insurance salvage boats

I have this idea of buying and renovating damaged boats with the hope of reselling at a profit and was wondering if anyone on here has done this sucessfully. My thought is to be selective and only buy based on what i would have a reasonable chance of selling,not necessarily what i would want for myself, i would rather buy a newer model with fairly extensive fiberglass work needed but equipment that isnt worn out so i can concentrate on the repair, An example is a boat i just missed out on because i didnt know of it until it was too late, a 2007 Telstar 28 Tri on a nice trailer but with one ama severly damaged, went for less than 20k,low cost to get back to my shop, low material cost to repair, potentially sell for 60-70k.
So,what im trying to figure out is how to arrive at a $ figure to offer that puts me in the hunt in a bid process without overpaying. Ive done this once before and bought a Tartan ten with a hole in the side from blowing over on dry land so no water damage, i paid $0.10 on the dollar for it and made a decent profit on it. So here are my thoughts
1/ Try to find out what comparable boats have actually sold for in the past year(not asking prices)maybe a friendly broker can get this info for me
2/ Average out as many as possible, say 6-10 examples.
3/ I asked a local car lot that specializes in salvage title autos and they price them at 70-80% of blue book as the banks will finance at that, so im assuming that no matter how good you do the repairs it wont be valued at full book so figure at say 70% as what you might reasonably expect to sell it for in the current market.
4/ Now figure out all your costs to get the boat home,materials for repairs ,outside services etc.
5/ Estimate all your labor costs as if it were for a customer.
6/ Add in a reasonable profit and subtract 4,5 &6 from #3 and this should be the max you would be willing to pay.
I would appreciate any thoughts and ideas, especially from anyone who has been down this path. Btw,im mostly interested in sailboats as this is what i know.
Steve.

 

Unless you have extensive experience estimating, expect to lose money as you learn. Also, you need to either do all the work, or have subcontractors or employees that will work for less than shop rates.

 

Gonzo,your right,lots of traps for the unwary. Ive been building and repairing boats for about 40 yrs now including estimating so im not worried about that side of things (not that i dont get it wrong sometimes) I would be selective of which boat i bought based on my own strengths so that i would do most work myself but there is always stuff i dont do such as upholstery, ss welding etc. Do you have any experience buying, repairing and reselling boats for profit, what i really need to know is how people who are sucessfull at this, arrive at the correct $ figure to bid. The example i gave of the T ten i did worked out well but i found out about it from a friend who was the insurance agent who had it insured and i made my offer before it came up for sale so wasnt bidding against anyone.
Steve.

 

There are a few things to consider. The market price, how well they are selling if at all, and if you can afford to hold on to the boat if it sells. I do trade in or buy boats to resell at times. Inside trading is illegal and may land you jail, so be cautious. Also, check that the numbers in the boat can be re-used because you get a title. The maximum bidding price is determined by the selling price from which you discount the minimum profit you can live with, the parts, subcontractor fees and overhead. You also need to take into consideration storage and transportation costs.

 

Yes, i think you need to select specific boats that you are pretty sure have a market, even in the current economy, for example if i could find a deal on a Gemini catamaran i know i could sell it at a profit. My preference is boats with substantial fiberglass repair required because i can do it whereas it would turn off a lot of people who may be bidding against me. I expect that there are plenty of larger trailable powerboats that would be good candidates but i just dont have knowledge of powerboats. I once saw a really good deal on a Glacier Bay powercat with a lot of damage to the bottom that would have been an easy fix for me and it was all below the waterline so no cosmetics. Unfortunatly i didnt have the money at that time to act.
Steve.

 

You got the idea. Find the boats with the damage you can repair.

 

Easily doable if you know the repair costs and boat market. However salvage is usually recorded and you will never sell a salvaged and repaired boat because everyone avoids them.

 

Im sure that some people would never buy a boat with a salvage title just the same as some would never buy an automobile with a salvage title and yet there are thousands of them sold every year right up to porsche and ferrari. We have a fairly large used car lot in town where most of the cars have salvage titles, they have their own body shop on site and record the rebuild with documents and photos which the buyer gets and they price them, as i said in my initial post, at 70-80% of NADA book value, and that is why folks buy them.The banks will loan on them. I believe that if you do the same and take a lot of photos and keep documents and maybe, if its a high value boat, hire an independent surveyor to document the work, it should sell. I have done this once years ago and made good money for my effort, it was no more difficult than any other boat, but that was a different time.

Steve.

 

There are lots people that make a good living doing something similar with cars, industrial machinery, etc. I even had a client who makes a lot of money brokering old fire trucks, he finds good used fire trucks that large cities are unloading (usually have very low miles, they are hardly used), they had the big budget to buy the latest and greatest new models, and than finding buyers in smaller cites or communities that need firefighting equipment. He never even buys the trucks and equipment until after he has money in hand from his customers. What a great business!

As far as boats, why buy fixers? There are so many perfectly good boats who's owners are desperate to sell them at a great loss right now. Just get them, clean them and resell them at a profit. Seems there is lots of boats out there right now, just buy right (knowing the value before you even make an offer), and you get all the profit without the hard work. There is someone selling a "work book" instructing you on how to buy and sell used boats at a profit. The book sounds like a waste of money, but the idea is not.

