Mallorca berths - purchase

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simon

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I have been advised by my pension advisors that it is now possible for me to purchase a berth through a SIPP. They have confirmed that it is an acceptable investment and would be classed as commercial land.

As long as I pay full market rent when I use it and make it available to others when not there, there is no personal tax implication to myself.

This looks attractive, my only concern is what is likely to happen to the values as they get nearer to the end of the lease.

Any thoughts?
Simon
 
negotiate a very long lease. sipps pensions have to be taken by 75 latest but you can drawdown on the pension fund from 50 so clearly depends on how long you intend to keep the berth for. clearly value is affected detrimentally as lease period reduces so plenty to think about. imho. Mallorca seems to be huge investment area at moment though so does seem very attractive proposition as good berths become harder to get.
Mind you Looking at other threads perhaps you should consider sticking the lot into iron.
 
can't "negotiate" on anything but price - these are leases already part-used, and only new (but still fixed length) if there's a new marina. You buy a long lease with up to about mebbe 30 years in majorca, less on mainland with older marinas. Usually, the leases to start were 35 or (older ones) 50 years and hence french mainland ones starting to draw near.

The big price rises seem to have gone for the moment, for the most part. In 10 years berthlease prices have risen to 4-5 times price in 96, maybe more in some places.

If you can use the place, buying makes loads of sense. Hardly anynew marinas being built and emerging countries like russia are discovering the med. You cannot get moved out, ever - the usual terms are otherwise that they can (and do) give 1 month notice and that's it, you're out . There's no real security of tenure, really - uless you own the lease. I'm taklking about private or part-private marinas of course.

As the lease nears the end, well, at worst it becomes worthless - you clear off and a new lease is arranged. Your sums should make sense even if that happens.

But will that actually happen? I think not. Cos if the marina operator gets no hint of renewal, why should he continue to maintain thje marina and keep it all smart? May as well stop spending and the place goes to the dogs.

Licence renewal won't be like when a marina opens from empty and they offer the leases cheap to gettem started and then a bit more expensive. The day the lease runs out the whole of the marina berths would come up for renewal, a bit of an admin nightmare from all angles, risky pricewise (suppose they end uip[ with a half-empty marina) and so on.

Much more likley is that an extension period is negotiated, annd perhaps negogiated again as end of lease draws near, imho, and i think this has already happpened here and there.

Sepretly, note that purchase of a marina berth is often (or praps always) partly offered for ahem ask no-questions cash. Sometimes as much as 50% cash. There are several hereabouts wandered around a marina with a carrier bag full of big foreign notes. For all involved, esp in continental europs, keeping the prices paid *on paper* nice and low reduces tax.

The ultimate benefit of the partly-cash deals is that lease renewal would be based on that "on paper" value - half the actual value. Don't be surprised if cash is requested - they are not joking and it's (usually) not a scam.

I'd buy.
 
I agree I think the figures stack up. Problem with buying through the SIPP is that the trustees and their solicitors will actually carry out the transaction so it will mean that cash is out the question and will most likely mean buying at a higher price.
I still think its worth following up.

Next question - Anyone know a good source for buying berths!
 
Almost every single boat broker in the med worth the name will own/trade berths. There are also berth traders of apparently no fixed abode.

Best is to find the marina you fancy and ask around starting at the marina odffice or one of the on-site boatbrokers.

Note that the cash ain't for the buyers benefit - it's for the seller who shows minimal profit. No cash might mean a loads higher price, or even no deal if a broker/dealer of several berths is involved - else why on earth does one of them sell (on paper) for double the others?

Can perhaps the trustees nominate a purchaser to make the deal? You, frinstance? They have to sit around a table at some point with the buyer afaik?
 
simon, this is something I've been thinking about myself but I can't make the figures stack up. Most marinas in Majorca are more than half way through their lease periods. For example, Club de Mar have about 13 years left on their leases but the official selling price for a 15m berth is €180,000. On top of that you have to join the yacht club for another €10,000 plus you still have to pay the port charges of about €2000 pa plus the marina service charges. So that 13 yr lease will end up costing you well north of €200,000. At the moment I'm paying in total about €12000 pa in total berth rental charges. Granted that will rise year on year but you will still end up paying a premium for buying a berth. Club de Mar agree that this is indeed the case but insist that the premium is worthwile for security of tenure which is a fair point but it still does'nt alter the fact that the figures dont stack up
What tcm says about lease renewal is correct but there is no precedent in Mallorca. No marina on the island has yet come to the end of its lease so nobody knows yet whether extensions will be granted or how new leases on berths will be offered. I would not factor in any kind of extension IMHO especially given that Spanish authorities have a reputation for squeezing the rich pips way beyond when they start squeaking
Obviously, if you can buy a berth at a large discount for cash, the equation changes but I would be very careful to find out whether the transaction is legal without being brokered by the marina office
If you find out any more info, I would be v interested as I would buy a berth myself if I thought it offered a financial advantage over renting
 
Fair enough. Though can you remember what you were paying for a med berth praps only four or so years ago? It's likely tohave been a fair bit less, and it is that pre-factored-in inflation that buying protects you from or er explains why the price is high.

