Best Ways To Reduce Yacht Ownership Costs in Florida
We have seen all sides of the coin when it comes to yacht ownership. Our experiences have led us to regularly recommend placing boats in a charter program as a way to offset costs of yacht ownership. As Michel Benarrosh, the former commodore for The Moorings Owner’s Group and owner of Sailonline.com. He says, “I got to enjoy a great activity with my son while teaching him about seamanship, marine science, and love and respect of the environment. I made a lot of great new friends. I owned a boat partly paid for by charter income after 5 years of personal enjoyment. I can’t think of anything I could have spent my money on that would have given me so much enjoyment and fulfillment over the years…”
We have practiced these techniques and helped many of our clients do the same. Offsetting the costs of sailing yacht ownership with charter income and tax advantages makes sense for most buyers. Whether you plan to charter your monohull or catamaran and go cruising after a few years, or want to own a yacht and need someone to manage it in your absence. It makes sense to make your asset pay for at least some of its carrying costs.
However, be careful to not get trapped into something that does not work for you, because not all management companies or charter operations are good fits for everyone. Not every boat is a good fit for 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.
You can tell that there are many ways to reduce costs of boat ownership. And while all aspects are not for everyone, we share these 10 tips from which you can choose the advice that best fits your lifestyle and budget.
Ten Tried & True Ways To Reduce Yacht Ownership Costs
1) Yacht Charter Management
Yacht ownership through a management program in a charter company enables you to offset up to 50% of the purchase price. You will, however, need to put about 10% of the original purchase price back into the boat to get it ready to go cruising after phase-out from the charter company. You will need to replace wear-and-tear items like new sails, new instruments, maybe install a watermaker (although some charter boats now have them anyway), and do cosmetic refurbishments.
The charter industry has matured over the last 30 years to the stage where it is no longer a given that the boat will be “trashed” at the end of the 5-year term as once was the case. So, you can walk away after the 5-year charter term with a pretty good boat only needing some upgrades and cosmetic fixes with it halfway paid off.
Visit our section on yacht management for more information.
2) Yacht-As-A-Business
In our experience, yacht charter management together with active participation by the owner is a great way to reduce the cost of yacht ownership. We found that most yacht owners use this program as an avenue to acquire a cruising yacht for retirement at a big discount.
With this business model, you place your boat into a corporation and into a charter company and run it as a small business to take advantage of tax breaks, government programs, and income from charter. If you are a U.S. taxpayer, this is probably the best route to go as it yields the best return in a controlled environment. Although the acquisition of a new yacht may be an effective business tool to take advantage of these tax rules, the tax benefits must be carefully planned, documented and implemented to make sure that it can withstand scrutiny.
Visit our section on yacht management for more information.
3) Sailing School Program
Using an educational or sail training program such as an accredited sailing school with a sailing instructor on board, is another great way to offset the cost of monohull and catamaran ownership. The boat will always be under the care of an instructor and will usually hold up much better than just a regular bareboat charter boat. It will generate good income, covering its holding costs and possibly the mortgage payments as well.
We use this ownership model successfully for our US Sailing accredited Charisma Sailing School and have helped set up several clients under our programs. This is one of the best ways to have your boat well cared for, while being able to use it at agreed upon times.
Visit our section on yacht management for more information.
4) Continuing Education Yacht Program
Offer “Ongoing or Continuing Education” programs on your boat whereby it can generate income and possibly tax advantages. This program works well for doctors, real estate professionals, lawyers, accountants, and other high-income professionals. You can use the boat as a platform / venue for the professional continuing education seminars and not only earn income, but write expenses off on your tax return since the boat is run as a business. You can operate the boat yourself or hire a crew.
A good example would be Market America who owns several yachts that are used in their business for continuing education events for their associates. Another example is a medical doctor, who uses his catamaran as a training facility for other doctors to do their CME. There are all kinds of other examples for professionals like accountants, dentists, dermatologists etc. and in fact, The Moorings offers group charter events, combining medical education with a fun-filled vacation for medical professionals seeking CME credits. This can be a very good way for a professional to offset costs of yacht ownership.
Visit our section on yacht management for more information.
