Nov 05, 2024

The Ultimate Guide to Types of Yacht Ownership in 2024 [Updated]

CHARTERING

FRACTIONAL OWNERSHIP

PURCHASING

CONCLUSION

Wondering about the ins and outs of yacht ownership? You have several options. Explore the diverse types of ownership that are available, from yacht chartering and fractional ownership to sole and co-ownership. Whether you're a seasoned sailor or a newcomer to yachting, we can help you find the perfect ownership model to fit your lifestyle and financial goals.


Chartering

More often than not, the journey to yacht ownership begins with a yacht charter. The cost of chartering and the flexibility it offers makes this a natural first step for many yacht owners. Spending a week living aboard a yacht will help you determine what is most important to you in a way that is impossible with a simple viewing.

The Pros

Chartering allows you to:

• Sample yachts of different sizes from different builders with a low upfront cash commitment

• Explore different charter regions throughout the year

• Save on relocation fees (assuming you are chartering from the yacht’s home port) — for example, if you wanted a summer charter in the Mediterranean and later escape winter in the Caribbean

• Be responsible only for the operating costs of the boat (fuel, crew, docking fees)

All of these advantages make chartering an ideal option for someone who is either new to yachting or only looking to be on the water a handful of days throughout the year.

The Cons

As with everything, chartering also presents some drawbacks. There are a few things you will want to consider before booking your charter.

Most major yachting destinations have strict coast guard laws that limit the maximum number of guests allowed on a charter to 12, regardless of the size of the vessel. If you are looking to entertain large groups during the day or the evening, chartering is restrictive, so you’ll need to be mindful of this.

The yacht you want may not be available when you want it. Often the most popular yachts are booked several months in advance of busy holidays like Christmas and New Year’s Eve, and throughout the months of July and August.

You also might not be able to book your chosen yacht if its owner chooses to use it to celebrate the holiday with their family and friends or if it has already been booked by another charterer.

Case Study

Let’s look at a simple example to understand the cost of chartering a yacht. Let’s say you are looking to spend a week in the Bahamas over the New Year holiday. You’ll be eight guests: two couples, each with two children.

Working with your charter broker, your and your guests decide on this 84′ Lazzara Chip with five well-appointed guest staterooms and an updated design. A sample charter would entail:

• A $39,000 charter fee for the week,

• $5,460 in taxes in the Bahamas

• $5,850 in crew gratuity

• $11,700 in operating costs (estimated)*

• For a total of $62,101


*The running costs of the charter can vary widely depending on your itinerary and your provisioning preferences. The standard 30% APA is included here as an illustrative example.


Fractional Yacht Ownership

Fractional yacht ownership is when a manager arranges to purchase a boat among several owners. Each owner has an equity stake in the vessel, depending on what percentage of the purchase they fund. Similarly, each owner is allotted a set number of days they are able to use the boat each year. 

The owners pay an annual maintenance fee to the manager who is then responsible for managing the boat’s calendar, crew, and maintenance throughout the year.

The Pros

Fractional ownership allows you to split the cost of owning a boat among several owners. Thus, the capital required upfront and annually is a “fraction” of what it would cost if you were to purchase a yacht on your own.

This type of ownership also allows you to have a professional manager run all aspects of the boat — hiring the crew, coordinating maintenance, and managing the calendar among all owners.

Unlike chartering, fractional ownership means you are able to invite as many guests as deemed safe and as long as you have proper safety equipment onboard. Furthermore, if you no longer wish to own a fraction of the yacht, most fractional ownership agreements allow you to easily sell your shares to another owner.

Fractional ownership could make sense if you already know which yacht you want and are likely to use it several times throughout the year in one particular region. However, in exchange for the lower cash required and the convenience of having a professional manager, you will be restricted to using the boat a limited number of days per year and will need to coordinate your usage with the other fractional owners.

The Cons

Similar to chartering, fractional ownership comes with some drawbacks.

It’s possible the vessel might not be available for the particular dates you are looking to use it. After all, you are splitting the boat among several owners, so there’s a good chance more than one owner will want to use the boat at the same time over the course of the fractional ownership.

If you want to relocate the vessel from one area to another for an extended period, you’ll need to get most or all of the owners to agree, depending on how your ownership agreement is drawn up). 

For example, if you want to move the boat from its home berth in Cap d’Atibes to Sardinia for a month, you would need to get approval from the other owners before the boat is relocated. If you were chartering the boat, you would simply pay a relocation fee, and if you owned the boat, you would simply advise the captain to arrange for dockage in Sardinia.

Case Study

You’ve just returned from your New Year’s charter in The Bahamas aboard that 84′ Lazzara Chip. You and your friends fell in love with the boat and had the most incredible week ever. You call your broker and ask how much it would cost to buy the boat new. Your broker informs you the latest model with all the custom upgrades and finishes similar to the boat you chartered would cost around $4 million.

