Buying A Cruising Yacht in Todays Economy

Purchasing a Cruising Yacht
in Todays Economy
Presented by Steve Szirom

Bellingham, Washington
www.OysterYachting.com
Boat Buying Methodology

info@OysterYachting.com
Asses the state of the boat market

Buyers market or sellers market?
What is the intended use

Inland waters, coastal, blue water
Where and how often
Search (local, regional, wide)

USA West coast, Mexico West coast
Research and view boats locally

Learn characteristics of different manufacturers
Learn valuation of used vessels
Focus on short list

Builder, size, budget, usage
Offer, Negotiate, Contingencies, Close

Mechanics of purchase
April 12, 2012
HTE Research, Inc.
Assumptions & Notes

Boat design and sailing involves compromises and

controversy
When quoting numbers and figures, assume used vessel,

about 42 feet LOA
Assume cruising mode (part(part-time or longlong-term),

monohull
When I state my preferences, it is based on 30+ years

boating experience, many boat shows, research
Buying sailboats is not about investing, but adopting a

lifestyle
Presentation is from POV of buyer (not seller, not

broker, not boat manufacturer)
If you have any questions, contact me by email or phone

Email: info@OysterYachting.com
Tel: 360360-676
676--2260
April 12, 2012
HTE Research, Inc.
Boating Market Status

DJIA low 3 mo. earlier
WMAR low 6 mo. earlier
Source: Bellwether Report

April 12, 2012
HTE Research, Inc.
Boating Market Influencers

Availability of credit, currently more restricted
$150K loan, ~4%~4%-5%, 20 years, midmid-700s CR
Loss of wealth via home price declines, house equity bank has
dried up
Rising cost of new boats, fiberglass materials related to the price

of oil, labor cost increases
Stock portfolio losses recovered, but uncertain future

Unemployment rate lagging recovery (~8.3% official number),
40 weeks unemployed historic high level
Loss of talented worker pool due to 2009 shakeout

Government regulation increasing: engines, licensing, liveliveaboards, etc.
April 12, 2012
HTE Research, Inc.
Boating Requirements
Where will you be boating

Bays/inland waters, coastal, blue water
on-board
How many persons will be on Sailing couple,
couple, family
Storage requirements
Weekenders, twotwo-week sails, coastal/ocean passages
How often will the vessel be used

Cruising lifestyle,
lifestyle, and , weekend/day sailing
Racing or performance cruising

April 12, 2012
HTE Research, Inc.
Cruising Sailboat Alternatives

Size: 39-42 ft LOA

Coastal
Blue Water
Displacement
Light--Moderate
Light
Moderate--Heavy
Moderate
Stores/Spares
Two weeks
Four weeks+
Keel/Rudder
Fin/Spade
Cut-away/Full/Skeg
Cut-
Rig
Sloop/Sloop--cutter
Sloop/Sloop
Cutter/Sloop--cutter/Cutter
Cutter/Sloop
Liferaft
Preferred
Must Have
Fuel Tankage
200--400 NM range
200
400--800 NM range
400
Typical Builders/Models
Beneteau, Catalina,
Hunter, Bavaria
Hallberg-Rassy, Valiant,
HallbergNordic, Tayana, Passport
Price
$80K--$200K
$80K
$150K--$450K
$150K
April 12, 2012
HTE Research, Inc.
New Boat Price vs. Size LOA

Price increases exponentially, not linearly

Maintenance cost annually is about % to 1% of purchase price (not
including berth, insurance, tax)
25%-35% to sales price
To outfit for cruising add 25%April 12, 2012
HTE Research, Inc.
Cruising Sailboat Ideas:

The Big Picture
For a couple, about 36 to 44 feet LOA
For stores, living aboard, guests, a few
Quality always trumps size
best-bang
bang--for
for--the
the--buck 55-7 years old, cruise
For bestequipped
Turnkey setup, rigging, engine, sails should be in good/very good condition
Moderate displacement, good performance
Prefer no cored hulls below waterline
Sloop, sloopsloop-cutter, or cutter sail plan

