Expected life of yachts?

[1eyedjack]

Hi all. Please accept my apologies if this is is an inappropriate forum for my enquiry. In that case any pointers to a more appropriate forum would be welcome.

I have no involvement with yacht design, building or usage and know next to nothing about the subject. I am an accountant, in the middle of an argument with a local tax authority (in the UK) on a tax technical matter. It would be helpful in resolving our dispute if I could get some feelers for the life expectancy of a yacht, what would be its residual scrap value at the end of that life, and what third party information is readily available in the public domain to support these conclusions.

Quite clearly, these issues will vary according to the specific facts, and I have few facts at my fingertips while writing this, other than to say that the yacht is a sea-going single hull racing yacht with a kevlar hull, an engine for manoeuvering in harbour, that cost GB£59000 to build and was sold for GB£69000 in 2005. Hopefully that will give you a feel for the scale, and at this stage I just want to get some industry benchmarks.

The principle involved in this case is that the tax authority regard assets that have an expected life of less than 50 years as being "wasting assets", and they regard yachts containing engines as "machinery" which in principle has a life of less than 50 years. If we accept this principle (and we are free to reject it, but might have to argue the matter before the Commissioners) then in computing the gain, the cost to be compared with the proceeds should be abated in proportion to the expired life.

To take a fairly extreme example, if on the facts it were assumed that this particular yacht has a life of (say) 10 years after which its residual scrap value is (say) £1000, and it were sold at age 5 years, then the tax allowable cost for deduction from the proceeds would be 59000 - ((59000 - 1000) x (5/10)) = £30000.

Clearly, it is in my interests to argue for a long expected life, with as high a residual scrap value as can be justified. Indeed, ideally we would want to argue for a life expectancy in excess of 50 years, but that may be stretching credulity (or would it?). The Inspector would secure a higher tax take if he can successfully contend that the expected life is relatively short, with a minimal residual scrap value.

I believe that it is reasonable to assume that the yacht will be properly maintained during its "life". I am also conscious that modern building materials may extend the life of a yacht to such an extent that few yachts may yet have reached their "expiry" when constructed out of these materials, leaving us with very little to go on.

If anyone has any very general info on this subject or can point me to links etc that would help I should be grateful. Do you, for example, typically find 50 year old yachts that originally cost (in today's terms) around £70K changing hands for significant amounts of money?

[Tim B]

Good Question. VERY Good Question.

It really depends on which yacht it was, what the condition is like, and how well it has been looked after.

It is hard to say (without contacting the designer) what the designed life of the yacht was, and indeed, it's absolute life (before it becomes dangerous) is even harder to predict. Often, the usable life of a yacht is extended because of the uncertainty of the medium we are designing it to operate in. Typically, though, designed lives (of boats) tend to be between 5 years and 20 years, depending on the type of yacht. The actual usable life may be upto 30 years if the yacht is well looked after.

For financial reference, you'll have to look in magazines and on the web for similar boats (of similar age).

You also need to be careful when considering older "classic" yachts, which like classic cars, are a law unto themselves.

If you can, talk to the designer, and decide how it's going to be sailed. You can then get a reasonable estimate of life expectancy.

Good Luck

Tim B.

NB. Please note that figures given are typical values. No guarantee is given that these figures reflect actual boats.

[1eyedjack]

Thanks for the speedy response, even if the figures (despite the caveats which I take on board) are slightly on the depressing side from my perspective. The thought that a yacht might have a design life of as few as 5 years I find quite horrific. Anyway, our client is the individual who built the boat, so I can certainly go back to him for more information regarding *his* opinion on the life of the boat. The main trouble with that is he is not exactly impartial to the outcome and the taxman will understandably be sceptical of his assertions.

[Crag Cay]

Here are some generalisations about the value of boats in the UK, that I make with some provisos:

1. They are my views born of experience not academic research.

2. This is as close as I want to get to your troubles with the Inland Revenue. I have enough of my own.

3. Pure racing boat's values are more volatile than cruiser/racers or pure cruising boats. Their value is greatly affected by their racing success.

4. Boats that deviate too much from the 'norm', either in the way they are styled or the materials they use, also do worse that my model.

5. Boats that were built 'cheaply' also tend to suffer, as do expensive 'one-offs' that when finished, have nothing to differentiate them from production boats. I would hazard a guess that your boat is something around 30-35ft.

6. Boats can never be valued by the sum of their parts. Add 20000 GBPs worth of equipment to a boat worth 60000 GBP and you will increase its value by perhaps only 2000 GBPs.

So that said, boats generally cost about the same throughout their life, (in monetary terms) as their list price was new. In the first years their depreciation is usually off-set by all the equipment that gets added. After three years their price may soften a little, but from then on, boats that stay 'in commission' generally stay at about the same price. That is they depreciate in real terms at about the rate of inflation.

