Partnerships?

I was talking to a friend of mine the other day. He said if he was to ever own a boat, it would be a partnership as he felt he could not "afford" to pay a captain to maintain a boat on his own and my friend did not want to spend all his free time up-keeping his boat but rather enjoying it..

Our conversation did open up my eyes to this option, I dont feel we use our boat enough and I feel that perhaps it could be a good idea to share a boat in a partnership perhaps one where a monthly fee is paid to include slip rental, upkeep maintenance and some put aside for higher cost to come down the pipe..

Are there any pre-designed "partnership programs" available to the boating world?

Does anyone here have experiences with partnerships?
I am guessing money is the biggest point of disagreement.

"The only ship that can't stay afloat is a partnership."

there are a couple of outfits in this area that manage boat share arrangements. you show up on your pre-selected use dates and use the boat and the service does all the rest. No idea of the cost, etc. We are on our boat every weekend and enjoy the upkeep so we have never looked into that. Seems like a good way to enjoy boating if you don't have the time and inclination for the upkeep.

We have been boat partners with another couple on a sailboat. We never had any "issues" per se but we felt that it was not our boat as the other partners had lots more money to spend on the boat and made all the decisions since they were the ones paying. We were very happy to go back to having our own boat.

All depends on what you are looking for!

Partnerships are fairly common with the blow boat crowd, not so much with power until you get over 75+ feet. At least as far as the Admiral and I have found. We almost got into a couple of sail partnerships but the details and vibe wasn't there so we passed.

My thought is the personal investment in 30ish to 60ish foot range for power is such that many are unwilling to risk a share agreement. Much past 60' and professional Captains and crew are more common and the expense is such that it is increasingly common for fractional ownership. Professional crew also negates the risk factor. Many pointed out to me once that personal items are a big factor, that hasn't been expressed to me as a major hang up in the sail crowd

Many powerboat owners seem to focus on the destination(anchorage,marina,etc...), whereas the sailors I've met feel the boat itself IS the destination. My .02, YMMV

I would not do an equal partnership, maybe a partial 30 to 40 % partnership in writing, so I had the control of the boat. slip, location, how maintained and could terminate the partnership, with the understand that any damage done beyond normal wear and tear is born/for the person that was responsible for damage. In other words it would be a PART Partnership

Partnerships can be anything the parties agree upon. Equity/Non-Equity. Any percentage you can imagine. Non Equity partnerships with a predetermined amount and type of usage are fairly common. Owner maintains sole ownership interest and the non equity partner pays a monthly fee for a predetermined amount of use per month.

I have seen a mixture of the two on the same boat work great with like minded people. One boat I looked at had a mix of four partners for several years and they wouldn't have it any other way. Damage is normally paid by responsible party and insurance. Have been told that it seldom if ever causes problems if arranged well.

I have run a boat partnership now for about 15 years, we have four partners, equal shares, in that time I cannot remember having any co-ownership issues.

I think the secret for the success of these ventures is compatability and trust. In our case we have known each other since uni days, got married about the same time , kids came along, lots of holidays together etc.

We have an agreed monthly contibution to cover insurance, mooring fees, basic maintenence , slipping etc. When something over & above that comes along I send out an email (which the partners have come to dread) updating them on the issues and giving them an estimate of how much I will need from each partner. Over the years I have tended to inflate the initial figure so I can give them some good news when I get round to asking for the money.

I draw up a roster to cover 6 months, each partner gets the boat one weekend a month, in practice there is usually a spare weekend each month, due to work etc, so it's first come first served. Same for midweek use.

In regard to accidents etc, we either just cover the cost out of funds or claim through insurance. We do not ask the offending party to pay. We do that on the 'that there for the grace of god go I 'principle.For us the boat is there for fun and companionship.

We do have a formal boat share document, however when I checked the records none of us have bothered to sign it.

For us to own the boat outright would be too big a drain on funds, this set up allows us to own a nice boat, and share the pain when something goes wrong. FYI the monthly contibution is $420/month per partner and the capital cost was $180K

We have owned three boats together, each one got bigger, which roughly corresponded to the children growing up. You probably won't be suprised to learn that although the boat can be locked none of us has any idea where the keys are.Although the boat is on a nice marina with security.

I think some people reading this may feel the way we run our boat may is a bit lax or irresponsible, probably is. However it is a great feeling to have complete trust in your partners and not be tempted to be responsible and formalise the whole thing.

