Buying a yacht and leasing it out - advice needed

[Anthony3200]

Dear All,

I have a dilemma that I would be interested in seeking your advice about:

I'm fairly 'new' to sailing, having just completed my day skipper course and about to move onto Coastal skipper shortly. At the moment I do most of my sailing just going out with friends on their yachts for the day.

I would like to purchase a yacht, something around about 30ft, but wanted advice on a proposal for acquiring it:

Basically, although I'm on a decent salary, I would have to settle for something pretty old to fit within my budget (which is about £15,000). What I would like to do, therefore, is purchase a new yacht for about £60-£70,000 and lease it out, either to private groups, or to holiday tour companies if this is possible, to pay for it.

My ambition is simply to put the yacht in a nice sunny location in the Med and repay the purchase price through leasing it out, so that it is paid off in 2 - 3 years. Clearly this would mean I don't have much access to it (particularly in the high-demand summer season) but I am perfectly comfortable just using it two weeks in the winter, knowing that after two years or so it will be mine. This also works out good for me, since when I take holidays I can just take a flight down to where it's located and enjoy the sunny climate.

Has anyone tried this approach before, and if so, any advice?

I realise it is fraught with difficulties, which is why I have aimed at a price range which is something I could actually cover myself (although I wouldn't want to) if it all goes wrong. I realise that such a scheme might mean that it is only leased for 3 months of the year, when demand requires, but I'm hoping that it will be in demand for slightly more. I'm also aware that I would be in England while the yacht would be in the Med (of course, I could base it in England, but that would decrease the amount of months it is likely to be in demand for) and so I would need someone to clean it after each group returns it.

Would holiday companies be interested in leasing the yacht, or do you think they would prefer to purchase their own outright? Do you think there would be demand for from private individuals? How much do you realistically think I could get from this approach?

I appreciate that this is quite a large task and will inevitably require a business plan in its own right, but just to begin I'm trying to get some general feedback on the idea as a whole.

The perfect (unlikely situation) would be for me to buy the yacht, then lease it to a company like sunsail for 2-3 years, after which time the income from that would have paid it off.

On the topic of which boat - I'm interested in the Sydney Yachts 32OD which was on display at Southampton last weekend - although it's on offer just above the £70,000 I suggested previously.

Is it feasible, or lunacy?

Many thanks,

Anthony.

 

[Swagman]

Steve Clayton charters his yacht Seraph from Denia in Spain and it took him some considerable work to comply with Spanish Charter regs - over a year I recall. He uses this forum and I am sure will come back with his own views.

I recall Steve saying he's the only 'legal' Brit charterer in the region - so he's possibly the one to give best and current practical advice.

IMHO you minght find it all a lot easier to buy via one of the professional charter mobs - Sunsail etc - leaving them with the official headaches - and giving you the time (albeit limited) to go sailing.
Good luck
JOHN

 

[twisterkai]

I seem to recall that the 'Sunsail' scheme is that you buy the boat through them, they cover all the maintenance/running costs and then after a predetermined time scale the boat reverts to your sole ownership.

Charter yachts tend to be heavily used, so when it finally becomes yours, after say 4 years, it'll probably have the wear of an 8/10 year old boat. I think that you'll also find that you don't have a great deal of choice with regards to the make/model of boat.

I suppose the other way would be to take finance on the whole boat and then place it with a charter management company, the income that you then derive can be used to pay the finance.

Alternatively, just buy an older boat and keep her in the UK, where you can experience the full joys of ownership: trying to antifoul in the rain, varnish when there's a heavy frost, service the engine when it's so cold you can't feel anything! Second thoughts, go for the Med option.

Talk to Sunsail and see what they're prepared to do.

Good luck!

 

[Anthony3200]

Thanks for the advice - the sunsail site looks interesting, but they suggest the packages on offer either let you put 80% of the cost onto them, or around 50%. Has anyone used them, and do they have any feedback on them? It certainly seems decent - I charted using sunsail this summer and the boats were well looked after. I'm just curious to see why it's not possible to squeeze more from their coffers by leasing it out for a longer period.

