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Old 09-24-2010
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Feedback on Yacht Management Programs

I'm considering buying a new sailboat and placing it in Marina Sailing's yacht management program at either Marina Del Rey or Channel Islands in Southern California. Since I'm not sure if I'll be able to sail as much as I'd like to, the idea of having charter income to offset ongoing operating expenses (slip fees, insurance, etc.) helps me feel more comfortable about the cash outlay required to purchase the boat. As I see it, the advantages and disadvantages of this approach are as follows:

advantages

no sales tax (over $16K savings when purchasing a 200K boat)
tax write off for maintenance, insurance, etc.
charter income to offset slip fees, insurance etc.

disadvantages
boat not available for my immediate use at all times
people I don't know using my boat and possibly not taking good care of it

Just wondering if there are any disadvantages I've missed or if anyone has any personal experience with yacht management programs that might help me decide if this is a good idea.
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Old 09-24-2010
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SG,

good luck, and be sure to search the forums for similar posts. You could write a book on the disadvantages to match the marketing creativity of the charter managers.

For some it works, but if you think at the outset that the charterer will use YOUR boat and "possibly not taking good care of it"..I would rethink the whole idea.

They will not take care of your boat, think rental car..

They will "lose" valuable items, that you will have to replace at cost plus 40-60% before the next charter. Things like dock lines, both sets, will be "left somewhere, earlier this week". The manager will not charge "his best clients" for "little things like dock lines"

Anything not nailed down will be used, abused or misplaced..

Your insurance will be higher as you are now a charter boat owner, and you will likely need a fairly expensive $1M liability policy, just in case

Slippage will be higher, because the client wants to park his car near the boat, not walk, as does the management company, cleaners, fuelers, etc.

Maintenance will need to be done 6- 10 times more often, and likely by the $100 hour technician, unless you are going to take off work to do it.

Then the wear and tear of a 2 year old charter boat, will be similar to a 10-12 year old non charter boat.

Unless you have a more compelling reason to do this, I would seriously think other wise..
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Old 09-24-2010
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Thanks for the feedback SG. I guess I probably overestimated how well charterers would treat my boat based on the fact that when I've chartered, I made sure the boat was in the same condition after I used it as when I first stepped on board.

Good point about the higher insurance cost, I'll be sure to factor that in also.
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Old 09-25-2010
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I've heard good and horror stories from folks that put their new vessel into charter. The advantages can be easily outweighed by the liabilities. I'd talk to some of the owners about their feelings or experiences, get a good feel as to how the management company will treat your investment, and what additional costs are going to be incurred with charter management.

The management company will want the boat available 24/7 and that may mean deferring maintenance. You may be severely limited in the time and times you can take your boat out. There may be costs associated with storms, lost or damaged equipment, or misuse that aren't in the contract and therefore are at your expense. Repairs may be designed to get the boat back into charter rather than fixing the problem correctly. You may be charged retail for wholesale items and going labor rates for work done as opposed to a more reasonable charter management rate.

There are very good charter management companies who consider your boat theirs and make every effort to keep it as pristine as possible. You might consider widening your search to find the management company that sees things your way, has a satisfied and happy group of boat owners, supports the owner in damage negotiations, and has a good community rating.
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Old 09-25-2010
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Usage info?

Has the management company shown you figures from comparable boats so you have an idea of how much rental usage you can realistically expect?

I'm guessing that the California usage patterns are a little more seasonal than at the big Caribbean operations, so you'd get less money out of the operation but maybe less depreciation and more maintenance and owner time.

Does the boat layout and equipment that the company wants you to have on the boat match up pretty well with what you'd want for your own use?

How specific is the company about their end-of-contract procedures for when the boat gets turned back to your sole use (what repairs do or don't get done)?

Oh, and if you haven't done much business with them as a customer, it just might be fun to have a friend of yours do a short charter from them to get an idea of how good their procedures are.
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Old 09-26-2010
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I have looked into this a bit. I would make sure you have a very clear understanding as to how much you can use the boat personally, while keeping your business exemption. It's very limited, I believe.
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Old 09-26-2010
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As long as your objective is well defined and achievable, I don't see what is wrong with it. Treat it as business deal and let the emotion out.

Currently I am in the sail share program, I really like the concept of it. I think it is the way of the future for manufactures selling more boat and more ordinary folks can be able to sail their dream. Think of it as a car leasing, it certainly helps a lot folks to drive their car that otherwise unobtainable. Hey, it may be bad for the lease-ee, but it sells more car.

I may consider invest a new boat and put it into the sail share program. I am not the type of person who wash and wax their new Porsche or BMW every weekend. I don't emotionally attach to my toys. If someone dings my new boat, I am not going to lose sleep over it. It is a purely business transaction that comes with the territory plus perks of doing some more sailing.

I am not a compulsive buyer/consumer. I am not in a rush, I take my time. When in doubt, I keep my money in my pocket. And you should too
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Old 09-28-2010
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Don't count on any tax write offs unless you have other "passive" income. You may have to carry over your losses till you sell the boat.

If the charter company is on the ball and takes care of the boat as well as does its best at getting you charters it could make sense.

Rick
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