Ownership of a yacht without having constant maintenance and management concerns is what Charlie Hamilton sought when buying a yacht for his busy family, who all enjoyed spending time together on the water. A yacht as a small business, an investment, is what Brent Kessel desired, while also wanting to use the vessel vacationing with friends and family. Both men’s objectives are somewhat different. Yet Hamilton and Kessel’s solutions were the same. That is, to buy a yacht and put it in a charter fleet
“We see yacht ownership become more popular, especially trending towards hybrid models of private ownership, mixed with the availability of charter revenues,” explains Dare Blankenhorn, owner and director of Charter Caribe, yacht sales and management in St. Thomas, U.S. Virgin Islands.
This hybrid trend is why companies like Saint-Mandrier-sur-Mer, France-headquartered Dream Yacht Charter, which operates a fleet of over 850 boats in 47 bases worldwide including the Caribbean, offers six different charter management programs.
“Every owner’s desires and objectives are different,” says Dan Lockyer, Dream Yacht’s general manager. “Our programs include a guaranteed income program, a performance/active yacht ownership program that can lower costs by applying specific tax laws, and a partnership program where you can own a particular yacht for 55 percent and can sail up to 12 weeks annually through a reciprocal owner use program.”
There are advantages and disadvantages to buying a boat for charter.
“The biggest advantages are an opportunity to offset the costs of yacht ownership,” says Brianne Beatty, founder and president of St. Thomas, USVI-based VINE Yacht Charters. “Once the yacht becomes well known with good crew, there is the potential for profit if a certain number of charters are secured each season. And, of course, the owner has the use of the yacht between charters to enjoy themselves.”
The ability to cruise your own boat in some of the most beautiful places in the world is certainly another plus. So are, on the operational size, flexible tax advantages.
“Owners are starting new businesses around the financial model of owning a charter yacht. There is a myriad of depreciation opportunities for these assets and driving a business model behind the vessel is bringing new buyers into the market,” says Charter Caribe’s Blankenhorn.
This is the route taken by Kessel, who purchased the two-year old 56-foot five-cabin Lagoon catamaran, Playtime, for $1.1 million rather than the same vessel priced new at $1.8 million. Kessel has Blankenhorn’s Charter Caribe manage the vessel.
“Boats depreciate over time, but not the cost of a charter, so there is positive cash flow right out of the gate,” says Kessel, who is a California, USA-based financial planner by profession. “My advice to someone planning to run their yacht in charter as a business is to hire a tax attorney. They are better prepared in this area than a certified public accountant.”
On the downside, Raul Bermudez, vice president of Clearwater, Florida-headquartered, MarineMax Vacations claims that some owners have a tough time accepting the idea of others using their yacht. “As for the yachts themselves,” says Bermudez, “the best for charter are power catamarans. The charter business was typically sailboats; many of those sailors are getting older but they still want to enjoy the islands and charter yachts and the power catamarans are the way to go.”
Other challenges are the expensive nature of maintaining yachts, insurance – especially in the Caribbean in the wake of last year’s devastating hurricanes – and financing, as the
nature of a moving asset is still an unnerving risk for most banks, and the options to have a yacht financed, even as a business model, are very rare.
The ‘if’ and ‘how best’ to buy a yacht for charter is one that should be well researched rather than rushed.
“We evaluated numerous options for boat ownership and several boat layouts. Three boat shows later and lots of due diligence we choose an Aquila 48 power cat and the MarineMax charter program,” says Hamilton, from Lubbock, Texas, whose boat is based in the British Virgin Islands. “My advice is to narrow the list of potential boats and charter companies to two and then charter each potential boat. See how the boat layout fits your family and how the charter company responds to issues as they arise. Another thing I did before I purchased my boat was to compare the physical wear and maintenance of a four-year-old Aquila MarineMax boat versus a similar aged boat in another charter program. After doing this, we knew what choice to make.”