Anyone have experience with Dockominiums?

Question

I have an opportunity to purchase a marina on Lake Norman in the Charlotte, NC Metro area.  The sellers were already preparing to covert to a structure similar to a dockominium, which they are doing a lot of at marinas in Florida and South Carolina.

Purchase price: $4,500,000
Net Cash Flow: $368,000

By selling lease hold interest in most of the boat slips, will generate $4,500,000 in cash.  That gives me  enough cash to purchase the marina, $1,500,000 in my pocket and another $100,000 yearly in cash flow from ancillary income.

Want to know if anyone has had experience in dockominiums that they can share so I know I'm checking the right things.

Thanks.

Nechelle Vanias · Answer

The deal is under contract and now we've begun selling the leasehold interest in each boat slip for $26,000.  This results in a net 8% CAP return for the investors that are buying the boat slips.  The lawyers in the deal are taking care of all of the legal paperwork savings us thousands of dollars for this to be structured right.

We are finding most of the interest has been from outside of NC, seeing a lot of our deals coming from NYC and CA and other places.  We've reached out to all of our contacts even in Australia, the UK and Canada and have been selling them on the fact that it generates rental income like a residential property but without the leaky toilets and late paying tenants.   So it makes sense for the out of state/country investor. Very hands off, a new found real investment twist for me now.

I will keep a count down of the number of slips sold, as they come.  We're looking to sell 176 in the next 14 days.  Ambitious yes, but we've got all hands on deck (no pun intended, lol)

Bill Gulley · Answer

Sounds like a great deal, having a partner already in the business makes deals a slam dunk. You should be able to deal with a muni managed lake, we don't get buy so easily here. I have been investigating as I said, sounds like you all ready have your feet wet! Good luck and post up how it goes!  :)

Nechelle Vanias · Answer

Thanks Bill, following are the answers to your questions:

The marina was built in 2006.  
The majority of the slips are in the dry dock storage; no boathouses
The facility is fully leased with a waiting list.  
There is a full time onsite supervisor and full time seasonal staff.
The Lake is municipally zoned.
My partner owns three marinas, I'm the business operations part.
Insurance is $18,000 per year, with all expenses, including insurance, taxes, payroll, HOA, legal, etc. It's net cas flow is $368,000.
Ancillary income comes from winterization, detailing and Pontoon boat rental during the season.

I too like netting out of the marina up front, delivering an 8% CAP for investors and still receiving cash flow from the ancillary income generated.  The seller has two more marinas for me to get if this one closes promptly.

Bill Gulley · Answer

What ever floats your boat, :)

I have heard of your lake but I'm not familiar with it. I'm at Tablerock Lake and Lake of the Ozarks.

How slips/moorings?

I like the concept of  condo docks, and sounds like netting out the marina up front would be great! Are they full or will start from scratch leasing/sales.

You need to get a diver or if the water is clean enough an underwater-vision camera and inspect piers and anchorages, if those don't hold in a flood or high tide you'll break loose and float off, nothing like watching a dock with a million+ dollars worth of yachts/boats crash into a bridge..... Consider breakwater, wake zones and size of craft, an active area will wear on the anchor cables and piers.

Will these have boathouses? Some are floating homes.

How nautical are you, as to experience?

Management, to me is much like a motel with a boat repair shop. You'll want or have access to a good marine mechanic. Another profit center.

I'm seeing here insurance is expensive and told the underwriters are cracking down, no wood or old boats, depends on size, probably, next to utilities your biggest expense. You may need to be very selective and restrict what goes in.

Is this a municipally zonned lake or a Crops lake? Fuel issues are a big deal here with the Corps of Engineers.

I have looked at prices and locations, considering buying so I don't have any ownership expierence except for private docks, a real pain. If you are not around you need someone on call, 24/7. I'd retain the dock builder.  :)

Karen Margrave · Answer

We need to get Bill Gulley in on this, he's considering boat slips, maybe he has some insight. Good luck.