However from about 5 years old, expenditure on those boats truly 'in commission' increases as kit begins to wear out.

At ten years old, real expenditure starts, for example with new rigging being amongst the major costs. You now start to a see real differences in actual selling price between those that have been maintained well and those that have been neglected. Whilst the asking price for both may be similar, it's normal to then beat the price down on the neglected ones to reflect all the work that needs to be done.

At twenty years, boats that are not in 'loving care' are really beginning to show it, although the others continue to give satisfactory service. By now these tend to be in the hands of people who enjoy looking after the boats themselves, and although their price remains firm, labour is no longer costed in their economics. Neglected examples of 'classic' models, may still be attractive to some for 'refit' at twenty years old, but most sit in marinas, hardly used and listed for sale with brokers. Although their asking price is still around our 'constant', they take ages to sell and often the out goings to cover marina costs and insurance etc, will be more than their residuals, so that by 25 years old, they are worth less than zero.

The only problem is boats these days don't actual die. As they sit around without being scrapped, they give the illusion of lasting for ever. But I think that at 25, those boats that have real value (ie would actually sell on the open market) have had more than their selling price spent on them over the years (in either money or sweat equity) and without these regular renewals, as opposed to simple maintenance, their value (in real terms)would also be zero.

On larger yachts, the running costs per annum, which include all the maintainance and refitting that is necessary to keep them 'in commision' is never less than 10 percent of their build costs.

[Raggi_Thor]

The main question may be how you understand "life".
There are many boats from the 1960's that still sail and even race.
One example familiar to me is the IF boat,
http://www.ifboat.com/ome_baten.htm
Now, this boat is very strongly built, quite heavy laminates, and it's a strict one design class.

Another example is the Soling, designed in 1964.
Many old boats are still around, BUT they are not competitive in racing! The Soling gets soft after a few years of hard racing, so you can buy a very cheap Soling for recreational sailing...

You see the problem?
Your boat will probably last for more than 50 years.
Kevlar (and epoxy?) may be more resistant to fatigue than glass and polyester, BUT the boat may be useless (and thus worthless) as a racer after 5 years..

The engine will probably last more than 50 years if it's a diesel and you are a sailor :-) I think 5 to 10.000 hours is a reasonable estimate for a small diesel with good maintenance. Say you use the boats 100 times a year and the engine 100 hours per year, 5000 hours is 50 years...

[tri - star]

To 1eyedjack:

This is very much an open ended question.
You will find it is akin to the old line,
" If you need to ask the price of a yacht you can't afford it."

As this is very much a market - where the ASKING price - is a function of
the emotional investment. The asking price? Not too......reliable.
The SELLING price is a better indicater of value.
Then, even here; you have inconsistancy. As a vessel from a well respected
designer and/or yard, will have a selling price - that will often bear little
connection to the true life expectancy of said vessel.

However, to help you in your Quest......

A few guidelines:

Boeing considers that ALUMINUM must be looked at carefully after only 20 yrs.
STEEL is good for maybe 30 to 40yrs.
- However, electrolosis can dramaticaly reduce the above numbers.
So it's hard to predict how long all the assorted hardware on a vessel will
last. Some of which, like masts and keels, are critical componants.

The only material that will go well beyond the 50 year benchmark, you
refer to - in my humble opinion - is WOOD.
( When treated well ).
Unfortuneatly, this is not a classic wooden ship.

So; the element that gives me serious pause: is the KEVLAR Hull.
IN THE LAB - very impressive test results can be demonstrated with this
miracle fiber.
Even in the field, many policemen owe their lives to it.
Although, presumeably, they don't immerse themselves and their bullet
proof vests in salt water, for months at a time.
Kevlar simply hasn't been around long enough to make firm predictions,
as to, how long it can last.

There is also a hidden element that concerns me, perhaps, even more.
The RESIN used. The hull has been made in a similer fashion to what is done
with fiberglass boat construction.
The resin ends up taking compression loads and the glass fiber acting
in tension.
In your vessel - the Kevlar takes the place of the glass.

The good news might be: that EPOXY resin has been used.
( Often the case - when Kevlar shows up.)
Epoxy can be twice to four times better, than the common and garden resins.
Used with the usual F/G.

Although, simple sunlight, degrades ALL catalized plastics.........
... the element that most effects the life expectancy of the resin
is how much accuracy was used, AT THE TIME, the resin was mixed in.

There are ways to try to pin down all these varibles......
One process, to establish how BRITTLE the hull has become and looking at
other concerns - is by taking core samples and having them tested in a Lab.
This is common practice. Done by SURVEYERS / P. ENGINEERS.

Which comes to: The BEST SOLUTION to your concerns.
Hire a competant Surveyer - who has the confidence of Lloyds.......
They will know all the above....and much, much more. So they are the most
likely to assertain the TRUE value of a boat.

This will be the most cost/effective procedure, by far. You will find.
Saving everybody, in the long run......time & money.

