There’s one math problem that almost no boat owner ever wants to calculate: cost of ownership divided by actual days spent sailing. A stance of cheerful delusion might be the best way to accept the hard answer.

This is the problem charter yacht-ownership programs are designed to solve. If you talk with folks who’ve spent many years in the business of selling new boats into charter fleets and operating those fleets, you can expect to hear several cautionary themes: A sailboat is a depreciating asset; owning a charter boat is more a lifestyle choice than a financial investment; beware the aggressive tax-benefit pitch. Yet, by and large, they agree on this: If you love sailing and love traveling but you know that—for the next five years, at least—you won’t be able to devote more than four or eight or maybe even 12 weeks to it, placing a boat in charter will substantially offset the cost of owning it.

Consider this ballpark example from Dream Yacht Charter’s new Fractional Program, introduced this past fall. You put down roughly $200,000 for a 25 percent share in a new 45-foot Bali 4.5 catamaran. In exchange, for the five-year agreement, Dream Yacht covers all of the boat’s operating expenses (dockage, maintenance, insurance and so on), and you receive five weeks’ use on any similar boat at any of Dream Yacht’s 50 bases around the world. Every year of the contract, Dream Yacht sends you 5 percent of your buy-in price: $10,000 per year, or $50,000 over five years. Toward the end of the term, Dream Yachts lists the boat on the open market. If it sells before the end of the charter agreement, you receive your portion of the proceeds. If it doesn’t, Dream Yacht guarantees a 40 percent minimum buy-back value at resale, or $80,000. According to this math ($50,000 plus $80,000), by the end of the five-year term, you get $130,000 back from your original investment, and your total cost amounts to $70,000.

Now here’s where the sailing comes in. The average cost of chartering a Bali 4.5 is about $8,000 per week. The value of chartering a Bali 4.5 for two weeks per year over five years comes to $80,000; four weeks per year, $160,000; five weeks per year, $200,000. The takeaway: If you can go sailing for four weeks a year, with this program, you receive $160,000 in value for the $70,000 you spent. (And the ratio looks better still if you can get out sailing for five weeks a year.)

We’ve looked into the ownership programs offered by several of the major charter companies and charter-management companies around the world. These can be roughly divided into two categories: guaranteed income, or passive models; and variable income, or active models (in which you assume more of a role in managing your boat as a business). In addition, many charter companies offer other programs adapted to such special circumstances as crewed charters, fractional ownership, and special circumstances for particular countries. Each company has its particular quirks; we’ll aim to give an overview from which you can start your own conversations.

The Passive Model: Guaranteed Income

Full-scale bareboat chartering is just over 50 years old. Before that, you could always find a boat to charter directly from its owner or from a small mom-and-pop operation. But the business as we’d recognize it today began when Jack van Ost founded Caribbean Sailing Charters in Tortola in 1967. Dick Jachney soon followed with Caribbean Yacht Charters in St. Thomas, then Charlie and Ginny Cary started the Moorings in Tortola in 1969.

Jean Larroux has been with the Moorings, on and off, since 1976. Now the company’s yacht sales manager, Larroux is credited with creating the “guaranteed income” model that has become the most popular plan among the world’s largest charter companies.

“Before Ronald Reagan changed the tax laws in 1986, we used to sell basically only variable programs,” Larroux said. “But as the Moorings’ fleet grew, the appetite for boats was such that it was difficult with the variable program to find enough buyers. We sell 150 to 200 boats a year. So we found that to be able to sell that number of boats, we had to focus mainly on a program in which there was virtually no risk.”

The Moorings Guaranteed Income program works like this: You buy the boat and pay the registration fee. The Moorings leases it back for an agreed-upon term—more or less than 60 months, scheduled so the boat doesn’t come out of service during the chartering high season. During that period, the Moorings pays you 9 percent of the purchase price annually, broken into monthly installments. Those payments do not depend on how often your particular boat has been chartered. The company covers all operating costs: dockage, insurance and maintenance. As for sailing, the Moorings offers you as much as 12 weeks of chartering each year, depending on the season, and allows you to use any equivalent boat at any of the company’s bases. The only cost to you is a nominal turnaround fee to cover consumables (water, ice and fuel) each time you start a charter trip.

A ballpark example might look like this: You purchase a 50-foot Moorings 5000 catamaran for $1,000,000. You put down 25 percent and finance $750,000 for 15 years at 6 percent interest. Your monthly payment on the loan comes to about $6,300; each month, the Moorings pays you $7,463 for the lease. If you apply the entire fee to the loan each month, by the end of the term, you’ll owe $505,460. The Moorings estimates the boat’s resale value after five years at $580,000. And, as in our earlier example, the true value comes in sailing weeks—as much as $550,000 worth of chartering over those five years.

Nowadays, most large charter companies and some smaller ones offer a version of the guaranteed-income model. One constraint of this model is the charter company is likely to require that you spec out the boat for optimum charter appeal. If a 45-footer is offered with three cabins or four, for example, it’s likely that you’ll need to go with four. Compare companies.

The charter company you choose might steer you toward a particular make of catamaran. The Moorings sells mainly Robertson & Caine catamarans, branded as either Moorings or Sunsail boats. Dream Yacht sells Bali, Fountaine-Pajot and Lagoon. Horizon Yacht Charters sells Nautitech, Lagoon and Fountaine-Pajot. Navigare sells Fountaine-Pajot, Lagoon, Nautitech and Sunreef.

The Active Model: Variable Income

Before the advent of guaranteed-income programs, ­virtually all charter arrangements were on the variable-income model, and most companies still offer some version of it today. In this case, the costs and proceeds of chartering begin and end with your particular boat. It offers the flexibility for you to either use your boat more often—or use it less, and potentially make more money from it. It also gives you an active role of running your boat as a business, which might have tax implications. (There are no tax breaks for such passive investments as the guaranteed-income model.)

The Catamaran Company is a charter-management company that works exclusively on the variable-income model. Whereas guaranteed-income programs might dictate the way your boat will be laid out and appointed, CatCo offers its owners unlimited choice. “What is always going to charter best,” said Hugh Murray, CEO of CatCo, “is the boat you can put more people on for the cheaper price. So the income projections for an owner buying a four-cabin boat will be higher than for the owner of a three-cabin boat. But in a lot of cases, our owners are likely to want fewer weeks rather than more weeks.”

