Boat sharing and yacht syndication

By: Michael Troy

Presented by
  • Trade-A-Boat

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Is boat ownership too expensive? With a boat share (also called syndication or fractional ownership) you’ll be surprised how often you can get on the water – and for such little cost.

Boat sharing and yacht syndication
Yacht syndication (that is, a boat share arrangement) is one way to have a boat for a fraction of the cost.

They are two of the best days of your life: the day you take possession of a yacht, while the other, of course, is when you sell it. Let’s face it, yachting is not for the fainthearted and many people’s dreams are often sunk by the financial realities. There is an old way, however, to get the best value for your money, spread the risk, and manage a seaworthy investment more effectively — form a syndicate. Just think of it as a ‘shared portfolio’ with a guaranteed profit on the lifestyle scale and a known loss on the financial end.

In three decades of sailing I’ve seen just about every scheme on offer to get a boat without taking the wind from your finances. Up till now I’ve taken the safe route and bought a half share in a secondhand boat I can easily afford such as my last Etchells.

 

HOW TO BOAT SHARE

Now, as I approach my half-century, I have an irresistible urge to own something a bit more comfortable. I want a proper head as peeing overboard is not without risk and older men found drowned at sea usually have their fly undone. And I’d even like to take the kids cruising and experience a few luxuries like an onboard barbecue and a cold beer from the fridge while relaxing at anchor off one of the many beaches in Sydney Harbour or Pittwater.

I’d often considered investing in a charter boat so I could claim a big tax benefit. The problem is you can easily end up with a cash-flow problem from servicing the high interest payments before realising the tax loss at the end of the year. Besides that, you rarely get to use your new yacht, which is finally handed to you after five years of "charter hell" looking like Jessica Watson has just sailed it around the world.

 

BOAT SYNDICATION: PROS & CONS

Another popular way of getting onboard an expensive yacht for a reasonable price is through a professionally managed syndicate. Smart Boating in Pittwater, for example, offers excellent value for cruising yachties, with a one-tenth share costing around $30,000 to $40,000 allowing for five weeks sailing a year. However, their system doesn’t suit everyone and the monthly all-inclusive service fees are painful at around $500 a month, adding $18,000 to the three-year bill. There is also a risk with any management company that it could go broke, as has happened with some powerboat-syndicate operators.

That’s why I decided to try the DIY (do it yourself) syndicate. It’s a lot more hands on, much cheaper and allows the yacht to be located closer to your home in Sydney Harbour, Botany Bay, or wherever. The benefit of buying a new yacht is that you gain from the latest in technology and ergonomics and your costs are pretty predictable for a few years at least. I was surprised, though, how quickly it has all come together and how it all seems to make perfect sense (at this stage at least).

One friend had been looking for a timber yacht for years. I asked him if he was a shipwright and he said no. I said: "You soon will be."

Only the super rich and retired people have timber yachts. You spend far more hours sanding and varnishing than ever sailing one. His wife, too, was not impressed with facilities, or lack thereof, down below. He finally gave up on his "Hemingway" dream and came round to the idea of a modern cruising yacht. As a bonus he had a mate who was ready and keen to get onboard too. Another friend soon put up his hand.

 

DIY FRACTIONAL YACHT OWNEERSHIP

There are many pitfalls to yacht ownership and the dream can quickly turn sour if you don’t do your sums and homework. We first compiled a written agreement and then set a budget before looking for the most appropriate yacht to suit all our needs. The four of us wanted to be able to take our families sailing and to also compete in twilight racing with the occasional coastal cruise.

We looked at some secondhand yachts but eventually agreed on the new Hanse 320. At 32 feet, or 9.6 metres, she is the baby of the Hanse range but still has plenty of room above and below decks. Our rationale was why go bigger in length when most of the time no one will crew with you anyway and we weren’t planning to sail around Australia!

As they say, the bigger they are the harder the financial fall.

Maritime authorities charge everything by length and I’m sure the rationale goes that if you can afford a big yacht you can pay for all the poorer people in the bay. Slipways, too, charge by the foot and everything that breaks on a big yacht costs so much more.

 

WINDCRAFT BOAT SHARES

Windcraft at Bayview in Sydney’s north sell the Hanse brand. Sales director, Mary Bickley, last year put together a package to ramp-up stalled sales and allow new-boat virgins to get onboard with the help of the Global Financial Crisis.

The Start Line deal was designed to take advantage of the strong Aussie dollar and weak Euro to deliver a brand-new, quality German yacht on the water and ready to sail for just under $200,000.

Mary is proud of this deal, which involves a complicated mix of imported and local features, and she believes the Hanse 320 will prove a great entry-level boat. Several have already arrived and there’s now talk of racing them as a class.

The Hanse 320 is a nice looking boat and the architect in our syndicate was very impressed with her lines. Several reviews rated her as a quality performance cruiser with lots of room, an easy-to-use sail plan and a self-tacking jib. A lot of cruising yachts (that shall not be named here) are often described as more like floating caravans than sailing yachts. We are used to doing well in social racing and didn’t want to be condemned to the back of the fleet.

 

BEFORE YACHT SHARING: TEST IT

The test sail is where you can really decide which boat suits. One of our tactics was to wait for a foul-weather day to push the yacht. It’s too easy to fall for a glamorous looking boat that sails well in a 15-knot breeze. We wanted a forecast of gusty 20-knot winds and didn’t mind if it rained. We asked if Mary was up for it and without hesitation she jumped at the chance to sail in some ugly conditions blowing in across Pittwater.

