Thursday, November 28, 2013

Thankful for a few Freedom Chips and the Wisdom to Use Them Well

It's Thanksgiving Day in the U.S., and we have been busily preparing to take possession of our future home afloat. While I don't generally like those "I'm thankful" messages that seem to be so pervasive (and not always sincere) and pop up in our social media society always connected conscience this time of year, today I decided to write one. So my apologies for writing this, and I do hope you find it interesting or at least sincere.

Actually, I hadn't planned on writing this at all.  My intention was to try to catch up on some of the reading I've wanted to do but am terribly behind on. I was reading the Cost Conscious Cruiser (one of the books that was so generously gifted to me and that I plan to pay forward in the future) and in one of the stories, it made mention of the phrase "Freedom Chips".  If you have been researching cruising much, you have probably heard this term used for money a number of times now.

Freedom Chip
I think it is a great term.  In our society we seem to be well trained to try and collect money but not to really see what the true cost of that effort is.  Sometimes there is a specific goal for the money and it is needed (food, shelter), but most of the time it seems it is just collecting money for the sake of trying to "keep up with the Joneses", to prove success or justify our existence.  We trade it for the newer shiny car, the bigger house, the big flat screen TV, or other symbols of our success.  At least that is what I feel I've spent most of my adult life doing anyway.

Calling money freedom chips makes the actual transaction much more clear.  I've traded my freedom for these chips by sitting in a soft-walled container staring at a glowing box on my desk (OK, I was diligently writing computer software) for 40 to 60 hours each week of my adult life. I would then trade these chips that represented my lost freedom for the bigger house, the newer car, the 65" big screen TV, or even just putting them in storage (bank) for later use.  Once or twice a year I may even trade my freedom chips in for a little freedom, a vacation from the other 50 weeks a year where I was trading my freedom away.

Since we started this idea of leaving it all behind and going cruising, we have been converting some of these symbols of our success back into freedom chips.  We've spent some of our chips to learn to sail and will soon be spending a lot more of them to acquire our traveling floating shelter.  Over the next few months we should have far fewer symbols of success and far more freedom chips.  We intend to trade a larger percentage of our chips for freedom as we move forward.  Freedom to spend our time the way we want.

We will always have to trade some of our freedom for chips and some of those chips for life's necessities, but we hope to find a balance that better favors our freedom and not symbols of our past "success".  The realization of our role in the rat race and the desire to change that role is what I'm most thankful for this year. Hopefully as we move forward we will spend our freedom chips wisely.

Thursday, November 21, 2013

Conditional AOV Accepted

I'm shocked I tell ya...shocked.  Was starting to wonder if this day would come. We may soon be the new owners of a Leopard 38.  The current owner accepted our conditions to fix a couple things (replace a leaking transmission cooler and fix a slipping/late engaging transmission) and so we are finally heading into new boat buying territory...we've passed the AOV hurdle and it is on to closing.

Of course as I look out the window and watch the snow fall, I can't help but think of the past years' Corona commercials with the Christmas light decorated palm tree and think...soon.

So, while we work on wrapping up a bunch of odds and ends in preparation for closing on the our boat, I'll leave you with some videos of what increasingly looks like will be our future home afloat...

Sorry if there are some distortions in the videos...YouTube's "fixer" tried it's best to compensate for my rather shaky cell phone video (yeah, it must be the phone...couldn't possibly be me).

The port hull accommodations starting in the forward berth.

From the port hull across the bridge deck to the starboard hull

The starboard hull accommodations starting in the separate shower and moving to the forward berth with private half bath.

The cockpit and swim platform on the back of the boat.

Tuesday, November 19, 2013

Acceptance Of Vessel

The Acceptance Of Vessel, or AOV, date is an important one in the boat buying contract thing.  This is the point by which the conditions listed in the original contract should be met and the buyer informs the seller that they will accept the vessel and complete the contract as-is, will conditionally accept the vessel based on findings from the personal inspection/survey/sea trial (basically a renegotiation option), or reject the vessel and cancel the contract (without loss of the deposit).  It is where we are now with the current boat we have under contract.

