# Owning a charter boat (and not operating)



## JoCoSailor (Dec 7, 2015)

I’m guessing this topic has been discussed here. But, in searching the archives I’m finding is mostly threads about folks owning and captaining charters. I’m interested in just owning a boat that is managed and chartered by someone else. I’ve found some info on the net. I see there’s a couple ways to do. I have no interest in the “timeshare” nor “the guarantee a monthly income”. However, the income sharing relationship or performance program has me intrigued. If there’s a thread here you can point me to that’d be great. Or if anyone with experience doing this, wants to share their thoughts that be great too.

TIA
Lew


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## ianjoub (Aug 3, 2014)

Talk to the Sailing FL people.


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## JoCoSailor (Dec 7, 2015)

ianjoub said:


> Talk to the Sailing FL people.


Yeah they planted the seed....I'd like to hear from the other side of the table before I go any farther with them...


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## capta (Jun 27, 2011)

If you put a boat into charter, even with a professional full time crew, the boat is going to take a beating.
There are no such things as "weather windows" when a boat is in charter service.
For instance, we must be in Carriacou to pick up passengers just 4 days after dropping our present passengers in Grenada and the weather is forecast to be 20 to 25 knots directly on the nose. No if's and's or buts!
If your boat is based in Fla, this will probably mean frequent Gulfstream crossings, which can be downright nasty at times.


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## Minnesail (Feb 19, 2013)

I have chartered from a place where all the boats are owner-owned, and the charter company bareboats them out when the owner won't be using them and splits the fee. Is that the sort of arrangement you're talking about?


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## JoCoSailor (Dec 7, 2015)

Minnesail said:


> I have chartered from a place where all the boats are owner-owned, and the charter company bareboats them out when the owner won't be using them and splits the fee. Is that the sort of arrangement you're talking about?


Yes sir!


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## Faster (Sep 13, 2005)

We have friends with a boat in that situation.. he's an occasional poster here so may ring in. I do know that the benefits are a trade off against loss of owner time, esp in peak season. I think you also tend not to put too much of yourself into the boat because much of the time it's not "yours". 

Depending on the specifics of the arrangement, you may also lose that " hey, it's kinda nice out there, let's head out for a couple of hours" type of spontaneous daysail.


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## Jammer Six (Apr 2, 2015)

Depends on whether you're talking about a day-weekend charter company or a by-the-week charter company. They're two different kinds of companies. They have two different sets of standards, and they cater to two different types of skippers.

Most of my sailing has been in a charter fleet, in a fleet that rents day boats and weekenders. I've looked at the boats available for the week charters, but frankly, at about the time I was ready to do that, other boats became available to me.

The biggest advantages to an owner are prime moorage and maintenance, not money. The biggest disadvantage is not being able to leave your gear aboard.

Which are you interested in?


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## Minnesail (Feb 19, 2013)

I've chartered that way several times and one of the benefits to the charterer is that it becomes known which boats are well maintained, we pass that info around. And there's incentive to the owner to keep their boat up, because they'll get more charters.

However it would drive me crazy as an owner to come back to the boat every time and have stuff stored differently, things tied wrong, little things broken...

On the other hand (some) people probably treat the boat nicer than they would a straight rental, if they know it's somebody's baby. Sort of the different way you might treat a rental car vs. a car borrowed from a friend.

I've talked to a couple owners and they say the charter income pays slip fees, winter storage, and a bit of maintenance. They eat some maintenance of course depreciation.


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## capta (Jun 27, 2011)

JoCoSailor said:


> Yes sir!