Furling jib, fullfull-battened main, roller bearing cars
Bulletproof anchor setup, electric, min three anchors
Fin keels/spade rudders, or modified keels/skeg rudder
Deeper draft keel version is preferable for cruising
Bulletproof engine setup, double Racors, oil/fuel filter change friendly
April 12, 2012
Extended cruising range under power is a plus

HTE Research, Inc.
Where to Look for Boats

YachtWorld.com (dominates industry)

SailOnline.com
BoatOwners.com
Boat owners association websites (by owners)
Charter boat operations websites (Moorings, Sunsail)
Preferably in the Mediterranean, competitive, inventory
Best time to make offers is May when contracts expire
eBay/other auctions (wild card)

Craigslist (hit or miss)
Boat shows on West Coast
See Oyster Yachting for tips and West coats shows
Boating magazines classifieds (for sale by owners)
April 12, 2012
See Oyster Yachting for a list and links
HTE Research, Inc.
10
Why Do a Wide Search?

For negotiating power, even if considering a local or regional

boat purchase
$$$$
Boats which have cruised to Mexico or other cruising

destinations are better cruisecruise-equipped, bugs worked out,
and often more attractively priced
No sales tax in Mexico, and Oregon.

The best equipped, best priced, best condition boat may be
outside the buyers region for any number of reasons
Either start your cruise in paradise, or deliver boat to home

port
Delivery costs vary, many variables
Better prospects for cruise equipped boats, possibly motivated sellers
Look more closely near yachting centers

$$$
April 12, 2012
San Carlos, La Paz, Mazatlan, Puerto Vallarta, San Diego, Los Angeles,
San Francisco, Seattle, Vancouver, BVI
HTE Research, Inc.
11
Boat Research
Owners associations
Google boat manufacturer, owners association)
Boating magazines (print and web)

Cruising WorldWorld-Classic Plastic section
Blue Water SailingSailing-Boat Reviews section
Practical SailorSailor-Sailboat Reviews section
Sailing
Sailing--Used Boat Notebook section
Google specific vessel under consideration

manufacturer, model/size, boat name
Sailing community portals such as SailNet.com

April 12, 2012
HTE Research, Inc.
12
Valuation of Used Boats

bucvalu.com
$28/mo
nadaguides.com
FREE
April 12, 2012
yachtworld.com
soldboats.com
FREE
boatus.com
FREE
HTE Research, Inc.
$$$
13
BucValu Pricing
April 12, 2012
HTE Research, Inc.
14
Yachtworld Search
April 12, 2012
HTE Research, Inc.
15
NADA Pricing
April 12, 2012
HTE Research, Inc.
16
Buying Through Yacht Brokers

Pros
Facilitates purchase mechanics, such as, showing vessel, offer/counteroffer/counter-offer,
negotiations, haulout, sea trial, paperwork, documentation, lining up insurance,
loans
A trusted yacht broker can work with buyer to assist finding the right yacht
(buyers broker), assess true market value, provide sales prices of recent sales,
inputs on market conditions, other relevant factors
Cons
Works for and represents buyers interests
Charges 10% commission of sales price
Sometimes not knowledgeable or reputable
Caveats for Buyer

Dont use brokers recommended surveyor, get recommendations/references
Require funds to be deposited in escrow account, preferable 3rd party
Do all the work during sea trials, check everything (engine, equipment, sails,
etc.)
April 12, 2012
HTE Research, Inc.
17
Buying Directly from Owners

Pros
Knowledgeable about vessel, knows intricacies, systems, may be useful
after the sale
Commission fee saved by seller, can be a negotiating point for buyer
May assist in onon-the
the--water delivery of vessel
Cons
May not have realistic assessment of the worth of the vessel, no broker
sanity check
Emotional component enters the picture when making low offers
Owner may not be knowledgeable about the process, paperwork
May not have urgency to sell
Caveats for Buyer

Use a marine escrow/titling company
Have offer/sales agreement reviewed by attorney, consider using for the
deal
More due diligence is needed to check authenticity of seller and the boat
April 12, 2012
HTE Research, Inc.
18
Ask Basic Questions

