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Chartering your boat

Discussion in 'General Yachting Discussion' started by luvtocruise, May 27, 2021.

  1. luvtocruise

    luvtocruise Member

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    So, in discussing the boat we are buying with the CPA and the Attorney — both suggested for liability purposes we put the boat into an LLC. Ok I was good with that— then both suggested we might consider looking into chartering the boat when we are not on it. There will be blocks of 2-3 months where we will be back in Texas and the boat will be in Florida. I immediately said this was not something I would consider, we had a beach house for 10 or so years that I was pretty much the only one who used— I never even considered renting it out.
    The CPA suggested I not be to hasty, and that a number of his clients did this and chartered their boats out for Sundowner Cruises as well as Dinner Cruises not overnight stuff. He said they have the captain lock the doors to the staterooms and basically people rent the boat to have cocktails— He said things do get “dinged” but its really minimal and its a great way to offset costs, realize depreciation and have the boat exercised when not on it. There are yacht management companies who handle all of this. When I ran it by the broker he said absolutely and he could offer some companies as well as Captains his other clients had used with great success.
    Sounds kinda crazy to me— is this a really a thing? Anybody do it? Does your boat get torn up? What has been your experience? People would really pay what sounds like a family decent amount of money to just go watch a sunset on a boat?
  2. Pascal

    Pascal Senior Member

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    Hard to answer without knowing what kind of boat and where it will be docked.

    the day charter market has changed here in SoFl especially Miami. A few years back it was an option as long as you had a good crew. Nowadays, you don’t want the kind of people that are chartering on your boat. I m not going to into details because of PC / woke police...

    We do charters on the boat i run, in fact the owners are former charter guests of ours, but no longer do day charters, only weekly charters in the Exumas.
  3. luvtocruise

    luvtocruise Member

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    58’ sonship for now we are planning to keep her in the Tampa Area— early next year we will move it to the Bahamas and then back to Ft. Lauderdale or the area— or Puerto Rico — not sure.
  4. Pascal

    Pascal Senior Member

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    Tampa should have better clientele than here... the key though is to have a good captain and mate.
  5. luvtocruise

    luvtocruise Member

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    CPA said if we go this route— we need to use subcontractors and not have employees for some reason — I’m not sold on the idea of sharing my toys yet—I would prob. Do I it if I could find an OCD captain and mate. I am sure they exist its just been my experience you find the turds first before you find the gems and that might ruin my day.
  6. NYCAP123

    NYCAP123 Senior Member

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    Your CPA is talking about bareboating your yacht so it can carry more than 6 passengers. You'll need to present your charterer with a list of captains for them to choose from and your regular captain can't be on it. Quite frankly you don't sound like chartering type people. You don't sound like the type of owner who wants people holding parties on your boat, doing whatever in your beds or smoking whatever in your salon. You can charter to 6 passengers and use your captain, but how many people are going to lay out the kind of money involved just to day cruise with 6 on a 58 footer? Then there's the possible scrutiny from IRS.
  7. olderboater

    olderboater Senior Member

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    I'm very skeptical of CPA's recommending such as I would be very afraid of them taking greater depreciation and expenses that reasonable and also the idea of contractors instead of employees gives rise to questions on my part.

    First the finances of chartering and when it helps and how much and when it doesn't. If your usage is going to be far more than the charter usage, then at most it will offset a few expenses. The depreciation and other deductions would be minimal. However, the charter fees would give you some spending money and at least offset the higher insurance costs and docking costs.

    If, however, you're going to use it very little and charter a lot, then chartering can eliminate a sizable portion of your expenses and make for sizable tax deductions.

    This is much like chartering vs. buying. Whether you own and charter to others or whether you charter, chartering makes sense for those who use the boat very little but not so much for heavy users.

    You think, I have a couple of months here. Well those months are the ones you need to do maintenance and to give crew time off. However, if you only use the boat two months of the year, it's far different.

