You might want to consider forming a partnership.

Here's the text of an article that appeared in one of our regional boating
magazines.
It descries a local business that arranges yacht partnerships. but much of the
advice if probably "portable" to almost any region of the country.

Creative Alternatives, Part I

Most of us suffer from two-foot, or twenty-footitis. Our present boats are OK,
really, but would somehow be a bit more perfect if only...(if our beer budgets
could only pay for champagne). Then there are the people who would really love
to be involved in boating, but feel compelled to wait for a time of greater
personal prosperity or fewer expenses before attempting to afford and maintain
the family dream boat.

Our Creative Alternative series will take an in-depth look at some options that
might allow the landlocked to begin enjoying some quality time afloat, or
enable existing boaters to trade up to a much larger or newer boat than they
may have previously considered possible.

We'll look in turn at yacht partnerships, traditional chartering, and Seattle's
own YachtLease program. Each of these creative alternatives has some specific
advantages for boaters with a broad spectrum of economic means and boating
requirements.


Partnerships


Iko Knyphausen has opened a new firm on Westlake Avenue in Seattle,
(Nautishare), to arrange yacht partnerships. The concept of partnering with
other boaters to acquire a common vessel cannot be considered a new idea.
People have been partnering boats, with various degrees of success, for
generations. Iko has made an exhaustive study of the partnership concept and
has developed a thorough understanding of why some partnerships work very well
and others are less successful.

Until the advent of Nautishare, a boater's list of potential partners was
limited to the group of people he or she was already acquainted with.
Nautishare functions almost like a "dating service" for boaters, by introducing
people to a wider range of prospective co-owners. Nautishare will help
interested parties form firm, fair, practical partnerships and maximize the
probability that all partners will be satisfied with the arrangement.

Iko agreed to share some of his insight with our readers.

"Most boaters only use a boat between 20-30 days in a year," observed Iko. "The
rest of the time, the boats sit at the dock unused. Even on the very nicest
days in the summer, we will see the majority of boats still tied up in their
slips and not out on the water. A boat is not an investment. A boat isn't going
to appreciate, and so all the numbers associated with a boat are actually costs
and expenses. There is no good reason not to try and eliminate or share some
portion of the costs if it can be done without giving up the use of the boat.
Potential boat partners are other people who share the same problem: paying 365
days of expenses in exchange for 20-30 days of use."

Iko noted that partnership agreements are more common with other high-dollar
assets that might receive only limited use. "A company that formalizes
partnerships is a new concept in boating," said Iko, "but similar firms have
been successful in the private aircraft and vacation home industries. Nobody is
going to sit in a cabin up at Whistler all year around, and nobody is going to
endlessly fly around in an airplane, either." Like boats, recreational cabins
and aircraft are not inexpensive to acquire or to maintain, yet often get only
limited use by a single owner.

"One of the benefits of a partnership is that the arrangement is totally
transparent," remarked Iko. "Nobody is taking a markup over and above the
actual costs incurred for
fuel, moorage, repairs, insurance, etc. All the partners know exactly what the
actual expenses are, and pay an exact share. Unlike other arrangements,
everybody using a partnered vessel is a co-owner, and will be motivated to take
good care of a hard-earned asset." Most partnership arrangements allow 84 or
more days per year use by each partner, providing more opportunities for days
on the water than most people could manage to use.

Iko explained that most partnerships select a single partner to be the
"managing" partner, and that in some cases that responsibility is rotated among
the partners on an annual basis. The managing partner is the party who will
contract for repairs and maintenance on a vessel, avoiding situations where
(for example) two separate partners might contact two different detail
companies to clean up a boat on subsequent days. The managing partner would be
the only partner authorized to spend the partnership's money, and then only
within previously arranged parameters.

"In a lot of cases," observed Iko, "the partners will authorize the managing
partner to OK expenses up to a certain dollar amount. They might decide, for
instance, that any repair or expense up to $2000 could be contracted without
consulting with the other partners and that expenditures beyond that amount
would require a majority vote."

"There are certain important elements to consider when forming a partnership,"
said Iko.
"Obviously, a fundamental item will be the selection of a boat. This is one of
the advantages of partnering a vessel as opposed to renting a boat; the boater
gets to choose exactly the make and model they want rather than be required to
choose between a limited group of boats that might be available at any given
time."

