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Pros & Cons Of Yacht Charter Management Programs

choosing a Yacht charter Management program is a carefully made decisionYacht charter management is a good way to reduce the cost of a boat and also offset the cost of yacht ownership. If you and your family are sailors and want to explore different parts of the world,  owning a boat in a charter fleet can be a very fun and rewarding experience. To make it a successful endeavor, we recommend that the yacht owner be informed and involved in the management of their boat.

New vs Used Catamaran

The one question we get a lot is: "Should I buy a new boat and place it into charter management or buy a 5-year old boat that was phased out of charter management when I am ready to go cruising". That is a fair question and can be easily explained. 

Usually your timeline will determine if you should buy a new catamaran and place it into charter. If you have 2-5 years before you will go cruising full time, doing a charter program is a good way to own the boat that you actually want and help pay for the boat with charter income. By the time that you are ready to go sailing, your 5-year old charter boat will be worth 60% of the original value of the boat, exactly the value of what you will buy someone else's 5-year old charter boat for, give or take. So, why would you give up a new boat, five years of worldwide sailing and 40% of income? It makes no sense!

Pros Of Owning A Charter Boat

  • Pride of ownership
  • Warranties in place on all equipment 
  • The boat will generate income and will pay 40%+ of the mortgage over 5 years.
  • 5 years of sailing (8-12 weeks @ between $4,000 - $20,000 / week value)
  • Phase out program ensures a fair outcome at the end of your charter program
  • You sail away with a known quantity. You know the sailing and maintenance history of the boat that you will go cruising on.

Conclusion: If you have the time and the financial means, it makes total sense to buy a charter boat sooner instead of waiting five years and then buy a five-year old charter boat.

Charter Yacht Program Types: There are different types of management programs offered by the charter industry, but the two most popular programs offered by most charter companies are the "Guaranteed Income Program" and the "Performance or Income Sharing Program". Both these programs have their pros and cons and the boat owner has to figure out what will work best for their particular situation and plans. Charter Programs In A Nutshell>>

Risk Assessment: The main aspects to consider for the boat buyer when choosing charter management programs are their risk tolerance and possible need for tax benefits. That will dictate, to a large degree, if a guaranteed monthly income with less risk, involvement, and liability vs the Performance Program with higher revenues, but more personal involvement, may be a better fit for you.

Income Split: The income split in the Performance Program is an important issue but unfortunately it is often very misleading and is used as a marketing tool when it looks very favorable to the owner. Truth is, only the bottom line is relevant. What the owner is charged for after the split (costs of the price of services, booking commission paid to charter brokers, etc.) is what truly determines the bottom line and not the split formula.

Owner Exchange: Another consideration for your choice of management program is the importance of an exchange program between locations for the yacht owner. Guaranteed Income programs often have generous owner exchange in locations all over the world while the Performance Program owner is limited to no exchange or a very limited number of weeks.

Exit Strategy: There is one more very important element to be considered which is not often highlighted when you are speaking with the salesperson that presents the programs and options, and that is your exit strategy. What happens at the end of the program? Do you go into a second tier fleet or sell? Is there a good second hand market for your particular choice of boat? How much will you still owe? Are trade-ins an options?

Contract Issues: Knowing and understanding the contract, can go a long way to making a great deal. We analyze and explain the different options to ensure a good understanding for owners of what charter management really entails. Find Out Here The Pros & Cons of Guaranteed Income Programs & Revenue Sharing /Performance Programs>>

Also Read: Guaranteed Income Program: Do The Numbers Work? AND Yacht Dealer Or Yacht Charter Company...who should you buy your yacht from?

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