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Yacht Charter Management Programs In A Nutshell

luxury catamaran charterOwning and sailing a catamaran in an exotic part of the world is a dream for most people. However, paying for maintenance, insurance, dockage, new “must-have” equipment, and other bills can be a drain on any yacht owner as you watch the sum add up monthly. Fortunately there are ways to reduce the overall cost of owning a yacht so you can get back to smiling with the wind in your sails.

Charter yacht management is one way to make it more affordable and help keep costs low while owning the boat of your dreams. We have used these same methods with our own boats and we have helped hundreds of other sailors do the same.

But don’t be fooled! You can get trapped into something that does not work for you because not all management companies or charter operations are a good fit for everyone. Not every boat fits the “charter” model either. Make sure that you understand what you are getting into. Read and understand your contract. Make sure you have a good exit strategy and if you are unsure, get a good expert advisor.

In our experience, five of the most popular yacht charter management programs offered by companies like The Moorings, Dream Yacht, TMM, CYOA and others are:

Guaranteed Income Program

Charter yacht companies

  • 9% Guaranteed Income For 5 Years
  • Operating Costs Paid by Charter Company
  • NO Further Costs to the Owner
  • Up to 12 Weeks FREE Worldwide Sailing on Sisterships
  • Comprehensive Phase-Out At End Of Program

This program is offered primarily by the bigger charter operators like Dream Yacht Charter and Moorings/Sunsail. The charter company pays the charter owner between 7-9% of the total boat value at the time of purchase each year for the duration of the contract, which is usually 5 years. The guaranteed income, covers the mortgage payment, which is the owner's only financial repsonsibility. The charter company pays for all expenses, including insurance, marina fees, and maintenance during the contract. The boat owner gets to use his/her boat or a sistership at any of their worldwide bases for between 8 and 12 weeks per year. At he end of the program the owner proceeds with the phase-out program and has his/her surveyor represent them to insure a fair outcome. Based on historical data, a catamaran is worth approximately 60-65% of the original value after five years in charter. The owner then has several options:

  • settle the loan and sell the boat
  • settle the loan take the boat and go sailing
  • continue chartering the boat in a second tier charter company or
  • trade in the boat and roll into a new boat and continue chartering with the charter company

Pros: Whether the boat is chartered or not, the boat owner gets a guaranteed payment monthly for 5 years and there are no additional costs for the owner. Check out this article that explains this program in detail: Guaranteed Income program: Do the numbers work?

Performance ProgramCharter yacht management tips

  • Shared Revenue with Generous Income for Owner
  • Shared Risk with Charter Company
  • All Operating Costs Paid by Owner
  • Unlimited Owner Use
  • No Owner Exchange 

Most charter companies offer this program and the smaller charter companies like CYOA, TMM and Catamaran Company particularly favor this program. They usually do not have the financial muscle behind them to offer a guaranteed income, therefore, this is a good alternative.

This is the highest yielding program financially and can be very beneficial for the owner, particularly in the first 3 years. But unlike the guaranteed income program where the buyer has no financial risk, there is a shared risk attached to this program. The income split is usually between 60-80% to the owner and the rest to the charter company. However, be aware that what appears to be better split ratios, such as 80/20 sometimes end up yielding fewer dollars than a 60/40 split because of loaded costs.

When looking at the split, more attention should be paid to the actual bottom line number. For example, some companies will deduct the charter booking commissions before the split while others pass that cost on to the owner entirely. So, make sure to compare apples with apples. With this program the boat owner is responsible for ALL operating costs including the mortgage payments, insurance, maintenance and dockage. Owner use is unlimited but ONLY on the owner's own yacht – there is no reciprocal use unless negotiated beforehand. Dream Yacht Sales, for instance, will in some cases give two weeks of reciprocal use at a 50% discount. For this program the reward is high but the risk is equally high.