What may ultimatly sink us though is work. Two partners have now been posted O/S for up to five years, no one wants out , but I can't see how we can work around this. It may come down to the 'all for one and one for all principle'. One goes we all go.

Andy - That's a damn nice arrangement you fellows have! Hope you can keep it "afloat"!

I would not recommend a boat partnership, but if you really want to do it, I suggest having it dran up by an attorney who specializes in business partnerships.

There are far too many ways for it to go bad.

I think one would have to be a decent businessman with a level head and an understanding of the balance of responsibility. I'm way to nice of a guy for that.

I wouldn't want to be in a partnership with friends, I have seen that go very badly a couple of times. But I purchased my boat in a three way partnership with my father and sister. Family disagreements are usually minor and everybody gets over it and moves on.

We had an agreement and we each put down a downpayment as a one third share and then split all the costs and monthly payments. The agreement was in writing and included the understanding that if someone wanted out, the remaining partners would assume the loan and ownership, no buy out. If all three wanted out, the boat would be sold outright. It worked good for about 10 years, then my sister and her husband wanted out. My Dad and I assumed ownership of the boat. When my father passed away, I assumed ownership from him as he had put that in his Will.

Larry B

thanks guys, lots of good thoughts here..

Never.

I would never be in a partnership with a boat. It just wouldn't happen.
As an alternative, there is at least one time share boat company in the Galveston Bay area that I know of. It could be a great deal for some but I have never seen their contracts.
What I am curious about in time share boats is what happens after about 20 years when the boat is de-valued to only a small part of the purchase price. Normally with time share condo's they have a much lomger life expectancy and at least the property they are sitting on goes up.
Sorry i aint much help, but those are my thoughts.

Per said:

......I am guessing money is the biggest point of disagreement.

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Good guess.
The only way I could see this working is if both parties have a lot of money. They would have to immediately have a repair budget of about $20K, keep it at that minimum and an agreement that routine maintenance and things that crap out get fixed immediately by a professional mechanic. That way, one party does not lose use of the boat because the other party can't come up with the time or money to maintain it or repair it. To me, that would be the biggie.

Tony B said:

What I am curious about in time share boats is what happens after about 20 years when the boat is de-valued to only a small part of the purchase price. Normally with time share condo's they have a much lomger life expectancy and at least the property they are sitting on goes up.

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Tony I was curious after reading Per's post and just having seen some of these time share boats in Alameda the other day, I looked into it. I looked up Sailtime I think? Despite the name they have power boats as well. It operates a lot like the charter companies. They get one person to put 20% down to buy a specific boat and then the company takes the boat into the program and deals with everything. Supposedly the money coming in will cover the payments and all the expenses. The "owner" gets the best pick of usage times. Other people sign up for a specific boat with a year commitment and pick from the leftover availability. I believe the deal was the owner had to sign on for three years and could re-up twice after, for one year each time. After five years the boat is out of the program and the "owner" can keep making the payments, sell it, whatever. Can't imagine doing that but probably works very well for a lot of people...

Pineapple Girl said:

Can't imagine doing that but probably works very well for a lot of people...

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The wife and I have all but resigned ourselves to going this route for the next couple years, not as owners but as charter members. We are quite happy with our day sailor and do not wish to commit to buying anything larger for the foreseeable future.

Club membership like this will offer us the flexibility we desire until we really hammer down our true wants for a larger boat. The larger clubs have multiple cruising locations available as well.

You are right that it is not for everybody, but we feel the large boat handling experience and class offerings are our best option to safely and responsibly enter the world of larger boats.

My wife and are investigating this concept too. We have found a program in Anacortes, WA that is based upon the NetJets model. There are a maximum of 8 share owners in a boat (we are currently looking into either a 39' or 40' Nordic Tug). The owners are formed into a LLC along with the brokerage with the asset being the boat. All of the owners are named on the title and the owners pay a monthly fee proportional to their share of the boat. There is a super share owner who funds the construction and commissioning of the boat. This owner gets priority scheduling and all of the monthly fees paid by the brokerage. The brokerage is responsible for scheduling, maintenance, cleaning, moorage, etc. Hard scheduling and open time are proportional to the share of ownership. If a owner wishes, they can direct the brokerage to put their hard schedule time into charter, if the brokerage sells a charter, the owner and brokerage split the charter compensation 60/40. Charter renters must be qualified by the brokerage prior to rental.

