How to Buy a Yacht in 30 Days
We love hearing from our boat buyers and this yacht-buying process testimonial was quite unique! Donavan went above and beyond in sharing his story of how he and partner, Mary Beth, decided what yacht ownership program was right for them, selected their dream boat, a Bali 4.3, and proceeded to work with us to set up their business.
Keep reading for an entertaining and very informative viewpoint of buying a charter yacht with Catamaran Guru.
Charter Yacht Buyer Testimonial
September 4, 2018: Milwaukee, WI.
Here’s how you buy a boat in 30 days:
- Step 1: Call Stephen Cockcroft (855.208.6881), no email, just call. Tell him you want a boat.
- Step 2: Have fun for 30 days, a few gin & tonics, nice fine White Porto, if you wish.
- Step 3: Pickup your boat.
- Step 4: Buy another one, go to step 1.
This is a story that’s probably not much different from yours. You’re looking to dip your toe into charter yacht ownership, and you don’t know who to call, who to trust, or even where to start. You probably saw a romantic ad in Sail Magazine and said to your spouse, “Let’s do this”. My story is for you. Here’s who you call and how you do it.
Chapter I: Sailing Dreams Begin
Mary Beth and I began our dream by sailing on big blue water a few years ago. Some call it cruising. We became educated with the finest of schooling, ASA’s 101,103,104, 10-everything and learned all the idiosyncrasies or chartering, even sailed across the Atlantic as volunteer crew to build that valuable experience. In that ASA class, we never did learn how unfurl a headsail, anchor, or dock well. We do now. There’s no substitute for experience. Our goal was to charter anywhere in the world, fly there, see Bequia, Seychelles, or Croatia and then leave the boat and fly home. No worries. Mary Beth is fluent in Spanish.
Our motto was, “If it flies or floats rent it.” “Stuff” takes maintenance, it’s worrisome and that takes your time. Time is precious to us, so we did everything to resist getting any more “stuff”.
Then we met Artemis. Artemis V was a beauty. She was an Island Packet 485 and fully equipped to circumnavigate. I said to Mary Beth, “Love, let’s buy a boat and circumnavigate”. She replied with her cute little German eyes, “But I thought you said, if it flies or floats, we should rent it?”
Yes, but there has to be a way that we can have our boat and sail it too! “We’re almost ready to unplug from business, let’s consider what it takes to own a boat so we don’t have to drag our stuff everywhere. We have charter sailing checklists and a complete duffle bag of little tools (Allen wrenches, brass brushes, zip ties, PFDs).
Before going any further about our amazing experience with Stephen Cockcroft, I should explain our work life situation. We both started our careers in our early twenties and built companies that still do take our time on occasion. Mary Beth and her late husband, Frank, started a candy brokerage and I started a tech company that implements ERP systems. Mary Beth sold her company a few years ago and joined as a partner of a larger firm. I turned the day-to-day management over to my executive team and now they run the daily operations. We met just two years ago, fell in love, and instantly shared our passion for sailing. We also share a brain. Mary Beth is definitely the smarter of our quorum. I frequently tell Mary Beth, “Love, you have half my brain. It’s tough to think without your half.”
Chapter II – The Light Bulb
Charter cruisers have three big motivators with regards to buying.
- If we did buy, who do I trust to look after the boat?
- How can I still sail somewhere else in the world without moving my boat (Because I like where it is)?
- And if I want to, how do I reasonably move said boat?
The lightbulb came on with morning coffee. I said, “Mary Beth! We should check out buying a boat and put it in charter so it can make money when we’re not using it. It gives us our passion for sailing relatively cheap and we can have someone else manage it.
Yacht charter companies we do know well. With our experience, we have rented many a yacht. After we set our vacation dates, I blast an email to all the charter companies, tell them exactly what we’re looking for, dates, boat type, and we get a barrage of options and prices back. I pick a charter company based upon the available boat. We take our vacation and we typically don’t bother the company at all. We are very experienced charterers.
So after my epiphany of wanting to buy a boat, on the very next day, July 17 to be exact, upon opening up the Zinio app on my iPad, perusing through Sail Magazine, right there I saw on page 14 was the advertisement from Dream Yacht Charter, “Yacht Ownership Made Simple” I said to myself “Self, this is where I start.”
So, I called the “I’d love a new boat please” hotline, 855.208.6881, and Stephen Cockcroft picked up on the first ring. And with very first conversation ever, he immediately answered my basic questions. Then he emailed me detailed information and I brewed on it. Being from Milwaukee, we brew a lot. [Stephen and his wife, Estelle, are pictured at left.]
Wisdom has taught me that if I’m the smartest person in the room, I’m in the wrong room. It became very obvious, very quickly that Stephen knew how to navigate buying the correct boat, and more importantly how to sail boats. And sail, he did very well.
