Yacht purchase and charter management

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Vid

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Is this a good idea?

As far as I can see on something like a £120k boat (charter-ready), you put in say £40k deposit, finance the balance and use the charter income to pay the loan off plus maintenance. After three to five years of having a month's use of the yacht yourself each year you sell the boat for 2/3rd of the purchase price ie £90k. That's £50k return on your £40k investment and no capital gains tax.

The downsides are coming up with that deposit and taking the risk of not having enough charter income.

You then use some or all of that £90k to buy something that hasn't been chartered...

Or am I missing something?
 
A mate of mine reckons it's so good he's just started on his second term with Sunsail, albeit with a more modest investment than the one you're considering. I think it's pretty good too since he invited me to the Ionian last year!

You really need to do your own sums though.
 
I would have thought that you would have more than a 30% depreciation after 5 years of chartering. Also insurance and maintainance will cost more than for a private boat. I haven't looked at this since 1995, but at that time the best I thought I could hope for was getting the boat now, rather than later, and to hope to break even at resale time. I certainly couldn't find anyway to make a net profit in 5 years.I think you may be being a little over optomistic on your projected income from charter. I assume you would want your month when there was some decent sailing weather.
Where are you thinking to base the boat?
 
Is a 5 year old boat that's been sailed pretty well non-stop by not especially skilled crews really going to be worth 90K? (incidentally 2/3rd of 120K is actually 80K).

Look at Sunsail brokerage ads to get a good idea of what they're worth after a life in charter (and remember that the ads quote the asking price, not the selling price).
 
This is something that we thought about seriously before we eventually decided to "go private". The charter management options certainly looks attractive, but it comes back to what it is that you want the boat for.

We wanted the flexibility of, for example, Tuesday night racing, and the occasional potter down the coast. That only comes with owning the boat yourself. We also looked at sharing a boat, but in the end kept it in the family, sharing with my parents.

In the end we went for an older boat, which brought the cost down.

Keep looking though. I have been waiting ages - always "next year" and finally in the last couple of week have taken delivery of a boat. First trip out with the family this weekend. Can't wait!
 
financially it is fine. It's everything else that is NOT fine. I speak as part-time charterer on both sides of boats and skiflats. You miss out on two main things

1 The "our boat" thing.

2. The flexibility thing.

Item 1 is enuf to put many off and works against you in two ways: firstly it's a less comfily equipped boat - no leaving loads of clothes, bits of food, spare tins of food, drinks cabinet, interesting olde charts, swathes of reading gear, spare extra gear or ANYTHING on board for your own interest - it needs to have empty hanging space, crap/bombproof cooking gear, plastic glasses and an a gas lighter. Secondly - see that bunch of peeops clattering along with big wheelbarrow cos they have chartered? That's what you'll have to do as well. You can't tell who's the charterer and who is the owner - except the owner doesn't pay to rent the boat (sorry, USE the boat...). Oh and in case you fancy naming the boat yerself - no problem usually - but the agency would please like to put "Nitpot Charters" sticker down both sides anyway. Its not at all "your" boat and you have to be very laid back to be ok with this. If you are even a tiny bit bothered about "people shagging in our bed" - you probably aren't the right sort.

Item 2 means you have to say when you're on board, and not on board, well in advance. If you puttit with a busy agency, expect every single time you aren't on board to be taken up with other charters. Expect a bit of resistance to you "nipping down cos there's no charter this weekend until monday" because the agency needs to go thru the boat ready for that charter on sunday or saturday perhaps. This ESPECIALLY applies in season, when there's nice weather.

As owner of a charter boat you are lowest of the low - the important people to the agency is NOT you - it's the paying clients, who'll come back with repeat business IF the boat is nice and clean (ie can we have slightly better gear on board please, ta) and IF the agency is "reasonable" (ie don't recharge them for breaking or stealing or losing stuff that belongs to you) and of course IF the boat is relatively new (so expect progressively skinflintish charterers year on year starting with rich wreckers and ending with poverty-stricken chart-pinchers after three years).

Bit negative, sorry. Above i think is as bad as it gets. As an alternative to owning it's not great for many. As an alternative to paying for lots of charters, it's fine. all imho...
 
Mac, What happened at the end of your mate's first charter? was the boat a wreck? did he sell it on and how much did he make/lose overall?

I remember looking at this a while ago and, financially, it all comes down to what you can flog the boat for at the end of the contract. I stopped looking because while its easy to imagine the worst (hi tcm /forums/images/graemlins/wink.gif ) I have never actually found somebody who has finished a scheme (esp sunsail) and can give a personal account of what happens.
 
Vid, The one thing that you seem to be missing is the balance of the loan at the end of the contract. If you are taking a loan whose repayments can be matched by charter income you will still have a significant portion to repay after the 5 years. I have also heard stories of the IR being, erm, sceptical about peoples claims that their boat purchase is a business only and therefore VAT free.
 
This is an option I have thought about too, and quite frankly I am still in two minds.

The financial logic depends on whether you can earn sufficient income in 3 - 5 years to meet the interest payments and full repayment of the capital sum you need to pay off the loan. If that works you have your boat, for whatever it's worth, at the end of the 3 - 5 years for the price of your down payment which is a good deal by any standards.

Under most schemes you have the option to charter a similar boat anywhere in the world during the contract period, which has its advantages.

I think you would have to assume that the boat would be pretty well knackered at the end of 5 years. Even if it looked alright the running rigging and sails would be in a pretty poor state, and you would probably have to assume an early replacement of the windlass and the engine. (I think that some operators offer to put in a new cooker - big deal!)