If Possible, ask questions/make inquiries by email
Hull/deck
Fuel tanks
Number, material, total gallons, replaced?
Engine
Manuf./model, engine hours, last overhaul, what

was serviced/replaced, fuel injectors serviced?
Age of fuel lines, exhaust/other hoses
# primary fuel filters
Motoring range under normal cruising RPMs
Sails/canvas
Age of sails, manufacturer?
Age of other canvas, dodger
Rigging
Condition? Spider cracks, gouges?
Cored hull below water line?
Blisters? Was epoxy job done?
Lead or iron keel?
Windlass model? Anchors?
Condition of rudder bearings
Below Deck
Holding tanks macerator? Discharge pump? YY-valve?
Height to headliner, length of bunks
Useful to know
# of previous owners, cruising history
Documented?, name of vessel
Age of standing rigging, lifelines
Last survey available?
Age of running rigging
Last bottom paint job?
April 12, 2012
HTE Research, Inc.
19
In--the
In
the--Water Inspection
Bring flashlight, camera, notebook

Compare info given by email to personal inspection (not good sign if many
discrepancies)
Take pics, make notes of all systems that are not covered in brokers pics and info
When checking engine start/run, insist that it be started from cold state
Typical red flags:
Birds nest wiring behind fuse panel, wiring not properly secured
Engine room very dirty, oil drips, or fuel leaks, rusty clamps
Boat heavily scented to cover up smells, or just heavy fuel/oil smell
Signs of water leakage (wood discoloration) around liners, wood panels, ports, fittings
Very dirty bilges, oil or fuel smell in bilge water, rusty keel bolts
Engine blowing out too much black or blue smoke, oily sheen on water
Spider web cracks in gelcoat (difficult to see) on side of hull, or too many gel coat cracks around fittings
Rusty or seized fittings/valves, rusty rigging wire, cracks in turnbuckes
Spongy, soft areas on deck
April 12, 2012
HTE Research, Inc.
20
Buying Considerations
Focus on seaworthiness issues and basics
A sound hull/interior structure, engine, sails, standing rigging, anchor setup are
necessary for successful cruising
Electronics depreciate fast, minimum value after 5 years

Big ticket refitting items:
Engine/installation ~$15~$15-$20K
Suite of sails (main/full(main/full-battens, furling jib, asymmetrical spinnaker with sock ~$12~$1215K
Replace standing rigging ~$4K~$4K-$7K
Replace canvas (dodger, sail cover, bimini, winch covers) ~$6K
Only buy a used boat which needs extensive refitting if you have time
and expertise
Dont fall in love with a boat, be patient, more boats always come on
the market
Dont be shy to make a lowlow-ball offer for your dream boat, see where it
goes (you can always add more $$$ but not take away).
April 12, 2012
HTE Research, Inc.
21
Costs of a Boat Purchase

Cost vessel (full price or down payment)

Sales tax*
Sailing school* (for newbies only ~$600~$600-$1,200 per person)

Travel costs to view candidate boats (varies)
Haulout (~$300)
Surveys
Most states, ~ 66-9% of sales price

Offshore delivery?
Defer it via charter program
Vessel (~$15/foot)
Sails* (~$75/hour, usually 11-2 hours)
Rigging* (~$75/hour, about 2 hours)
Engine* (~$150)
Marine title/escrow company

Documentation (~$150 selfself-service, ~$400 for agent)
Delivery* (by truck, delivery skipper, owner delivery)
Refitting for cruising (coastal less than blue water)
<7 years old, ~15~15-30% of purchase price

>7 years old, ~25
~25--50% of purchase price
* Possible cost saving

April 12, 2012
HTE Research, Inc.
22
Dealer/Broker Pricing
New boats
Commissions range in price from 10% to 20% over factory cost
Boat show specials can sometimes yield good deals
Aftermarket installations
Equipment marked up 40%
Labor 25%
Used boats
Exclusive listing or open listing for six months term
Caution
Caution
talk to owner only with open listing
Commission is 10% paid by seller
~50-50
Split between the listing broker and selling broker ~50 Splitting involves CoCo-op Agreement between brokers
Trusted selling broker can sometimes bring better results
April 12, 2012
HTE Research, Inc.
23
Sales Contracts
Names and addresses of buyer and seller