5) Crewed Yacht Business
You can offset the cost of ownership of a bigger catamaran by earning income through luxury charter and using available tax advantages. It is the most cost effective way to own a big luxury yacht! This might require a bit more personal involvement, unless you have a staff to take care of the business.
There are three ways to do this:
The owners live aboard, are personally the crew, and operate their catamaran as a business.
Charter companies like Dream Yacht and The Moorings offer “by the cabin” charters on their bigger catamarans that enable guests to enjoy an all-inclusive luxury crewed charter for the price of a stateroom instead of the whole yacht.
Place your yacht into a crewed charter yacht management program.
A crewed yacht business generates very good income and can qualify for substantial tax advantages as well as business tax deductions.
Visit our section on yacht management for more information.
6) Yacht Partnerships In A Charter Program
Buying a boat with a partner is becoming more popular with charter companies that allow more generous “owner’s use” as an incentive for buyers. Therefore, two families can each enjoy 3 to 4 cruising weeks per year, which is often more than most people can use annually. Another reason boat partnerships are desirable is that the financial burden is shared. You could go into a partnership with one or more people and negotiate a buy back at the end of the period. At the end of the program, you will own the boat and you finance only the depreciated value at the end of the term.
Of course, there is risk to partnerships, so you will need a rock solid contract establishing the exact rules, responsibilities, and owners’ use between the partners. However, do not be intimated by this prospect. It is a simple document and an easy process. Sailonline.com provides a document tailor-made for partnerships. It covers most situations that can arise during the life of the partnership but can easily be adapted to your personal situation.
Visit our section on yacht management for more information.
7) Yacht Cruise Club
Join a cruise club like Sailtime.com (they have about 150 boats worldwide), where you pay an entry fee as well as an annual fee that is the same or less than a charter fee for usage over a 5-year period and then end up with ownership of the yacht at the end.
8) French Tax Incentives For New Yachts
Buy into a charter company like Dream Yacht Charter or Navigare that offer French tax incentive boats. The cost of the boat can be as low as 45% of the full price of the boat once fully equipped and delivered to the charter base. One such program is the “Dream Easy Program” from Dream Yacht Charters. For example, you can own a luxury yacht like a Bali 45 catamaran with 35% down and a balloon payment of 25% at the end of a 66-month term. There is no operational expense to the owner and worldwide reciprocal owners’ use is available.
There is also the “defiscalisation program” where you pay about 45% upfront, no expenses, no income with reciprocal owner use worldwide and at the end of the program you own the boat free and clear. The bigger Catana cats (55, 62, etc.) are favorites for this program. There are some snags to navigate, so make sure that you understand the contract and limitations of these programs.
9) Peer-to-Peer Yacht Rental
Yacht rental pool is one of the fastest growing programs in the world. It is a “peer-to-peer” boat rental program where a company like Boatbound, Sailo, Boatsetter, Getmyboa, Click&Boat, Samboat and Afloatbnb, take yachts into a rental pool and rent it out to pre-screened, qualified boat renters. The company collects the rental fee, provides charter insurance, and takes a share up front (up to 25%), and pays the owner the rest for the charter fee. You are in control of the price and approve the renters.
It is a good program if you do not want to be in a permanent charter fleet. However, it takes some involvement from the owner. You handle the approval of the booking, cleaning and prepping of the vessel, meeting and greeting, orientation of the yacht, and other day-to-day operational decisions. Rental income might cover your dockage and insurance.
10) Fractional Yacht Ownership
Fractional yacht ownership, is exactly what it sounds like—you buy a fraction of a yacht. It is not a time-share where you only purchase the rights of usage for a certain amount of time. At the end of the period, your “investment” also comes to an end. But, with fractional ownership you legally own the fraction of the asset, and can transfer or sell it. You pay an annual membership fee and have the use of the boat for a certain period of time every year shared with several owners. There are pluses and minuses for this type of ownership. Make sure you understand the rules!
Visit our section on yacht management for more information.
Interested In Reducing The Costs Of Yacht Ownership?
With all these examples you will find a way that works for you to substantially reduce the cost of yacht ownership. In some cases, this includes using business tax deductions. We caution everyone to do their due diligence, plan their exit strategy, and consult with experts in the field.