Co-ownership of a boat - ideas for defraying the cost of boat ownership

[dcg9381]

I own a 1998 23.3 foot Glastron power boat.
Boats are not frugal purchases. We all know this.


I've been trying to come up with ways to make the boat ownership work for me, rather than work against me. The obvious way to do this is to rent it out. Unfortunately, insurance for "charter" boats is signficiantly expensive (think 5x the cost of full coverage) and the insurance company doesn't really differentiate between a full time chartered boat and one chartered a few times a year. The other obvious issue with a rental is that people treat rentals like rentals... And with a high performance boat, this can lead to real trouble.

My new idea is to sell off 3 shares of partial ownership. There are 4 shares total (including mine). Each owner owns 25% of the boat.
Insurance is reasonable because the boat is privately owned, not chartered.
I'd sell off 3 pieces of boat ownership at market retail value of the boat, which gets me to almost zero total investment in my 25% share and covers some of overhead of "managing" the boat.
Let's say a 25% interest in a 20k boat cost $5000.
Additional costs:
1) Cost of maintaining the boat would be split 4 ways. An escrow account would be established with funds provided up front. Normal maintenance costs are easy to estimate.
2) Cost of slipping the boat would be split 4 ways. I?m in a community that provides a substantial discount on slip costs. Again, I?d escrow these funds which would be required in advance.
3) Cost of insurance ($400-$500/yr) paid in advance.

All owners would be listed as loss payees on insurance.

Individual owners would be responsible for non-wear and tear damage below insurance claim status. How to monitor this is a little tricky.

Individual owners would be responsible for individual fuel usage.

I have access to software that would allow easy online scheduling for use. There are 8 weekend days per month. All owners get 2 weekend days per month, with some limits and roll over exceptions.

Co-ownership isn?t a new idea to the boat industry. There are all sorts of ?boat clubs? where owners pay $5000-$7500 (in my area) to have access to several boats. This is a lease arrangement with zero equity, and limited use, often indicated as less expensive to true boat ownership.

I?d offer a 2 year ownership period after which the boat gets sold. The boat would be offered to owners (first right of refusal) at some pre-determined value, otherwise to be sold at market. Proceeds from the sale are split evenly between 4 members. Chances are that everyone would get back more than 50% of what they paid?.

Any thoughts?

 

[SpinnerBait_Nut]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Boat topics and questions, non engine forum

 

[salty87]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

sounds like a nightmare of legalese. how do you plan ahead for all contingencies?

i don't even let my family take my boat without me. i wouldn't be interested, too many restrictions. there are plenty of turn-key owners though who would rather not deal with the realities of ownership. but, that's alot of money to have to wait your turn for your weekend.

 

[dcg9381]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Yes, it might be a nightmare in terms of legal structure. The concept exists for private aircraft as well as for some of the higher end boats. I can work that side of it out as a partnership or some sort of LLC.. Don't know yet, I'll have to look how it's done with planes.

There are several companies doing boat "clubs" for profit - but there is no ownership.. They're essentially rental arrangments which makes liability and insurance a nightmare - probably part of why the cost is so high.

I think the amount of weekend use we need as boat owners varies a lot between person to person. I live in a "lake community" - we're 2 blocks from the lake, but too poor for lakefront. 90% of my neighbors have boats. I'll bet that I'm the high use case in the area - using one to two days per month average.

I have software to manage the logistics of reservations.. Talking strictly weekends - if two days per month isn't enough, then that's great feedback for me. Holidays are something else to consider.

It is a lot of up front money to wait for a weekend, but it amounts to about 10 days of a much smaller less well equipped runabout rental boat in my area. The big upside is that the majority of that money would be returned upon sale - as it's not new, someone else has already taken the depreciation hit.

Still thinking about it...

 

[thunderroad]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Sounds like a mess. Just my opinion. The most fun part of boating for me are the times that we say "hey...the weather is supposed to be great this weekend. Let's head for a lake somewhere". I just can't imagine boating being "scripted" as to which weekends you can and can't use a boat. Doesn't sound like fun at all. If I can't afford the cost of a boat, I'll find a less expensive boat.....and still have as much fun as the big boys.
You start talking about using "software" to manage "boat reservations"....the whole point gets missed, IMO.

 

[luckyinkentucky]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Doesn't sound like a good idea to me either. What about popular boating holidays like Memorial Day, The 4th of July, and Labor Day? What are you going to do .... raffle the winner? It wouldn't be long before the other people bailed on you, and left you with the bill. If people pay money to own something they want to feel like they can use it all of the time, and whenever they want. This wouldn't be the case in your proposal. The other 'owners' would be disgruntled before too long, and you would be stuck with them unless you could figure a way out. Co-Ownership of luxury items NEVER works out. Look at the turn around of condominiums in resort areas. People pay $300 a month to be able to stay in 'Their' condo one time a year. Before too long they realize it would be cheaper to buy a house near those areas, and you find their 'time share' on the market. If this was such a good idea why is the resort 'time share' market going down the drain? They have to pay YOU to come listen to a seminar and hope there is one or two suckers in the mix.

 

[WaterWitch2]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

I know two friends that did that and then they weren't friends. It took them a few years to get over it.

 

[Bigprairie1]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

My friends and I talked about doing this at one point. However, the issue of who gets what when...etc, made it difficult to go much further with it. The biggest hurdle we faced at the time was what type of boat. You already have the boat so that helps your situation if you proceed with it.
In the end, I got a great deal on a boat and thus did not feel a need to have to seek a shared arrangement to pay for it. Although I was approached about it tho' I thought the prudent thing to do would be do not involve friends in that kind of a deal. However, I am happy to let them use it if they want to, provided they pay for all incurred expenses.
For smaller boats (under 25') I would just find something that suits my budget....or make sure the other members of your group are good boaters...but not friends.

