Buying a 2nd hand yacht for charter or taking over an existing lease might be a valuable alternative to buying a brand new yacht with added benefits. 'Fidelio', a Lagoon 450 based in Australia provides some insights...
There are plenty of deals by bareboat charter companies enticing you to buy one of their brand new yachts straight from the factory.
Various business models advertise guaranteed income and free annual ‘owners weeks’ for personal use. Given their close affiliation and sometime ownership involvement with specific shipyards, this makes sense from their perspective.
When times are good, all works well, as documented numerous times on this blog. But what about buying a 2nd hand yacht for charter or taking over an existing lease to reduce your risk as well as initial capital outlay and still get involved in what can best be described as a ‘life style’ option?
Colin Budich, owner of ‘Fidelio’, a Lagoon 450, has done exactly that and he shared some of the finer details of his experience:
Hi Nils,, We purchase ‘Fidelio’ off QYC (now Dream Yacht Charter) in the Whitsundays . I have noticed your various charter travels. You have been out on their Lagoon 421 ‘Traviata‘ in the past so you know their operation.
‘Fidelio’ was about 4 years old when we took her over. After looking at other boats coming into the country, we figured that we would have had to put them into survey at an approximate cost of $30000 plus import duty and GST. The beauty of our deal was that all those costs were avoided plus we inherited any future bookings.
Depending on your tax situation, the devaluation of the boat can be very tax effective. It is currently at 13% per year for a tax deduction. About$ 60000 P/A in our case.
We intend to slowly fit the boat out to go cruising in 2022 and also claim those costs against current tax.
This past 10 months have been pretty challenging but I think we will come close to break even for the year. Last year was pretty profitable.
So for you, the primary benefit in making it work financially are the tax benefits?
I think you would make some money without the tax benefit. But that really pays for the loan interest. We keep 66% but about half of that goes to expenses in a good year but more in a bad one.
We grossed about $ 200000 in our first year so there was plenty for upgrades.
Your figures are pretty much in line with Paul Roger’s who owns the Lagoon 421 ‘R&R’ with Whitsunday Escape in Airlie whom I talked to. Did you look at any other boats at the time?
We looked at a 2017 Nautitech Open 40 but it was asking nearly $700000 at the time. Our engines were the only real worry as they had about 4000 hours when we bought her. I thought at that rate they would be too old to go cruising on. In one way its lack of charter in the past year will be good from that point of view.
A lot more things do need to be fixed when chartered. Toilets, winches, sails, stereo, hatches. At least a lot of things will have been renewed before we cruise for a year.
So do you think buying a 2nd hand yacht for charter is a worthwhile exercise?
I think there will still be a fair bit out of our own pockets to fully upgrade to cruising standard before we go. It really would pay for itself if you just wanted to cruise QLD for four or five weeks a year.
Any other comments you have that you might like to share?
Apart from some shameless self-promotion? Try ‘Fidelio’ through DYC at Airlie Beach. We also have Facebook site that we encourage clients to join so we can get photos and feedback. Friends of Fidelio. Take a look if you get a chance.
Thanks for your time and insights Colin. I will check out ‘Fidelio’ next time I am up in the Whitsundays for one of my ‘owners weeks’ – they have been noticeably absent this year!
What a lovely post you wrote about The Catamaran’s Journey, in which you purchase a used boat to rent out, and you did a lot of enjoyment that day. This blog is extremely intriguing. I really enjoy the articles you’ve posted on this page.