With a geographic region tentatively determined, I started scouring boat listings to get a sense of the market. This began long (2 years) before we were actually interested in buying. I was primarily looking at a the following factors:
- Quantity of available boats that would fit our budget and our needs/desires
- Seasonal variations in the quantity of boats on the market, knowing that we wanted a roughly Nov. 2015 start date
- Does the market soften during the hurricane season? My theory being that sellers run up storage costs and risk while buyers are few and far between
- The comparative value of a boat purchased in the Caribbean versus the US East Coast. Were we likely to gain, lose, or break even by buying in the islands and selling in the US
At first this research was pretty casual. Browsing listings on Yachtworld, SailboatListings, and Craiglist. Also reading lots of forum discussions about relevant topics. Then I started actually tracking all the individual boats that met our qualifications. I made a spreadsheet with information about each boat- model, asking price, date it was listed, equipment, etc. I’d check on each boat every couple of weeks to determine whether the boat had sold or if asking price had been lowered. I figured that if boats were staying on the market for many months and/or the price was being cut drastically, that would signal to me as a prospective buyer that it was a healthy buyer’s market. To examine the regional price difference, my strategy was to select a high volume production model with loads of examples in both regions – comparing a model with few examples would not have been statistically valid. I focused mainly on Beneteau 323s and Pearson 365/7s as there are always a ton on the market and they represent both new and old models, respectively.
Budget Boats, or Lack Thereof
So what did all this analysis reveal? First off, there weren’t many boats in the Caribbean that met both our criteria and budget. And since you may be wondering, our intended budget for the boat was initially around $30,000. The boats that met the price were generally either beat up, under-equipped (requiring costly refit), or built by some obscure boatyard in Sweden that no one in the United States has ever heard of, thereby destroying any resale value on the East Coast. The boats that met the other criteria generally didn’t meet the price.
The limited supply of appropriate boats was initially quite surprising to me as there are plenty of cheap 30 to 40 foot boats in the U.S. After thinking on it for a while, I reached the conclusion that the average size and age of boats that get sailed to the Caribbean is both larger and newer than in the U.S.  My guess is that most of the folks that take this type of trip are retired and have quite a bit of money behind them, so they spend 5 years fitting out a 44 foot, quarter million dollar yacht before they ever leave the dock.There just aren’t that many 25+ year old 36ish foot “budget cruisers†down island, particularly ones that are rigged out for cruising and in turn-key condition. At this point we decided it was necessary to play with the finance spreadsheet, jigger our numbers, and raise our budget up to $40,000. But with all that said, there were still a handful of boats that fit the bill, but we weren’t going to have the pick of the litter like I initially assumed.
The Reason for the Season
Are there seasonal variations in the availability and price of boats? Definitely. Lots of boats go on the market in the Caribbean in November/December and again in April/May. My hunch here is that the Nov/Dec listings are guys that recognize that they want to get rid of their boat, but it’s going to take some time, so they might as well do some more sailing while they’re waiting for a buyer. We’ll call these the Forward Thinkers. The Forward Thinkers price their boats high and presumably are less willing to negotiate as they’ve got many months until hurricane season. They’ve got time. They’re savvy. Research suggested that the boats stayed on the market for a while, but their asking prices were not routinely being slashed. This was definitely NOT the group of boats that we wanted to look at if we expected to get a decent price and be on the water by November.
The April/May boats are sold by one of two groups: The Procastinators or Doctors from Iowa. The former are people that must have wanted to get a full season of use out of their boats before putting them on the market, thinking that they’d have no problem selling them off at the end of spring. You know, at the beginning of Hurricane Season. When everyone is shopping for boats…? The latter group is comprised of production boats (Beneteau, Jenneau, Bavaria) that have reached the end of their 5 year charter commitment and are being sold, frantically, by Doctors from Iowa. I ought to take a moment to explain how the charter industry works so that you have context.
