Many prospective yacht owners want to know the financial implications of buying a yacht. But here’s the thing: You shouldn’t look at this investment as purely financial. Yacht ownership is an excellent investment in your mental health, wellness, and your family. It’s an investment that will reward you with many new adventures in stunning destinations for years to come.
But that still begs the question: Is buying a yacht a good investment?
In short, it depends. A luxury yacht can make a solid financial investment. But it does require careful planning. There are just so many factors that can affect value. In-demand vessels from top yacht builders, for example, tend to retain more value, and yachts that are put into charter can also help to offset costs, helping to make the investment more financially sound.
Ultimately, buying a yacht is a significant expense. But if you plan correctly and most importantly can afford what you are buying, it’s an investment that can pay off financially and by providing plenty of fun and adventure.
Don’t Buy a Yacht Without Considering Operating Costs
Yachts aren’t just expensive to own; they’re also very expensive to maintain and operate. In fact, owners should expect to invest about 10% of the yacht’s purchase price in maintenance, upkeep, and operating costs every year.
A new 180-foot superyacht that costs $45 million can easily require $4.5 million per year for upkeep, crew salaries, dockage/storage, insurance, and other costs. Yearly operating costs for a luxury yacht include:
- Fuel: Depending on the number of hours you plan to operate your yacht per year, fuel can easily cost tens to hundreds of thousands of dollars per year. A 180-foot yacht, for example, will have fuel costs of roughly $500,000 per year (which includes fuel for water toys, tenders, and equipment).
- Dockage: Dockage may cost $20,000 to $300,000 per year, depending on the size of the yacht and location. The owner of an 80-foot boat, for example, might pay $1,500 per month in marina fee, while superyachts typically cost $100,000+ per year.
- Crew Salaries: Hiring a crew for your yacht is another consideration. If you’re not licensed to operate a large yacht, hiring a captain would be necessary. A superyacht captain, for example, earns $200,000+ per year, on average. To help you estimate: A 7-person crew on a 135-foot boat would cost roughly $35,000 per month.
- Maintenance: Keeping up with maintenance is especially important for your yacht’s value. Deferred maintenance can quickly diminish resale value. A rule of thumb: Yacht maintenance accounts for about one-quarter of your yearly operating budget.
These are just a few of the most significant cost centers; there are many others, including insurance, WiFi and onboard communications, shipping costs and more. In other words, if you plan to invest in a yacht, you should be able to afford operating costs to ensure your vessel holds value long-term.
How Much Do Yachts Depreciate in Value Each Year?
Depreciation is usually dependent on a number of factors, similar to how it’s calculated for automobiles. Yachts from in-demand builders hold value better than others, and maintenance is also a big factor in resale value. Deferring maintenance or refittings can cut into your resale value.
In terms of depreciation, here are some rough estimates for a new yacht:
- Year 1: About 10% depreciation in the first year
- Year 2-6: About 5-8% depreciation per year
- Year 6+: About 1-3% depreciation per year
This is just a general estimate. For example, buying a used yacht would result in less depreciation, and the builder, the type of vessel, its appointments, and size can all affect depreciation.
You might be wondering: Do yachts ever appreciate in value? This is a rare scenario, but it is possible. Favorable market conditions, success as a charter vessel, and a rare/exclusive yacht from an in-demand builder can all lead to a yacht breaking even or turning a profit on resale.
Estimating Resale Value
As noted, resale values are dependent on a number of factors, and they can range widely. For example, if you have an in-demand vessel and have kept up with maintenance, you might expect a resale price 80% of the initial purchase price. Deferred maintenance or a less desirable brand might retain just 45% of its initial purchase price.
Ultimately, it’s important to work with an experienced yacht broker when shopping for yachts. A broker will help you better understand which types of yachts retain value, if the vessel is a successful charter yacht, and connect you with sales teams from builders and brokers.
How Chartering a Yacht Can Help Protect Your Investment
There are pros and cons to chartering a private yacht, but in general, the pros outweigh the cons. In fact, putting your vessel in a charter management program helps you protect your investment in a number of ways. A few include:
- Upkeep and Maintenance – Hiring a crew is one of the best ways to ensure your vessel is well looked after. A crew will perform regular maintenance and upkeep and catch potential issues before they become costly problems.
- Offsetting Costs – In general, the income from charters can help owners offset operating costs. In some cases, owners might break even each year. Although profitability is possible, chartering your yacht is more likely to help limit annual expenses.
- Marketability – A successful charter yacht commands more on the open market. Not to mention, many prospective buyers will charter the yacht before purchasing it. That helps make it more marketable when you’re ready to sell.
- Tax Benefits – As a charter vessel, some expenses, upgrades, and maintenance can be deducted. This can help to greatly limit annual operating costs.
Investing in a Yacht Is a Lifestyle Investment
If you’re considering whether buying a yacht is a good investment, don’t only think about the financial aspects. Really, a yacht is the ultimate lifestyle investment. It can bring years of family fun and adventure in unforgettable locales.
Of course, on the financial side, there are many factors to consider. That’s why it’s important to work with a reputable broker. In general, there are some 20,000 yachts available for purchase in the U.S. each year, as well as custom yachts. Navigating the market can be a challenge. Working with a brokerage will ensure you make an informed decision and the best investment possible.
Interested in buying a yacht? Contact Worldwide Boat today to learn more about investing in a yacht.