OK, the low down on bareboat chartering.
The highest paid professional on most bareboat teams is the "glass man". The guy or guys that can repair any damage as quickly and inexpensively as possible so it can't be seen or even found by a surveyor. The horror stories abound from those that purchased ex-bareboats.
Every single day we see numerous bareboats. Let me repeat that. Every single day we see numerous bareboats. Most seem to be operated by fairly competent operators, but the rest are the best entertainment in the West Indies.
Just today, in the anchorage at Saline Island, 3 of the 5 boats there were bareboats. A cat came in and seemed to do just fine. A 40ish foot Bene came in and anchored so close to the beach that once he was set, he was sitting on the sandy bottom. Deciding to reanchor, he revved his engine so much, his engine intake was probably sucking in more sand than water. While setting up to reanchor, he left the anchor hanging and it must have hit the hull a half dozen times.
The second, also a Bene I believe but slightly smaller, dropped his anchor and put the boat in reverse to set the hook at full throttle. He ran down his dinghy painter and rather that a pleasant day in a beautiful anchorage, they spent the day hacking the painter off the prop shaft. Bet you dollars to donuts the won't tell the charter company and sometime in the future the company will find the shaft and perhaps the strut are bent.
That's just one day in one anchorage!
I've seen them drag into other boats, doing considerable damage to both boats, on a pretty regular basis and even running into anchored boats for no apparent reason at all. Almost all bareboaters seem to have no regard for the engines, often running them wide open with no sails up at all, to get from anchorage to anchorage.
If you really need to put your boat into charter, I'd recommend you find a professional crew to operate it who will treat it as if it was their own boat. A good crew can do the majority of the maintenance and keep costs down by insuring that the person at the helm and operating your equipment is caring and capable.


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## Jammer Six (Apr 2, 2015)

If you find that crew, (*HAHAHAHAHAHAHAHAHAHAHAHAHAHA!* ...okay, that was good for me.) buy them. No matter what it takes.

They'll be worth whatever you spend in any industry in any country.


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## capta (Jun 27, 2011)

Jammer Six said:


> If you find that crew, (*HAHAHAHAHAHAHAHAHAHAHAHAHAHA!* ...okay, that was good for me.) buy them. No matter what it takes.


Apparently you've never been to the VI (and plenty of other places down island and world wide) where there are dozens of small 4 to 6 passenger sailboats being operated by professional couples just as I suggested. 
Of course, one certainly wouldn't expect you to see them up your way, as they'd starve to death waiting for enough nice days in a row to actually do a charter.


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## denverd0n (Jun 20, 2008)

Do some searching around, both within this website and on the web in general. There is a lot of discussion about placing a boat with a charter company.

Are some charterers incompetent? Yes, of course. But I think capta paints a rather more-bleak-than-reality picture of the situation. I know, capta, you're going to disagree with that. Fine, go ahead. I stand by that statement for the simple reason that you can find a lot of examples of people who have had their boats out for charter for quite some time, and have never had any serious problems with it.

From the reading on the subject that I have done, I have come to a few conclusions...

First, for it to financially beneficial, you need to be able to take full advantage of both the tax breaks involved, as well as the owners time that is available. If you don't do both of these things then, at best, you might break even. More likely you will be losing money.

Second, when doing the financial calculations, be wary of any estimates you hear about how much the boat will be worth at the end of the contract period. No one knows what the market for used boats will be like next year, let alone in five years. Any and all estimates are really nothing more than wild guesses.

Third, you must be brutally honest with yourself about how much of that owners time you will really use. The one close friend that I have, who bought into the owners program with The Moorings, was certain that he was going to be using all of the owners time, every year. Yeah, not so much.

Before buying in he did a week or two of bareboat chartering each year. After buying in he used all of the owners time the first year, and then quickly went back to one or two weeks a year, at most. If you don't spend five or six weeks a year doing charters now, it is unrealistic to think you are suddenly going to triple, or quadruple, your charter time just because you become an owner -- especially if the boat is not kept in a local marina that you can get to any day that you want.

