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FAQ's About Buying A Charter Yacht

victoria67You have done some chartering on sailing boats and love it!  Owning a sailing boat in some exotic location has been a dream of yours for years but you just don't know where to start and who to ask. What is involved in placing a sailing catamaran into a charter fleet? Confused by all the chatter out there about charter management programs? Our experience as charter Yacht owners in charter fleets has shown some areas in the management of your yacht that are important to all of us, regardless of the charter company we choose. We have compiled a list of FAQ's as a quick reference for buyers.

1. Why is it a good idea to own a yacht in a charter fleet?

If you are already someone who charters, then it is a way to improve the charter experience and by owning a yacht in a charter fleet, you would probably do more sailing. Once the buyer has paid the 20% deposit, the cost of ownership would be covered by the guaranteed income (if that is your choice of program) while the charter company pays all expenses for the 5-year term of the management contract. So in most cases, the cost of ownership is largely offset by chartering your boat.

2. Will I make money chartering my yacht?

It depends on the management program you choose. On the Guaranteed Income Program, you will not make money but you will offset the cost of ownership. This is a safe no-risk management program. The Performance Program throws off a lot of cash and combined with your tax advantages, you can make substantial income but you assume the risk with the charter company.

3. What are the financial risks and rewards, and how much does it really cost?

Every program is different (see our section on charter management programs explained). We will discuss the most popular program called the Guaranteed Program. There are no financial risks in the Guaranteed Income Program as explained above. The monthly payment will cover the mortgage, which the owner is responsible for. At the end of the 5-year program, there will be a residual on the mortgage, which the owner can either pay off or offset the cost by further chartering the boat with a second tier charter company. It does not yield the same revenues as a first tier company but will go a long way towards paying off the residual mortgage. Generally it is a wash for most boat owners but the "owner use", which represents a substantial amount of money is free to the owner, so that is a big positive value financially. We have at least 7 if not more programs to choose from like our Cruise Club Program, the Defisc Program, etc. and each one is tailored to the individual client so feel free to contact us for more information. However, each program, if done correctly, will yield you a good boat at the end of the 5-year program, either partially paid off or owned free and clear.

4. How many weeks can I sail?

Owners generally get up to 12 weeks depending on how the program is structured. Usually owners get more weeks than they can use.

5. Can I sail in other places besides where my boat is placed in charter.

Owner exchange is a big plus and allows you to sail in places that you otherwise would never have sailed before. If you place your boat with one of the bigger charter companies, you can charter any similar boat, anywhere in the world at no cost to you, the owner besides a small turn around fee, fuel and permits. It is not so easy with smaller companies, but even some of them have some exchange programs with other smaller companies.

6. Will the boat be well maintained?

The charter company needs to provide well maintained boats in order to have a good reputation and earn repeat business which is crucial to them. The pool of sailboat charterers is fairly small and there are a lot of charter companies to choose from so it is in the company's best interest to maintain the boats well. Charter companies usually check the boats in after each charter, at which time the charter guests will report any deficiencies to be repaired or replaced. If everything is in order, the guests will get their security deposit back or all or part of the deposit will be with held for damage repairs caused by the guest.

7. What is the insurance and liability aspects of the charter yacht management contract?

The yacht is usually covered under a group policy, provided by the charter company to the owner and bank and the lender and yacht owner are the loss payees. The deductible is covered by a "Yacht Damage Waiver" insurance paid for by the charterer as a daily additional insurance against the deductible. In the event of a claim , the YDW will cover deductible so there is no cost to the owner.

8. Can you sell the boat at the end of the 5-year program?

Yes, once you take possession of the boat at the end of the program, you can either put it into private use, sell the boat, trade it in for a new boat or place it into a second tier charter company and continue chartering the boat. If you do sell the boat, you will need to satisfy the note (usually a 10- 12 year note) and you are out of the obligation

Contact us for more information

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