The term of the LLC contract is five years. At the end of the term the boat can be sold to one of the share owners, with the super share owner taking priority, or the boat can be sold out right if all the owners agree and then each owner would get a proportional division of the sale minus a brokerage fee. The share owner can at that time also choose to roll their share into a new boat and receive a discounted fee on the sale of the original boat.

Exit clauses are written into the LLC and if the brokerage were to go bankrupt or otherwise dissolve the share owners would simply sell the boat and divide the proceeds so as to not saddle the LLC with a large boat that none wish to or cannot maintain.

The basic math behind this is: New Commissioned Boat = $800,000 Divided as follows 1/2 share, 1/4, share, & 1/8 share. If one were to purchase 1/8 of a share, their buy in would be $100,000 and they would pay a monthly fee for the term on the LLC contract. At the end of the contract if the boat is sold for $600,000, the 1/8 owner would get $75,000 back minus the brokerage fee.

This is very interesting and appealing to us.

Do the exit clauses provide for a share owner that wants out for whatever reason or are they stuck for the term?

No partnership ever appealed to us so I never paid much attention but i think i remember something similar in the back reaches of my mind[??] and one of the folk we knew ran afoul of one of these deals. I do not remember the why's or wherefores so cannot be more specific but just go in, if you do, carefully.

If you haven't already done so, maybe you should try a bare boat charter of one of their boats first before you invest and make sure that is the boat for you. A 37' Nordi rents for $645 per night Spring and Fall at Anacortes Charters. A one week charter is roughly, just 1/2 of my annual slip fee.

In the PNW the best cruising is packed into about 3 months per year. Divided by eight doesn't sound like much fun to me. Also, with a vessel the size you are contemplating lots of TLC is needed, I can't see 8 owners being diligent. Who decides on upgrades and fix up stuff? C lectric has a very good point, selling out can be iffy.

What has been your previous boating experience? Also, you may be seriously underestimating the depreciation on a new vessel as well as the ease of selling.

I think partnerships can work, especially if you know everyone going in. My 2 brothers, sister, and I jointly own our parents summer / retirement home for the benefit of our children till the last one reaches 18. Works well. Where I think this falls apart is the amount of money that ends up going to the management company. If the boat is short term use, a week at most, and you can't keep your stuff on the boat, it's basically a rental. So what's the advantage over renting? If a $100K is the minimum buy in plus some number of $1,000 per annum for dock, insur., maint., and management costs, think you could rent 1 weekend a month and 2 weeks a year and invest the $100K. Reality is you may not use it that much depending on family commitments, and with rentals you only pay for what you use. Also gives you the option to rent out of your area. That's how I see it anyway.

Ted

IMO

1. Love Boating
2. Know boats
3. Know how to buy at correct price
4. Shop boats
5. But a correct Boat
6. Enjoy boat
7. Sell boat.
8. Buy another boat

And the beat (err boat - lol) goes on!

O C Diver said:

Where I think this falls apart is the amount of money that ends up going to the management company. If the boat is short term use, a week at most, and you can't keep your stuff on the boat, it's basically a rental. So what's the advantage over renting? If a $100K is the minimum buy in plus some number of $1,000 per annum for dock, insur., maint., and management costs, think you could rent 1 weekend a month and 2 weeks a year and invest the $100K. Reality is you may not use it that much depending on family commitments, and with rentals you only pay for what you use. Also gives you the option to rent out of your area. That's how I see it anyway.

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I knew Nordic Tug in my marina was offering these condo boats, but had never heard the numbers before. I wonder how they divide up the use?

Eight owners and about 12 prime summer weeks of use and another 12 Spring/Fall weeks. The prime owner gets 1/2 of the time, Plus a 1/4 share owner, and six 1/8 share owners to get. . . . . what? That doesn't work. . . can't be eight owners or am I doing something wrong? The 8 owners must be the case if they're all 1/8th share owners? Even then you would only have a week and a half during the summer months.

I think you're right OC. . . chartering would make more sense!!

Edelweiss said:

I knew Nordic Tug in my marina was offering these condo boats, but had never heard the numbers before. I wonder how they divide up the use?

Eight owners and about 12 prime summer weeks of use and another 12 Spring/Fall weeks. The prime owner gets 1/2 of the time, Plus a 1/4 share owner, and six 1/8 share owners to get. . . . . what? That doesn't work. . . can't be eight owners or am I doing something wrong? The 8 owners must be the case if they're all 1/8th share owners? Even then you would only have a week and a half during the summer months.