    All this is without the personal side. Boating is your recreation. Do you want to cloud your pleasure with business and create additional worries? The boat is your private sanctuary. Do you want to allow others you don't know to use it, to sleep in your beds or to lounge on your deck. Do you want nicks and scratches and spills that you know nothing about how they happened? Did you buy a boat to share? The only way I would ever consider it was with my crew that I knew and knew I could trust and was on my payroll.

    I've said no to businesses having to do with boating so as not to mess up my pleasure with business. For those reasons, I say no to chartering. However, the only way I personally would ever charter would be when moving to a new boat, I might hire a crew and put the old in charter, but I don't really ever see myself doing that. I'm in the Boating Recreation and don't want to be in the Boating Business.
  8. chesapeake46

    chesapeake46 Senior Member

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    Exactly.

    I had a friend that day chartered his sporty around Annapolis MD. Some of his rules included NO RED ANYTHING on the boat. Red wine, Red sauce, Red anything because of stains in the carpet & upholstery. Which he learned the hard way.

    People unused to marine heads ? Newp.

    Sea sickness in the head ? Newp again,

    A CPA is looking at it strictly from the $ standpoint, no emotion attached.
    I could not do that with my personal boat.

    We spend so much time on ours it would not make sense anyhow but I'd never do it.
  9. olderboater

    olderboater Senior Member

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    You've also got to be careful even with advice from CPA's. Major accounting firms have pushed tax shelters that were deemed by the IRS to be tax avoidance and all the clients ended up owing large amounts. I can easily picture a CPA building a little niche of boat owners who charter. Years ago it was owning horses so daughters could be in shows and claiming to be breeding, but IRS put in hobby rules. I can't speak of the CPA in question but I can tell you I've heard of CPA's on plane and boat chartering pushing things that I don't consider legitimate.

    The big tax issue is over the allocation of expenses and depreciation to personal vs. business. Many long years ago after my father died I handled the audit of one of his former clients. Young agent in training tried to say his plane wasn't a valid business expense. I showed the logs, used for one trip during the year which was clearly a business trip. Used for three days. Agent then said it was stupid to own a plan for one trip a year. I said I agreed which was why he sold it later but expenses don't get denied because business owners are stupid.

    A boat or plane being chartered is not likely to ever get you audited, but if you do get audited, I can guarantee it's something they will look at carefully and will question the calculations. So, make sure you've done it by the book.
  10. CaboFly

    CaboFly Member

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    I couldn't charter my boat. I understand it financially makes sense but it is just not worth it to me. If you had a Captain and didn't handle most maintance yourself and also had a mainly unemotional stance towards the boat then it could work for you.
  11. olderboater

    olderboater Senior Member

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    And we love our crew too much to subject them to charter guests.
    CaboFly likes this.
  12. Pascal

    Pascal Senior Member

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    Our experience with charter guests over the last 13 years has been very different. We have never had an issue with anything being damaged or trashed. No red wine spills... no issues and very little additional west and tear. If anything having a boat being used regularly is a lot better than one that just sits for a couple of months

    Many of the families who have come on board the boats we ve run have become repeat following us up when we moved to larger boats. Some have become friends over then years

    one guest ended up buying his own boat which we are running now doing some Exumas charters. They really don’t need the charter revenue but like the idea of the boat being a business.

    now as I said, we have stopped doing day charters 5 years because of change in clientele.
  13. olderboater

    olderboater Senior Member

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    I'll bet you lay out the rules carefully to new charter guests as well. I would agree that weekly is far safer in terms of the type charter guests than daily is. We have friends who have gotten into rental homes and their minimum is a week. They don't want fraternities and sororities and similar just using it for a big party, same issue as boats.

    Also, if you can get repeat customers, always best.
  14. Capt Ralph

    Capt Ralph Senior Member

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    My friend Pascal has been blessed with many years of operation coming back to his and the owners positive.
    He has repeat customers. He has references from those customers that set the field. He screens new customers with the expected expense schedules.
    Many years of positive relations and customers have proven well.
    The ships owner considers The captains comments/advice very well.
    This is the team that is now considering a larger boat.
    It does not get sweeter than this.
    A tight relation ship with owner and on ship management.