I began calling daily. First, I asked Stephen the basic business question, “What’s difference between you and your competitors, such as Sunsail, Moorings, etc. and why is your email address firstname.lastname@example.org and not @dreamyachtcharters.com?” He explained, “I started the yacht sales from scratch for Dream Yacht in the USA about seven years ago. The main reason was that they worked with me to develop products that would comply with IRS rules to place boats into the fleet for tax advantages. Moorings and Sunsail are a closed shop and will not work with independent contractors apart for the fact that they have no flexibility for the type of programs that I was developing at the time”. Stephen went on to explain the differences with the two ownership programs, Guaranteed and Performance. I prefer to think of “Performance” more as active “Participation” in the business, where we own the boat as a business.
What was most interesting is Stephen wasn’t looking to sell me a yacht. What he was looking to do, mostly, is give me good advice so I could choose what I wanted. After finding my background information, he made a few observations. It was all his ideas that gave me the most confidence. I didn’t ask him for the ideas, he freely offered them to me.
Chapter III – Questions Lead to Answers that Lead to Boat Ownership
I believe in “trust but verify”. If I’m about to go into business everything is fair game, the good and bad. So I tried to find dirt on Stephen Cockcroft. Instead I found testimony after testimony of good old-fashioned honesty. Reading the forums with his advice, it became obvious he was well trusted by his peers, and yacht owners. Stephen gave advice like:
- With your situation you should consider taking advantage of the Bonus Based Accelerated Depreciation that was introduced in Tax Law in 2017.
- Realize that if you take the depreciation it is a business and you have to actively participate. You can’t just take the deprecation and not work within the business.
- Since you’re considering Antigua as a base, you should consider a catamaran over a monohull as they rent much more easily than a monohull. (Typically we rent monohulls because it’s usually just Mary Beth and I sailing)
- Financing. Do you want to use your own money or finance the purchase?
- Try and plan to have the boat paid off in five years when the charter contract is over.
- You’re not going to make lots of money at this. In the end, if it breaks even, hopefully you’ve paid for your sailing passion and had fun. He provided a very helpful return on investment and cash flow analysis spreadsheet.
- You need to be connected at sea. Consider technology like xGate for email with satellite connectivity using your Iridium Go.
Starting and organizing a business is something I’m very good at. 35 years of being good at. Nobody starts a business in something they don’t like doing. You find your passion and if you have that entrepreneurial risk bug, you organize it, put some money in and you get more back. Hopefully lots more back.
The next week I had a few things to verify. Remember the golden rule, trust but verify? Especially when it comes to tax law and proper legal organization. First thing I did is setup time with our attorneys for validation on the pass-through of expenses and depreciation in the form of a K-1 from a company to an individual. Since depreciation is a business expense, a business needs to be created. The question is what type of company or corporation is best for you? That is, the question for you and your attorney. To complicate things, Mary Beth and I are not married yet, as we both file a separate tax return. So we had a few more questions:
- What type of corporation should we setup? Our advice given was an LLC.
- What percentage of shares should be allocated to each member? We chose 50/50.
- Pick out a name, search the web for a good available web URL, we chose Fun Sail Yachts, LLC.
- What are the basic components or documents you need for the corporation? Your attorney should create the filings for the state Articles of Incorporation, IRS registration for your Federal ID Number, be sure to note a filing of Form 1065 on each anniversary date and form SS-4 Application for Employer Identification Number.
- What was the cost of setting up the corporation? Our cost was about $750 for a basics structure.
- Do we use our cash or finance? We chose to finance with 20% down. The reason is the market conditions were better to leave our cash alone and buy the cash for 4.74%. What you can do is negotiate paying the mortgage weekly. That way your term and interest paid is relatively cut by 1/3. The advice from Stephen Cockcroft is correct. Try and plan to have the boat paid off in five years when the charter contract is over. That’s when the money train ends. You can choose to put the boat into the “B” Charter system after five years and just keep it going, but you’re going to make much less in rental. The rule is cover your costs.
- What type of accounting system do we use? Some of the best small companies run on Microsoft Excel and Word. Setup a spreadsheet and track all your expenses. I’ll put a shameful plug in for my company, Innovia Consulting, Inc. My profession is setting up ERP systems for companies and Microsoft introduced a new ERP accounting system call Microsoft Dynamics 365 Business Central. It’s based upon Microsoft Dynamics NAV (Navision) and it’s worth taking a look at over QuickBooks.
- Realize this is a business. It’s not personal. Someone else is going to be sleeping in your bed and using your things. If you cannot handle that, then buying a charter boat is not for you.
- Have you validating tax rues with your accounting firm? We chose to include Stephen Cockcroft on our conference calls with both our attorneys and CPA firm. He spent so much time with us that no amount of profit in this boat could ever repay him! Having Stephen involved made everyone more comfortable that the tax deprecation was indeed valid and would pass an audit if done correctly with Owner Participation.
- Does Owner Participation work for your tax filing? Remember, no one member can participate more than 100 hours in the company. That ruling is interpreted as a filing entity. That means if you’re married and filing a joint return, no problem. Both you and your spouse can work by going to a boat show, yearly inspection, or deliver the yacht to the new base, etc. and you can legally take the depreciation. If you’re NOT married such as our case, then only one of you per year can take the depreciation. Choose which one and make sure you have a transaction log register of that person’s time working within the company. The others involved cannot register more time than that individual taking the depreciation. This ruling is subject to interpretation by your CPA firm so it’s important that they are intimately involved for this question.