Business Yacht Ownershipcrewed charter ownership

  • Shared Revenue with Generous Income for Owner
  • All Operating Costs Paid By Owner
  • Tax Advantages Using Section 179 & Bonus Depreciation
  • Unlimited Owner Use
  • Worldwide Owner Exchange (if pre-negotiated)

Very few charter companies offer this program. It could be complicated to manage unless approached cautiously. And the tax benefits must be carefully planned, documented, and implemented to make sure that it can withstand scrutiny. This program is based on the performance program template discussed before, but has additional modules, which enable the buyer to run the boat as a small business.

By placing the yacht into a corporation and running it as a business, the owner is able to create substantial tax advantages that further offset the cost of ownership. For U.S. buyers who are in high income tax brackets, this is definitely an option that should be explored. Check out more details about Business Yacht Ownership modules

Lease Purchase or "Dream Easy" ProgramCrewed yacht charter ownership

  • 35% Down Payment
  • NO finance required
  • Zero Out Of Pocket Costs For Owner
  • No Income To The Owner
  • Worldwide Reciprocal Owner Use
  • 25% Baloon Payment at End of Program
  • Own Yacht for 60% of new price
  • Comprehensive Phase-Out At End Of Program

This program is typically only offered by French charter companies like Dream Yacht Charter or Navigare. The Moorings also offers a version of the program, but is not as flexible or generous to the owner. This program allows a buyer to purchase a boat using the charter company financing and the owner does not need to apply for a conventional mortgage. Canadians, in particular, benefit from this program because it is so hard, if not impossible, for them to get finance on a boat in the U.S.

The buyer pays 35% of the purchase price at the start of the program and then there is a balloon of 25% at the end of the 66-month program. The charter company retains the title until the balloon is paid at which time the title is handed over to the buyer free and clear. You effectively get the yacht at a 40% discount. There is reciprocal owner use worldwide for a maximum of 8 weeks. There are absolutely no out of pocket costs for the duration of the program and there is no income to the owner. There is a comprehensive phase-out program at the end. This program is a no brainer for people who want to sail worldwide on different makes, models and sizes of boats. The other upside is that there is no residual mortgage at the end of this program. Cons: You have no option to end the program early and the charter company holds title until the 25% balloon payment is settled at the end of the program. 

Owner Operated Crewed Yachts Within Charter Company

  • Operate As Independent Small Business
  • Yields Best Revenues With Robust Booking System
  • Very Generous Revenue With 70/30 split
  • Owner Is Responsible For Operating The Yacht Independently
  • The Use of the Charter Company Infrastructure, Charter Bookings & Support
  • Substantial Tax Advantages Available Using Section 179 & Bonus Depreciation (if applicable)

Most of our catamarans buyers who want to live the cruising lifestyle and operate thier boats themselves, place these catamarans into one of several crewed charter programs. Both The Moorings and Dream Yacht offer very good platforms for owner operators. The basic idea is that the boat is operated as an independent business, which enables the owner to quickly pay for the boat through the use of available tax advantages and income from charter. Other owner operators simply use the very generous income to pay off their boat quickly and opt not to use tax advantages. Either way, it provides the owners a way to buy a bigger catamaran than they otherwise would have been able to afford and live their chosen lifestyle! Our clients on a Fountaine Pajot Helia 44 is a perfect example of how this program works.

 

Island Spirit Catamarans

Insights From Our Clients

One of our clients who bought a Lagoon 42 catamaran, Blue Buddha, this year and placed it into charter with Dream Yacht, documented his experience of the buying process on his blog. Check out his perspective on why he chose the catamaranan and charter company program.

If you are unsure of how to navigate this process and which choices would be best for you and your family, contact us.

Request More Info OR Call:1-804.815.5054

*Please note: These numbers, percentages and assumptions or rules are generalizations and can change from time to time and from charter company to charter company. We recommend that you get yourseld a trusted advisor to guide you through the process if you are new to charter yacht management.

 

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