How do you buy a 5 million dollar yacht?

Hi,

All of the above and then some

My experience is limited to the sportfish market but all of the seven figure builds I've done the checks were written and drawn on personal accounts. None to date have been financed nor owned through joint or corporate ownership during construction although some have since become a major asset of a corp. for charter purposes. One of the more savvy owners told me his rule of thumb was to keep the value of the yacht below 1:100th of your net personal worth.

Hiring a negotiator can be extremely effective. I just helped a buyer knock the price down over 1/3 (well over $100K in savings). Not sure if hiring a negotiator is the right term though as I was paid to helped him locate, check out and compare several boats as well as guiding him through the negotiations and the entire process. All I charged was a modest day rate for my time plus expenses and he gave an appropriate bonus when we were successful.

I understand the principal on the 1:100th of net worth, but not sure how much truth there is to that number. That means that somebody worth $10million would have a spend of around $100k which wouldn't buy you much in this day and age...hardly a "yacht"! Just like if you are worth $100million, you could probably swing a couple million dollar vessel versus only a million in spend. I understand it's just a rule of thumb - similar to the 10-15% a year (purchase price) to operate/maintain a vessel.

Well, let's say you buy a $3 million sportfish. You could easily blow through $500k-$1mill a year in expenses, running all over the map, crew, tackle, tournaments.....etc.

Let's just say that you have a net worth of $300 mill. and you're making a 5% return, thats $15 mill a year....you still have to maintain the houses and all of the other things you have......

there are a lot of variables. For most of the guys i know it depends on what we want. some of us have had large boats and found them to be a pain in the wallet and to much drama so it is easier to find a boat you like with a crew that is compatible and go that way. i bought a boat once and cruised around the world for two years then sold it. now i just charter in the areas i like, but i am not your average person either

just some thoughts

travler

I have a friend that ran yachts up to 70 meters and has seen buyers think they're getting a great deal on a 40 meter yacht not knowing that it costs $2 mil/year to actually use it.

Your example was obviously over simplified, but that's pretty much the drift from everything I've experienced. I would hire a consultant that you like/trust sooner rather than later. As NYCAP did, those with experience and knowledge can save a lot of time and money in the long run. Remember, brokers only get paid if they sell something regardless of who brings them to the table.

Some owners prefer to buy with cash, I've also spoken/worked with a few owners that are financing right now because they can get the money so inexpensively. The current rates allow savvy buyers to make more than they pay on their points.

Same with the registration in their name vs a company. It all seems to hinge on their financial profile and highly paid accountant's instruction.

Good luck.

Great topic, however unfortunately i think many owners are purchasing boats well above their means. Net worth and cash flow are extremely important when purchasing a pure luxury item. 1% of net worth is a little too catious in my books. i would stay closer to 2-3% assuming i have safe investments and my cash flow was stable.

Aside from the upfront cost and maintenance i think one big element which gets over looked is that these boats/yachts are depreciating assets and that this loss of value each year needs to get factored in.

YOU don't...

If the 1:100 rule is hard and fast I guess that makes me a risk taker. If I thusly abided I would be in a kayak!


Cheers!

I hear ya there! But I think we're really talking about a very "non linear" rule here.

If you just applied it broadly to all boats, heck, 95% of the boat owners couldn't/shouldn't buy a boat at all. The SeaRays of the world would be out of business because the vast majority of their buyers have little or no net worth.

But I can see the logic when it gets up to the multi-million dollar yachts that require crews and dern-near full time maintenance. The depreciation is steep and the upkeep is high. Almost need to look at it like a disposable asset.

better act fast there are only 4 left..........

the tender for it might be a little more in my range