Description of boat and engine, including make, model, year, and Hull
Identification Number and engine serial number(s), detailed equipment list
Purchase price and deposits made, tradetrade-in boat, if applicable
Typically 10% cash deposit held in escrow account
Delivery date, where and when the boat will be delivered

Whether sold with warranty, or as is condition
Buyers contingencies
Inspection, sea trial, financing, surveys, insurability, clear title
Statement that the boat is free of all liens, encumbrances and debts incurred
during sellers ownership
April 12, 2012
HTE Research, Inc.
24
Purchase Contract Contingencies

Personal inspection
For out of town buyers, can reject deal after viewing
Satisfactory sea trial

Test and try everything/all systems yourself,
yourself, prefer windy days, put engine
under load, bring a knowledgeable friend or consultant, dont rush it
Survey(s)
Negotiate purchase price downward to correct defects
Prefer price reduction, rather than fix (?)
Clear title
essential for used boats
Acceptable boat loan terms

Ability to obtain insurance
April 12, 2012
HTE Research, Inc.
25
Offshore Delivery Basics

The State of California will assess ~9% sales tax (for new vessels) or use tax (for
used vessels) if the boat was
(1) purchased in California (includes within 3 miles offshore); OR
(2) purchased for "use" in California
If the purchase can be structured so that the transaction closes > than 3 miles
offshore (technically outside of Calif.), then the buyer would satisfy the first test
The second test involves the buyers intended use at the time of the purchase
Calif. determined that true intent is difficult to determine through an objective test
A "presumptive test" was established, where a buyer who could prove that the boat was used
outside of California for a particular time period after the purchase was presumed to have
purchased it for use outside of California.
Pre
Pre--2008: met test if used outside of Calif. for 90 days in the first six months after purchase (The Ensenada
Yacht Club)
Post
Post--2008: Gov. Schwarzenegger signed into law legislation to close loopholes resulting in return to the one
year rule
Very complicated, suggest services of maritime attorney familiar with offshore

delivery.
Requires supporting documents for the State Board of Equalization, offshore delivery affidavit, Use
Tax Return for State Board of Equalization
April 12, 2012
HTE Research, Inc.
26
Offshore Delivery
The buyer must follow very specific rules

Not appear to intend to bring the boat back to Calif., or
Not Appear to be keeping it out CA. to avoid the sales tax
How it works:
Broker takes buyer >3 miles offshore to international waters
The location is documented by taking a picture of the GPS location
A picture is taken of the days newspaper to document the date
A picture of the buyer is taken behind the helm
A picture of the exchange of the final payment is taken
Back onshore, the broker submits all the required paperwork and
gets it notarized
The buyer will provision his vessel and sail it to Mexico (or
Oregon) shortly thereafter and stay out of California for 6 months
to one year (depending on the buyers state of residence).
April 12, 2012
HTE Research, Inc.
27
Offshore Delivery
Key Points
The purchase contract (new or brokerage) must stipulate
the offshore delivery as one of the contingencies
The purpose of the offshore delivery is not to avoid sales tax
Do not keep current California berthing arrangements, or
anything which could be used as argument that the buyer
intends to return to California
California buyers must keep the boat out of state for a
minimum of 365 days
Buyer must keep records of using the vessel to verify it has
not been stored (no specific usage period given, but the
more the better)
The buyer cannot use the boat or put equipment on it until
he has taken delivery out of the state
April 12, 2012
HTE Research, Inc.
28
Sailboat Usage Trends

Sailboat Owners
~ 33 days usage
each year
~ 2-3 days usage
each month
Source: NMMA
April 12, 2012
HTE Research, Inc.
29
Boat Usage Models

