Other things to consider: How many people will you be cruising with? (i.e. how many sleeping cabins do you need?) Most catamarans have a minimum of three sleeping cabins and more storage space than you will ever use. However, as you add much extra weight to a cat, the sailing characteristics are altered significantly. The standard Lagoon 42 that will hit an exhilarating 16 knots on a broad reach in 25-30 knots of wind can turn into a slug that can barely reach 9 knots when loaded down with generator, air-conditioning, extra water and fuel, and tons of gear.
A cat that is suitable for charter may not necessarily be the best for a couple's live-aboard. Many people tell me, "We will cruise our new boat for "x" months, then we will put it into a charter program". Well, then, you must go with a charter type boat (lots of staterooms and simply equipped) because otherwise, you will get killed by high maintenance costs and low utilization. 92% of all catamarans are built for charter.
Financing
Now, the most important question to ask is, "How much do you feel comfortable investing in your new cruising yacht?" Often this will involve the input of a marine lender.
Ask your yacht broker what lender is offering the best rates and terms. At this time, you can expect the lowest rates in recent history. Loans are now amortized over 15 years, require 20% minimum down payment and, rates are from 6.5% to 7.25%. Lenders do not recognize charter income as additional income to qualify for a loan. The Catamaran Company offers in-house financing through Bank of the West and other lenders are listed at the end.
Tip: If you have sufficient equity in some real estate then the cheapest loan is a real estate equity loan.
Tip: Get pre-approved by a lender. It is free to get pre-approved and marine loans have no points to qualify. They are all "simple interest" loans with no pre-payment penalty. If you know you will only keep the boat 2-3 years then the "out of pocket" expense is surprisingly low. Many yacht buyers have a three year "itch cycle". That is, they keep a boat for three years, then they "get the itch" to sell it and try out another boat for three years. If your credit score is less than 600 then the situation may be difficult. Lenders mainly look at the debt to income ratio. Use only marine lenders, as most banks do not understand the yacht lending business and don't lend for yachts valued over $100K.
If you know your income as shown on your tax returns will be not be at least 200% of your debts then ask for a "no-income verification" loan. Essex Credit does these.
Tip: Many banks say they are "interested in yacht lending" but they are really only interested in finding that "one in a hundred golden borrower"
so you waste your time filling out forms only to be rejected if you don't have 110% perfect credit.
Tip: If you are traveling, sign your loan documents out of the state of Florida to avoid paying "State Document Stamp Fees" If you sign your loan paperwork in Florida you will pay a state fee of $3.50 per $1000 of the loan amount.
Tip: Loan interest payments are deductible as "second home mortgage interest expenses" unless you already take this deduction on a second home.
Concerning "seller financing"
It may be possible in a very few, very rare cases like with some "501- c(3)" charities. But you will need 40% down and are severely limited to only the boats they have taken in as donations (it will NOT be your dreamboat). Ask your broker what is available here. Because yachts can be easily moved out of the country, 99.9% of all sellers will not agree to seller financing.
What to do with your old boat?
In many cases we encounter sailors' who own monohulls and have decided to improve their sailing lifestyle by trading up to a catamaran. The Catamaran Company, in some cases, will accept your boat in on trade for a new yacht. The Catamaran Company owns a monohull dealership in Florida that is our facility for liquidating trade-ins
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New Catamarans:
When to make a buying decision.
What is your time frame? Because of the popularity of catamarans often the builders are running about 6 months to 1 year out in production availability and delivery can range anywhere from 1 to 2 months. Tip. Plan ahead and start checking availability now.
The final step is to talk with a Catamaran Company yacht broker about what will suit your needs best. Do some research and check for reviewst at http://www.catamaransja.com. Request detailed specifications and brochures. Choose options and upgrades and review a purchase agreement. To confirm your order and reserve a hull, expect a deposit of 10%, then 90 days before closing 15% is due, and at closing your final payment normally from your lender is due. You may also want to make an appointment to charter from The Catamaran Company base in the BVI or see the new yacht of your dreams. The Catamaran Company has new yachts on display at the major in-water sailboat shows and in inventory at Harbor Islands Marina in Ft. Lauderdale, Fl.
New yacht buying tips:
Ask your dealer if there are any special discounts. Often boat show specials will be available before shows but, not after. Ask specifically if the builder has any unsold inventory or production slots. Ask if the dealer has any inventory they would really like to sell. Mention that you would be agreeable to have your yacht displayed at any up-coming boat shows. Often this opportunity will enable a new owner to enjoy their yacht in New England for the summer before their yacht starts chartering in the Caribbean.
Pre-owned Catamarans:
Because of the relatively high demand for cruising catamarans you will find the resale value of catamarans relatively higher than that of monohulls.