With a variable program, the boat owner covers all the costs of operating the boat, and the charter operator splits all the income from charters, with the larger portion going to the owner. Horizon Yacht Charters splits 80 percent (to the owner)/20 percent (to the company). CatCo splits 77 percent/23 percent. Dream Yachts and the Moorings split 65 percent/35 percent.

Typically, the charter operator sends the boat owner a statement every month, detailing the charter revenue and the boat’s expenses (docking, water, maintenance, turnaround, electricity, repairs, cleaning and laundry). This statement comes with either a check or a bill. “It goes both ways,” Murray said, “depending on what time of year their boat arrives in the fleet. If a boat arrives in December and starts chartering immediately, you’ll start to get good revenue. If your boat arrives in July, and there’s very little happening in August, September and October, you’re getting a bill.” On average, he says most owners see a return of 9 or 10 percent of the boat’s purchase price per year.

Typically, the charter operator sends the boat owner a statement every month, detailing the charter revenue and the boat’s expenses (docking, water, maintenance, turnaround, electricity, repairs, cleaning and laundry). This statement comes with either a check or a bill. “It goes both ways,” Murray said, “depending on what time of year their boat arrives in the fleet. If a boat arrives in December and starts chartering immediately, you’ll start to get good revenue. If your boat arrives in July, and there’s very little happening in August, September and October, you’re getting a bill.” On average, he says most owners see a return of 9 or 10 percent of the boat’s purchase price per year.

What about tax breaks? Jean Larroux told me that the Moorings does not actively market them as an incentive. “It’s marginal whether you’ll survive a tax audit,” he said.

Others I spoke to concur. “We do not market the tax benefits whatsoever,” Murray said. “If somebody wishes to do it, we’re happy to refer them to tax consultants.”

That said, each person I spoke to said they had some clients who were able to make tax benefits work with a variable program. “That’s exactly the difference between our guaranteed-income and our Performance programs,” said Eric Macklin, yacht sales manager for Dream Yacht Charter, referring to the name Dream Yacht gives to its variable-revenue model. The IRS, Macklin says, sets two benchmarks. The first is that the boat owner has to be “actively participating” in the business. The second is that the owner has to show the intention and the ability to earn a profit. As others do, he recommends working closely with a tax adviser first.

The takeaway is that a variable-revenue program might offer you more flexibility in every aspect of owning a boat in charter service: how you spec your boat, how often you use your boat, and how active you’d like to be in the business.

Alternative Models

While the guaranteed-income and variable-income programs are the most popular, ask the charter company about others too. At the top of the piece, we looked at one of these: Dream Yacht’s new Fractional Program, which allows you to buy into part of a boat. Most companies offer programs adapted to setting up your boat for crewed charters, with different levels of involvement from you in the hiring of crew and the marketing of the boat. Ask the Moorings about its Option to Purchase program for boats in such countries as Greece or Thailand, where strict citizenship laws apply; or ask Dream Yacht Charter about its Forward Sale program. Horizon Yacht Charters offers what it calls “the ultimate test sail.” You can charter a boat for up to a week; if within three months you decide to purchase a boat from them, they’ll deduct the cost of the charter from the purchase price.

Whether or not you put your boat in charter service, the reckoning of cost per use always works better the more you sail. But by starting with an honest estimate of how much time you’ll actually get to go sailing—particularly if it’s limited to something between four and 12 weeks a year—putting your boat into charter service might help you suspend the delusions and face the math more cheerfully. Even rationally.

Tim Murphy is a Cruising World editor-at-large.

Charter Companies and Programs

The following list is a selection of the charter companies that ­contributed to this article:

Dream Yacht Charter
Horizon Yacht Charters
Navigare
Sunsail
The Moorings

The following is a list of charter-management companies that contributed:

Atlantic Cruising Yachts
The Catamaran Company
CYOA
Sail Caribe/Atlas Yacht Sales
TMM/Tortola Marine Management

For more details, see Cruising World‘s Owning a Charter Sailboat

Charter-Ownership Programs

The Catamaran Company: founded 1989; sells Fountaine-Pajot, Gemini, Lagoon and Nautitech cats, each spec’d by the owner. The charter-management operation has one base in the BVI, operating 31 boats at press time. Active model: variable income, based on your particular boat.

Dream Yacht Charter: founded in 2000; sells Bali, ­Fountaine-Pajot and Lagoon cats. Offers guaranteed-income, variable-­income, fractional and crewed-yacht programs. The charter company has more than 1,000 boats in service at 50 bases around the world.

Horizon Yacht Charters: founded 1998; sells Fountaine-Pajot, Lagoon and Nautitech cats. Guaranteed income or split-­revenue programs available. The charter company operates 120 boats at three bases in the Caribbean.

Navigare: founded in 2001; Offices in Sweden, Croatia and the Caribbean; Sells Fountaine-Pajot, Lagoon, Nautitech and Sunreef cats. Guaranteed-income or variable-income programs available, among others. The company operates 300 boats in nine countries, with a strong presence in Europe.

The Moorings/Sunsail: The Moorings was founded in 1969. Now, together with Sunsail, the company is owned by Travelopia, a travel company that comprises 50 brands, specializing in sailing, safaris, sports tours and Arctic expeditions. The Moorings and Sunsail sell catamarans built by Robertson & Caine in Cape Town, South Africa. These boats are branded according to their use: A 45-footer for private ownership is branded as a Leopard 45; for charter, a Moorings 4500 or a Sunsail 454. For a limited time, the Moorings is also selling Lagoon cats. Guaranteed-income or variable-income programs available, among others. The company operates 840 charter boats at more than 20 bases around the world. Every year it brings between 150 and 200 new boats into its fleet.

The post Buying a Charter Catamaran appeared first on Cruising World.

“I spent five years mulling it over,” Bob says. “I looked at all the different financing programs and charter companies. I went to the U.S. Sailboat Show in Annapolis, Maryland, every year. Boat shows are great because you can sit on the boats and the salespeople are there to answer all your questions.”