Granted the service chargs on top and er the yot club membership is a new one on me...

Not bought in spain, tho in france the large lunks of cash were entirely expectd and very calmy wopped into a safe in the marina office...
 
tcm, how do berth owners in French marinas pay for all the marina services like marineros, office staff, rubbish collections etc etc without being levied a service charge? Admittedly the yacht club membership in Club de Mar is a bit unusual and I'm not actually sure what you get for your €10k 'coz all the facilities are available to renters like me anyway
I agree with you in that berth rental costs are only going 1 way and thats upwards so the calculation could be very different depending on the rate at which rents rise
 
There is a service charge in France, at least there is in Antibes. I forget how much now for a 23m berth but it was between €4000 and €6000 per annum.
 
sorry, rough writing - as Magnum says, the srvce charge is normal in france, as in spain. No idea how much but then i always get swmbo to go and pay, as usual, otherwise it'll just upset me.

It's the yot club membership which is the new one - but then hardly any actual yot clubs in france as there are in spain. Mind you, still have to pay for drinks...
 
I thought that the leases had 18 / 19 years left. At 13 it makes it harder to justify, but if cost was 180,000 and current rent 12,000 you could expect about 295,000 over the next 13 years (increasing at 10% per year, I don't think that would be excessive).

Given that you would have to write off the 180,000 at the end the return would only be 115,000. Not a lot and certainly not a good 13 year investment, but the lease could still be sold at any time during the remaining lease. I can't help feeling though that there will be some residual value at the end of the lease as you expect existing lease holders to be given first shout on a new lease. Am i missing something?
 
simon, dont forget you have to add 13 yrs of port charges and service charges to the €180k purchase cost. I dont know exactly what these would be but you could reckon on €3000 pa so that adds €39k + inflation to your total purchase cost
I think your rental inflation rate of 10% is too pessimistic plus to make a true comparison you would have to adjust future rentals to take account of the fact that payments are made in the future, not present ie DCF factors in business speak. Obviously you'd have to do the same for the port and service charges when calculating the true purchase cost as well
Yes you may well be right about there still being a value to an expired lease in terms of preferential renewal terms but I would'nt want to bet on it
The remaining lease period varies from marina to marina depending on when the marina was developed. Club de Mar was one of the first in Majorca so has one of the shortest lease periods left
I'm not trying to be unduly pessimistic about this. If I could convince myself that buying a berth stacked up financially I'd be very happy to do so
 
I think it might well boil down to if I can or can't find a reasonable rental berth. If I can't then I suppose I will convince myself (wife) that it is a good investment and leave out some of the details if I can I think I'll take the rental berth and then look further into it once installed in Palma!

Thanks for the input.
 
There's only 1 reason to buy a berth these days - security of tenure. On financial grounds alone prices have risen too much for it to make sense.
 
I've been following the thread with interest, as we're trying to decide what to do on the berth front. What I know is there are many new millionaires made every day in Eastern Europe and Russia, and sooner or later a proportion of them will want to flaunt their new found wealth on a swanky yacht in the Med. This new demand will almost certainly outstrip new supply several times over, so I can only see rental and purchase values going steeply one way. Med boating may become more a preserve of the rich than it is now.

If investment return is number one priority then maybe Croatia and Greece are the places to look, but balancing that with accessability from the UK still leaves Cd'A and Balearics looking fairly safe bets to purchase?
 
Well, yes, there's certainly plenty of new Eastern European money in the Med and, yes, potentially that puts further pressure on berthing but, on the other hand, there seem to be plenty of berths for sale. I could walk into virtually any marina in Majorca today and buy a berth so there's not that much demand. There's certainly no waiting list to buy them
The other factor is cash. Other Europeans, particularly the Germans tend not to borrow money to buy luxury goods like we Brits do. If they dont have the cash in the bank they dont buy it. The recent stock market dive is supposed to forecast an impending recession so maybe peeps wont be feeling so bullish about buying berths in the future
For me security of tenure is not something I'm willing to pay a premium for. If Club de Mar chuck me out, I'll go elsewhere. Like as not, we'll fancy moving on to another cruising ground in a few years anyway
 
I echo your views Mike, In my mind I can't put together a good financial case for buying.

I suppose I am a bit better placed in that 10m berths are pretty readily available - most of the marina's were created when 10m was a "large boat" so the marina's built enough concrete pontoons to capture this market. Average boat size is now greater than this hemnce shortage of 12m+ pontoons and plenty of 10m and below berths

Martyn
 
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