Monday, April 23, 2012

Liveaboards Welcome

Marinas are like RV Parks.  And when people turn boats and RVs into full-time or vacation homes, they are no longer boats or RVs.

We went back to the Marina the other day - where we used to keep our boat.  What was interesting was how depressing it was, which maybe was one reason why we sold the boat.  In theory, a Marina is a place to store your boat or keep it at a dock, ready for use.  And some Marinas are like this - in whole or in part.

But other Marinas - or parts of them - become "liveaboard" Marinas, where people live on their boats either full-time, or use them as vacation homes.   In either case, the boat rarely, if ever, leaves the marina, and devolves quickly into a floating condo - albeit one with a damp basement and a perpetual mildew problem.

Is this a smart move?  For the individual or the Marina (or RV park) owner?  I think not, and again, that old bugaboo, monthly cash flow is behind the whole deal.   People fail to take into account the overall transaction costs of using a boat as a vacation condo or house.

For example, say you buy a boat to use as a condo at the Marina.  You decide you like to vacation at that particular destination, so you buy a secondhand yacht for $75,000.  It has been in the water a long time, and while in theory, you could take it out on the ocean, in reality this would be a bad idea.  The engines, not having been run in months, may crap out on you.  And the navigation electronics are old and out of date.   No, it is best to leave such a boat at the dock.  Machinery unused becomes unreliable in short order.

The monthly docking fee is $450, which includes electric and water.  You have to pay to pump out the waste tank, so you end up using the shower and bath ashore, which are public facilities and, well, a little messy. 

And of course, since your boat never leaves the dock, it becomes "ensconced" at the dock, with some rusty bicycles parked next to it, as well as some potted plants.   The canvas has started to fade, and the boat has not had a good wash and wax in years.  So yes, you have your floating condo, but one that looks rather ratty and uses a public bath.

OK, so you say, this is still a good deal, even if it looks a little shabby.   After all, $450 a month is cheaper than owning a house, right?  Well, yes and no.

The monthly cost of owning my HOUSE, without any mortgage payment, including taxes, insurance, utilities, and the various fees here on the island, is about $850.  And that is pretty high, since we have high insurance rates and have to pay a $500 fire fee and the like.  So yes, in terms of monthly cash-flow, the boat is cheaper.

But, that $75,000 boat will be worth about $35,000 in five years or so.  So you have to factor in another $583 a month in depreciation.  A house, even in a crappy market, will hold its value, provided you were not idiotic enough to buy it during a bubble time.

Once you throw in the depreciation, the monthly costs are about the same.    And, over time, the home may actually appreciate in value, which makes the cost even less.

But we are comparing apples to oranges here - a three bedroom house on 1/4 acre of land to an old 40-foot cabin cruiser that "sleeps 6" in tiny berths.  Perhaps a better bet would be a duplex, or a condo, or hotel condo.  Here on our island you can buy a hotel condo for $75,000 to $150,000 that would sleep two to four people comfortably.   And as an added bonus, they can rent it out for you when you are not using it, providing you with additional income as well as a depreciation deduction on your taxes.

In terms of overall cost, monthly cash-flow, or whatever, the boat is starting to look pretty shabby.

So why do people do this?  Why do people live in old Motorhomes or old Boats, convinced they are "saving money?"

Well, once again, our old friend poverty-think comes into play.   The poor tend to think in terms of monthly cash-flow, not overall costs.  Many times they end up with boats and motorhomes or trailers because of low, low monthly payments (or so they think) and then they keep these things because they "aren't worth much" once the payments have expired, and then turn them into full-time or part-time homes, on the premise that the monthly fees to store or dock them are low as well.

But what they are not doing is the math on the overall ownership cost experience - how this plays out over five years, or ten years.   At the end of that time, all they have is a fist-full of receipts for lot rent or dock rent, and a boat or RV that is worth 1/2 to 1/4 of its previous value.  They are poorer than they were before.

But a home may appreciate in value slightly over time, and thus wipe out the monthly operating costs.   As I noted in an earlier posting, you don't really "make money" on a house, but over time, in a normal market, you can get back every penny you put into it.   You break even, which sounds like a bad deal, until you consider the alternative.