Slowly but surely, Bob and Cheryl figured out what they wanted, as well as what they didn’t want. “At first,” Bob says, “I had my heart set on a big monohull. My wife looked at those and basically said, ‘No way.’ Then we saw a Lagoon cat, and she said, ‘That’ll work.’ She also had to be able to handle the boat herself in an emergency if she had to, and she can now.

“As for me, I didn’t want a cookie-cutter boat,” he says. “I wanted a boat fitted out my way. If I wanted a helm with all power winches, I could have it. If I wanted satellite TV, I could have it. If I wanted four staterooms, done. I got to choose the interior colors. Spinnaker, genny — what I wanted, I could have.

“I wanted my own private locker for my scuba and snorkeling gear so I don’t have to carry it back and forth. If I buy cans of tuna fish, sugar, salt, I can store them without having to reprovision every time I come to the boat. [A private locker onboard was included in the agreement.] It’s also important to me to know my boat’s being maintained properly.

“I can take it out on charter up to 12 times a year, and use it when it’s not in charter. In my case I want the boat to pay for itself and build equity for the final boat I plan to retire upon. I can do what I want with it.”

Sounds ideal, right? For sailors eager to attain Bob Piccoli’s level of satisfaction, he shares a few tips:

• Understand that this is a major financial investment.

“If they tell you it’s going to pay for itself in the first year, don’t walk away, run,” Bob says. Be certain you can handle miscellaneous startup costs.

• Ask yourself what you ultimately want from this boat.

“Do you want it to pay for itself and then sail away on it? Are you going to trade it in? You have to know what you want to do with the boat,” Bob says.

• Be comfortable with the charter company you’re dealing with.

“They’re managing and maintaining your boat,” Bob says. “They’re doing all the things that are required. They’re not always going to call you. You have to be comfortable with that.”

Questions — and Answers

Those insights about the boat, the company and the related costs only skim the surface of a type of ownership arrangement that’s not as basic as renting and that can turn out to be a far more emotional investment than a time share. Eager to learn more basic details about charter yacht management and the variety of programs, destinations and financing options available, I sent a set of questions to a number of companies as well as to Bob.

Those who participated included global outfits, such as The Moorings and Dream Yacht Charter; midsize companies like Catamaran Company and Horizon Yacht Charters; boutique-style operations like CYOA Yacht Charters; and domestic operators such as Bavaria USA and Great Lakes Sailing Company.

Their feedback shows that just about any arrangement is possible, and the key, as Bob points out, is to know what you want going into the deal. The questions and composite answers below, followed by Bob’s answers, can help vacation sailors pin down the right match.

Q: When you buy a boat and put it into a charter fleet, is it to broaden vacation sailing options, to cover the expense of sailing vacations or to make money? Tell us in basic terms what the financial risks and rewards are, and how much it really costs.

A: Buying a boat and placing it in a charter fleet is fundamentally about financing the cost of sailing vacations, and in many cases, paying down the mortgage on the hull. It’s not a way to make money, but the best-run programs guarantee that at the end of the term, whether one year, three years, five years or longer, owners who use their boats in one cruising ground or use sister ships offered at other destinations will have done so without losing money.

Some companies pay all expenses and give the owner a guaranteed payment that will cover a portion or all of the mortgage; others professionally manage boats owned outright, arranging for charters to help defray and sometimes completely offset all expenses.

Bob: It’s a little of all three. We enjoy sailing in the Bahamas, where our boat is based. Chartering it out helps pay for the boat and expenses, and we can also charter boats in other Dream Yacht Charter locations, so we get the best of all worlds. In my case, it is my boat and the mortgage is in my name, so if the boat doesn’t break even on any given month (there are slow months) I’m writing a check. That is a big financial risk you must be ready to take on. There are also other costs up front.

The first year, you should be prepared to pay the mortgage note every month. In my case, the charter company has covered about half the payments after expenses. Next year should be a bit better, and there will not be as many initial costs.

The reward? Eventually it will be my boat, and I am not shelling out charter fees to another company when I sail with no return. Let’s face it, sailing is an expensive hobby. If you break even in any given year you did great.

Q: What kind of reciprocity do you get when you place a boat in charter? How many weeks do you get to sail your boat? What does it cost you, the owner, and where do you get to sail?

A: The actual time varies, but an owner usually gets from 2 to 12 weeks. Large companies offer owners time aboard sister ships at various worldwide bases. Owners are charged for items such as cleaning, linens, ice, gas and dinghy use; costs can run to several hundred dollars.

Bob: With my agreement, I get up to 12 weeks per year on our boat or on another boat in the Dream Yacht Charter fleet anywhere in the world. The beauty is that it is my boat, so costs are simply food and fuel. I can log on to the company website and see if it is being used any week. If not, we can take advantage of the down time and use the boat. There are other tax advantages that reduce that cost further, but that is based on each individual’s position.

Q: How do you ensure the boat is well maintained? Is it checked before and after each charter? What maintenance expense is covered by the company, and what is left to the owner to bear?

A: Maintenance is done and recorded regularly, yet how it’s paid for varies among companies. Some companies pay all maintenance and examine the boat before and after each charter, periodically and annually. Others examine the boat after each charter so the boat runs smoothly for the next one. Inspection can involve a mechanic, rigger, shipwright, diver and underwater video footage. Some companies allow the owners to perform annual maintenance. Some companies split maintenance costs with owners; others hammer out customized agreements with owners specifying who pays exactly what.

Bob: My boat is almost a year old and has had 18 charters. We just returned from a trip to the boat. While I have to say there was some expected wear, the boat really looked almost new. Costs are split based on the contract and program I have signed up for. This was something we researched before we picked a company. We looked at charter companies’ boats after they had been in charter for a year or so to see how they fared and were maintained; we checked what the splits were and who paid for what. This is a key factor, as we all know boats aren’t cheap to maintain.

Q: Explain the insurance, liability and warranty aspects of the charter yacht management arrangement. Are warranties available?

A: Charter companies have policies in place to cover the fleets and the owners. In some circumstances, charterers are charged for the deductible in the form of a damage or collision waiver, so the owner is spared the expense. Warranties on new boats are specified by the manufacturers.

Bob: The charter company handles all the paperwork for me, ensuring that the boat is insured. After each charter, the boat is inspected for damage and the company bills accordingly.

