Question:
Buy or Rent a offshore fishing boat?
A friend of mine (I own a 24ft Pontoon for lake use) is looking to buy
a used boat for offshore fishing off Corpus Christi, TX. It's about
50 miles from port to 'good' fishing areas.
The main question I have is, should he by the boat or simply charter a
boat each time he wants to go?
The second question is, does anyone have any advice about operating a
charter boat?
I'll now write alot of supporting detail and other information.
He wants to spend around $75,000 for the boat and he wants to pay
cash. He expects to use the boat twice a month as weather conditions
permit. Knowing him as I do, I think once every 3 weeks or even once
a month will be more likely as he has alot of other obligations at
home.
I've been telling him to consider simply establishing a relationship
with an existing captain and charter the boat as he wishes. I went
out 3 weeks ago on a 34' Boston Whaler Defiance. Price for the day
for 5 guys was $1000. We caught Amberjack.
Being a boat owner myself, I have tried to explain how much additional
work is involved with boating when you are the captain, rather than a
guest. Storage, maintenance, fuel, cleaning, care, safety
precautions, weather monitoring, collision avoidance, anchoring,
navigation, trailering, inspections, insurance, equipment.. etc.
While I enjoy doing these things, I have more time (no kids) than he
does.
In addition he would have to dock the boat somewhere in Corpus
Christi/Rockport, and have to buy all the fishing equipment for the
boat unless he finds a boat for sale with the equipment.
He claims that he wants the 'freedom' of owning his own boat so he can
go when he wants and stay as long as he wants.
In summary, I think he would be better off chartering when he wants
rather than owning. Your thoughts?
The second question is more of a financial one. Given the scenario
above, is there some sort of tax break he can obtain if he has his
business purchase the boat, and operates it as a charter? Does
owning a boat and allowing it to be run by a charter service pay off?
Answer:
-Can't answer the charter question, but if it has a kitchen head, bunks, etc.
it may qualify for a second home. The interest would be deductible and he
wouldn't want to pay cash then.
-So you want to pay $100 in interst to get back $28 or $30 dollars in
taxes? Different strokes for different folks, but borrowing the money
so you can get a fraction of the interest back in taxes doesn't make a
good argument for financing when you have the ability to pay cash,
imo.
-You forget that the $75000 can be invested (in conservative safe
investments) earning 8 percent annually. That money compounds annually.
Meanwhile, you're paying interest on a declining balance. If you sell the
boat in the first couple of years, then you're right...pay cash. If you
keep it for the life of the loan or longer, then finance the thing. The
payments are all principal by then anyhow, and your $75000 is worth over
$150000 (assuming you made 8% annually on the invested money for 10
years..the life of a typical loan). This is the premise of making other
people's money work for you. It is also the same exact reason you shouldn't
own your home outright.