CHEERS !

[jim lee]

Your talking about a kevlar race machine. Are you interested in how long it will last as a sailing machine or how long it will last as a piece of capital investment?

As a race machine, it very well may follow the model of the personal computer. PCs will work forever, but after 2 years most everyone tosses 'em in the dumpster 'cause they no longer have any value.

Many times custom (Kevlar/carbon) racing boats are only good for racing and only competitive for a short time. Hence their short lifespan of their value.

From you post I'm betting this is not what you want to hear.

-jim lee

[1eyedjack]

Thank you all for your replies. I have a working starting point.

Anyway I have a bit more information about its construction. It is described as an "Open 50", LOA 49'2" (15.20m), Beam 14'9" (4.57m), displacement 4921Kg, designer Skip Miller, Hull profile Bulb keel. Kevlar skin with cedar core hull, epoxy treated, kevlar foam deck and superstructure, bolted lead keel with steel fin. 1x20Hp Lister Petter Alfa 20 diesel engine (1998) with saildrive. 1x three bladed propeller. Keel can be lifted. 2 single berths, spartan racing interior.

I am a little unsure whether a boat that has been designed for racing commands much demand outside of the racing scene, particularly after its short racing life. I recall from somewhere in my distant youth that racing yachts tend to sacrifice stability in the interests of speed. That might make it rather less attractive to a "cruiser" when not racing. If it were simply a matter of changing the fixtures around a bit then I would be more relaxed.

[Crag Cay]

This is exactly the sort of boat that falls outside any rules. Its 'uniqueness' means only a specific inspection can really give you any real insight.

However, Open 50's were never that popular and more recently their slim raison d'être has been stripped away by the emergent Class 40's.

A truely competitive Open 50 would have cost many hundreds of thousands of pounds to build, and if it was any good, one of that age would still be asking in excess of 100000GBPs, with slightly newer versions costing up to 400000 pounds.

Some boats of that vintage did have stability problems which have now both excluded them from racing and precludes their easy conversion to cruising without major work.

If it has been built well and is reasonably well equipment and could pass a detailed survey with flying colours, then someone who was looking for a fast spartan cruiser or a boat to enter in some low key, short handed races, would think it has some value. But there's no simple rule of depreciation that could calculate its value.

[Raggi_Thor]

I would say that wood core and epoxy resin is good news for you.
Is it this boat?
http://www.oceanware.co.uk/sailing/o...news/1705.html

[Crag Cay]

Thanks for the link. I found it easier to navigate this site if you started from here. Interesting accounts of the 2000 STAR.

http://www.oceanware.co.uk/sailing/open50/

[1eyedjack]

Originally Posted by Raggi_Thor

I would say that wood core and epoxy resin is good news for you.
Is it this boat?
http://www.oceanware.co.uk/sailing/o...news/1705.html

Quite possibly. From what I see in the article it rings all the right bells.

[Raggi_Thor]

I think it boils down to life as a racer for maybe 5 years, life as cruiser maybe 50 years.

[tri - star]

To 1eyedjack:

I support Raggi_Thor's comments:
Where there's CEDAR - there's HOPE !

If it is decided that only core samples will satisfy poeple
demanding to know how solid the hull is......

Tell the owner / builder to have said samples, taken from
non - critical parts of the hull. Replace with wooden plugs - with
generous amounts of epoxy - and this indignity to the boat will
hardly be noticed.

Thankfully; there are a host of NON DESTRUCTIVE testing
gizmos available.
Like Ultra - Sound, X - rays and Moisture Meters......
That are less invasive.
The aforementioned SURVEYOR - if he's up - to - date,
will be conversent with all these procedures.

Why cedar is important - and needs to be put forward more
- is that when a race boat is put out to pasture, in can be
more readily turned into a cruising boat.
If for no other reason: that when you add bunks or cabinets
there is something for screws to bite into.....
Also if you follow the old adage " glue 'n screw " - using epoxy.
- Each addition will ADD to the STRUCTURAL INTEGRITY of
said boat.

- Also: to many potential buyers - the longevity quotient
will be perceived as a lot better.
i.e.
Recently, a survey of one of the cedar core vessels,
designed / built by Yours Truly - more than passed muster.
To quote the surveyor,
"..... dry as a bone - down below.."
".....as were the core samples." " With no sign of rot, at all."
Nice words to hear, about a charter boat that's been
in sea water for the last 25 yrs.

So don't be shy - to mention the word - cedar.
Some people dread the word: wood.
Others appreciate that ( Looked after well ) wood and
Western Red Cedar in particular - have tangible virtues.

Cheers !

[water addict]

Can't say for the UK, but if US beauracracy is any indication of UK rule bodies, you are out of luck trying to change the opinion. You would likely need studies proving the extent of the life of the yacht. The studies to discredit the government's assumptions will likely cost more than the value of the yacht itself.