On the first boat we had under contract, we rejected the vessel.  We knew that boat would have been a bit of a project boat going in, but the large number of expensive items found (including structural issues) made it more of a project than I, as a first time buyer, was willing to tackle.

The second boat we had under contract, we submitted a conditional acceptance of vessel on at this stage.  During the survey, over $32K worth of issues were found that we did not anticipate (the total list of stuff to fix was between $60K and $70K) .  We asked for a credit at time of closing to cover 50% of the unanticipated items (many of them were broken systems that should have been disclosed ahead of time when we asked if there were any known issues with the boat). The seller wasn't willing to meet us half-way and the previously agreed upon price was higher than we were willing to pay for a boat that needed all that work, so the conditional acceptance of vessel became a rejection of vessel at that time.

With the current boat there were about $12K worth of items we did not anticipate (and a total of $42K). There are only a couple issues that I would consider critical (water leaking into the boat is considered critical...right?) and would like to have them fixed, so we are again submitting a conditional acceptance of vessel asking that the items be fixed.  It isn't a big or expensive list (maybe 15% of the unanticipated stuff) but I want the boat ready to be moved when we close so it is critical to us. We are submitting the Conditional AOV today.

Hopefully this seller will see that this is more than fair and we will finally have our boat.

Sunday, November 17, 2013

Going To See A Leopard - Day 3

I wake up and look out the window of our hotel room at the surf breaking on the shore. Does it actually look a little better or is it just wishful thinking. My wife opens the door and is happy to report that the winds do seem considerably lighter. Maybe, with any luck, we can get the rest of the survey (the haul out) and sea trial done before we hop on a plane back to Denver later today.

Pete (my broker) makes his way from St. Augustine back to Daytona and Jonathan (my surveyor) heads back up from Ft. Lauderdale. I remember when I was surprised that the survey and sea trial happened on the same I seem to be wishing we actually could get them done in the same day...funny how perspective changes.

We meet at the boat at 11am to move the boat to the boatyard for the haul out. Fortunately, the boatyard is very close, only a 5 or so minute trip. When we get there it looks just like the lift we couldn't fit in with the Leopard in Marathon. I have a quick flashback to that fiasco, but the selling agent confirms that the owner has used this lift on several occasions. We slowly work the boat into position and indeed it does fit...barely. We carefully move the boat into the lift's slip using ropes, poles, and a few fenders. Once again I pay to make a catamaran fly through the air. Unlike the bottoms of the other boats I've surveyed, this one was pretty clean so we forgo the pressure wash.  Jonathan gets out his trusty hammer and does the usual rapping on the hull, listening for the dull thud that indicates possible delamination or water intrusion. Other than one time he hit one of the few barnacles that took up residence on the hull, everything below the water line sounds good. That is welcome news.

We move on to the sea trial portion, which is done in the Ponce inlet since the waves were still in the 7 to 8 foot range just off the beach in the Atlantic...but I really didn't have time for a long sail anyway. Jonathan checks out the engines and finds that they were not producing the expected rpm and the transmission on one seemed to be slipping a bit when engaged. Ugh. There may be simple explanations for these issues...or expensive ones...clearly more investigation is required. We also found that the transmission cooler was leaking water into the bilge when underway...a fact that was confirmed when the very loud bilge alarm went off a few times during the trial (hey, at least the bilge alarm worked).

We quickly run up the sails to inspect them. The genoa looks fine, except the UV protection strip could use replacement. The main looks a bit strange to me as we raise it...seems a bit baggy like it isn't attached to the mast right. Jonathan and my broker both confirm that the sails cars (guides that attach to the front of the mainsail to the mast), specifically the ones at the batten locations, are missing. Really?!?!? The cars that are there are hanked on between the battens and this apparently isn't a typical configuration and may not be suitable for the mainsail.

