New Retirement Cruise Ship project

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I’m glad to see other people trying this area, we are actively investigating it as well, and the more players the better when it comes to getting acceptance for a new industry. It will be tough to make it work, though, a number of post-ResidenSea ventures have tried a condo cruise ship, and none have pulled it off. It is worth keeping in mind that investors, founders, and banks lost approx $100M to $200M on ResidenSea, out of a $270M or so investment! Yes, the ship is in operation, but it was “funded” by investors losing money, so it doesn’t prove that the model can work profitably.

It is still worth investigating, I think, as we may be able to save substantial costs by retrofitting a used ship, moving more slowly and rarely, and following a small fixed route rather than wandering around the world. If it did work, it would be an awesome incremental step towards seasteading. But it is not, unfortunately, an easy path, so you should not believe in any specific proposal (including ours) until it is funded and in construction. That said, this is the smallest (ie, most incremental) and closest to completion cruise condo I have seen yet, and it makes me significantly more optimistic about our chances:

> Oceanic Retirement Communities of America (ORCA) has created a new dynamic in adult living with its Lifestyle Cruising Program. Retire on your own private residential cruise ship! This totally innovative continuing-care retirement model provides Independent Living and Assisted Living accommodations to seniors who want more out of their retirement years than what a conventional adult community can provide.

It has 100 condominiums, and is based in Florida. Here’s a [Fox - Orlando](http://www.myfoxorlando.com/dpp/news/030309_Retirement_on_a_cruise_ship) news story, including a video:

Some key details, in case you don’t want to [read their faqs](http://www.condoships.com/?pageid=faqs).

* 100 condos
* Cost is $160K to $400K, for 125 – 330 ft^2. So this is quite small – far smaller than ResidenSea, and significantly smaller than we had been planning. Perhaps retirees don’t have as much stuff? And they don’t have kids living with them either. They have extensive common space as well.
* The all-important operational costs are $25K – $41K/year for two people. Note that they decrease costs a lot by staying in their home port, Port Canaveral in Florida, much of the time – greatly reducing fuel costs, canal costs, docking fees (assuming their home port is chosen for low docking fees). However, these costs also include meals, housekeeping, and all the care of an Assisted Living facility.
* Ship plans to take 10 3-day cruises to the Bahamas each year, and one long cruise to the Caribbean or Central America. So it spends 10mo of the year in its home port. The residents will control the future itinerary.
* No property taxes, as you are not buying real estate, you are buying a share in a Florida LLC that gives you equity, voice in decision-making, and exclusive right to use a specific unit on the ship. So the business model is resident-owned with the developer cashing out at the beginning, as far as we can tell, which is one of our top proposed ownership models. (It is nice to see confirmation of our thinking.)
* No financing, unless your bank will do it.

If you’re interested in condominium cruise ships like ORCA, Utopia, Magellan, and ResidenSea, check out all our posts tagged cruise condo. For more general information on how to live on the ocean, read A Brief Introduction to The Seasteading Institute.

3 comments

  1. wagiboy 12:21 pm

    Congratulations to the ORCA (Oceanic Retirement Communities of America) condo cruise line for setting up such a promising long-term ocean residency program for retirees. ORCA fills a market niche, that of the ever-growing number of active baby-boomer retirees.

    The ORCA offers good value for the money. The monthly fees range from $2,100 to $3,400 ($25K to 41K a year) and include the ship’s operational costs, meals, housekeeping, guest room, port fees and assisted living care. In comparison, one month of living in a (land-based) retirement home can cost $2,000 to $6,000.

    We know that the operational cost of residential condo ships are curial for its success. Given that an experienced ship management company (Marine Growth Ventures) manages the ORCA’s 2 cruise ships I think the costs are well-calculated, probably at a break-even. As Patri noted the investors might cashed out after the condos have sold. What’s also interesting is that ORCA’s annual operation cost ($25K to $41K) agrees with the number Patri came up with ($30K) for a similar project.

    Now the million dollar question is: "Is there sufficient interest in the working-age demographic to pay $30K a year to live on board a cruise liner?". I think so but then I am naturally biased. A survey or even a Freestate-Project like commitment drive would answer this question to a higher degree of certainty. Also, the Fox News interview with an owner of the ORCA mentioned a 29 year old who wanted to purchase a condo despites the ship’s focus on active retirement.

    True, the commitment free and unemployed demographic of retirees are well suited to live on cruise ships. Yet I think the benefits to us working-agers are strong too: tax savings, improved legal environment, adventure and partnership with fellow libertarians. Such a cruise line could learn from the ORCA and adopt its cost-saving move-slowly-and-rarely approach. The main difference to ORCA’s schedule is that would need to spend at least 330 days outside U.S. waters to legally lower the tax burden to its income earning residents.

  2. Patri 11:33 pm

    thanks for the detailed comments, I generally agree. Our plan to proceed does involve the idea of doing surveys and doing an FSP-like contingent commitment.

    ORCA has no tax benefits, as you point out. It may be difficult to get both tax benefits and low costs from slow movement, anchoring 12 miles out seems the most likely way. But then you sacrifice the convenience and great port infrastructure. There will be some tricky tradeoffs.

  3. wagiboy 1:53 pm

    Neither the ResidenSea nor the ORCA include tax planning as a benefit to their passengers. While I feel this omission is a serious limitation of their respective business plans. And I am oblivious for the reasons thereof. If I had to guess I would surmise that the ORCA considers tax savings to be of secondary importance to its retirees perhaps because the tax liability of retirees is generally lower than that of an income earning citizen. The ResidenSea is ship of occupants from about 50 different countries around the world. Considering the tax laws of 50 different countries is quite a challenge and probably put citizens from some country into an disadvantage (bad for marketing).

    However, I believe there is a way to legally exclude $87,600 of taxable income for a cruise ship passenger "who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months" (quote from the IRS tax code)
    http://www.irs.gov/businesses/small/international/article/0,,id=96817,00.html

    Unfortunately, the term foreign country does not include being on a ship in international waters. But what it does includes is being on a ship in the territorial waters of any individual nation. Thus, a tax saving cruise line strategy involves anchoring or floating within the 12nm of nation states for at least 330 days a year.

    I found a tax case article that applies to long-term residents on a cruise ships. The tax case is about a couple who were working and living on a yacht outside U.S. waters in 2001 and 2002. The IRS initially did not allow the tax exclusion because the couple didn’t have an address in an foreign country. After an appeal by the couple the IRA admitted is error as a foreign address is not an requirement to quality for the tax exclusion. The couple proved its whereabouts by means of the captain’s log.
    http://usexpatriate.blogspot.com/2007/02/seamen-on-yacht-qualify-for-foreign.html

    Excluding up to $87K of their taxable income translates to about $30K in real annual savings. Thus, the operational costs of living on board a residential cruise ship could be paid for by the tax savings alone.

    P.S.
    Other tax savings strategies include not having to play the sales tax for purchases in foreign countries and paying no property tax when the cruise ship is the residence.

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