Plenty of Canadians enjoy a beautiful day on the boat. But when the fun is over, where are they supposed to store it?
Table of Contents - Investing in Boat Slips
Boat slips are a useful alternative to storing the boat in the yard, where it risks becoming a neighbourhood eyesore. As a result, they’re also an excellent alternative property investment given the high demand and low supply.
Boating is on the rise
With the last of the baby boomers retiring, the number of people who can afford boats is at an all-time high. Subsequently, the demand for boat slips is also high, but the number of slips hasn’t grown at the same rate. The amount of waterfront property where one could put a slip is limited, with many other developers competing for housing, hotels and other businesses in the same area.
In addition to the lack of new slips, marinas are also closing. The land is much more valuable for development, so many marinas are becoming new housing developments. More boats with fewer places to put them mean boat slips will remain in high demand for the foreseeable future.
While people are buying boats of all sizes, there is a great demand for slips that will accommodate bigger boats. The average boat is 55 feet; mega-yachts are yachts 80 feet or larger. Because these are especially hard to come by due to physical limitations, securing a large boat slip is a great investment opportunity.
Types of boat slips
When considering purchasing a boat slip, there are two kinds to choose from: A dry slip and a wet slip.
A dry slip is where boat owners can store their boats on land. Boats are kept in a rack, so these are sometimes called “rack-o-minimums.” Like other recreational vehicle storage, this allows boaters to keep their boat out of the driveway but tucked away safely. There are more dry slips because they are on land, and they can fit more boats. They protect boats from the elements by keeping them indoors.
A wet slip has boats stored dockside, hence the name “dock-o-minimums.” Wet slips may be simple docks in marinas or luxury clubs featuring a restaurant and other amenities. These are ideal for larger boats greater than 40 feet that wouldn’t otherwise fit in a dry slip.
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Researching your investment
You need to do plenty of research on the market before making this type of investment. You’ll need to understand the popularity of boating in the area, and which other slips are available. You’ll want to know what boaters in the area want from their slips and what they’re currently lacking.
You’ll also need to spend plenty of time researching the individual slip. The two primary factors are slip location and slip size. With location, note how well the slip can protect boats from bad weather. While the price is one decision-making factor for boat owners, they are ultimately looking for convenience. Your boat slip should be located in a place that makes it easy for people to access their boat and get on the water quickly, while also trusting that their expensive vehicle is safe.
If you’re interested in international investment, boat slip construction is up in Costa Rica and the Bahamas. Croatia and the Caribbean are currently experiencing high demand for boat slip development as well.
Financing and leasing a boat slip
Unlike buying a house or other real estate property, getting financing for purchasing a boat slip could be tricky since it’s a less common practice. Banks are less familiar with the process of purchasing and owning a boat slip and are less aware of the business potential. Most boat slip owners pay cash because boat slips are designed for a rental model.
If you’re buying the space for a wet dock, you need to control the land underneath the water. Fee simple ownership allows you to own the land under the water and rent the space. However, bottomland tends to only offer lease ownership, so you’d have space only for a limited time. If you manage to secure fee simple ownership, that’s an even better investment.
The rental market for boat slips
The rental market of boat owners looking for slips is steady and generally increasing. Popularity may rise in summer months with out-of-town visitors wanting a place to keep their boat for the season. You may also have people who are willing to keep their boats in the driveway during summer months but want to store it once winter arrives.
How much you’re able to charge for rent at your slip depends on several factors, including type, location, size and amenities. Most slip rentals are charged by the foot.
Depending on the demand in your area, you may be able to charge a premium rate to renters. Some popular boating regions have waitlists for people eager to pay rent to dock their boats. You’ll see a greater return if you can rent to larger boats. Having amenities onsite will also let you charge more for rent.
Boat slip returns range from 5 to 10 percent for investors. Owning a boat slip has some high associated fees, so returns may be somewhat lower depending on your costs. You’ll need to maintain a common area for renters to enjoy, a dockmaster, staff, security and maintenance fees. You’ll also have the property tax. Managing a boat slip rental is more like running a small business than being a landlord for an investment property.
If you own condominiums with waterfront access, there’s also the possibility of placing the boat slip in the water nearby and covering your associated costs with the fees tenants pay.
A creative addition to your real estate portfolio
Owning a boat slip is a smart investment because demand currently outweighs supply dramatically. Capital appreciation and potential for rental income make boat slips an excellent alternative investment. Though it takes quite a bit more legwork to find, finance and manage a boat slip, the long term returns and appreciation possibilities make it an enticing option to consider.
Should I buy or rent a boat slip or dock?
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