It’s easy to romanticize the idea of buying a boat for yacht charters. Who wouldn’t want to own a boat, while earning charter income on the side? You can show up at the dock, set sail, and leave your boat with a captain to look after her.
It seems like the perfect scenario. But although there are many benefits to buying a boat for charter, long-term profitability requires some careful planning.
Looking for advice? The brokerage team at Worldwide Boat has put together some tips to help you navigate the charter boat market.
Buying a Charter Boat: Is It Right for You?
You want to buy a boat to put into charter. But does it make sense? Do you have the resources and time to own and operate a charter boat?
These are some of the top considerations you should make:
Do You Have Enough Time?
To take full advantage of owning a charter yacht, you’ll want to be able to sail when your yacht is available throughout the season. Some charter companies allow you to earn points, while others allow you book high- and low-season weeks. In general, you should estimate spending about 4 to 8 weeks aboard for the maximum benefit (and in some cases, up to 12 weeks).
Some companies will also provide last-minute charter opportunities. So, it helps if you have a flexible schedule, and are located in close proximity to your charter boat. Really, if you aren’t excited about potentially spending 2 to 3 months aboard each year, you might consider chartering a yacht instead.
Do You Have the Financial Resources?
Owning a charter boat can be very expensive. You can expect to put down 20 percent of the purchase price when buying a boat for charter. Plus, you’ll want to account for yearly operating costs. In most cases, maintenance and ongoing costs come to about 10% of the boat’s purchase price per year.
One advantage of chartering your boat: You’ll be able to offset annual operating costs. This can greatly limit the financial burden.
Do You Like to Travel?
Some charter companies will provide you opportunities to charter similar yachts, so-called “reciprocals,” in other destinations around the world. This will allow you to sail in exciting destinations, while limiting the cost to you. If you prefer to stay close to home, this is a benefit that might not appeal to you.
How Yacht Charters Help Owners Offset Costs
One of the most attractive benefits of buying a boat for a charter is the income. Depending on location, charters can significantly offset operating costs – which come to about 10% of the boat’s purchase price per year.
For example, in an in-demand destination like the Caribbean, there’s a longer charter season; as a result, boats in the Caribbean have the potential to offset up to 100% or more of yearly operating costs. In general, charters help to offset the five most significant operating costs including:
- Marina Fees – Dockage and marina fees are a significant cost center; in the Bahamas, dockage fees can be as much as $5/foot a night.
- Insurance – Insurance averages about 1.5% of the boat’s value per year. Insurance for a boat valued at $2 million would come to $30,000 per year. Owners will pay a premium for insurance for charter boats.
- Fuel Costs – Fuel costs are dependent on the type of boat and its size.
- Maintenance – Upkeep and repairs account for about 25% of a boat’s yearly operating budget. It’s vitally important; deferred maintenance negatively impacts a boat’s resale value.
- Operating Expenses – Crew costs, refit, and international fees also factor into yearly costs.
Key Benefits of Buying a Boat for Charter
Buying a luxury boat requires a lot of time and resources. Putting your boat into a charter is one of the best ways to limit the amount of time and energy you have to invest in ownership. In addition to offsetting costs, owners also benefit from:
- Expertise – By working with a charter management company, you’ll have an expert in your corner on maintenance, chartering, tax benefits, or if you choose to sell your boat.
- Financial Benefits – Owning a charter boat does have tax implications; you may be able to deduct a percentage of the purchase price and/or ongoing maintenance.
Quick Tips Before You Buy
Shopping for boats can be exciting. But remember: It’s extremely helpful to work with a reputable brokerage. A broker will help you to best understand your investment and help you learn more about the chartering process. Here are a few additional things to consider:
- Charter Before You Buy – Interested in joining a charter fleet? Charter with a company before you enter into an agreement. You’ll get a better idea of the wear-and-tear you can expect, as well as the maintenance standards.
One Tip: Charter new boats, as well as 5- to 7-year-old boats. You’ll be able to see wear-and-tear over time.
- Pick Your Location – Don’t choose a location because you it’s in-demand for charters. Pick a location where you want to sail; you’ll be much more likely to take advantage of your sailing weeks if you look forward to the location.
It’s a Great Time to Own a Charter Boat
Boat charters have grown in popularity over the last decade, and they’re continuing to grow. This is another reason why it’s a great time to buy a boat for charters: It will be in demand.
Remember that owning a boat is a considerable expense; if you aren’t in love with being on the water, buying a charter boat might not be the best investment. In fact, although it can be profitable to own a charter boat, in most cases, chartering will help you offset expenses and pay down the boat’s mortgage.
But if you’re an avid sailor, and you dream of spending as much time aboard your boat as possible, buying a charter boat can be a great way to limiting the costs of ownership.
Have questions about buying a boat for charter? Contact a broker with Worldwide Boat today to learn more.