Cost of 30 Days Sailing/Year

(40-Foot Sailboat, $175K, <8 years)
Sole Ownership
Highest upfront cost, highest monthly cost
Best for cruisers, livelive-aboards, lifestyle sailors
Partnerships
Share upfront and monthly cost
Usually 22-4 compatible partners (partnership agreement)
LLC is an option but more paperwork
Timeshare, Fractional Ownership
Buy
Buy--in, monthly cost, usually local waters
Up to 6 or 8 owners (contract with management firm)
Managed by a third party, scheduling program
Charter
Best for busy sailors with limited sailing time
Flexible cruising areas, bareboat or crewed
Less expensive than ownership for < four weeks
usage/year
Sailing Club
Initiation fee, monthly dues/rental fees
Usually for local wagers, good for social networking
April 12, 2012
HTE Research, Inc.
$19,500
$9,750
12,250
$13,560
30
Lessons I Learned About the Sailing Life

There is no perfect cruising sailboat ... everything about sailboats is a

compromise.
The happiest day is when you buy a cruising sailboat. The second happiest is
NOT when you sell it.
Cruising sailors are the greenest people on the planet.

Reading books and sailing classes are useful, but experience is the best
teacher when it comes to sailing.
Sailing is not a sport, it is a lifestyle (except for racers) that is magical,
relaxing, terrifying at times, enhances confidence, instills independence,

teaches green living.
Anything that is not lashed down on deck will eventually fall overboard.
Sailing is NOT free. The wind IS free but after 36K NM, a new set of sails costs
$12K (~$.33/NM)
When in hot climates, you can never have enough beer on a sailboat and it
can never be too cold.
When women are on board, keep the heads clean.
April 12, 2012
HTE Research, Inc.
31

Buying A Cruising Yacht in Todays Economy

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Purchasing a Cruising Yacht

Presented by Steve Szirom

Boat Buying Methodology

Asses the state of the boat market

What is the intended use

Search (local, regional, wide)

Research and view boats locally

Focus on short list

Offer, Negotiate, Contingencies, Close

HTE Research, Inc.

Assumptions & Notes

Boat design and sailing involves compromises and

When quoting numbers and figures, assume used vessel,

Assume cruising mode (part(part-time or longlong-term),

When I state my preferences, it is based on 30+ years

Buying sailboats is not about investing, but adopting a

Presentation is from POV of buyer (not seller, not

If you have any questions, contact me by email or phone

HTE Research, Inc.

Boating Market Status

DJIA low 3 mo. earlier

WMAR low 6 mo. earlier

Source: Bellwether Report

HTE Research, Inc.

Boating Market Influencers

Availability of credit, currently more restricted

$150K loan, ~4%~4%-5%, 20 years, midmid-700s CR

Rising cost of new boats, fiberglass materials related to the price

Stock portfolio losses recovered, but uncertain future

Loss of talented worker pool due to 2009 shakeout

April 12, 2012

HTE Research, Inc.

Where will you be boating

How often will the vessel be used

Racing or performance cruising

HTE Research, Inc.

Cruising Sailboat Alternatives

Size: 39-42 ft LOA

April 12, 2012

HTE Research, Inc.

New Boat Price vs. Size LOA

Price increases exponentially, not linearly

HTE Research, Inc.

Cruising Sailboat Ideas:

For a couple, about 36 to 44 feet LOA

For stores, living aboard, guests, a few

Quality always trumps size

Turnkey setup, rigging, engine, sails should be in good/very good condition

Moderate displacement, good performance

Prefer no cored hulls below waterline

Sloop, sloopsloop-cutter, or cutter sail plan

Deeper draft keel version is preferable for cruising

Bulletproof engine setup, double Racors, oil/fuel filter change friendly

April 12, 2012

Extended cruising range under power is a plus

Where to Look for Boats

YachtWorld.com (dominates industry)

Preferably in the Mediterranean, competitive, inventory

Best time to make offers is May when contracts expire

eBay/other auctions (wild card)

See Oyster Yachting for tips and West coats shows

Boating magazines classifieds (for sale by owners)

April 12, 2012