All that said, there is a certain intangible something about being able to say, "I own my own boat." There are a lot of people who do this, and are very happy with the arrangement. Indeed, if you talk to the folks at TUI Marine (the parent company of The Moorings, Sunsail, and Footloose) you will hear that a fair percentage of their boats are owned by people who have been through the ownership thing more than once. That is, they buy a boat, put it into charter for a five-year contract, and then after the time is up, sell that boat and end up buying yet another boat to put into charter.

Good luck, whatever you decide to do.


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## JoCoSailor (Dec 7, 2015)

Jammer Six said:


> Depends on whether you're talking about a day-weekend charter company or a by-the-week charter company. They're two different kinds of companies. They have two different sets of standards, and they cater to two different types of skippers.
> 
> Most of my sailing has been in a charter fleet, in a fleet that rents day boats and weekenders. I've looked at the boats available for the week charters, but frankly, at about the time I was ready to do that, other boats became available to me.
> 
> ...


I've not seen those two types but, rather one you PAY for a boat and company "owns" its. Rents the hell out and lets use it or another boat a couple weeks a year. Not what looking for. The other is. It's your personal boat and the company tries charters it when you're not using it. (not really that simple) This is what I'm looking to.


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## JoCoSailor (Dec 7, 2015)

Minnesail said:


> However it would drive me crazy as an owner to come back to the boat every time and have stuff stored differently, things tied wrong, little things broken...
> 
> On the other hand (some) people probably treat the boat nicer than they would a straight rental, if they know it's somebody's baby. Sort of the different way you might treat a rental car vs. a car borrowed from a friend.


Well owned I've rental homes since the late 70' and vacation rental homes for 10 or 12 years. So I'm very aware of what folks can and will do to someone else's property. (I'll take the vacationers)


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## SecondWindNC (Dec 29, 2008)

JoCoSailor said:


> It's your personal boat and the company tries charters it when you're not using it. (not really that simple) This is what I'm looking to.


I managed just such a fleet (4-6 sailboats ranging from 30-45 feet) for our family-owned marina in N.C. for ~6 years and would be glad to provide info on it from that perspective. In my opinion, the closer you are to the boat, the more you'll use it and the happier you'll be with the arrangement; but we did have owners who were far enough to fly in rather than drive and who were happy customers nonetheless.

Depending on the arrangement, the starting condition/age of your boat, etc. the income from this kind of arrangement can offset moorage and insurance costs, and some maintenance. Do not expect it to offset all that AND a boat payment. There can be tax benefits as well; to take advantage of those most people need to consult a financial professional.

The way we did it was that it was the owner's boat 100%. They could block out personal time on the calendar or come use the boat on short notice any time it wasn't already booked. Obviously the time you block out for yourself during peak season can impact your income potential.

Think of it as a middle ground between chartering and full ownership. If you have to fly somewhere and you're realistically going to be on the boat less than a few times a year, chartering makes more sense. If you're going to be on the boat every other weekend and you want to be able to jump aboard and go at any time, straight ownership makes more sense. But there's a pretty broad in-between area where owning a boat in a charter fleet can be a reasonable option to consider.

Somebody mentioned not being able to keep your stuff on the boat. We provided storage space at the marina for personal items such as linens, clothes, grills, fishing gear, anything the owner wanted to use on the boat but not send out for charters.

Happy to answer any other specific questions you may have.

Disclaimer for SN: I no longer have any financial interest in any boating or marine business.


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## JoCoSailor (Dec 7, 2015)

Thanks for all the replies! 
Capta, I believe every word you wrote…I’ve seen all happen in real estate. The PM can make a big difference. For now I’ll assume the same is true of marinas.

denverd0n & SecondWindNC - Thanks for the positive thoughts. Not looking to get rich or a free boat. I’m in Kansas until the summer 2020. Then we plan to be in Virginia, on the Chesapeake. I’m thinking this might be away to get a boat now and have a place to stay while house hunting and offset some of the expense….