Q: When your ownership program is over, do you get the boat free and clear? Can you resell it? What if you don’t want the boat? Conversely, what if you already own a boat and want to charter it to offset some expenses? What are your options for management?

A: How much of the boat you own depends on the term of your mortgage and the success of the income program of the company you worked with. In many cases, the owner can make up most of the mortgage by selling the boat. Charter companies can assist with brokerage. Also, owners can trade in boats at the end of the term to continue the management relationship and allow for continued sailing opportunities. Large charter companies don’t accept pre-owned boats into their fleets, but various smaller companies do.

Bob: I own the boat, I pay the mortgage, so to speak. So I will ultimately own the boat to keep, trade, sell or sail.

Resources

Each company devotes a portion of its website to yacht ownership programs. The Moorings also has a separate site dedicated to charter, private and pre-owned yacht ownership program options.
Atlantic Cruising Yachts
Catamaran Company
CYOA Yacht Charters
Dream Yacht Charter
Horizon Yacht Charters
Sail Caribe
Sunsail
The Moorings
TMM Yacht Charters

There are many varied programs for charter sailboat ownership and management. To read about specific programs offered by each company, click here.

Cheryl and Bob Piccoli

The post Buying a Boat for Charter appeared first on Cruising World.

Charter Sailboat

Q: When you buy a boat into a charter fleet is it to broaden vacation sailing options, to cover the expense of sailing vacations, or is it to make money? Tell us in basic terms what the financial risks and rewards are, and how much it really costs.

The Moorings/Sunsail/TUI Marine
When you buy a boat in our charter management program it reduces the expenses of sailing and owning a boat, as well as broadening vacation sailing options for the owners. We do not promote the program as a business opportunity. In our program, we pay 9 percent of the price of the boat annually and this money is guaranteed to be paid to the owner monthly. However, if the owner doesn’t take advantage of using the boat or sister ships, the program is diminished in value.

Also, We have a variable ownership program in which we sell yachts to owners who have specific needs which fall outside of what we offer in our standard core program. Some buyers want different layouts, models or want more sailing time than we allow in the core program. We have a fleet located in Miami with all variable yachts, and we offer this program in BVI, Abacos and Turkey for Europeans.
– Jean Larroux, Yacht Sales Manager, TUI Marine

Dream Yacht Charter
You do not make money. It is a way to offset the cost of ownership. If you are already someone who charters, then it is a way to improve the charter experience and by owning, you would probably sail more. The cost of ownership would be covered by the guaranteed income and the fact that the charter company pays all other expenses — once the buyer has paid the 20 percent deposit, the guaranteed income covers the mortgage. All other expenses are paid for by the charter company, so for the 5-year term of the management agreement, it is cashless.

There are no financial risks in the guaranteed income program; the charter company pays all expenses and gives the owner a guaranteed payment that will cover the mortgage. At the end of the 5 years there will be a residual on the mortgage, which the owner will have to pick up if he doesn’t put the boat into a secondary or second-tier charter company. Generally, the final numbers work out to a wash, but the owner use, which represents a substantial amount of money if one were chartering someone else’s boat, is free, so there is a big positive value financially. The major advantage of dealing with a large first-tier company is that you have owner exchange at all the bases worldwide. In the case of Dream Yacht Charter, there are 35 bases globally and the owner can use a sister ship at any of their locations. The only cost would be the turn-around fee for cleaning and preparing the boat for the next charter after the owner has used it. This cost typically ranges from $350 to $550 depending on size of boat. The additional other cost would be diesel and the yacht damage waiver, which is insurance to cover the deductible on the insurance policy in the event of an accident. Normally there is a deductible before the insurance kicks in, so the charterer can insure against this by buying the insurance for this.
– Stephen Cockcroft, Yacht Sales Manager, Dream Yacht Charter

**

The Catamaran Company**
Our goal at The Catamaran Company, located at Hodges Creek Marina, British Virgin Islands, is to offer an owner many choices with flexibility. We strive to ensure that we book an owner’s yacht to ensure a 10 percent return per year after fixed charter expenses, charter related expenses and annual maintenance have been paid. We don’t guarantee the 10 percent return but do have the historical data to prove we normally achieve this 10 percent return. The owner can enjoy unlimited owner’s time, a yacht exchange program throughout the world, choice of layout & equipment onboard.

The Catamaran Company offers these programs:

• Reserved for new catamarans, the owner can charter for 3 – 5 years on a 77/23 split management program.
• Reserved for preowned catamarans, 2 years or older, we do offer the 70/30 management program.

We allow any model, make, year and layout into our charter fleet with unlimited owners’ weeks. Owners may equip their yacht as they wish.
– Kimberly Lee, Charter Manager, The Catamaran Company

Horizon Yacht Charters
The prime reason to place a boat in charter is to cover the expense of sailing vacations. It is an investment in lifestyle. Horizon has owners on their third and fourth yachts with us. They, their families and friends, have years of sailing experiences and memories from the best cruising grounds in the world. Depending on the type of yacht purchased, the financial returns can be significantly more interesting than just covering expenses. This is borne out by the fact that Horizon has some owners with more than one yacht in the fleet at the present time.

HYC offers two ownership programs:

• The Guaranteed Income Program (3 years): This provides sufficient funds to cover loan payments (assuming 20 percent down payment for 20 years) All expenses are paid by Horizon, with up to 12 weeks/annum personal usage. No risk. No costs. This program can be converted into the maximum income program for an additional term of one to three years. A financial report and full service history for the yacht is provided on a monthly basis.
• The Maximum Income Program (5 years): This provides for a split of charter revenue, from which the monthly operating expenses are deducted. Owner usage is unlimited. A financial report and full service history for the yacht is provided on a monthly basis.