Will post information once they reply to my email, as could be of general interest (perhaps!).

 

[chrisgee]

talk to Yacht Fractions - Chris Hawes, about the management deals with Kiracoulis in Greece.
Do not expect to get much back after five years just look at the prices for 5 year old Jeanneau 42.2 that sunsail are selling. and be aware that yachts on this type of deal are NOT always well maintained despite what the management co will tell you. Again go to Vounaki ans see some 5 year old sunsail yachts!!

 

[bedouin]

It is possible - but I would tend to advise against it.

For a start, to be of interest to a Charter company these days the yacht would tend to have to be at least 34' - probably setting you back well over £50K. Then if you want an adequate income from it you need to charter it out as much as possible which will severely restrict your usage of it. Even then the income from the chartering will not be sufficient to cover the complete repayment of the loan over the period of charter (mainstream charters are unlikely to have boats more than 6 years old at most).

IMHO these schemes are best regarded as a good way of getting a lot of cheap chartering rather than as a route to full time boat ownership.

I would suggest that you are better off buying an older boat in the 26-30' range and seeing how you get on with that, then you would be in a better position to consider the leasing later.

 

[Seafort]

Have a look at this guys site.

Usual-Suspects-sailing.

Click on "The Boat".

It may be in the Caribbean but does show some of the ups and downs of chartering. The management company also has a site accessable from there too.

If you do have a look don't like it too much. It's awfully expensive to fly there and its a long way..... /forums/images/graemlins/wink.gif

Dave.

 

[machurley22]

There's a thread here that discusses some of the pros and cons.

 

[Sailfree]

Suggest you read Machurleys link posted above as I am otherwise repeating myself.

The truth is that you can subsidise the cost of yacht ownership but NOT pay for the boat. I have done it for 7 yrs but there are downsides especially if the boat has mechanical problems so I would not buy anything with a Volvo bit!!

If there was such a profit to be made the charter companies would buy their own boats and not use other owners boats. On others boats the risks are to the owners and the 40% income (with little financial risk ) is to the charter company

 

[Anthony3200]

Thanks for the advice - and the information on the other threads.

I think I'm being realistic about the situation - these comments all remind of those DIY Makeover programmes on television, where people think they're getting the house of their dreams, only to discover it has dry rot/unstable foundations/faulty pipes etc...!

Personally, I wouldn't have much use for the boat over the course of the next few years, which is why I'm interested in the scheme - I would probably just use one or two weeks each year through the programme as part of my holiday. The reason is appeals is that in a few years time I want to take a year off and sail round the med (or wherever, in fact!), so this ensures that I have ownership of a boat by that time that I can use - think of it as an investment.

I could, in practice, taking account other expenditure and general essentials, contribute about £5 - 7000 of my own money each year towards a purchase. So, after five years, I would have about £25 - £30,000 saved. The sunsail scheme allows you to punch above you weight, so to speak, and get a better boat for your money. I wouldn't be interested in the buyback option as I would use it myself.

Having been on a sunsail week earlier this year, I can see what happens to some of the boats they have - generally inexpert tourists not being aware of what is going on, failing to put fenders down and scratching the hull, running aground, being careless with anchors etc. After five years though, just how much damage could be done? My understanding is that sunsail would put it right (although not accounting for wear and tear).

Do you think it is a reasonable expectation to pay less than £20,000 towards the total cost of the yacht, and would it be worth it - would a syndicate with four others be a better option?

 

[twisterkai]

I don't think you'd get many takers if you're offering less than £20k. They've got plenty of takers, so why would they want to offer you such a fantastic deal? Perhaps researching the syndicate option would be a better bet. 1/4 or 1/5 of the running and maintenence costs would be quite appealing if you don't really invisage using the boat that much.

Unfortunately, you almost certainly wouldn't have the option of saving up your allocated time to have the yacht for a full year in a few years time.