So, in effect, a home can cost you nothing, if you don't factor inflation into the mix.  But an RV, boat, or apartment, are just expenses.   So living aboard a boat or in an RV does not really "save you money" over time, but results in your spending more.

And you are paying a lot more for a lot less.   Boats and RVs that are lived in, tend to degrade over time.  And public showers, laundry, and bathrooms do get old, over time.   And let's face it, they look pretty ugly as well.

By focusing on monthly cash flow the person who uses an ensconced RV or boat as a vacation home - or full-time home - is missing the larger picture.  They are spending a lot more and getting a lot less.

For the Marina operator or RV park owner, full-timers are a double-edged sword.  Many managers like to have the "liveaboards" around, as they provide a steady stream of income, particularly in the off-season.   In addition, these folks can be hired to do various chores around the park - often in return for lot rent or slip space (which negates the income argument).  Unfortunately, the person cleaning the restroom in exchange for a free place to stay is not likely to do a good job - if they do it at all.  So the restrooms look even worse.

And then evicting such folks becomes problematic.  In one incident, when a boater did a crappy job of cleaning the restrooms, the marina owner told them they could no longer "work off" their slip rent, but would have to pay cash.  The boat owner didn't have the cash, so he was evicted.  The boat owner then called the Department of Environmental Conservation and informed them the marina owner was illegally allowing "liveaboards" in the marina, and then called the Labor Department to inform them they were hiring people in exchange for free slip space, which was basically paying under the table and not reporting income, as well as violating labor laws.

As you can see, it can be a bad move for a marina owner or RV park owner to let people live in run-down trailers or boats, and work off their rent.

But worse yet is how these run-down boats and RVs make the place look like hell, and scare off the tourists.   While a "full-time" RVer or Boater might pay $450 a month for slip or lot rent, a nightly tenant might pay $30 to $60 a night.   In terms of profitability, the transient boater or camper is a far better deal.

But if you are turning away customers "in season" because you have some old stoner living on a ratted-out boat or in a ratted-out trailer, that is lost income to you.   Worse yet, if your park or marina has enough of these derelict boats (and the scary derelicts who live in them) it will scare off your better customers.  The fellow in the brand-new motorcoach or the fancy yacht, is not going to park next to some half-sunken trawler covered with dirt and blaring Jimmy Buffet songs.

But again, the cash-flow mentality sets in - with marina and RV park owners.  "I'm getting $450 a month for those slips/spaces" they say, neglecting to think of the overall costs - in terms of business turned away, of people repulsed (and your reputation damaged) as well as wear and tear in the facilities.

Full-timers, simply stated, are a lot more wear on the facilities that transients are.  A marina, RV park, motel or hotel, can make more money by being slightly more than half-full all the time, than they could by being full.  How does this work? Well, in order to sell every last room, slip, or space, you have to discount prices - in most markets - and when your operation is running at capacity, your costs are the highest.  Your utility bills go up, your maintenance costs go up, your cleaning staff costs go up.

So when you chase after marginal deals - selling that discounted motel room or full-time RV space or boat slip, you are not "making more money" but making an incrementally less amount, until you reach a point that you may actually be losing money.

But again, people don't get this - they assume that higher occupancy and more income equals more profits.  So they chase after these marginal deals and wonder why they are making less and less money.  Cash flow is a bad way to run a business.  Overall cost is a better way.

And living on a boat - or in an RV - is not an inexpensive lifestyle.

UPDATE:  Since I wrote this, nearly a decade ago, the marina has changed hands and the new owners are tossing out the "liveaboards" and embracing the more lucrative trade by real yachtsmen.  Before the end of the older ownership, they had a kid (21 years old) living in an 18-foot sailboat with no mast and a Confederate flag hanging off the back - with the de rigeur tarp and duct tape.  This was a profitable customer?  Customers like that turn away other business.  It is basic common sense.  But the "gold 'ol boys" who ran the place turned a blind eye toward such things - they literally could not see them.

The downside of this gentrification is, of course, that the slip rental is much more today than it was when we kept out boat there.  But the boat ramp is still free, for trailerable boats!