There are issues with every propulsion option available to this boat...well, unless I get out on the transom and kick. Fortunately these are items that are not too serious and can be resolved...for a price.  The rest of the survey is uneventful.

Overall, the boat is in what I'm learning is just a little below average condition (or by the survey definition I'd call it "fair" condition).  There are a few more serious, safety related items but most are just the usual laundry list of issues found on used boats.  Being an ex charter, the boat is a little bit rougher than average on the cosmetic front but is mostly mechanically sound.  So, as we board the plane back to Denver we have some thinking and some research to do on repair costs while we await the official report from the surveyor. Not a lot of time though, the acceptance of vessel date fast approaches.

Saturday, November 16, 2013

Going To See A Leopard - Day 2

My usual luck with weather from my aviation days seems to be following me to this new adventure. We awoke (several times during the night, in fact) to strong, gusty winds and angry seas...and we're on the 7th floor of a Daytona Beach Holiday Inn Express. The weather report was calling for sustained winds up to 20 knots with gusts over 40 and seas in the 9 foot range with small craft advisories. The wind was blowing off the ocean hard enough that our rental car, that was clean the previous day when we picked it up and was sitting on the opposite side of the hotel from the ocean, was now coated with enough salt that you could barely see through the windows. And we were going to do a survey and sea trial in this? That was the plan anyway.

Big waves on Daytona Beach, from the 7th floor.
Despite all of this, I was feeling better about the boat today than I was yesterday. I guess a little more sleep deprivation was just the ticket. I call my broker to query about the chances of meeting today's goals (expecting they were slim) and he said we would do whatever we can but it was ultimately up to the captain how far we would go. Can't say that I felt all that comfortable with the idea of a sea trial in these conditions, but I know how things can change and our flight back home is tomorrow evening so we have a very limited time window.

We all meet at the boat and the owners agent says the owner is not really comfortable with the idea of moving the boat today but would make the call later, after the part of the survey that could be done at the dock is complete. Jonathan goes about his checks and even goes up the mast for that inspection. Must be fun at the top of the mast in these winds.

By the time he is done with the checks he could perform at the dock, Jonathan had a moderate sized list of issues. And the wind hadn't improved any either, so no haul-out or sea trial was going to happen today. We review John's list and figure out a plan to do the haul out and sea trial before we have to hop back on a plane tomorrow evening. The list of issues on this boat is less than the previous Leopard (thus far). Many of the items we were aware of like the cosmetic issues with the exterior and the strange issue with the Corian counter top.

There were also a few surprises. A couple of the bigger ones were a transmission issue with one engine and a windlass that doesn't work going in the "up" direction (and i doubt the anchor needs help going down). There were also a number of other odds and ends that we didn't know about but seem to be common issues (such as non-functional lights and valves) on used boats.

So, while the boat is not quite in the condition I had expected, it is not bad. Of course, that could all change with the sea trial and haul out, but hopefully that will go smoothly...aren't we about due for some good luck anyway? Guess we will find out tomorrow.

Friday, November 15, 2013

Going To See A Leopard 38

Sitting in seat 7A listening to some Jimmy Buffet and taking a trip that is starting to feel like a regular commute, we are flying back to Florida again to inspect and survey another boat. The whole process is starting to feel just a bit too familiar and the thought that we may get past a survey and actually own a boat feels like just a fleeting dream at times.

This trip is a bit different, though. This time we are under contract on a boat we have yet to see in person. All we know of the boat is what is shown in the listing, the videos that Pete our broker sent when he went and took a look at it for us, and our brokers personal report on it's condition. It is another Leopard 38 (a.k.a. Moorings 3800) and this one is an ex charter boat. So, unlike the last one, this one has higher time engines, more nicks and scrapes, and does not have a hard top bimini, water maker, or solar. On the other hand, it appears from the pictures we have seen that this one as been regularly maintained and the systems it has are reported to be in good working order. Oh it also comes with a RIB and motor (a.k.a. the family car).