    A new and wanting charter company will be short/lax on these until established (if).
    Starting a new charter company with today's issues could cause lots of bad dreams.
    IMO, on the fly captain & crew is the wrong way to run a boat. A constant and dedicated crew will prove returns faster and protect your investments better. They have a stake also (continued employment).
    A good business does not happen automatically or (IMO) short term.
    To the OP, if you do not have the room in your portfolio to loose anything, I would recommend a second look and/or bail.
    Your partners may be looking at a loss company while having a boat to play with short term.
    Last edited: May 27, 2021
  15. LuvBigBoats

    LuvBigBoats Member

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    Surprised no one has mentioned CG rules and higher insurance costs if you charter.

    I thought any boat being chartered had to satisfy a whole host of requirements that don't apply to boats not being used for charter. Also would have assumed insurance requirements and costs would differ.
  16. Capt Ralph

    Capt Ralph Senior Member

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    There are pages and pages of rules for inspected vessels, and non-inspected vessels. As captains and smarter operators, these CFRs are on our minds or libraried with in reach.
    IMO, Unless a particular topic or concern is raised, further comments about the buckets of rules are understood and not mentioned much.
    Also, with less discussions on the rules, helps keep the feuding down between the folks that know the rules, those that think they know the rules and those that have not a clue but act like they do.

    Insurance is a topic and getting serious, even the private, non-business owner / operator is having issues with insurance coverage.
    Commercial policies have gone to thin-air heights already.

    This was another automatic thought until the air got to thin to breath. IMO, this issue will continue to be a topic for a while to come.
    ie; https://www.yachtforums.com/threads/insurance-will-not-be-renewed.34730/#post-315734
    and others.
    Last edited: Jun 7, 2021
  17. Pascal

    Pascal Senior Member

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    If operating as an un inspected vessel (up to 6 pax under 100GT, up to 12 pax over 100GT) there are very few additions safety gear requirement compared to private use. The biggest one is having Type 1 PFDs.

    same with bareboat

    On the other hand inspected vessels have to have a number of modifications incl higher railings
  18. Oscarvan

    Oscarvan Senior Member

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    From all I've read and all I've seen there are two scenarios:

    1: Your boat, as OB said, is your sanctuary. Everything is just so, and you put a lot of money and even more love sweat and tears in to it. Close friends are allowed on board. I trust them to respect me and my quirky ways and treat the boat with utmost respect.

    2: Your boat is a business. It's a spreadsheet, an asset. And it comes with said CPA. And crew. And if you're on it you have very little, if any, emotional attachment. You keep it looking and running so it does the business and the customers are happy.

    I won't mix the two.
    motoryachtlover and bayoubud like this.
  19. jonrd463

    jonrd463 New Member

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    In thinking about my future boat, chartering was something I weighed for the oft-cited cost offset, but in the end, I don't think I could for reasons stated here. I would feel the same as I do about my home. I have more bedrooms than people who sleep in them, and people have asked me why I don't let out any of them and the reason is simple: My home is my castle, and I don't want strangers here. My boat would be my floating summer palace, and the feeling is the same. So for costs, I draw a final conclusion-- if I can't afford to operate it without chartering it when I don't use it, then I can't afford to buy it.
  20. luvtocruise

    luvtocruise Member

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    I am leaning away from this— granted this isn’t the boat I wanted— but it what the warden wants — I personally think we need 10 feet mas — but I was out voted… and for a number of reasons I conceded defeat.
    The next boat will be 72-75 I think thats the sweet spot, but we will see — so this is a starter boat to see if show loves it as much as I do — so I am not emotionally attached to this craft as I normally am to boats— but when I get in there no wrench around a little that might change— still on the fence— but always leaning towards my stuff is my stuff solely because I worked for it