Fundamentally, an owner should be able to enjoy free sailing for five years, sell the yacht at the end of five years, and come out cash positive. This is influenced by the yacht and program chosen, but with decades of experience in providing charter management to discerning yacht owners, Horizon are very well placed to advise owners according to their requirements.
– Andrew Thompson, Director, Horizon Yacht Charters

Bavaria Yachts USA/Horizon U.S.
Our overall model is to build the Bavaria brand in the United States and to partner with Horizon Yacht Charters in the Caribbean. For the U.S. locations of Mystic, Connecticut, and Annapolis, Maryland, it’s more about owning a boat and sailing it often and less about it being a time share. The focus is that you are the owner of the boat and you use it. We want people to sail Bavarias and get to know them through charters. We are a brand that happens to also offer charter. We offer owners guaranteed income above and beyond covering costs.
– Kenny Feld, Managing Director, Bavaria Yachts USA

CYOA Yacht Charters
At CYOA our ownership program is not a “free boat” or “get rich quick” scheme. We professionally manage boats owned by others, arrange for charters to help defray and sometimes completely offset all expenses. Our owners want a professionally maintained boat ready to go when they walk on the dock. Our owners own and finance their own boats. Our variable programs return all of the revenue and all of the expenses so all of the risk is with the owner. Our guarantee programs ensure we pay 100 percent of the costs and that the owner gets a fixed payment each month for a predetermined number of months.
– John Jacob, Owner, CYOA Yacht Charters

**

Great Lakes Sailing Company**
In northern climates having a boat in management is mainly to offset expenses. A secondary reason is for tax incentives. We offer a very low cost way to own a boat but it is not a way to get a “free” boat. That’s not really possible in a short sailing season. The upside to a short sailing season is that the boats look pristine after 3, 5, 7 or even 10 years of charter with a fraction of the use time compared to southern management companies. This means the resale value is that much better. A higher resale can typically make up for less revenues.
– Dave Conrad, President, Great Lakes Sailing Company

Q: What kind of reciprocity do you get when you place a boat in charter? How many weeks do you get to sail your boat, what does it cost you, the owner, and where do you get to sail?

The Moorings/Sunsail/TUI

Owners of yachts in The Moorings Yacht Ownership and Sunsail Ownership programs have the luxury of getting to sail on their own yacht or on another sister ship located at any of the bases in the program worldwide. Access to sailing is on a point system. Low season is 1 point per day, high season is 2 points per day, and there are no blackout periods. In total, there are 84 points per year. 42 of these points are available with advanced booking outside 16 days and as far out as the end of the contract. The other 42 points are available to use inside 16 days.

There are turnaround fees to cover gas, ice, water, propane, yacht prep and cleaning, use of a dinghy and outboard, cleaning of linens, and chase calls if necessary. The costs of the turnaround fees are dependent on the size of the yacht, and each yacht is categorized in one of 6 groups, A through E. The turnaround costs range from $525 for group A large cats to $285 for small monohulls. We operate in BVI, St. Martin, St. Lucia, Grenada, Belize, Abacos, Tahiti, Australia, Greece, Croatia and Turkey with some destinations having multiple locations.
– Jean Larroux, Yacht Sales Manager, TUI Marine

Dream Yacht Charter
There are 2 weeks of high season that can be converted into 4 weeks of low season, there are 2 weeks of low season and then there are 6 weeks of last minute walk-on if the boat isn’t chartered, so technically you can sail for up to 12 weeks with the right permutation. The truth is that you have between 4 and 6 weeks that can be booked in advance depending on season and the walk on-is a bonus if you can use them. You have worldwide reciprocity at 35 bases around the globe.
– Stephen Cockcroft, Yacht Sales Manager

The Catamaran Company
Our owners may sail unlimited on their very own catamaran in Tortola, BVI. If the owner would like to try a different location other than the BVI, the Catamaran Company then offers the yacht exchange program. The number of weeks the boats are out on charter do differ depending on year, make, model and layout of catamaran. The average charter version catamarans do tend to book an average of 26 weeks a year. Owner versions can do just as well depending on the year of the boat.
– Kimberly Lee, Charter Manager

**

Horizon Yacht Charters**
Horizon offer up two weeks of reciprocity at our 4 (5 when St. Vincent opens in October 2014) Caribbean bases, and owners enjoy special privileges at our Horizon U.S. bases in Annapolis, Maryland, and Mystic, Connecticut. Horizon has also teamed up with charter fleets in Greece, Turkey, Australia, British Columbia and others.
– Andrew Thompson, Director

Bavaria Yachts USA/Horizon U.S.
In our program, the owner is guaranteed at least two reserved weeks blocked out before we book for the season. It could be more and comes down to just a conversation between us. Also, if the boat is not booked, owners can take it out any time on short notice. The only cost to the owner each time is a small cleaning, or, turnaround, fee. Because our business model is boat ownership, we can help owners get discounts at our other U.S. base, or with our partner company, Horizon Yacht Charters, in the Caribbean. Our program is for people who want to sail where there boat is — Mystic or Annapolis — but they can move the boat to other locations the following season.
– Kenny Feld, Managing Director

CYOA Yacht Charters
At CYOA, as a one-base fleet, we can’t offer any alternate sailing destinations. Our owners get between 4 and 12 weeks of use each year depending on the agreement we negotiate with them. Depending on our agreement, an owner can pay as little as zero or as much as the standard turnaround fee for his boat ($600-$1,000).
– John Jacob, Owner

Great Lakes Sailing Company
The owners who have a boat in management with us live within a 7-hour drive range and tend to use their boat more, so reciprocity isn’t really an issue. The owners can sail on their boat as much as they like. We structure the contract around how much they anticipate using their boat. We offer them a discount when they charter south using our charter broker connections.
– Dave Conrad, President

Q: How do you ensure the boat’s well maintained? Is it checked before and after each charter? What maintenance expense is covered by the company, and what is left to the owner to bear?

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The Moorings/Sunsail/TUI**
Each yacht in the Moorings Yacht Ownership and Sunsail Ownership programs is thoroughly checked after each charter, and debriefing results in a squawk list of things that need attention before the next charter. Periodic preventive maintenance such as oil changes, transmission and engine servicing are done as needed and managed by the operations managers. TUI is 100 percent responsible for all of the boat repairs and nothing is ever billed to the owner. We have found great preventive maintenance helps us avoid more costly repairs.