But your broker also informs you that you could split the boat among seven other owners in a fractional ownership program. 

In this example, you would pay the manager $500,000 for your fractional shares in the boat, along with a $60,000 annual maintenance fee.

You would get roughly 45 days of usage each year, and if you choose not to use the boat, the manager would try to charter the boat for you. You would earn proceeds from any charter the manager successfully confirms.

After three years, the manager sells the boat for $2.8 million, and the owners split the proceeds amongst each other, with each owner netting $350,000.

In the above example, instead of paying $4mm to purchase the yacht along with roughly $400k in annual operating costs, you would instead pay $500k upfront and $60k annually in exchange for 45 days of use on the boat each year.


Purchasing

While there certainly are advantages to chartering and fractional yacht ownership, those who make the decision to invest in the purchase of their own yacht have full access to a private vessel with their crew on their terms. 

Purchasing: the pros

Having your own dedicated crew means your staff will learn your tastes and preferences so that when you step foot on your boat, everything is exactly as you would expect — from the wine that is being served to the music that is playing to the food that is prepared.

Every detail of the boat is personalized for you by you, including the color of the hull, the cushions on the sunbed, the towels in the heads, and the artwork on the walls. The ability to store your clothes, toiletries, books and wines onboard leads to a level of convenience simply not possible with chartering or fractional ownership, in most cases.

And let’s not forget the pride of ownership in itself. For many people, purchasing their first yacht commemorates a special moment in their lives — perhaps the sale of a business or the beginning of retirement. Having your chosen name on your vessel and the freedom to travel somewhere only accessible by boat, dropping anchor and staying there as long as you wish is at the core of yachting.

Purchasing: The Cons

Of course, with ownership comes responsibility. The biggest downside to purchasing a yacht, versus chartering or fractional ownership, is the financial responsibility that comes with buying and then operating your vessel. 

Aside from the purchase price of the yacht, you’ll need to hire staff to run your vessel, pay for insurance and dockage, and take care of any needed maintenance and repairs.

Similar to buying a private aircraft or an automobile, in almost all cases, a yacht owner should expect depreciation from the time of purchase to when the yacht is eventually sold. 

As with any major purchase, it’s always important to have a long-term plan in mind and work with your broker on putting together a budget for your yacht. Chartering is a common way for owners to offset the yacht’s annual cost.                                                                                                                                                                                                                                                                                                              

Purchasing: Case Study

Let’s return to our 84′ Lazzara Chip we chartered for our trip to the Bahamas. Instead of splitting the costs of the boat in a fractional ownership program, you decide, after careful consideration, that you would like to have the full freedom to use the boat as you wish, with your own crew. You want it outfitted down to the finest detail to your exact specifications, so you decide to purchase the yacht.

You and your broker work through an annual operating budget for a new 84′ Lazzara Chip. Let’s take a look:

You should expect to pay $4 million to have the boat delivered with the upgrades and finishes you choose. Your insurance should run you about $30,000 per year.

Now that you have the boat delivered and insured, let’s make sure you have it crewed. Running the boat with a full-time captain, first mate and stewardess will run you about $186,000 per year: $90,000 for the captain, $48,000 for the first mate, and $48,000 for the stewardess.

Your captain helps you secure a slip at a local marina with an annual berthing fee of $70,000. Your broker advises you that if you run your boat locally a few times per month throughout the year, you should expect to pay about $100,000 in fuel.

For a boat this size, you should expect to have a 12- or 24-month warranty that comes standard. Your broker should be able to help negotiate a 12-month warranty extension so that most work for the first three years should be covered. But even with this warranty, you should budget about $20,000 each year for maintenance and repair work.

Overall, you can expect to have a $4 million outlay for the purchase of your yacht along with a $376,000 annual operating budget.


Owners will often choose to enter their boat into a charter program to help offset the running costs of the boat. Chartering is an important factor you will want to consider before purchasing your yacht, as this will dictate what type of insurance you purchase and even which boat might make the most sense, given the charter demand in a particular market.


Conclusion

As you can see, there are several options when it comes to yacht ownership, each with its advantages and drawbacks. 

The first things to consider before engaging with a broker is what you will be using the boat for, where you will be, and how often you will be using it. After weighing the pros and cons of each option, the next most important step in the process is appointing your broker — someone who is knowledgeable when it comes to the type of vessel you are interested in and who understands your wants and needs.

A good broker is your advocate and whichever option you choose — charter, fractional ownership or purchase. They will be sure to make the process smooth and enjoyable. 

We look forward to hearing from you and helping you along the way in your journey. Our brokers are dedicated professionals who have deep knowledge and understanding of the fast-changing yacht market. We are passionate about making our clients happy and developing new relationships that will last a lifetime.

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