The prospect of owning a crew house has always been an attractive investment opportunity to crew. As an accountant, I am frequently asked to prepare taxes and book-keeping for local crew houses. Real estate appreciation and vacancy shortages have prompted many crew to at least explore the idea of owning one. Even if you do not want to be an owner operator, there are many companies that will manage it for you.
For those who do not like to get their hands dirty, hiring a management company is probably the way to go. The management company will oversee filling vacancies, paying bills, attending to late-night repairs, dealing with city inspectors, and collecting rent. Management companies are a great buffer between you and the mundane tasks that you may not otherwise have time to attend to.
Over the years, I have noticed it takes a special type of person to be an owner operator, and, in a sense, I do see some parallels between running a crew house and running a yacht program. Your tenants are usually short term, meaning a lot of turnover like that of a charter. You will also need a variety of skills that are commonly acquired while working in the yachting industry — hospitality, administrative, budgeting, working irregular hours, and dealing with different personalities. My experience has led me to believe that former head stews make the best landlords.
Aside from the tax implications, there are many things to consider before purchasing a crew house. Often, the house you’re purchasing might be in disrepair. If you have budgeted a certain amount for the purchase, you will also need to have a sufficient reserve for any necessary renovations. The cost of bringing your house up to city code can also be expensive. I recall a recent client whose house was under management, and they assumed that the manager was keeping the home in compliance. As it turns out, there were several costly code violations that were not being attended to, and the home was almost shut down.
While running a crew house can provide a great source of cash flow and capital investment, it is so important that you do your homework. It’s rare that you will find a turnkey home; many home purchases require months of work and preparation. If you will be out of town or unable to be hands on with the initial purchase and renovations, a crew home might not be the best investment for you.
This article was originally published in the April 2023 issue of Dockwalk.