Buying a Yacht to Charter & Make a Profit ?

Hi, it seems that you already know this will be working for free...

I wouldn´t do it if I could not afford to buy the yacht without money from others. Let´s say the economy goes down, you need to sell the boat with a loss and share the debts, how fun is this...?

But I know captains doing deals with owners to keep the yacht running, taking care of normal harbour fees and maintenance but no investments, and run the charter business themselves. This means the owner has the boat at no running costs and can use it at certain periods with just the cost of operation for this use. The yacht must of course be in a good condition to start with.

Maybe an idea in your situation?

Can anyone here remember a yacht that actually generated any profit for the owner?

You could also think about the attractiveness of a 20 year old yacht for the market. they are usually outdated and this ensures low charter prices.

Since a new or recent yacht is financially no option, I would go for a sixties or seventies yacht to give your guests a total "vintage" yachting experience.
Survivors from that era are usually well maintained or refited and easier to maintain. Classic sounds a lot more appealing than simply an old yacht.

There are some nice examples of Feadship and A&R on the market between 100 and 120 ft.

I doubt however that you will make any profit. It may pay the bills in case it's booked for a season.

Good luck

One of the most successsful charter vessels in recent years was a (roughly) 130' Broward with four equal staterooms, plus a fifth, the largest, for the charterer.
The captain told me they chartered 30+ weeks during a typical year.
The income covered crew salaries, running expenses, and yard bills.
It did not cover the mortgage, and it most certainly did not yield a profit.

Then, you decide to sell the boat.
This is kind of like looking over the choices at a used car lot.
Gee, do I want the clean, low-mileage one, or, maybe, that taxi cab over there with a jillion miles and thousands of rear ends who used the seats.

Years ago I looked into buying a day sailing charter boat. When I got into the figures I needed to run 250 to 280 days a year to break even. So take into account maintenance days, crew downtime and no booking days as well as bad weather ect.................. It's pretty tough.

Your friend has very unrealistic expectations. Look at the length of the charter season in the Med. Now he is going to take 3 to 4 weeks of that timeline for personal use? Your expenses are 52 weeks per year, your charter revenues will be for a much shorter period. Do a simple cash flow analysis, including a reserve for maintenance and repairs, and find your break even point. It will be tough just to do that, much less produce the returns the two of you want.

When robber baron J.P.Morgan replied to a question about his huge luxury yacht with the now-famous "If you have to ask how much it costs, you can't afford it," it was an era when only the incredibly wealthy could own a yacht.

Now you only need to be extremely wealthy to own a yacht instead of incredibly wealthy!!!

Tucker Fallon

The 10 percent will probably not cover the costs if you are running charter. The 33 m Feadship Bystander has a crew of 5 when chartering and she takes 6-8 guests. Ideal for charter is four staterooms for 8-10 guests on this size of yacht. You will also have more wear and tear during charter, higher repair costs to avoid downtime and so on.

From the 40´per week you need to give away a discount for double weeks as well as late bookings and don´t forget the 15 percent to the brokers...
(BTW, good yachts usually gets 10-12 weeks per season, but rarely the first year.)

So, if you think of it as a nice lifestyle instead of making a profit, it may keep you alive... But I would rather be a captain for somebody else and know that the money I get is for me and not for the shared yacht....

Charter Crew

You will never sell 12 weeks charter ( realistic price ) in the first year and for sure impossible with a 12 year old boat. We have hundreds of Yachts running in the med like this. Also most Charter Yachts have a Central Agent and that means not 15% fee it means 20 to 25 % for the brokers. ( on co-brokerage )
Also most charter guests want to see how good is the Crew and that means you have to employ the whole Crew through the Year. Delivering the Yacht to winter charter destinations is also a solution but more expensive I think.

I got the info that the 70m Feadship Utopia sold 28 weeks of Charter in the first year for around 300.000 a week + running expenses.
Start a calculation in this range and you will see that is a good business but now you have to wait until 2013 when you want to buy a ship like this.

You also have to offer something outstanding I think to make profit out of the Charter. For example the MY Giant offered Charter in the Antarctic region very successful 2 years ago. ( Sistership project is for sale )

Now we know where the "money" is in the Charter business.
Sounds like a career direction.

Charter

To take a Yacht into Central Agency is always nice. You get your 5 - 10 % for doing nothing.
Okay you place advertising, send the Yacht to Charter Shows ( mostly on Owners costs ) and just waiting that all the other small brokers around send you some clients and of course you have to check that you did not sell a charter when the Yacht is in the shipyard.

Innomare is now available as a central agency for charter yachts

Lol...

Dear Bruno a Naval architect and surveyor normally earns much more money.

Dear Crewagency,

I beg to differ.

We never get 5 - 10 % of anything for doing nothing.

The top money is for the broker, second is the stylist/interior designer. Naval Architects and/or surveyors are all the way at the bottom (together with the shipyards by the way).
Sales pays better than engineering in any industry, and yachting is not different in that respect. But then again, I wouldn't want to swap. I make a living with what I like to do and that's enough for me.
Working in this industry, you quickly learn that the real luxury is time, not money.

PS - in case you didn't notice, my previous post was meant as a joke.

Bruno

Success Stories

Does anybody have any SUCCESS STORIES on this subject that we can all learn from, or know of any reports, books, publications, etc which have described any SUCCESSES in chartering a boat to cover expenses ( be they just operating expenses or better yet including debt service and depreciation), and even better yet a small profit on sale and perhaps a couple free weeks of shoulder season use a year)?

Failures are a dime a dozen I know, but there must be some successes out there -- from which we all could benefit -- any insights appreciated.

The thing that screams out at all of us as the great untapped value is the low utilitzation rate of yachts -- if one can figure out a way to increase utilization with minimal transaction costs (eg broker fees, marketing fees, unnecessary crew during non-operating periods, etc.) the economics might work better. Loren S (Monocle Fractional Program) and the other fractional groups are doing their parts to try to tap this conundrum/opportunity, but does anybody else have any useful data or ideas on achieving success in this area?

Thanks much.

CNRules

Another issue you may wish to get advice on is the IRS. I seem to recall a case where someone attempted to do what you are talking about and the IRS simply didn't believe that they actually had a reasonable expectation of making money at it and on those grounds disqualified it as a coporate loss.

I'll look for the reference and post it for you if I can find it.

Tax Court Case

Here's the link to the tax court case I think you are talking about. This was a pretty eggregious case for trying to take a tax loss. I think what our thread starter is thinking about (optomistically as are we all) is that he'll break even or make a profit or (at least in my case) keep the net expenses (loss) to a minimum ,taxable or not.

As I understand ithe IRS rules(but no expert) you can offset any revenues (charter etc) against expenses for tax purposes even if you are doing this for pleasure -- you just can't deduct expenses in excess of revenues (ie net losses) if this is not a venture with any realistic hope of making a profit (to use the IRS's test).

Here's the link : http://www.ustaxcourt.gov/InOpHistoric/magassy.TCM.WPD.pdf

If this doesn't work, Google "maggasy feadship " and the Tax Court opinion link should come up.

Regards,

CNRules