"Through partnership, boaters can purchase a far nicer boat than they would
have otherwise considered. Take a boater with $125,000 to spend. If they want a
boat of
any size at all and want to be the sole owner, they will be shopping for a 15
or 20 year old boat that has some worn out systems and will probably require
some initial repairs and fix-up. The $125,000 boat will be used 20-30 days a
year. If the same boater can find three partners, each with his or her own
$125,000 budget, instead of a 20-year old 35-footer the partnership can
purchase a brand new, or at least much newer, far nicer and possibly larger
boat. Each partner will still be able to use the boat as many days per year as
they would be likely to use if they were the sole owners."

We asked whether some boats would be unsuitable for partnering.

"Boats that are extremely high maintenance are not good choices for
partnership. A boat with tons of exterior brightwork would be an example.
Brightwork is fine for people who enjoy working on it, but is likely to be an
issue on a boat where there are several partners who expect it to be kept
pristine at all times. Boats that are extremely technical or that are difficult
to sail would be better to avoid, as well."

"We recommend that partnerships contract most of the maintenance through an
outside company," said Iko. "We specifically refer people to Yachtcare at
Elliott Bay Marina, as they have a program where for $65 or $70 a month they
will perform basic maintenance on a boat and do periodic inspections. Splitting
the cost between four partners means that each partner is paying 50-cents a day
to have somebody else worry about the boat."

Iko stressed that the contract document is extremely important when
constructing a partnership.

"There are both major and minor considerations to address, but all can be
crucial when
arranging a partnership. It is important to identify locker space where each
partner can leave personal effects between uses without fear that they will be
moved or disturbed. In some cases, the number of staterooms on a boat might
determine the number of members a partnership will want to acquire. If there
are three decent staterooms, each partner can be assigned a stateroom and that
can be considered that partner's exclusive use and stowage area. Scheduling is
an area where disputes could conceivably arise, and we recommend that
partnerships consider outside using independent scheduling services. Yachtcare,
the company we recommend for maintenance, has a good scheduling system and will
take over the responsibility for a small monthly fee."

"A partnership requires that each partner is using the same method to pay for
the boat. It isn't possible to have one or two partners paying cash and the
remaining partners taking a mortgage on the same boat. We have identified a
local bank that is willing to finance partnerships, and one of the great
aspects of that program is that each partner need only qualify to finance their
individual portion of the boat rather than the entire amount. Four partners
could conceivably purchase a $2,000,000 boat, even if each partner would
ordinarily qualify for only a $500,000 boat on an individual basis. Of course,
it is easiest if each partner can pay cash and many people will consider
borrowing against real estate to fund their share of the boat."

Iko suggests that forming a LLC may be a preferred method for organizing a
partnership.
"With an LLC, if one of the partners wants out of the agreement and a
replacement partner is found, the boat doesn't have to be retitled to bring the
new partner into the deal."

Iko told us that it's important for the contract to have provisions for
dissolving a partnership. There are three common methods. One approach is to
agree in advance that if one party leaves the partnership, the remaining
partners will purchase the departing partner's share. A second option is to
allow the leaving partner to sell his share to an outside party, but it is a
good idea to have the outside party subject to approval by the remaining
partners. An agreement could say that the remaining partners have the first
right of refusal for a departing partner's share, and that if the remaining
partners failed to approve the departing partner's buyer, the remaining
partners would have acquire the share. The third option would be to dissolve
the partnership, sell the boat, and split the proceeds.

Nautishare doesn't actually prepare the contract documents, but is willing to
furnish a template for partners to use as a guideline when drafting an
agreement through the partners' own attorneys. Nautishare charges the
partnership a one-time commission based upon 5% of the partnered vessel's
value, and the 5% is split between partners. (Each of four partners would pay
1.25%).

What type of savings could one realize through a partnership, or how much more
boat could be enjoyed? With Iko's assistance, we prepared a spreadsheet
comparing two vessels; a 2001, 43-foot Riviera Flybridge vessel currently
seeking partners through Nautishare and a 1998 32-foot Carver 325 aft cabin
offered for sale on the internet.
Our first comparison will consider sole ownership.

( Julie, first spreadsheet goes here, let me know if you have trouble with the
format)


Our second comparison examines 25% ownership of the Riviera vs. sole ownership
of the Carver.

( Julie, second spreadsheet goes here)


The comparison illustrates some rather obvious differences between sole
ownership and partnership at the same level of expense. As Iko observed, "most
boaters are only under way between 20 and 30 days a year, and a 4-way
partnership allows each partner to schedule up to 84 days of use."

{Note to Julie; I'll forward images of the 43 Riviera and the 32 Carver to use
above the spreadsheets. Thanks)