Owner Financing for Sailboats

High-End Financing Tactics to Triple Your Profits

Many of us got started in the game of flipping sailboats because we have a passion for the boats themselves and we simply wanted to get more boat for our money… moving up as we went along at our own pace.

If that describes your situation, you’re in the right place.

But for us over time, as the ‘hobby’ evolved into a full-scale investment business, we started branching out into other, slightly more advanced techniques to increase the profitability and stability of our enterprise.

Financing is not the main substance of our system, but when it’s combined with the many other techniques covered, there are a number of benefits.

Cash flow, passive residual income, tax deferral and superior liquidity are among these advantages. Moreover, experience has proven that boats offered with owner financing command a significantly higher price tag.

Did we say ‘liquidity’?

You bet. Just because we finance a boat doesn’t mean we don’t get our money out of her right away. But before we go into details, I want to mention one more thing:

There’s quite a bit of “buzz” these days about the business of note-purchasing and brokering. Basically you hunt down existing cash flows, settlements, mortgages and annuities – and try to buy them for .70 or .80 cents on the dollar. And it’s true – that would be a very good business if it were not for a thousand other people in each town trying to do the same thing.

So instead of searching and competing for notes we’re going to show you how to create your own notes – quickly, easily and safely. With sailboats.

What’s more, you’ll create these notes for .25 to .30 cents on the dollar – not .70 or .80. And guess who reimburses you for the initial cost?

Your boat buyer.

This means you can take the same lump sum of investment capital and re-use it over and over to buy as many boats as you want… Safely, easily and all the while building up a tremendous portfolio of notes.

If you’re content with 100% R.O.I. (Return on Investment) on each sailboat flip, it’s unlikely you would need to explore the possibilities of owner-financing.

Stick to our basic formula (double your money on each boat). Sell your boats for cash and keep the funds clear for the next one…It’s a tried and true approach that has worked for centuries.

However… For those who are inclined to consider the big picture, there are additional tactics that can drive your R.O.I. through the roof… safely and easily.

Let me explain:

There are more people who want boats but cannot afford them than buyers who have both the desire and the cash to buy any given boat.

In our experience, the ratio is about 12:1.

What this means is that regardless of the actual price, boats which are offered with owner financing can sell up to twelve times faster than boats offered without.

For example, a ’78 Catalina 30 offered for $5,000 down and $450 per month over 5 years will sell much, much faster than the same boat offered for $15,000 cash.

So…

If you’re using our standard techniques and your total investment in the boat is $7,000, and if you flip her for $15,000 cash… then you’ve made $8,000.

Not bad.

But using the same $7,000, let’s take a look at what happens when we finance the boat for $5,000 down and $450 per month:

1) The down payment we receive covers most of our $7,000 investment, so the majority of our capital is still available for the next deal. Staying ‘liquid’ is consistent with our objectives.

2) The total sales price with financing is $32,000, and we’re pulling $450 a month pure profit for 54 months out of the 60-month term.

3) Our actual net profit is $25,000 instead of $8,000, which is an ROI of 357% instead of 114%*

4) We set ourselves up with a residual income that continues to stream in whether we’re working, sleeping… or out there somewhere on a starboard tack to paradise(!)

5) We helped someone into a fine 30′ boat which they might not otherwise have been able to afford.

6) The boat is fully insured and her title is secured by our lien. If the buyer skips, they lose all the money they’ve invested to that point… We foreclose, repossess the boat and then sell her again.

7) Our $25,000 note is a transferable asset and can be sold to any number of investors, note buyers or brokers for 70-80% of face value – if we so choose. Especially considering that we’ve already collected a $5,000 down payment, we still come out much better than if we’d ‘held out’ for all cash.

Hopefully you can see how with just a handful of these simple transactions, the income starts really racking up.

Retirement and cruising is well within the reach of anyone who enjoys sailboats and wants to earn a living as an investor.

For those who are interested in retiring or taking an extended cruise – or for the ultimate sailboat business building plan – we’re pleased to include extensive coverage of this subject, plus all the necessary paperwork and instructions to protect your interests, in the Start a Sailboat Flipping Business course. (Clicking on the link automatically applies a $10 discount to the course.)

- W. Parham,. Assistant Editor

*To keep it simple, we left interest calculations out of the sample equation, but normally we do charge a nominal, competitive interest fee.

**This technique works well especially on mid-size boats 10 years old and older, as banks and marine lenders are typically reluctant to compete in this range.