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For those longing for some waterfront, could this be the best time ever to buy a slip in your favorite corner of America?
In the end it turned out to be something of an expensive parking spot, but at the time it seemed like a great idea. My husband and I had returned from two years cruising and needed a place to keep our 48-foot powerboat on a more permanent basis. Coming from the warmer climes of Central America, we wanted somewhere within a days drive of Pennsylvania, our permanent base at the time, that would allow us an escape from the harsh North Eastern winters. We had a fairly substantial wish list. It should be somewhere within walking distance of a lively downtown, on the ICW but close to an inlet with ocean access, allow liveaboards, dogs, and have Wi-Fi. A pool would be a nice bonus.
During a transient stop in Charleston, South Carolina, we were charmed by the city's southern elegance, and strolling along the waterfront after dinner one evening, we came across a downtown marina that was in the process of converting to "dockominiums" — a converted marina that sells the slips to individuals or investors, handled by a management company, or homeowners organization, or both. You can buy your dock with a mortgage, in the same way you would any property, and pay real-estate taxes, and a monthly maintenance fee. The fee generally includes services that vary from marina to marina, but can include water, cable, Wi-Fi, electricity, and laundry.
They're Not Making Any More Waterfront
Back in 2003 the real-estate market was trundling along at a healthy pace; docks were no exception. According to the Wall Street Journal that year, the price of a boat slip had grown by more than 20 percent for the previous two years. In places like Southwest Florida they'd almost doubled. Marina developers were facing environmental, access, and permit hurdles. Larger boats were eating up slips that could previously host several, and the number of boats between 2001 and 2003 had increased by 300,000, while the number of slips remained the same.
Buying a house downtown in such a popular town as Charleston wasn't an option for us. Plus, we'd still have to pay a sizable slip fee to keep the boat somewhere else. Coming up the coast from Florida, marina fees were running more than $500 per month, before adding in 30- or 50-amp electricity, which was adding up to another $50-$100. Buying seemed to make financial sense. We were in boating for the long haul. Dockage fees were rising annually, and our thought at the time was that the shortage of boat slips in the southeast was only going to get worse.
So we purchased a 55- by 18-foot dock at the Harborage at Ashley Marina in downtown Charleston, which became our home away from home. Six years later, and Eddie McCoy, president of the dock-owners association at the Harborage at Ashley Marina, says dock values have dropped, due partially to foreclosures and tax sales, which are suppressing the market. Interestingly, there was a spike in the number of foreclosures in 2011, despite owners already being several years into a depressed economy. "We've had three to four every year, but this year we had between seven and 10," McCoy says. "Economies like this are difficult for everyone, but we all have a little savings. This year it seems that people finally gave up trying to hold on."
While that's unfortunate for those who've lost their slips, it's been an advantage for those on the other side of the market. "Docks that were $150,000 five years ago," says McCoy, "are now selling for $80,000 or $90,000, particularly if they're bank-owned."
Kirby Marshall, Market Sector Leader with ATM, a U.S.-based global consulting marine engineering company that does a lot of marina development work, says that 2007-2008 was the pinnacle of the boom for dockominums. The company still keeps tabs and monitors slips sales for some of their clients in South Florida. "We've definitely seen a stagnation in sales from individuals there," he says. "There isn't a lot of movement in slip sales right now." That's exacerbated by the fact that getting a loan to buy anything is difficult. "There were two ways people were traditionally buying slips. One was with specialty loans, which have all but gone away after the banking crisis, and the other was using home equity, which has been seriously eroded. A lot of dock owners have ceased selling and are looking to lease, where there's some stability."
Questions To Ask Yourself Before You Buy
How long are you planning to hold onto the slip? A dockominium is effectively property. You'll have to pay real-estate taxes, closing fees, most likely need a mortgage with a substantially higher interest rate, and monthly dues for services (similar to a homeowners association). You'll also be responsible for assessments for capital expenses. If you only want the slip for a couple of years, it's probably not worth it. How will you finance? It's gotten more and more difficult in recent years so be sure you've got approval before you set your heart on the dock of your dreams. How much are the "condo" fees? Can they be raised at any time?
Is It A Good Time To Buy?