We have probably all witnessed some amazing boat handling of charter boats. My classic, and I wasnt skippering or helming at the time, was a full-on collision at 6 knots under power with a starboard mark. The skipper was a RYA yachtmaster and experienced at that but even so it did quite a lot of damage to a six month old Sunsail boat chartered under an "ownership" scheme.

The bottom line though is whether the financials stack up as neatly as you are being told. I suggest you look at the numbers very closely because it seems an amazing return for a passive investment. I would also lok at clarification of the tax position. If you run the scheme as a business you can reclaim VAT and you could probably offset your interest payments and depreciation against charter income so you would probably not have to pay income tax. Brace yourself for a socking great big balancing charge when the boat becomes a personal asset or you flog it though!

The French have a number of lease/purchase schemes which seem to work very well. I dont know much about them, but they are starting to market them over here. Might be worth loking into?

I would be interested to know what you decide to do in the end. Good luck.
 
My mate Kenny had no intention of taking "his" boat at the end of the term and only ever even saw it once on the water. He had a guaranteed buy-back price at the end of the period and used the deal to charter other boats in Sunsail locations around the world. As well as the charters he books in advance in exchange for his "points" earned he also got the opportunity of "free" weeks at short notice and it was one of these he invited me on.

He keeps a spreadsheet showing his costs against the charter value he gets and reckons he's well ahead on the deal.

I'll ask him to have a look at this thread in case I've got it wrong, though I don't think so.
 
Hidden costs?

I bought an ex-charter boat and it wasn't until the survey that I found out it had been run hard aground, damaging the keel, and structure of the hull around the keel. This was all very well repaired at the vendor's expense, but must have cost a fortune as it was a full keel-off job.

Just makes me think - what are the provisions in these charter/sales contracts for major repairs of this kind, if they're not immediately apparent when you take ownership of the yacht? Sounds like you would want to insist on a proper survey before completing the contract.

For the record, our ex-charter boat, apart from the above, had stood up pretty well struturally and cosmetically, but had completely shagged sails neede immediate replacement and a knackered engine (which I should have replaced but was always repairing), and was ex-VAT. All of this was reflected in the buying price, and I think I got a good deal. But then the price I paid implied some pretty heavy depreciation on the price from new - more like 50-60% than the 33% quoted in the example.
 
I'am the guy that Mac Hurley is talking about who is in the Sunsail Partnership programme. I joined in 2001 by buying into a Dufour 30 on a three and a half year contract for which I was guaranteed a buyback price at the end of this term. Being someone who does not have the time for a lot of sailing and a wife who is only keen to sail in warmer climates i.e not in Scotland the Sunsail option has suited us fine. It has allowed us(and friends) to sail in Antigua Turkey(off to Turkey on Sat for 2 weeks) Greece(off to Greece in Sept for a week) and even Scotland (but without my wife)which would not have been possible if we had bought a boat outright.
I have kept a spread sheet of all our usage and when compared against full brochure prices then we are well ahead and that is not even using all our late booking weeks(the offer still stands MacHurley)
We have just bought back into the scheme for another 3.5 years with a Beneteau Oceanis 343 by which time I may be in a position to keep the boat. At that point Sunsail allow you an extra week to sail and check the boat before hand over during which time most people would get it surveyed.
Anyway like everything "you pays your money and you takes your chance" at the time I bought into the Dufour I put some money into ISA's(Yes early 2001!!) I now wish I had invested this money in the boat as Sunsail at the time guaranteed a 13% per annum return on the purchase price of your boat.
Hindsight is a wonderful thing.
 
question for sunsail expert

hi, thanks for this, and it all gets a bit personal saying "how much for this" and so on.

So, spose a boat costs £100k inlcuding VAT. Could you vaguley invent some likely frexample numbers regarding buying thru sunsail, guarantees regarding buyback and income and so on?
 
Re: question for sunsail expert

Hi, echoing tcm: thanks for the info its much appreciated. One thing that was never too clear in the sunsail literature: in the 'free' holidays, fights didnt seem to be included. Is there anything else that they scrimp on or do you generally get the full holiday experience?
 
Re: question for sunsail expert

best way is to go onto the Sunsail web site www.sunsail.com/yachtsales/ocean_passport.html and it gives all the info on the different ways to buy in. then look at the brochure prices and do some calculations
in reply to dedwards they will organise flights but are not included, I take this into account when I'm updating my spread sheet.
You can also use the Clubs which are great for kids and also crown blue which is canal boats in europe
 
Thanks for all the thoughts - really helpfull. I'm definitely looking at this as a commercial proposition - a place to put some money for a while that will produce a return and enable me to have some fun at the same time. I know what charterers are like (I am one) and accept wear/tear and damage as part of the deal. It's not a way of directly financing my dream boat.

Therefore after 5 years, the boat will be paid for, sold and realise a return of 10% per annum. In addition I have avoided all those annual holiday charter costs I'd probably have paid.

Sounds OK to me!

Now for the big decision - what to call the yacht? - Hubris?
 
you will be lucky to get 70% of your orignal value back what you have to remember is that at the end of each season there will loads of people like you all trying to sell their boats, none of which will be in great condition or have any decent inventory. Also if you do this in greece you will most definately have to the vat at the end of the period and you may also pay a monthly Mangement charge to the Greek "owners" who look after the paperwork as you are not allowed as a non greek to own a charter business! You will have paid for somthing that you do not legaly own and on paper neither does the "english " charter company
JUST BEWARE.
 
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