The Hanse lived up to its reputation as a stiff yacht that could still find her groove in 20kts with a full main up. As two of the syndicate members are relative beginners it was important, if not vital, that the yacht we chose could easily handle gusty conditions. There’s nothing like a wild round-up with inexperienced crew to crack any new skipper’s nerve.

The Hanse 320 we test sailed also pointed well and was very sure and light on the helm. Then the rain came on cue and let us know if there were any leaks. Dripping wet, we returned to the dock with the conviction the 320 was the right choice and we even agreed on a light grey hull colour and not another AWB (all white boat).

So we set about crunching the numbers. We calculated annual running, mooring and maintenance costs over the three-year period would be about $2000 each. We also estimated a 20 per cent total depreciation over the period and a five per cent sales commission. We figured that after the boat was sold we would receive about $38,000 each back from our original $50,000. The total bottom line cost to each syndicate member therefore was around $125 a week!

 

BOAT PARTNERSHIP MAXIMISED

In NSW last year, 217,000 boats were registered and I bet most of them weren’t out on the water for more than a few weeks a year. The more they sit idle, the more barnacles they gather and the more a chore they become for the hapless owner. No one seems to have enough time these days and even less to use a boat to its full potential. The Boating Industry Association estimates most boats are only used for five to six weeks a year. So even with four in a syndicate there’ll be plenty of time to use the boat as much as possible.

We will use a free Google calendar booking system so that everyone can use the internet to quickly see who is using the boat and when.

The basic sharing formula involves each member getting every fourth weekend, but if they can’t use it then the golden rule we go by is "always offer back to the syndicate any time you can’t use the boat rather than asking others to change their times". School holidays can be booked on an equal share first-in first-served basis.

As I used to run my own sailing school and am a yachtmaster instructor I have set up a special "the other half training" course, as it is never a good idea to teach your own partner to sail. This should ensure all syndicate members can operate the boat safely and efficiently without ruining their marriage or the vessel.

 

10 REASONS TO BOAT SHARE

So, all that was left was to convince our spouses that we could splash out and safely invest in a brand-new yacht, putting together my top 10 reasons to form a Hanse 320 syndicate:

1. A yacht is a sound investment — It might sound crazy, and we’ve all heard the stories of standing under a shower of 20-dollar bills, but the Global Financial Crisis has proved a yacht gives a better return than superannuation and many shares. Don’t believe me? Over the last three years $50,000 invested in ANZ shares would have resulted in a net loss of $13,000, NAB $19,000, Telstra $18,000, Timbercorp $50,000, Myer $5000 in just six months and Storm Financial your life savings!
Sure they may go up but they may also go down again. The uncertainty is killing us. Compare this to the known total outlay for the Hanse 320 of around $18,000 over three years!

2. Survival and education — With global warming and three-quarters of the world’s surface water it’s pretty important to learn to sail (just watch Kevin Costner’s movie Waterworld). Also, if we compare the three-year syndicate costs to school fees it’s way less than one year at a leading private school for one of your children, which clocks in around 23K (and that’s without taking into account extras).

3. Tsunami — The safest place to be in a tsunami is out to sea (although up a hill does work well too).

4. The Foxtel argument — To convince you and spouse that it’s not much money really, simply break costs down to a daily rate and compare it to the price of an everyday item. For example, "The Hanse 320 will cost me less than a sandwich and two coffees a day." Alternatively, you could equate it to "two beers a day", "a few good bottles of wine a week", around "one pack of cigarettes a day", or "less than it costs to run the car".

5. Wellbeing — What price can you put on your health? A yacht get’s you back in touch with the elements and allows you to breathe the freshest air in the world blowing straight into Sydney from the Pacific Ocean.

6. Cheap waterfront holidays — Where else can you get an absolute waterfront apartment for around
$120 a week? Your kids will love you and you can save on average $2000 in charter fees every weekend you use the yacht.

7. Singlehanded sense — The Hanse 320 is small enough to be handled singlehanded. Passengers not wanting to take part are not forced to work and marriages can survive docking and anchoring drills.

8. Gift buying bonanza — Kids and partners will never have to think of what to buy you for a present anymore. They can now choose gloves, shorts and T-shirts with corny logos like "a bad day on the water is better than a good day at the office", "I’d rather be sailing", "may the wind at your back not be your own" and "gentleman never sail to windward".

9. Save money on restaurants — Pitch Channel Seven for the new cooking show My galley Rules so as to take full advantage of the Hanse 320’s excellent oven and barbie.

10. Family time — There’s no better way to get close to the family than squashed up together on a small boat all night (as long as no one snores). Also, older kids make good crewmembers.

 

THE BOAT SHARE VERDICT

Now that we have signed on the dotted line we are committed to owning a new yacht for the next three years. What could possibly go wrong? The most common complaint I’ve heard from other syndicates is of members that leave the boat dirty. We have set down some rules to avoid this and made everyone do more domestic chores in preparation. Getting posted overseas is also a bit of a bummer as is losing all your money on the stock market.

There’s just one problem, though, that stumps everyone: getting four people to agree on a name. This could take weeks, but we do have some time till the boat arrives and we have planned a few "naming dinners" to help bond the syndicate.

So far Four-play has been rejected along with any names that involve Greek gods, mermaids or TV shows (e.g. Seachange). With four guys looking for solitude on the seas one wife suggested "Watershed". I thought, because of the potential for financial disaster and the fact it will be my first yacht with a working head, the new Hanse should more appropriately be called "Waterloo". We look forward to taking delivery of "What’s-her-name" around August in what should be the first of two of the best days of our lives.

 

Photos: Sydney dealership Windcraft believes the Hanse 320 will prove a popular entry-level yacht; Michael Troy and family onboard the new Hanse 320.

 


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