As with planning to own a new yacht you will first want to define for yourself the size yacht you want, number of cabins, your sailing plans, and budget. Be realistic, you won't find a near new 50 ft. catamaran selling for $100K. Talk to your broker and ask what the selling prices have been running.
I recommend not buying "backyard projects" or most "custom" catamarans. I have heard hundreds of times, "This custom cat is built differently! It really is top-quality, etc, etc." and every time we went to survey we found some large hidden defects. Even if a "custom" cat passes survey you may not find out about the defects until it is too late because some surveyors are even fooled. Don't get tempted by the relatively low prices these are offered at. You may end up with something you can never sell. Stick with well-known production yachts. You should look for and acquire models that are in demand and that hold their values well. Ask your broker what these models are.
Tip: To check values of yachts and availability on the market go to: bucnet.com, yachtworld.com, and boattraderonline.com . If you find a yacht listed you like, ask your broker what is the worst thing about this yacht. Armed with this insight there will be no surprises and your expectations will be realistic.
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Tip: The demand for yachts- Yacht sales have seasonal pricing tendencies. In relatively "thin" markets like the catamaran market, it is possible to see huge swings in prices in just 6 months' time. I have seen incredible price changes from year to year and I think understanding this factor alone can save you many thousands of dollars and make this Guide worth its weight in gold for you. Consider this: every year, most buyers of cats are buying for the winter "high season" in the Caribbean. They generally start their shopping in late August and this buying activity ends in December. The lowest priced/best deals sell first and the highest priced "worst deals" occur later on
Every year, the highest prices for a given model are usually seen in December or perhaps January.
The supply of yachts- On the other hand, most charter yachts finish their programs on May 1st of each year and are phased out at that time. Also, many non-charter yachts finish their winter cruises and the owners decide to sell them at this same time. These yachts are mainly berthed in the summer hurricane zone and many owners are under-insured or concerned about paying for hurricane preparation and dread owning the boat during this period. Other owners (like travel agencies and charter companies) who are not attached to their yachts like most individuals, start "blowing the boats out" at relatively cheap prices immediately after the income stops (May). Prices usually hit bottom around July of each year. There are speculators who buy yachts now and hold them until later in the year. So, you have to be ready to beat these guys at their own game. See your broker about how to do this. Just to illustrate how powerful this trend is, I will list some cat models and prices I saw trading. I picked boats that were most alike in condition and equipment. In some cases these were boats that I resold for speculators.
- Lagoon 37 sold for $94,000 in June, resold for $145,000 in December
- Privilege 482 sold for $222,000 in July, resold for $292,000 next January
- Lagoon 42 sold for $121,000 in summer. Another identical 42 sold for $187,000 in November.
- Lagoon 55 sold for $365,000 in June. Resold in November for $425,000.
"The names have been withheld to protect the ignorant"
Please note that price swings are not necessarily this wide every year. Also, another factor comes into play which amplifies these seasonal price trends
..
Tip: The "Flooding the Market" Factor: Certain very large charter companies own their own boats and they have regular "phase outs" every year. Most of the time, this happens after 5 years of charter. The charter companies, European tax shelter partnerships and travel agencies have to sell these boats to keep their inventories "fresh" and as new as possible and for other compelling reasons. The charter companies in particular depend on new boat sales to fund their money-losing operations (charter). These types of motivated sellers are, what I call, "absolutely unemotional realists" who ask me questions like, "What will it take to get this sold in 45 days, no excuses!!!" They can be a source of relatively inexpensive yachts. Contrast these owners with the typical "private" American or Canadian owner who tries to squeeze every penny out of their boat sale. Putting "conditional differences" between boats aside, which type of seller would you like to deal with?
In 1998 and 1999 there were large amounts of 1993-94 Lagoon 37's and Lagoon 42's phasing out. In one summer, twelve 37's hit the market all at once.
Sellers that "had to get out" were taking $90-115,000 for their boats that summer. Later, after most of those boats were sold, some of those same boats were re-sold for up to $145,000. This phenomenon occurs regularly, so ask your broker what models are hitting the market next summer and what is left over from the previous season...
Now talk with a Catamaran Company broker and ask them to send you the latest list of catamarans on the market. Be clear with your broker about your needs. The more you tell them about how the yacht will be used, the more the broker can help guide you to the "right" boat. Often brokers in our network know of catamaran owners who are planning to trade up to a newer or larger catamaran that would be interested in selling their yacht but, have not gotten around to listing it yet.
Tip: Don't be afraid of high asking prices. Often these sellers have had little interest in their yachts and they have been on the market for some time. Why not make an offer. You have nothing to loose and you might be able to "steal" that yacht you have been dreaming about.