I think you're right OC. . . chartering would make more sense!!

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My guess is it's 4 owners, 1/2 + 1/4 + 1/8 + 1/8 = 100% . The other part to consider, do you want to pick your weekends after 75% has already picked theirs?

Ted

I think Sunchaser raises very important inssues in his post #23. If you count our use of our trailerable fishing boat as well as our diesel cruiser we have been boating in salt water in the PNW for close to 30 years now. While we enjoy boating in the fall, winter and spring, the majority of boat owners here don't. Our nearly 2000-boat harbor is nearly devoid of recreational boaters from the begining of October through April or May.

So the boating season is relativley short, partciulaly if boaters have school-age kids. Eight owners vying for boating time during a three or four month period could get frustrating.

Prior to deciding to buy our own cruising boat here, we chartered a similar boat. And while chartering can make a lot financial sense, particularly if one's boating is going to be confined to one vacation a year, it has definite drawbacks.

An option for the buyers of a newer boat is to put it into a charter fleet. While the owner generally never makes money with this sort of arrangement, putting one's boat in charter can often cover the annual ownership cost of a boat.

We never considered this, or a "condo" type boat ownership scheme for a couple of reasons. One is the time and schedule limitation it places on the owners. But the big one for us is that you can't set your boat up the way YOU want it. Like a charter customer, you have to schlep all your stuff off the boat when you leave it.

As I suspect is also the case with year-round frequent boat users on this forum like Art and FlyWright and Mark, one of the things we like best about boating besides the boating itself is the fact that we can set our boat up exactly the way WE want it. We can leave our foul weather gear in the hanging locker, my wife can have all her cooking doodads on board exactly where she wants them, we can keep all the books we want on board, from bird and plant identifers to navigation and cruising guides, we can hang the pictures we want, and on and on and on.

If we want to go up to the boat on any given weekend and just hang out because the weather's crappy or we don't have the time to take a longer run into the islands, we can do it on a moment's notice and we don't have to pack and drag a bunch of stuff with us and then take it all home again the next day.

We know people who have boats like ours in a charter fleet, and it's working very well for them. But they are not the kind of people who use a boat like we do. Their schedules and other committments only give them time to take a cruise once or twice a year.

So chartering one's boat, or buying into a "condo" boat or multiple partnership can certainly work, but its success depends entirely on what the owner or partners want out of their boating experience. It would never work for us, nor would it work, I suspect, for a boater like Art.

If the original poster will be time-limited in his use of a cruising boat and does not want the year-round demands a boat can make of its owner, then a partnership could be a good way to go.

O C Diver said:

My guess is it's 4 owners, 1/2 + 1/4 + 1/8 + 1/8 = 100% . The other part to consider, do you want to pick your weekends after 75% has already picked theirs?

Ted

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Yeah that's what I think too OC. Looks like there are probably two formulas since he mentioned a max. of eight owners.

I know Nordic has been struggling for sometime now and they're trying different marketing strategies. I go by their plant going to and from the airport. Their offices are locked up and parking lot empty a lot of the time. I heard they weren't building spec. boats anymore, only custom orders now. $800,000. . . That must be full retail list price. This recession really hit the boat manufactures hard!!

Marin said:

As I suspect is also the case with year-round frequent boat users on this forum like Art and FlyWright and Mark, one of the things we like best about boating besides the boating itself is the fact that we can set our boat up exactly the way WE want it. ...

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Yes, in purchasing a boat, I didn't want to have to share (share?!) it with others (it might as well be a rental). I want to go boating whenever the mood and weather strikes in a boat configured particularly for me. (I digress. Today, Perla sent an email to FlyWright saying we were in Suisun Bay near the reserve fleet unbeknownst of his location/activity. FlyWright immediately texted he was "on Highway 680" [which crosses the western end of the bay] heading toward Suisun. We interpreted that as going to Suisun City via highway. Then he posted he was going "under" the bridge. That totally confused us. After having reversed direction headed back to Vallejo, while approaching the 680 bridge and having focused on the many close-by anchored boats fishing to avoid collision or cutting their fishing lines, Al called us, saying we passed him. He had the advantage that we had an easily-identified boat. Meanwhile, Al is staying in the bay, or perhaps Montezuma Slough, overnight on a fishing expedition.)