- Do you want to even use the Bonus Based Accelerated Depreciation in the first year? This may be interesting for you! We are choosing NOT TO USE the extra bonus depreciation. Depreciation is depreciation. You can choose to use it as much as possible in the first year which allows a business to make an additional deduction of 50% of the cost of qualifying property in the year in which it is put into service. Or, you can choose to take the depreciation and take the losses at the higher tax bracket margins and level load it over several years. That way you get more bang for your buck. Plus, you don’t create attention by having huge losses for several years with little income.
- Do you realize that if you sell the boat you will be hit with capital gains? Don’t ever sell the boat. That’s our choice. Sell the boat after 15 years after it’s been through the charter system, completely paid for and worth very little. I know that sounds cruel for this boat that’s the love of your life, but if you take the depreciation, your kicking the tax can down the road and you will pay the piper. Hopefully, just much less.
Questions led to more questions. Stephen answered them. I drove Stephen nuts, calling him every day. Over the next few days, it was a daily phone call with a list of questions.
- Who’s best for handling marine financing? Stephen Cockcroft’s advice was to use Dustin Howard at LH Finance (410) 689-4117, in cooperation with Bank United. They specialize in Marine financing and handle all of the USCG and Insurance rules with ease. Another big win. Using our traditional business finance avenues likely would’ve been a nightmare.
- What information will you need for Marine Business Financing? Complete a reasonable finance application, copy of paystubs within the last 30 days, two years of current Personal Income Tax returns with supporting schedules, proof of liquid assets, YTD Financial statement (including balance sheet & profit/loss statement), and two years current federal business tax returns. We were given an approval letter within 3 days.
Stephen was our complete concierge and there are things you just can’t take for granted, such as:
- Boat title and ownership
- Managing the insurance for both the boat and delivery
- US Coast guard documentation, suggested using Debbie Rich at Creative Yacht Solutions (813) 677-6885
- Overseeing crew delivery details
- Sourcing all the charter pack details, safety requirements, dingy, motors, the stuff you just can’t find easily
- Understanding the boats Sailplan, Spinnaker downwind sails, code zero. Highly suggest that you don’t leave them on the boat, owner use only.
- Understanding the importance of the engine 50 Hour maintenance service with warranty.
- Assisted with arranging a boat electrician in France for installing Raymarine Radar and Cell Extender Antennae
- Technology! – suggesting using your Iridium Go! With xGate email and Web – That worked!
From the start of this journey on July 17 as I was perusing through Sail Magazine and saw the advertisement from Dream Yacht Sales, “Yacht Ownership Made Simple”, to exactly three weeks later on August 11, we closed the deal and wired the final funds. We owned a boat.
On August 22, we arrived in La Rochelle, France. And on August 25th, we were underway bringing our brand new Bali 4.3 yacht back home. Currently we’re at sea, just a day from arriving in Las Palmas, Canary Islands. We plan to have our Bali 4.3 catamaran, “Corazon”, at the Annapolis Boat Show on October 4, 2018.
Yes, you can buy a boat in 30 days. However, I came to the conclusion, how could anyone possibly purchase a boat overseas for the first time without the help of a trusted advisor like Stephen Cockcroft?
We have fine White Porto on board.
About the Author, Donavan Lane & Mary Beth Geraci
It’s been the honor of both Mary Beth and myself to write the details of what Stephen Cockcroft helped us accomplish. We now move on to the next stage of ownership.
We spend our time in both Waupaca, WI, and Milwaukee with our two little Westies (West Highland Terriers), Melo and Monty, and a cat named Bella. Being in the middle stages of life, we have a reasonable amount of freedom as the companies that we founded are run by executive teams and my three boys Donney (Amanda), Ben (Jamie) & Sam (still single!) are all grown and on their own.
Mary Beth grew up in Sheboygan, WI, and spent her summers sailing on Elkhart Lake. Even as a small tyke she was quite competitive racing the small Lasers. When I semi-retired a few years ago, I wanted to learn how to sail big boats on turquoise blue, warm waters and took a sailing course in Key West, FL. From there I was hooked and spent the next several years sailing across the Mediterranean, Atlantic, and Caribbean.
My company, Innovia Consulting, is a technical firm that implements ERP Software. I recently stepped back in to assist with a new product call Microsoft Dynamics 365 Business Central that’s been amazing to see deployed worldwide. Since most of our company can work from anywhere, we’re having fun being able to travel and work from anywhere in the world.
Along with sailing, we also enjoy flying our Bonanza A36 and volunteering with mission trips. Being quite a skilled craftsman and woodworker, I typically find a calling to trips that can use my creative building skills.
We highly recommend that you use Dream Yacht Sales and Stephen Cockcroft and share our passion for sailing and travel!