Next step for me is see what my accountant has to say. If there’s a tax advantage (of course that could change quickly). I’ll do more research and start looking for the right marina


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## 757guy (Mar 2, 2017)

Our Pearson 28 has been in charter for 20 years, out of Lake City MN. Tho our season is fairly short (mid-May to Mid-Oct), we live only 65 miles away so we can head out on short notice if the wx is good and the boat's not booked. Ours is an '87 model, doesn't smell new (doesn't smell badly, either!), has a few scuffs but it gets used. The charter guy does sailing schools and prefers our hull for some reason. Customers rent what they know so it's booked 20+ days. A good year brings in $4K, so, with no note to pay off, we pretty much break even on our business. A shrewd tax preparer helps, as does decent record keeping. If I go to the boat, it's obviously to clean or fix something, yes? Deduction. New piece of gear? Business expense. Sailing training somewhere? Write it down. Ill give you that Lake Pepin isn't the BVI, but we get to go sailing w/o going flying. My take: Look around your area and see if there is a lake sailing school that needs a hull. Yeah, maybe stuff will not be where you left it and you shouldn't leave valuable things aboard. But you'll go out 15-20 times a summer instead of one week, maybe two.


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## Minnewaska (Feb 21, 2010)

denverd0n said:


> ......they buy a boat, put it into charter for a five-year contract, and then after the time is up, sell that boat and end up buying yet another boat to put into charter.......


This is not coincidence. One of the sales pitches to buy the first boat is the ability to take depreciation. I assume most know what that is, but for the sake of clarity, you can deduct a portion of what you paid for your boat, as an expense. This also reduces what you theoretically paid for the boat, when you sell. In other words, as you take depreciation deductions, you reduce your tax basis in the boat. Eventually, this basis becomes zero, when you've fully depreciated in a handful of years. As you sell, even if at a disappointing price, you will pay tax on the amount that exceeds your basis. This recapture is not emphasized, when the charter companies are trying to sell you a boat.

The solution? Buy another boat. Tax law, in the US, will allow you to transfer your basis into the next boat, if you choose. Many do, to avoid recapturing the basis and paying up.


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## eherlihy (Jan 2, 2007)

What happens when a Charter guest breaks something important, like a mast, on your boat? There was a post somewhere on SailNet where a boat owner had this happen. While the charter company reimbursed him for the depreciated cost of a replacement mast, the owner was unable to find an appropriate mast at any price. His boat was therefore ruined.


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## 757guy (Mar 2, 2017)

That's pretty much what insurance is for. Some folks who chartered our boat found it necessary to have an alcohol fire in the galley. They coughed up the deductible and my insurer inspected and sent us a reasonable check. A mast not available? Hard to imagine that.


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## eherlihy (Jan 2, 2007)

757guy said:


> A mast not available? Hard to imagine that.


Not at all. I was teaching in May on a school boat when we were dismasted (it is a long story). The owner of the school filed an insurance claim that month for a replacement spar. In October of that year, after losing an entire season while waiting for the insurer to make good on the claim for the mast, the owner canceled the claim and bought and reconditioned a used mast out of the school's operating budget. The work was completed over the winter, the boat surveyed for insurance purposes, and it put back in service the following year.

The boat was nothing exotic - a Lippincott 30 with an Isomat mast.


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## Minnesail (Feb 19, 2013)

757guy said:


> Our Pearson 28 has been in charter for 20 years, out of Lake City MN. Tho our season is fairly short (mid-May to Mid-Oct), we live only 65 miles away so we can head out on short notice if the wx is good and the boat's not booked.


I've looked at your boat online! We usually charter out of Bayfield, but occasionally I think it'd be nice to drive one hour instead of four, so sometimes I look at Pepin. Looks like a nice boat.


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## 757guy (Mar 2, 2017)

Thank you sir. We have some woodwork to finish up and a mast to step after it goes in. Given the weather we've had, she could dunk in early May. We already have one weekend booked in June with some Northern Lights folks.


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