but that kind of appreciation just doesn't happen elsewhere. I saw berth asking prices in Club de Mar, Palma (which is a pretty sought after marina in Majorca) fall gently over the 5 yrs I was there and in the last year (2009), the marina were falling over themselves to tempt me into buying a berth so I expect I could have negotiated a hefty discount.
I'm sure there are places where you can see an appreciation in the berth value despite the reducing lease period like Cote d'Azur, Portals (Majorca), Cervo etc etc but I'm really not convinced you'd see that in every Med location. Then for Sterling buyers, there's the exchange rate issue; I'm not sure buying a Euro denominated asset is such a great idea over the long term

 

[jfm]

And of course you have to take account of loss of interest on the original investment otherwise the calc doesn't stack up.

I don't want to go off on a big tangent, but I very strongly disagree with that. The cost of using your capital is, in my book, NOT the lost interest. It is the inability to do the next best thing you could have done instead with the capital. Very different things. The alternative you proffer of not spending your capital and instead depositing it to earn interest is fools gold and actually produces zero return other than a number on a bank statement; you might as well not have the capital if you don't use it.

If I have £10 and I can buy a lasagne or a curry as my two top choice options for how to deploy that £10, then the true cost of buying a lasagne is not £10, it's a curry, because the thing i forgego to have the lasagne is the curry.

All I'm saying is that one example of one particular berth transaction at particular x-rates over a particular time period does not in any way make the universal case for buying a lease on a berth

100% agreed!

 

[DAKA]

If I have £10 and I can buy a lasagne or a curry as my two top choice options for how to deploy that £10, then the true cost of buying a lasagne is not £10, it's a curry, because the thing i forgego to have the lasagne is the curry.

The Dog and Duck have got an offer on, buy one get one free

You could eat until you puke or eat one and take one home but either way you make a tidy profit , no wonder you can afford a BIG boat

 

[Deleted User YDKXO]

I don't want to go off on a big tangent, but I very strongly disagree with that. The cost of using your capital is, in my book, NOT the lost interest. It is the inability to do the next best thing you could have done instead with the capital. Very different things. The alternative you proffer of not spending your capital and instead depositing it to earn interest is fools gold and actually produces zero return other than a number on a bank statement; you might as well not have the capital if you don't use it.

If I have £10 and I can buy a lasagne or a curry as my two top choice options for how to deploy that £10, then the true cost of buying a lasagne is not £10, it's a curry, because the thing i forgego to have the lasagne is the curry.



100% agreed!

I dont want to go off on one either especially since its 25yrs since I attended a Finance and Accounting lecture but cost of capital was very definitely a factor in making investment decisions in those days! I guess the world has moved on.
I still think its a bit naughty of you to claim a £80k profit on your berth in Antibes when a significant proportion of that profit is due to a fortuitous and unforeseen movement in the exchange rate. Somehow I doubt whether the current owner of that berth is going to make the same profit over the next 7 years

 

[jfm]

cost of capital was very definitely a factor in making investment decisions in those days

Sure it makes sense in business becuase you are generally deploying someone else's capital. But when it's your own money the analysis changes, because stuffing it in a bank is a totally nonsensical alternative (except in the short term), unless you get kicks out of counting the commas at the bottom of your bank statement.

I still think its a bit naughty of you to claim a £80k profit on your berth in Antibes when a significant proportion of that profit is due to a fortuitous and unforeseen movement in the exchange rate.

Well, every penny I make is a bit flakey, so where exactly do you draw the line?

I doubt whether the current owner of that berth is going to make the same profit over the next 7 years

I'll know, because I bought the berth 7 spaces to the left. I'll let you know how it goes

 

[Firefly625]

How many people pay rising marina charges to moor their craft? and how many have considered the cost of buying their own berth, which could actually work out cheaper in the long term.

Several years ago i took the plunge and bought my own, over the years it has worked out much more economical than paying marina charges, and i am not tied down by rules and regulations, some of which can be petty. More recently a few boating friends, all long term boaters did the same thing and worked out they would recoup their costs in around seven years, after then mooring their boats is free.

Indeed my parents bought their 15m berth at Mercury I think around 17 years ago on 50yr lease, with 33 years of lease to run they would still get their money back. If you have the capital certainly seems to make sense in the real world. Could you make a better return with that lump of money that would make more money.....well there's always someone who will tell you they can....

... for the likes of me, my eyes are already starting to water with the idea of MDL re-newal coming through the post anytime soon...

 

[n.herring]

Not sure about France and Spain but bought my lease at Hamble Point a few years ago for 80k, saves me 8k a year. Expires when I am 83 so should just about see out my boating. Boats paid for, mooring paid for just service charges and boat running costs for next 25 years, happy days.

 

[GSL]

I am very much like n.herring.

Bought the berth in Sant Carles and it expires when I am well into my 80's so I will use it until then or sell the last 10 years if I have had enough, or rent it out as a supplement to my pension.

Boat is paid for and now I sleep easy at night, only have to pay service charge and boat running costs, all very manageable and takes a lot of the worry out of my hobby, ie no price increases can be sprung on me.

It all adds to the peace of mind and therefore the pleasure, also means that with much lower outgoings, I don't feel pressured to use the boat at every opportunity if I want to do something else.

Graham

 

[Assassin]

I was not talking of buying a lease, i was talking of buying a berth outright as some are coming available through a variety of means which means outright ownership, no annual maintenance fees, or other costs.

Several years ago i bought a seaside cottage from an elderly relative, it was formely two old fishermans cottages knocked into one, it has a natural harbour which was large enough for 4 boats and had its own slipway. The cottage was purchased and converted (updated) to modern standards and rented, this left us with the natural harbour, this had the legal right according to original documentation, for the cottages owners to moor boats owned or leased by them or their associates.

This means the cottage is another source of income which pays for itself, and my boating, and i have an owned berth which costs nothing but the shorepower electricity.

Many of these sorts of sites are coming up for sale, they sell the cottages and the moorings off seperately, meaning people can buy them outright with local conditions, and not pay rent or for other services.

 

[AndieMac]

an owned berth which costs nothing but the shorepower electricity.

meaning people can buy them outright with local conditions, and not pay rent or for other services.

Wouldn't the 'appropriate' government department charge an annual fee for you to lease the area above it's seabed?

The scenario sounds attractive until any ageing infrastructure needs repairing or replacing due to corrosion or weather related damage.
If the location is vaguely remote, and you have a jetty and pontoons held by piles, transporting a pile frame barge (and tug?) will be costly, as will sourcing the accredited marine engineers to rebuild the structure to meet any new OH&S standards.

Working over water adds many complications.

 

[benjenbav]

It suits me to pay an annual fee for a variety of things which are important to me: a managed and maintained environment; onshore facilities, such as power, showers, fuel, boatyard services; basically a turnkey deal. Buying a jetty wouldn't suit me any more than buying a river mooring would. But I can appreciate how it would be a great thing for someone with different priorities. Vive la difference.