"If you're going to be in boating for the long haul and want a secure slip, it could be a very good time," says Marshall. "If you're looking at it from an investment point of view, and hoping the market will come back like it was, there's no telling." Wet slips have fared better than their dry-slip cousins, also known as rackominiums," says Marshall. "They're more stable because they tend to cater to larger boats that you can't put on a trailer so easily." Boat owners paying fees to dry store on racks have the option of leaving the boat on a trailer in their own yard, and when the economy tanked they exercised that option in droves.
From the perspective of Linda Terry from Tranzon Auctions, it's a great time to buy. Back in 2005, her company was involved in selling the 60-slip Shallowbag Marina near the Outer Banks of North Carolina for $2.3 million. In October, after the owners defaulted, they were involved in auctioning slips at the marina piecemeal, at prices she says were very low, compared to even six months prior. "We sold 12-15 slips to individuals with the rest remaining with the retail store," says Terry. "At the height of the market the slips were going for $1,500 to $2,000 a foot. Six months ago they were $1,000 a foot." At the auction in October some went for half that. I think we're at the bottom now. There's nowhere to go but up. Buyers were looking at the rental potential. It's like housing. The buying market is cold, but the rental market is hot."
While "hot" might be an exaggeration, it would seem to have played out in my own dockominium experience. It may be a dreadful time to sell, but so far, leasing the Charleston slip has been dependably easy.
Look Before You Leap
A dockominium is a boat slip in a marina where slips are individually purchased rather than rented from a marina operator. Ownership may be by deed, where you actually have title to the property; or by shares; or by long-term lease, where you don't hold title.
Joseph Kalo, a Graham Kenan Professor of Law and Co-Director of Coastal Resources Law, Planning and Policy Center in North Carolina, says that because dockominiums are often in marinas on public-trust lands and waterways, and involve riparian rights, an individual slip owner may not be able to hold title to the slip. Instead, the purchaser is buying the exclusive right to the slip space, and rights in common with other slip owners to use the marina's common areas. It's important to know what you are actually purchasing.
Marty Laven, owner of The Dockominium Group, a marine real-estate brokerage, says people should be wary of buying a slip at a marina that is not yet built. He says that anyone who buys pre-construction should make sure the developer has taken out a big enough performance bond to return down payments if the project fizzles. He recommends doing one's due diligence on the developer and project. One way to do this, he says, is to work through a reputable real-estate broker who knows dockominiums and the area.
Another check is how willing lenders are to provide financing in the project you're considering. If a lender is reluctant to provide financing based on the project or who the developer is, caution is advised. When considering the purchase of a dockominium, Mr. Laven recommends looking for marina features that will enhance the value, such as: quick access to open water, money for dredging the marina and access channels, hurricane-resistant structures, good management, and top -flight amenities such as WI-FI, laundry, recreational facilities, and dining, to name few. If you decide to buy in an established marina, Laven recommends talking with the owners, renters, and employees of the marina to get an idea if they're happy with the facilities and its management.
To determine if it's better to rent or buy a slip, Laven says to make sure you carefully make the cost comparisons. Purchase costs should include down payments, interest rates, closing costs, title insurance, real estate and sales taxes, maintenance, and special assessment fees. As with any large purchase, consult an accountant or tax attorney regarding the financing of a dockominium.
Most experts agree you shouldn't plan on making a quick and fabulous return on your investment. They say the best return on investment will come if you plan on owning your dockominium for seven to 20 years. Long-term ownership may involve a need or desire to rent your dockominium to someone else. Make sure you check on any rules and restrictions for leasing out your slip.
- Debbie Shaffer
Do The Math
Before you consider buying a dockominium, look hard at the comparative cost of renting a slip, where you have mobility and financial flexibility, against the cost of a full-on purchase, where you'll have the benefit of permanently securing your boat in a prime dock location, but your money will be locked up in a still-shaky economy. Let's take a look at how much it would cost to rent a 40-foot slip versus purchasing that slip as a dockominium. (Figures estimated for dockage at The Harborage At Ashley Marina, Charleston, South Carolina).
*Note, the prices above do not factor in mortgage closing costs, title search, and so on.