The Genius of the Charter Industry
Sailboats that are chartered by The Moorings, Sunsail, Horizon, etc are not actually owned by those companies. They are owned by private individuals, generally 50-something year old white collar professionals that live in places that don’t have an ocean, and are leased back to the charter companies. Dr. Joe Landlocked buys a brand new Beneteau 393 through Sunsail, either through financing or putting up the full purchase price, and agrees to put the boat in charter for 5 years. Dr. Joe’s incentive is that he gets the good feeling of owning a shiny new sailboat in the BVI that he is allowed to use for 4-6 weeks per year, which is all the time he can get away from the office anyway. The rest of the year, Sunsail is maintaining, storing, managing, and chartering the boat. Dr. Joe is probably even getting enough income from the charters to almost cover the boat mortgage! Dr. Joe isn’t quite ready to retire yet, but he’s pretty sure that in 5 years, when his boat is out of contract, the kids will be done with college and he’ll sell the practice and sail off into the sunset with his wife on his almostnewboat. In the mean time, he’ll have had his expenses covered and was still able to sail a little. Sounds like a deal, right?
Well, maybe. What actually happened in that 5 years is that Dr. Joe’s knees went bad, his wife decided that she prefers homes that aren’t mobile, one kid failed out of college and moved back into the basement, and the other one is happily married, but just cranked out a grandkid. Dr. Joe isn’t sailing off into the sunset anymore. He’s staying in Iowa. Or maybe getting a condo in Florida. The problem, however, is that Sunsail is going to hand over the keys to the boat in May whether he likes it or not. Suddenly he’ll be responsible for not just the boat mortgage, but all the costs and responsibilities associated with owning a sailboat that’s smack dab in the middle of the most active hurricane zone in the world. And the hurricanes are coming. Soon.
Dr. Joe is in a bind. He knows he’s got to get rid of this boat. Too easy, mate! Sunsail has him covered. They’ve got their own in-house brokerage for just this purpose! They’ll only require 10% of the sale price for their trouble. So Dr. Joe’s Beneteau ends up on the market in May, along with 50+ other boats just like it. That, ladies and gentlemen, is the charter industry in a nutshell.
Back to the story. It was easy to conclude that the April/May boats being sold were going to be the focus of our attention when 2015 rolled around. Of the ex-charter boat groups, we could have just about afforded a Beneteau 323 or Jenneau 32i, but they’re on the small end of what we wanted and come with only the bare minimum of equipment. Just adding an autopilot and dinghy/outboard would be at least an extra 5 grand. Cat also thinks Beneteaus are “ugly†and she prefers boats with “pointy fronts and swoopy butts.â€
So we narrowed our focus down to the Procrastinators’ boats: 33+ feet, older (<1990), equipped to cruise, and coming on to the market at the end of Spring 2015. There aren’t a lot of buyers that time of year and the sellers are racking up expenses while they store a boat they are not using. Our plan was to let these guys sweat until August as they watch tropical depression after tropical depression roll off the western cape of Africa. That’s when we’d pounce, beat them down on their price, and drag the closing out until October when we would be ready to move down to the Caribbean.
Geographic Arbitrage in the Sailboat Market
The last factor I wanted to analyze was how the prices of boats varied between the Caribbean and the US East Coast. This was pretty easy to estimate based on the aforementioned comparison of a couple of ubiquitous models of boats. It would be pointless to calculate an exact variance in prices, because no two boats are exactly the same, but in general boats are more expensive in the US. There are a lot of factors at work here, but I’d guess that the primary reason is that the Caribbean is a long way away from most sellers/buyers, the storage costs are higher, the risk of hurricane damage is higher, and there is the valid concern of accelerated wear from UV and salt.
In short, while I believe that only a fool would expect to profit from buying and selling a sailboat, I concluded that we stand a reasonably high chance of not totally losing our asses on the sale of our boat when the trip is over.
In Conclusion
By the end of 2014 we had set a budget, a timeframe, and we had a bit of confidence in the geographic considerations. We weren’t quite ready to hop on a flight to STT and start writing checks, but the pieces were coming together.
In Part 3 of the series I’ll write about what we were looking for in the boat itself, since I’ve been writing in only very general terms up to now. There’s no such thing as the perfect boat for every scenario and budget, but at this stage I had a good sense of what we wanted in a boat and what we could realistically obtain. Stay tuned.
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