We land in Orlando, pick up the rental car (no not from Fox, won't rent from them in Orlando again), and make our way to Daytona to meet up with our broker and take our first actual look at the boat. The sales contract has the usual three conditions (personal inspection, survey, and sea trial) and I guess you can count this as part of the personal inspection even though I will want to see it again just prior to closing.

Blue vinyl...easy to clean but seems sticky in warm climates.

We meet Pete at the boat that is sitting behind a private residence near Daytona. We take a very careful look at everything inside and outside the boat. Inside, the boat is a pretty typical Leopard with some less than appealing blue vinyl cushions, a damaged Corian counter top (I've never seen Corian curl before) and damaged refrigerator lid. Other than a few lights, everything we tried worked. Outside is where you could really tell it was an ex charter boat. Numerous dings, scratches and minor cracks. There were numerous gel coat repairs that didn't quite match (likely from arguments with docks that the boat lost) and a few spots where the gel coat was getting pretty thin. The bright sides of the exterior appear to be the condition of the sails (from what we can tell of them sitting in the stack pack) and the somewhat weathered but serviceable dinghy with motor.

An abundance of caulk and the "two tone" gel coat.

Overall, it seems to be a decent boat. Mechanically, it appears to be in better condition than the other Leopard (although we don't know about the engines or generator yet). The detractor is clearly the hull condition that doesn't look the best and the higher time engines. There is one pretty clear repair issue that the surveyor will need to check. At the end of the day, I feel a bit perplexed about the whole thing and I'm not sure why. I think our broker accurately represented the condition of the boat, yet I think...or at least hoped...that it was in a tiny bit better shape cosmetically speaking. I think it may just be my mood though, as I have a bit of a headache and have been functioning with a general lack of sleep.  Or maybe it is our past experiences and I just don't want to get my hopes up again.  I will wait and see how I feel tomorrow.

On an unrelated but amusing note, the fact that the plane had to be deiced leaving Denver and the captain asked us to pull the shades down to help keep the plane cool after we landed in Orlando tells me we are working in a good direction.

Thursday, November 7, 2013

Hey Buddy, How Much for That Boat?

In the process of shopping for our future home afloat, this is a very common question on my mind. Of course, the real question I grapple with is "What is that boat worth?" Being a novice boat buyer, I entered into this process not really knowing much about the market.  Having gone through two contracts as well as a couple other offers and a lot of market analysis, I figured it was time for a "what I've learned thus far" on the subject.

Now before you go thinking what I write below is gospel, remember that we only started looking at boats in earnest in April (that's about 6 months ago folks). Also remember that we are shopping for used live-aboard catamarans in the sub $200,000 (US) category. And some of this is rather obvious, but I've found that with all the info swirling around on one's mind, sometimes even the obvious statements are worth mention.

The first thing that I've learned is that every used boat is unique.  They may have looked the same when they rolled off the assembly line, but they were probably unique by the time they were sold and certainly are by the time they are re-sold one or more times. Comparing live-aboard boats is a lot like comparing furnished houses combined with cars.  Each one has unique furnishings and touches, included equipment, as well as different levels of wear...and then they have engines and batteries and other vehicle aspects too.  This makes attempting to determine a reasonable value for a boat a very difficult task. I think most brokers, be it house or boat, learn the standard capitalist answer to the above know...the "it's worth whatever someone is willing to pay for it" answer.  That's great in your college Capitalism 101 course, but doesn't really give you much of a place to start when looking at boats. 

A near "bristol" condition FP Tobago.