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How to present an offer and close.
Ask your broker to first send you a blank copy of a Purchase and Sale agreement to review. Consult with your broker about what they feel is a fair starting amount to offer. You can present an offer with a 10% refundable deposit that is held in escrow. Next, think about what date you need to hear back form the seller, the date by which you can sea trial and survey the yacht, and the date you will be ready to close (have all the funds ready).
Tip: If the yacht you are planning to make an offer on requires you to travel to see, it is smart to get your offer accepted first, contingent on your personal inspection. If you go to see this yacht and don't like it, your deposit is completely refundable. However, if you like what you see, while you are there you can make good use of your time by moving forward with your sea-trial and survey. Be advised that no sea trials or surveys can commence until a deposit has been cleared into the escrow account so this should be arranged in advance. This will save you from traveling to see a yacht you can't buy or has been sold before you get there. Your acceptance date is the date you agree have the sea-trial and survey completed and you feel confident your finances are in order. Seller pays the cost of the sea-trial and you pay the haul out/survey cost. Your broker can send you a list of recommended surveyors and arrange the haul out for you. Generally this can all happen in one day. At closing the final funds will transfer to the seller and the seller will transfer a clear title and documentation. This can happen through the mail with your broker handling the transaction. Before closing you will need insurance and a place organized to keep your yacht. Your broker can help make these arrangements for you and even, coordinate delivery if necessary.
Tip: If you require financing then do not book a surveyor until you verify whether your lender requires a particular surveyor. In some cases, lenders specify that the surveyor must be a member of "SAMS" (Society of American Marine Surveyors) or "NAMS".
You would not want to pay for a survey twice!
Plan your financing ahead of time. . .
Tip: Often a seller is more agreeable to accept a lower offer if your finances are arranged so you can close quickly with no financial approval contingencies. When the offer is presented, advise the seller that you are "pre-approved" so there will be no delays or reason to back-out due to funding reasons.
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Insurance
Remember prior to closing your lender will require that your yacht be insured. Find out specifically what coverage your lender will require and shop policies with the same coverage. This will make it easier to compare the value of the policies. If you are buying a pre-owned yacht the lender will generally, depending on age of the yacht, require a survey and will base coverage on the value and replacement value reported on the survey. As a very general rule, the annual premium for "private use" coverage (vs. charter coverage) is 1.5% of the declared hull value. So, a $100,000 yacht will cost $1,500/year to cover for Florida-Bahamas use.
Tip: Most yacht policies are for an "agreed upon" value. That is, if there is a total loss, then you are paid the "agreed upon value" with no deductions. Beware of the "actual cash value" policies wherein the underwriter can deduct substantially for depreciation and other reasons. Beware of "Exclusions" ("weasel clauses" that allow the insurer to disallow payment) and always buy an "All Risk" policy (vs. a "Named Peril" policy). Usually policies will allow you to legally "over-insure" the yacht by as much as 20% of the appraised value. If this is of interest to you, then the surveyor should be notified so his appraisal is done properly. See the broker about this matter.
Tip: Insurance rates will vary depending on use. If you plan on crossing the Atlantic in the distant future and/or possibly living on-board, don't tell your insurance company now, because your rates will reflect this additional coverage now
Wait until your plans are 100% confirmed. Often with a simple phone call, your insurer will make those changes for you just prior to your trip or lifestyle changes. You may owe an additional upcharge to cover the increased coverage.
Tip: Often an insurer that does not specialize in yachts will offer lower priced coverage with fewer restrictions. If you already have automobile or homeowner's coverage through Allstate or State Farm then they can add your boat at a very low rate. The drawback to these insurers is that they generally do not offer navigation coverage outside of the U.S./Canada and the Bahamas and some of them have a large list of "Exclusions" or are "Actual Cash Value" policies.
After Hurricane Andrew devastated many yachts in Miami, I was surprised to see the Allstate adjusters walking the docks and writing settlement checks three days after the hurricane! Right there on the dock! No haggling, they just paid whatever the policy called for.
At the end of this guide you will find a list of insurance companies. A website that offers some good information on yacht insurance is www.dhwilliams.com
Dockage:
The best resource we have found to help you find a marina for your new catamaran is www.marinalife.com . Great searchable fields and maps and charts to find these locations provided by Maptec. Also search by region www.mpconline.com . In Florida you can try Dockfinders 954-786-0246 or the classified section of www.waterfront-news.com . Or ask your broker for assistance.
Tip: The cheapest docks in Florida are behind private homes and can range from $250-600/month depending on proximity to the ocean. Because of zoning laws, living aboard is not allowed in these situations. These are just for storage.