 

[dcg9381]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Yes... I understand that part of the joy of boating is a bit of freedom... Point taken!

 

[GatorTom]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

This has been tried with boats many times and failed most of the times. Usually with no one being friends anymore. Good luck to you. If you can make it work, you will be one of the few.

 

[JB]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Take off those rose colored glasses, DCG.

A really bad idea. Your chances of coming out ahead, even financially, are very poor and your chances of getting mired in a morass of legal problems is great.

 

[Bondo]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

A really bad idea.

Ayuh,.......

Boats ain't Planes,........

Planes rarely run into Realestate,....... Boats do it Regularly,.......

 

[dcg9381]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Take off those rose colored glasses, DCG.

A really bad idea. Your chances of coming out ahead, even financially, are very poor and your chances of getting mired in a morass of legal problems is great.

Thanks.. Risk vs reward ratio noted...
I'm hearing a lot of "not a good idea" - which is noted, especially on this forum.

 

[Silvertip]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

Ditto on the planes ain't boats. There are two very significant differences. 1) Pilots have licenses that say they are qualified to operate that particular plane. 2) Planes are serviced by licensed airframe and engine techs. Unless the members have a certificate indicating they have passed a Coast Guard approved boating course and have gone though a test run with you to prove they can handle the boat, I wouldn't let them near it. If they have no clue about the mechanics and electrics on the vessel, they would not get near it. Then there is the issue of "this wasn't broke when we had it!" And it's exactly that little statement that will break up the party. Johns turn comes up, he piles his family in the boat and its broken. The weekend is shot because someone else broke it and didn't report the problem or have it fixed. Ain't no way I share my power tools, vehicles, boat, cars, or trucks unless I'm operating them. If you think you can make this work, get four people in a car pool sometime. Most of those don't work for more than a couple of weeks either.

 

[aerwin]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

I wouldnt do it again. I did that with a buddy of mine, went halfs on everything. it ended up straining the relationship. i used it 10 times more than he did but things broke when he took it out. I ended up buying him out. I knew I had to if we were to stay friends. boats are supposed to be fun, not a nightmare. ask country bumpkin

 

[Scaaty]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

A dual ownership of a boat is a disaster in the making..
A ten foot pole aint long enough for me to stay WAY away...

 

[arboldt]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

guaranteed to maximize irritation and ill will.

15 years ago my wife and her sister agreed to dual ownership of their parents' boat after they passed. Within a year, neither our nor my sister-in-law's families were speaking to each other. Hmm... now what's the problem?

Seriously, all I can foresee are problems for that. If the cost of ownership is too much, get a less expensive boat.

 

[Mark42]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

If you want an almost new boat really cheap, go to Mexico. I understand they have lots of lightly used late model boats for sale.

Ya might want to think twice about registering it in the USA though....

 

[dcg9381]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

This is the conclusion that I've come to:
Boat partnerships often don't work, especially in regard to handshake or word-of-mouth agreeements. There is too much liability and too much opportunity for partner A to not take responsbility for the costs of boat ownership.
This is almost always true when responsibilities are ill-defined even in the best intentioned family or friendship relationships.


Most of the positive comments I've received from other boat owners that say it can work setup these deals as:

1) Structure an LLC to limit the liability of each partner. Otherwise all partners are liable for the screw ups of a single partner.

2) High liability insurance limits.

3) LLC has clear structure in regard to who pays for what. Expected Costs of ownership are more than paid in advance - there is no collecting payments or waiting on individuals to pay. The partnership gets funded up front for non-purchase expenses and these funds are left in escrow. A single individual "manages" the escrow funds and repairs/maintenance of the boat. Lay out clear rules for who is responsible for what.

4) Define what happens if a partner wants out. IE - they move, get divorced, want to sell, etc.

5) Definte terms for removal of a partner.

6) Define the "sunset" period - setup a specific sale date with a specific sale price, who has the option to purchase the boat, and how the remaining funds are disbursed.

Prospective partners agree on well defined terms up front. Good definition doesn't eliminate problems, but almost all the "success" stories I've been sent were instances of well defined written partnerships.

Partners should be experienced boaters and/or are required to have a minimum level of boater education in advance.

Also: 4 partners is too many on a smaller boat...

 

[rheyboer]

Re: Co-ownership of a boat - ideas for defraying the cost of boat ownership

DCG:

Yes, 4 is too many people. Also, since it is already YOUR boat you will have a much different emotional attachment to her than a new partner. I didn't understand the idea of selling the boat after a couple of years either.

I am a co-owner with a friend. It is the second time I've done this (different friends) and all is ok. I think the key has been, in both cases, there were only two owners involved and we bought well-used boats. Good, solid Great Lakes boats, but they already had their scratches and scuffs. My current partner is rough on things (he goes through a prop a year..me never), but having someone split fixed costs is great as both of us only use it 10 times a year or so.

I've never had anything but a handshake deal with the agreement that you fix what you break. If the deal goes sour one of us will buy the other out or we will sell it and split the $. Considering the money I'ved saved with the half cost thing no matter what happens I think I'm way ahead. If I end up losing a friend I'll get a different boat. That should attrack a few new friends, eh?

If I was dealing with a new boat or, like you, getting others involved with a boat you have already invested blood , sweat and tears into, I don't know if I could do it. In an older boat, what is one more scratch as long as she floats and runs well? Good Luck.