 

[jeremyshaw]

The yacht charter business is a lot tougher than most people realise. Sunsail struggle to make money despite getting big discounts on the boats they sell to investors. Remember you have very high maintenance and marketing costs, as well as issues of utilisation.

If you want to go that route have a look at some of the 'independent' operators such as Yildiz Yachting in Turkey or Horizon in the Caribbean who take on owners boats on a revenue sharing basis.

It's not a way to get rich or pay off a big mortgage though I'm afraid. Wish it was!

 

[moondancer]

Why don't you charter for a few years and save your money until you want to buy a boat to sail round the med?

 

[Melody]

I agree with everything that's been said. We run a charter yacht & sailing school in Greece, but you really have to be here to deal with all the bureaocracy.

Most of the big charter companies operate on part-owned yachts, so do a good search and then contact them all for comparison of what they offer.

If you are only going to sail for a couple of weeks a year and then for a year, I'd charter & then see if you could take a long-term charter for a year with the same company.

One thing I don't think has been mentioned is that the type of boat that a charter company wants is not necessarily what you'd choose to live on for a year.

Good luck anyway

 

[Anthony3200]

Thanks for your advice.

Although I accept the concerns raised, as I stated originally I am not interested in this as a revenue-generating exercise - more of a way of getting a cheaper boat at the end of the 5.5 years. So, in response to a suggestion made earlier, I wouldn't need to save up my allowances for after the 5.5. years, because after that time I would (subject to the paperwork) own the boat myself, meaning I could do what I want with it.


The Sunsail scheme also addresses other concerns raised: they cover ALL mainenance and insurance costs while under charter with them:

"You do not receive a single bill for your yacht ’s running costs while she is in the Ocean Passport fleet"

Additionally, the revenue is fixed at the outset, irrespective of the actual weeks of charter the boat generates.

I think that the Sunsail scheme may be slightly out of my price range, however - the only option worth pursuing is the 'sunsail financing spread payments' option (http://www.sunsail.com/yachtsales/ocean_purchase_options.html) which allows me to put a 20% deposit down and then contribute amounts to the total price thereafter (with sunsail financing the remainder). Given that my total budget is about £20,000, subtracting the quarterly payments from this will only give me a yacht value of about £60 - £80k new, which won't be all that good.

I will certainly look into the syndicate option, but the reason the charter option appealed is that it allows me full ownership (i.e. not 1/5th) and costs just slightly more, even if it does mean I'll have a five-year-old slightly worn boat rather than something brand new.

On another note: does anyone know the value of the Sydney Yachts 32OD that was on display at southampton boat show a fortnight ago? I've been emailing and telephoning the company, but no response - poor show!

 

[bedouin]

I looked at the Sunsail scheme in some detail a few years ago. The details of their offering may have changed since then. IIRC all the options they offered at the time were financially equivalent (i.e. pretty well the same NPV).

I think it should be regarded more like a "timeshare" scheme rather than yacht ownership because in terms of availability to you the yacht is in no sense really yours. What you do get is access to the entire Sunsail fleet worldwide for a number of weeks a year.

If you can make full use of that then it will be worthwhile doing it as an alternative to chartering for the same number of weeks; and I've met a couple of people who take this approach to get cheap sailing - and they love it. If your usage is more restricted, as it is for most of us in full time work, then the financial side looks less attractive.

 

[Ben_e_Toe]

Sounds like a great deal of hassle for a few weeks of chartering per year. You can get great deals on chartering (try latesail.co.uk) and have global flexibility. Given the over-supply in the Sunsail and charting business at the moment, slowing credit boom and housing market, I think used boats will probably be cheaper in relative terms in the four years you are looking. If you invest your £7,000pa well (via an ISA) you could significantly boost your 'pot' and find yourself in a buyers market four years down the line.

Also chartering enables you to try many different boats of different sizes, speeds and layouts before you commit yourself. Many of the very new boats are so built for accommodation that they lose the joy of sailing, which is after all the point of going out!