Annually the yachts receive a major work up where all systems are evaluated, gel-coat repairs are made and any damages to wood surfaces are dealt with. At the end of the program a major end of contract/phase-out maintenance is performed to include antifouling. The detailed procedure is documented in the company’s phase-out manual.
– Jean Larroux, Yacht Sales Manager, TUI Marine

Dream Yacht Charter
At Dream Yacht Charter, there is a pre-charter check which ensures that the boat is continually maintained and then there is a check-back where the customer reports any deficiencies that need to be fixed before the next charter. All costs are covered by the charter company. The owner only bears the mortgage payment.
– Stephen Cockcroft, Yacht Sales Manager

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The Catamaran Company**
The Catamaran Company prides itself on very high maintenance and catamaran expertise. For every charter that is completed, charter-related expenses apply. These are called turnaround fees, and include diving on the hull after each charter and technical checks after every charter.

Every year in the month of September we close our base and do not offer charters. This is when we haul out every yacht for anti-fouling and hurricane prep. Sailing equipment is checked, trampolines maintained, and decks are polished. Our owners are very involved with their catamarans. It is quite typical for owners to come to our base and sometimes even maintain their own catamarans.
– Kimberly Lee, Charter Manager

Horizon Yacht Charters
Horizon oversees every aspect of yacht specification, delivery, and commissioning, so that each yacht has tried and tested systems, and is commissioned to offer years of reliable service.

Every charter client gets a one-on-one boat and chart briefing, given by a full-time, knowledgeable member of the Horizon staff. We do not contract out briefings. Charter guests appreciate a quality briefing, and in turn, our clients appreciate that the yacht they have chartered is someone’s pride and joy, and treat it accordingly. Upon their return, clients are piloted into their slip, and given a thorough debriefing, comments from which are entered into our turnaround system, and added to our pre-charter service check lists.

Horizon is renowned for preventive maintenance. We have deliberately kept each location’s fleet a manageable size. It is easier to effectively maintain a 40- yacht fleet rather than a 100-plus yacht fleet in any one location. Horizon strives for performance beyond the expectations of both our owners and charter guests. All service work is documented and checked by management; owners receive the service history monthly. Owners have direct contact with the managers and directors of the company, with a guaranteed owner query response time of 24 hours or less. Our maintenance and customer service are the key reasons that Horizon has such a high percentage of repeat owners, repeat charterers, few chase calls, and very low fleet insurance rates.

The yachts are systematically checked by a mechanic, rigger, and shipwright, before and after every charter, including a dive inspection of the hull, with video footage at some locations. This is in addition to quarterly and annual deep maintenance procedures and yard work.

Under the Guaranteed Income Program, all expenses are covered by HYC. Under the Maximum Income Program, the monthly expenses include dockage, turnaround fees, insurance, and maintenance.
– Andrew Thompson, Director

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Horizon U.S.**
We meticulously maintain the boats because our charter ownership experience is a direct extension of Bavaria ownership. Because we sell boats off of the boats we charter, it is essentially like our standing show fleet. We are 110 percent invested in perfect maintenance. We cover all expenses in our guaranteed revenue program, except any financing/ interest they might pay on a mortgage if they finance. We cover insurance, dockage, monthly maintenance, haulout, etc.
– Kenny Feld, Managing Director

CYOA Yacht Charters
CYOA has a comprehensive maintenance strategy that focuses on preventive maintenance and tries to avoid breakdown maintenance. The process includes extensive pre-charter checks, post-charter oral and written interviews, and post-charter sail and dive checks. Depending on the owner agreement with CYOA , maintenance costs vary from 100 percent to zero.
– John Jacob, Owner

Great Lakes Sailing Company
Our fleet owners are our best reference, and this is what ensures that the boats are well maintained. We are a family-owned company and we know our fleet owners like family as well. There’s a lot of accountability on our end. It really depends on who pays for the expenses. This is where we customize the program to fit an owner’s need. With some of our boats, we pay 100 percent of the operating expenses (everything but the bank note) for up to 5 years, on other boats, the owners pay expenses. It depends on the revenue split and what structure best benefits the owner.
– Dave Conrad, President

Q: Explain the insurance, liability and warranty aspects of the charter yacht management arrangement. Are warranties available?

The Moorings/Sunsail/TUI Marine
All charter yachts are covered on a fleet policy. The yachts are covered for casualty loss as well as an umbrella $10,000,000 P&I coverage for damage to other yachts or personal injury. The policy names TUI, the owner(s) and a lender if the yachts are mortgaged. This cost is borne entirely by TUI. This is the most comprehensive in our industry. Most underwriters have strict limitations on operations in the Caribbean. A number of other companies are not insured to operate between 38 degrees North and 12 Degrees North during Atlantic Hurricane season. We do not have any of these limitations.
– Jean Larroux, Yacht Sales Manager, TUI Marine

Dream Yacht Charter
The boat is normally insured by a group policy where the lender and the owner are the loss payees. The charter company provides a copy of the policy to the owner and the bank. The deductible is covered by a yacht damage waiver insurance that is charged as a daily additional insurance against the deductible to the charter customer. In the event of a claim the owner will not be liable for the deductible because the yacht damage waiver will kick in and cover this.

The warranties are provided by the different manufacturers for the equipment that is on the boat. There is no additional cost for warranty, it is provided by the manufacturer at purchase.
– Stephen Cockcroft, Yacht Sales Manager

The Catamaran Company
Upon the owner accepting our charter management agreement with terms and conditions, he then joins our fleet insurance, which is estimated at 1.8 percent of the hull value. Upon a guest chartering the catamaran, with resume approved by us, the guest will pay a collision damage waiver per day that covers the deductible. If the guest refuses to pay the deductible, the charterer is responsible for the deductible of the hull insurance.

When the owner charters his own boat, he can choose to pay the collision damage waiver per day or the owner can be responsible for the deductible for the hull insurance. On a new yacht, warranty does apply on replacing items onboard. Warranty is normally included the first year on purchase of a new catamaran.
– Kimberly Lee, Charter Manager

Horizon Yacht Charters
An owner’s yacht is 100 percent insured year round under the HYC fleet policy. If a yacht is damaged during charter service, Horizon covers the deductible, not the owner. Horizon management has to review and sign off on every charter client’s resume, checking for experience on a similar size and displacement vessel to the one they wish to charter. Upon arrival, if Horizon has concerns about the client’s ability, Horizon, at its cost, not the owner’s, will put a complimentary skipper aboard to the first anchorage, in order to fully assess the client’s ability.