We tend to start like we do with houses, looking at comparable sales or "comps" as they are usually called in real estate.  Seems reasonable, but there are a couple problems with it.  First, there are far fewer boats of a given type than there are houses in a neighborhood, so a comp list of recent sales often must go back years instead of weeks or months as you would for a house.  Another issue is the wide variance in condition and equipment. Obviously a former charter boat with minimal 1990's electronic equipment (often not working), original sails and upholstery, etc. would be a far different value than a non-chartered boat of the same age where the owner has updated the equipment and interior as tastes and technologies have changed.  And yet another differentiator is location. If you are lucky enough to find a number of "comps" it is not likely they were sold in the same area in which you are looking. Boats in less tropical climates tend to age better than those subjected to the tropical sun, and this impacts the value.  Boats located in hard to get to remote locations or places people don't really want to spend as much time in tend to sell for less just as boats in hot boating markets or where the supply is limited relative to demand fetch a higher price.

Leopard in fair condition when we saw it.

So, you collect what data you can and try to come up with an average.  What the average boat, in average condition, with average equipment should cost...approximately. As a software engineer with a minor in mathematics, I prefer looking at hard numbers. In my many attempts to figure all of this out, here are some rough guidelines I've found seem to hold least for the catamarans in the price range I've been looking at sold in the United States (this excludes boats in "restorable/salvage" condition, see definition below).
  • Boats sell for about 12% less than they are listed on average.
  • Boats used in charter take about a 10% hit in price.
  • Location can make a 10% difference in price 
    • US non-tropical locations near the top
    • Remote (harder to get to) tropical locations near the bottom
  • The condition of a boat can make about a 30% difference in price (not including salvage).
  • 3 years seems to be a reasonable time frame when collecting "comps".
  • There is little difference in price between older and newer versions of a given model, prices are mostly based on condition.
  • Buying a boat with the equipment you want is cheaper than buying a cheaper boat and adding all the equipment yourself.

As condition has such a large impact on price, it also helps to have a common definition of the condition of a boat.  The following seems to be a pretty "standard" definition of several surveyors and surveyor organizations.
  • Excellent/Bristol Condition: A vessel that is maintained in mint condition or "Bristol fashion" – usually better that factory new, loaded with extras (very rare).
  • Above Average Condition: A vessel that has had above average care and maintenance and is equipped with extra electrical, electronic, and other gear.
  • Average Condition: A vessel that is ready for sale (or ready to sail) requiring no additional work and normally equipped for her size.
  • Fair Condition: A vessel that requires typical recurring maintenance to prepare for sale.
  • Poor Condition: A vessel that requires substantial yard work (in excess of normal maintenance items) and is devoid of extras.
  • Restorable/Salvage Condition: A vessel where enough of the hull and engine exists to restore the boat to usable condition.

So, with this information you can start to get an idea of what you might end up paying for a given catamaran when all is said and done.  Here's an example using a fictitious catamaran:
  • You are looking at a 1995 WidgetCat (I told you it was fictitious) in above average condition and started it's life as a charter boat (engines both have 5000 hours).  They are asking $190,000
  • Assuming you don't have comps available, you look at the available listings:
    • 1993 WidgetCat $220,000
    • 1994 WidgetCat $180,000
    • 1996 WidgetCat $200,000
  • The average asking price is $200,000 so the average sold price is probably around $176,000.
  • Since the specific boat is a former charter, expect 10% less than the average.
  • Since the specific boat is in above average condition, expect 7.5% more (30% range gives 7.5% per step with average being the starting point).
  • So, the final sales price for this 1995 WidgetCat should be about 2.5% below average (10-7.5) or about $171600.

Obviously this works a little better the more accurate data you have, for instance actual sold comps instead of average asking price.  But, hopefully it will give you some idea of where to start.

This isn't any sort of guarantee, and for every rule there is an exception. Also remember I'm of very limited experience in this take this for what it's worth (and for what you paid for this advice :-) ). And, as I stated earlier, every boat is unique.  All of this calculation of averages and estimates are just that, averages and estimates.  I guess the Capitalism 101 answer is ultimately correct...but I hope this helps folks figure out where to start the negotiations.

 So, what do you think?  For those that have purchased boats, does this sound like what you found?  For those just starting to look, does this help any? Anyone out there want to comment on differences with the monohull market or different price ranges? Am I just an engineer trying to apply some order and logic where there obviously isn't any?