Deliveries:
The Catamaran Company can help you arrange a delivery anywhere in the world.
Some ball park rates you can expect are between Florida and BVI $5,500, Florida and North-east US. $3-5,000, Europe and Florida $12,000-$15,000, Florida and West coast US. $15,000-$20,000. Ship deliveries are also available try www.yachtpath.com or 866-SHIP-YPI.
Tip: Professional delivery companies usually try to charge at least $3/mile plus a few variable expenses if the yacht is delivered on its own bottom. These can be negotiated down in some cases to $2-2.50/mile if this is a "back-haul" for the delivery company. See your broker about helping to arrange this.
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Taxes:
One of my favorite subjects!
Sales taxes are levied in the U.S. by the individual states. Each state is somewhat different in their approach to this subject. Whether you owe this tax has to do with where the yacht is registered and where and how the yacht will be used. Speak to Gary Fretz about this matter. He has attended every legal seminar and tax seminar for yachts ever held in Florida and stays up-to-date with all the nuances and changes in the tax code.
He can also give you a copy of the Florida Department of Revenue's summary on this subject.
Tip: The Florida Department of Revenue's booklet on Sales and Use Tax does not necessarily include all of the ways you can be exempt from tax, so be sure to consult your broker. He is there to assist you in every legal way.
Tip: Some yacht buyers who qualify, will register their yachts in a tax-free state like Delaware in the name of a corporation. These cost around $300 to form and around $100/year to maintain. The yacht registration fee in Delaware is determined by size of vessel and is usually between $50-90/year to renew. This is the most cost-effective registration. You may want to "Document" or Federally-register your yacht if you are traveling outside the U.S
..Ask your broker to explain the differences between Documentation and state-registration. There is no sales tax or use tax in Delaware. There are five other U.S. states who do not tax yacht sales.
Tip: Offshore registration is another legal way to avoid paying sales/use taxes and U.S. Customs duties. However, you can expect to pay $2,000 to $5,000 to set up an offshore corporation. Many larger yachts prefer to register foreign flag. Some U.S. lenders are comfortable with yacht documented in "Red Ensign" countries. i.e. former British colonies like the BVI, Cayman Islands, Bahamas, and Barbados. For details contact David Sims at Beacon Capital Ltd. 284-494-8829 www.beaconsecurities.com .
Other lenders will insist upon U.S. Documentation. Check with your lender early on.
The drawback to offshore registration is that you will have to enter the U.S. once/year to renew a Cruising Permit in order to remain in U.S. waters. The other drawback is that the attorneys in these offshore jurisdictions charge $1,000-5,000/year to maintain the holding corporations. But you can usually achieve anonymity of ownership by using this strategy.
Tip: Concerning European VAT. If you are an EU citizen going back to Europe with a yacht, then contact John Anderson about a little-known way to legally avoid paying VAT. You must follow certain rules which include first leaving the EU for 6 months, but many cruisers can arrange this in order to save 13-17% VAT taxes. If you are a non-EU citizen going to Europe in a yacht then you can usually get a cruising permit and remain there tax-free for up to six months. If you want to stay longer than six months then talk to your broker about strategies to do so and remain "VAT-free".
Tax Benefits
If you live in the US or most European countries, you can reduce your taxable income by writing off certain yacht ownership expenses. The most common U.S. tax benefit is to treat your yacht as a second home which is possible if you don't already have a second home and your primary residence is valued at less than $1 Mil. This method will allow you to write off your interest expense on your loan. The other method is by actively managing your yacht in a charter business. Many travel agents do this. This method will allow you to write off your operating expenses as well as interest expense.
Tip: No matter how smart your personal accountant is, he probably has little experience in the caveats of tax laws in regard to yachts. Contact an expert. Mike Kimball, CPA, has written several books on the subject 903-561-9555, www.yachtstaxadvisor.com . For those of you attempting to avoid California use and sales tax, contact Associated Sales Tax Consultants Incorporated 916-369-1200, www.astc.com .
U.S. Customs duty:
Congress passed laws to help the domestic ship and yacht builders which calls for a 1.5% duty on all hulls built outside the U.S. and brought here to be sold or used. This is on the "appraised value" of the yacht. There is a fee on top of this by the Customs broker of .4% and a surveyor must be paid to write a letter confirming the appraised value. Surveyor's fees are usually $100-300. Speak to your broker about the nuances of this law. So, if your situation calls for this tax to be paid, then plan on spending 2% of the appraised value to cover the "import duty" and guard this paperwork carefully. When you are ready to re-sell the yacht in the U.S., you will need this!
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So what will all this cost?
Below you will have a rough idea of what the expenses will be if you purchase a catamaran in most places in the world.
By John Anderson