Each yacht comes with a factory warranty, which is included in the price of the yacht, and the warranty term and conditions vary according to the manufacturer, the terms of which are an addendum to the purchase contract.
– Andrew Thompson, Director

Bavaria Yachts USA/Horizon U.S.
We have the same insurer as Horizon Caribbean.
– Kenny Feld, Managing Director

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CYOA Yacht Charters**
All boats are insured and have varying amounts of deductibles. Clients are required to purchase a Deductible Reduction Agreement ℠ from CYOA. This reduces their exposure to a lower number that they yehn self insure at boarding.
We do not offer any extended warranties but we do support all manufacturer warranties.
– John Jacob, Owner

Great Lakes Sailing Company
The boat insurance is broken down into hull and liability. Hull insurance is typically a percentage of the stated hull value but can also depend on an owner’s personal history with owning boats. The deductible is also a percentage of stated hull value. The higher the deductible, the less the overall premium. If an owner is responsible for paying the boat hull insurance, most charter companies will require that the deductible be a lesser amount so that it’s on par with the damage deposit the charterers pay. Liability insurance on the boat is a second layer of protection, as the charter company has its own liability that blankets the fleet. That said, a boat will be required to have a minimum liability coverage but the vessel owner can always opt for additional coverage at their expense.
– Dave Conrad, President

Q: When your ownership program is over, do you get the boat free and clear? Can you resell it? What if you don’t want the boat? Conversely, what if you already own a boat and want to charter it to offset some expenses? What are your options for management?

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The Moorings/Sunsail/TUI**
This depends on the finance terms. If the buyer finances and chooses a typical 25 percent down and 12-15 year mortgage, the income we pay generally is in excess of the P&I required to service the loan. Our records reflect that if the owner does not pocket the excess and pays down additional principal at the end of the typical program (4.5 to 5 years), the residual on the loan should be less than the expected resale after paying a brokerage commission. Catamarans have had great stability on resale, with smaller monohulls seeing a bit more devaluation in recent years.

Reselling the boat is an option, and we assist with this if the owner chooses to sell. We have a well-oiled, worldwide brokerage machine that sells over 200 yachts per year for owners and the ones we take in trade. We recommend listing the yacht 9 months to a year before the end of the program. Another popular option is to trade in the yacht for a new one and continue on in the program. We have some owners on their 5th yacht with The Moorings Yacht Ownership program.

There are a few companies that cooperate with owners and match them with renters if you already own a boat. This is not one of TUI’s business models.
– Jean Larroux, Yacht Sales Manager, TUI Marine

Dream Yacht Charter

No, the boat is purchased with normally a 10 to 12 year mortgage so when you take the boat after 5 years then you still have the mortgage. If, for example there is a 10 year note then theoretically the owner would have 5 years in the first tier company and then 5 years in a second tier company so the note would be covered by charter income for 10 years.

Once you take possession of the boat at the end of the management agreement you are the owner and can sell it or put it into private use or find a second tier home for it – it’s your boat and your decision. If you don’t want the boat, you would sell it , pay the mortgage off and you are out.

There are no options for a used boat to go into a first-tier charter fleet. If you do not buy it new from the operator they will not take it. A second-tier company might consider it but you need to know that they only have revenue sharing programs (no guarantee) and there is no reciprocal use.
– Stephen Cockcroft, Yacht Sales Manager

The Catamaran Company
The Catamaran Company charter management agreement is normally 3 – 5 years, but the owner can cancel by giving us 90-day written notice. We do sometimes renew contracts year to year depending on the condition of the catamaran. The owner can resell if he/she wishes and even consider trading in for a new catamaran. The owner could own the catamaran free and clear, but it really depends on the down payment, mortgage payments and interest rates during its time in charter.
– Kimberly Lee, Charter Manager

Horizon Yacht Charters
The privately owned yachts under Horizon Charter Management are not financed by Horizon; hence Horizon has no involvement in loan re–payment. A yacht may be free and clear based upon the yacht chosen, the program chosen, the term of the program, the owner’s usage, and the amount of the down payment at the outset. If an owner wants to sell their boat, they may list their yacht for sale with our brokerage offices. Horizon will trade in yachts against new yachts being placed into the fleet.

Placing an existing private yacht into a charter fleet will be considered at some locations, if the yacht is relatively new, suitable for charter use, and fits with the current fleet composition.

Horizon also offers a Private Yacht Management Program at some locations for yachts reserved for private use.
– Andrew Thompson, Director

Bavaria USA/Horizon US
In ours, you own the boat, can take it out of fleet the next season, or leave it in, sell it, anything. Our U.S. program is specific, with only new model Bavarias, so we don’t take other brands into fleet or older boats. But other charter companies do, some specialize in that.
– Kenny Feld, Managing Director

**

CYOA Yacht Charters**
At CYOA all boats are owned and financed by the owners and the arrangements for those are boat specific. CYOA does not offer a program where a boat is paid for at the end of the term, At the end of the term owners choose between private use, continued charter with another company or sale. We can help with selling.
– John Jacob, Owner

Great Lakes Sailing Company
We tell our owners to put the money they would normally spend on owning the boat (the money saved from us paying the expenses) toward the principal each month. This greatly reduces the amortized loan period. For instance, having a boat in a Northern fleet, an owner pays their bank note but saves $20,000 a year in expenses, we tell them to apply that to the loan amount so at the end of the 5- year contract they will be much closer to having a boat that’s paid off.

At the end of the agreement, we will offer to sell the boat for them or we will take it back in the fleet for charter. The big difference between Northern charter fleets and Southern fleets is that the boats will have much less use and will be in much better resale condition, or could be in charter service another 10 years before showing wear. We are happy to take in a late model boat that is already owned if the owner decided they want to offset some expenses. The incentives we offer won’t be as good as if they bought a new boat from us but we certainly wouldn’t turn it down
– Dave Conrad, President

Q: Describe what makes your company’s charter management program unique.

The Moorings/Sunsail/TUI Marine
There are a few other companies that have copied, literally copied word for word, our contract. On paper the programs look alike, but the comparison stops there. The Moorings Yacht Ownership program and Sunsail Ownership program have a very limited amount of boats that are over five years old. Others charter management companies have yachts that are twice the age of ours and more, not to mention the fact that their maintenance is suspect in many cases.

