To many investors – particularly those who enjoy boating – there can be no more exciting idea than owning a marina on a lake or ocean. But the fantasy does not always meet the reality, and there are some things that every potential marina owner should know before they take the plunge.
The bad news
Let’s start off with the issues that you may not have immediately thought of but are part of marina ownership.
- In some markets the marina business can be very competitive with potential price wars. There is not much barrier to your customer moving to a different location – only the length of their lease obligation really holds them in place. For many customers, all they really have to do is start their motor and go down the street. As a result, the marina business can be very cut throat. That’s means that you really have to be on your game and keep a constant pulse on your competition and their rates and specials. It also means that you manager is key because one of your best hopes for customer retention is a smart, pleasant manager that addresses all problems quickly and amiably (and that holds for you if you self-manage).
- Many marinas have restaurants and stores to manage, and these take a lot of responsibility. To maximize net income, many marina owners operate stores and restaurants that cater to their customers’ needs, as well as surrounding boaters. But these businesses need good management to succeed, and this requires additional systems and determination.
- There can be weather issues to contend with. Floods, droughts and hurricanes have become a common feature in American weather, and these have a detrimental effect, obviously, on the marina business. Before buying, you need to fully understand these risks and the historic impact.
- In northern areas, the business is seasonal and there’s little revenue in winter months. While most southern parts of the U.S. have warmer weather year-round, the northern states have to contend with the winter and freezing temperatures. Unfortunately, during this period, many boat owners pull their boats out and put them in dry dock or move them south. Additionally, the restaurant, store and gas sales go to zero. You have to budget accordingly.
- Safety and liability are a constant worry. Marinas have plenty of slip-and-fall opportunities as well as the combinations of gasoline and wood, and electricity and water. Any way you cut it, you will have to always be proactively watching out for any risks and fixing them.
The good news
OK, so here are the reasons why you would want to contend with these worries and risks. Like any good investment, you have to maintain a healthy risk vs. reward relationship. And marina ownership has a bunch of attractive positives.
- You can buy marinas from moms & pops that offer low pricing and seller financing. You can buy marinas from the original builders and owners and that means extremely attractive pricing and often seller financing. Cap rates can sometimes exceed 15% in lesser markets, and there is often massive opportunity to increase revenues.
- Rents and occupancy can be greatly increased with aggressive marketing. Many older owners have totally missed out on the concept of internet marketing or have lost interest in building the business altogether. As a result, it’s possible to make giant inroads on profitability quickly. There are cases where marina owners have doubled the income in just a few years.
- Services can be added such as restaurants and stores to increase net income. Many marinas have additional money-makers that the prior owners may have missed out on. These can have huge boosts for your bottom line, and are not that difficult to put into service.
- If you self-manage, many people love the lifestyle. Some marina owners invest to replace their current lifestyle with something completely different – and owning a marina can offer some true satisfaction in a number of areas. You can be your own boss, enjoy being outdoors, have a pleasant day that is filled with a myriad of jobs from sales to accounting to public relations. If you enjoy boating it’s a dream job in which time was fly by. And the ability to live away from the hassle of the city is also captivating.
- New supply is limited and there is a perpetual need. There is only so much water front property and they’re not making any more. In addition, only a select few locations are geographically possible for a marina. Since the number of boats on the water is always increasing, the ratio of supply and demand is always in your favor.
Conclusion
Owning a marina can be a terrific investment, but only if you understand the risks and difficulties as well as the positives. The key is to make an informed decision that will pay you huge dividends in perpetuity.