Finance

What to Know about Owning a Crew House

1 January 2021By Tom Andrews

Written by

Tom Andrews

This tax advice is not intended, and cannot be used, to avoid any penalties as a result of taking any position from this column. Thomas Andrews is a CPA and a principal of AvMar Accounting Services. +1 954 764 0404; www.avmaraccounting.com

While many yacht crew have stayed in a crew house from time to time, the prospect of owning a home has always been an attractive investment opportunity to crewmembers. As an accountant, I am frequently asked to prepare taxes and do bookkeeping for local crew houses. Low interest rates and vacancy shortages have prompted many to at least investigate the idea. Even if you don’t want to be an owner/operator, there are many companies that will manage your crew house for you.

For those who don’t like to get their hands dirty, hiring a management company is probably the way to go. They will be in charge of 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 to running a crew house to that of running a yacht program. Your tenants are usually short term — this means a lot of turn over, maybe similar to 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. For those looking to be owner/operators, my experience has led me to believe that former head stews make for the best owner/operators.

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 and require renovations. If you have budgeted a certain amount for the purchase, you’ll also need to have a sufficient reserve for any necessary renovations. The cost of bringing your house up to city code can 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 — the home was almost shut down for those violations.

While running a crew house can provide a great source of cash flow and capital investment, it’s so important to do your homework. It’s rare that you’ll find a turnkey home; many home purchases require months of work and prep. If you’ll 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.

This column originally ran in the January 2021 issue of Dockwalk.

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