 

Hi Petros, i think that buying rebuilders is probably the only way to get late model boats with potentially high value for really short money. Ive looked at a lot of low buck boats over the years but usually the difference between purchase and sale price is not enough to make much.
Steve.

 

It's hard to know where weight has been added or the quality of glass work once it's all painted.

To even look at a boat that had fiberglass damage, it has to be a real quality shop with a good reputation.

 

I used to work with a friend who is a salvage agent for several large insurance companies. He would get offered written off boats on a regular basis.
Thing was he could not afford to pick & choose as someone else would have muscled in & pulled the contract away. This meant that a lot of the boats were so badly damaged that little money was to be made. Approx one in 5 was a good earner.
Probably as much money was made stripping the boats of loose gear & selling it at boat jumbles
I learnt a lot about GRP repairs & it is the filthiest trade going, if you like grinding GRP you will love it!

 

Steve, I still think you are coming at this from a builder perspective, not a marketing perspective. People will avoid your boats. There are tons of derogatory articles about people doing what you are suggesting. I recently read one written by a surveyor. The general public doesn't know enough about the repair (that it can be as good as new) and will move to the next boat after finding it was a salvage. You could probably sell more just building new ones.

 

I think the key is going to be to only buy boats which are sought after on the used market,document the project well with lots of photos and accurate specs of what you have done, and as i said, maybe involve a surveyor from day one to do this and write up a report and then price it agressivly. As i said, the local car lot that specializes in salvage cars prices them at 70-80% of book, they seem to be doing well. 70% of a 100k boat is a 30k discount. I have actually bought 2 salvage boats, the first one, the Tartan Ten worked out well and turned a healthy profit, i had completely forgotten about the second one which is the boat i currently sail, a Bob Perry Aloha 8.2 which was totalled for mast damage (i probably have all of $20 and a days work in the repair)which came well equipped and in good shape, actually better, as it has zero core issues in the decks, ive been sailing it for the past 3 seasons. The insurance company offered it back to the owner for $2500, he didnt want it back and put me in contact with the insurance co, i offered $1500, we settled on $2000, im sure i could sell it for $10000 if i wanted to, it dosnt have a salvage title though because i paid the money direct to the owner and he signed it over to me without it passing through the insurance co.

Steve.

 

Steve, I've done this countless times and it takes quite a while before you can reconize "marketable" projects. The best course is to look up the types of boats that are selling in your area. These typically will be flats boats with big HP outboards, bow riders and fish and ski hybrids. Assuming you'll be avoiding the usual PWC collection, which also sell well.

Finding these boats with good equipment is difficult, mostly because by the time problems show up with the structure or major damage occurs, you are also looking at repower or severe neglect.

The problem lies with how long it takes to get a settlement from the insurance company (if any) and the amount of time it takes a typical owner to give up hope on the the thing.

The general way it goes is something like this; the owner bashes into a bridge and stoves in the bow. The boat was 5 years old and on it's second battery at the time. Other then this, it's received no maintenance since purchase. The outboard is pumping water, but not well (when it was parked), the cable ends at every connection are getting loose and/or corrosion is forming. She's filled with water a few times, until the owner realized the transom plug was never pulled, etc., etc., etc. The "incident" left the boat useless and popped most of the flange fasteners in the forward half of the hull shell/deck cap. Since, it's sat idle in the carport and a local cat has made a home under the helm box. 2 years have passed since the run in with the bridge and leaves, debris and mice have found their way between the liner and hull shell, not to mention the water that is pooled around the foamed in place, stainless tank.

The insurance company adjuster calculates the repair on this bow rider and it's more then it's value, so it's a lose and paid off at 70% - 80%. The insurance company now owns the boat and transports it to a holding site, which makes no attempt to protect the boat's vitals. More corrosion, local fauna and livestock move in. Eventually the insurance company attempts to recover some of it's investment and it's sold at auction, typically for 10% of it's value.

What you now have is an engine that's not been started in 3 or 4 years, a pin hole riddled fuel system, electricals that have corroded up pretty good, the sole is probably experiencing some issues, as well as any below liner problems, the bow is still stoved in and you'll have to evict the mice and litter of kittens too.

In short, expect to take a bath on your fist half a dozen projects. It takes a long time to figure out what you want, can and are willing to do to flip a boat. In the current market, there's lots of "deals" but most have seen serious neglect in the last few years. The best deals aren't from the auctions, but from JimBob and JoeLarry, who's Bayliner bow rider has languished for years, for lack of fuel bill funds. The bimini will be tatters, the seats cracked and soggy, but most of it's issues will be cosmetic. An axle bearing, new trailer lights, fuel and oil filters, flushed full system and lots of buffing can bring it back. If you go the insurance route, then you might get a AFP title (Assembled From Parts), which will scare off any potential buyer, just when they're about to hand over cash. Try to find clean title boats. Stick with the major name brands and stock up on new engines. The reason is simple; a 10 year old boat with a brand new 50 HP Mercury will sell, in spite of a few stress cracks, but a well stained 10 year old 50 HP on a buffed up hull will sit for a while.

FWIW