Our buying power allows us to work with builders to help design yachts that are easy to maintain, are built tough for charter use and perform well with all expected amenities. The TUI GmbH and TUI Travel connection give the group the financial clout to conduct strategic fleet planning by ordering literally hundreds of yachts at a time prior to selling them. These are placed in the reservations system so the yachts have a backlog of charters before they are even paid for.

Most other companies must wait to find a buyer, place an order and then scramble to get charters. I am of course prejudiced, but I believe The Moorings and Sunsail offer the best customer journey. The large number of annual repeat owners supports my contention.
– Jean Larroux, Yacht Sales Manager, TUI Marine

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Dream Yacht Charter**
We pay personal attention to the owner’s needs, we are not a corporate environment. We offer a wide choice of brands to choose from and many options when it comes to management agreements that are flexible to meet the owner’s needs.
– Stephen Cockcroft, Yacht Sales Manager

Catamaran Company
The Catamaran Company has been in the catamaran industry since 1989. We offer expert knowledge of Lagoon & Gemini Catamarans from our base in Hodges Creek Marina, Tortola, BVI. Our expertise in warranty issues, preventative maintenance, charter management is unrivaled in the catamaran industry. We offer the owners a flexible program with many choices. He or she can join our fleet for a 1 year, 2 , 3 or 5 years. We allow our owners to choose any layout, any model and the owner may equip the yacht as wanted. We offer the highest return in the industry. The owner has unlimited owner’s weeks. Sail 4 weeks a year or 4 months a year. We customize and tailor-make our programs for our owners.
– Kimberly Lee, Charter Manager

Horizon Yacht Charters
Horizon is the only company in the Caribbean and USA to sell the quality German-built Bavaria monohulls. Horizon also offers Fountaine Pajot and Lagoon Catamarans for placement in the fleet. The company’s founding directors from 1998 still work in the business. Each location is run by partners who have a vested interest in their base, so owners are always working with the same directors and management, for the length of their program. Horizon is able to create bespoke and flexible programs based upon the yacht owner’s requirements. It is “Your yacht, Your way” with Horizon.

The majority of our owners opt for the maximum income, split revenue program which returns a good net income and provides for unlimited sailing, with annual income offsetting operating expenses. HYC manages over 100 yachts located at 4 (soon 5) Caribbean bases, which allows for excellent yacht owner to base manager relationships. Personalized attention, with hands-on knowledge of each yacht by the staff overseeing its maintenance, is a unique benefit for Horizon owners.

Also important is the “hassle-free” experience of the owners when personal time is booked. Their preferences are known and personal gear is placed aboard from a dedicated storage area. An owner may be sailing within an hour of arrival at one of our bases.
– Andrew Thompson, Director

Bavaria Yachts USA/Horizon U.S.
Our mission is to promote ownership and charter of the Bavaria brand and allow owners to sail as much as they wish.
– Kenny Feld, Managing Director

CYOA Yacht Charters
Owner on site, high level of client screening and high level of personalized interaction with each boat owner for maintenance and for fitting out their boat with their own unique vision is what we stand for. We are not a cookie cutter management company; all of our boats are equipped to reflect the owner’s desires.
– John Jacob, Owner

Great Lakes Sailing Company
We have a program called the “Learn – Sail – Own” program. This is a simple stepping stone format for buying a boat and it takes away all the reasons people have for not buying a boat: The “Learn” part is that we offer customized sail training on a new model boat with an ASA certified instructor/captain. We look at what they need to learn as a couple or family to safely and competently sail the boat they might want to buy.

The “Sail” part is where we offer the same new model boat for charter for any length of time for an ultimate “try before you buy.” It gives people the ability to make a very educated decision about that boat. Then the “Buy” part is where we can offer charter management or they can just sail it away to their own home port.
For charter management, what makes our program unique is that we offer very customized management programs to fit an owner’s financial situation. From the first conversation, we talk them through a flow chart of what boat suits their needs, how much they plan on using it, what their short and long term plan might be. Even if they don’t elect for charter management, we’ll set up maintenance program and sail training for hassle-free ownership.

Our “Learn – Sail – Own” program is very popular, allowing people to really get familiar with Hunter, Jeanneau and Gemini catamarans before taking the plunge into ownership.
– Dave Conrad, President

The post Charter Companies on Owning a Charter Sailboat appeared first on Cruising World.

Lyra sunset

Buy a boat that meets your needs: When looking at options, make sure that you’re pleasing yourself first. The needs of the charter company come second. You want a boat that’s going to make you and your family happy while you’re out on the water.

Pick the right sailboat charter company: If your goal is to have your new boat earn 75 percent to 90 percent of the cost of ownership, you’ll need to consider the charter company’s recommendations. These usually include buying a boat that’s less than 5 years old, has a three-stateroom layout with en suite heads, and an overall length of 37 to 42 feet. Boats that fit these specs will charter the most.

Look at cabin equality and layout: If two couples are splitting the cost of a charter, they may be uncomfortable if one stateroom is far superior in creature comforts to the other. If the staterooms are at opposite ends of the boat, offering increased privacy, that’s a plus, too. If the boat you’re considering is a catamaran, a galley-up design is usually preferred as it allows the one doing the cooking to also participate in the evening’s conversation.

Have the right mindset: Make no mistake, a boat in charter is a business, with some nice perks for the owner, so be sure you think of it that way. Expect to pay a little more for a boat that’s ideal for both you and your charter company. But since your charter guests are helping you with your monthly loan payment, not to mention the cost of insurance, moorage, maintenance, and property taxes, the economics of a boat in charter tend to work favorably for most.

Editor’s Note: This article by Jen Brett appeared as part of an article by David Kilmer called “A Charter Boat Goes Cruising,” which was originally published in the August 2011 issue of Cruising World.

Click here to read more about how to plan a charter vacation.

The post Put a Boat in a Sailboat Charter Fleet appeared first on Cruising World.

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Do your homework: Talk to other owners, sit down with the management, take one of the boats out, and otherwise thoroughly investigate the charter company.

Plan on minor mechanical issues, dings, and scuffs: If you’ll agonize over letting other people take your boat out and over the usual wear and tear that comes with such use, then you probably shouldn’t be in a charter fleet at all.

Plan on racking up engine hours: In addition to powering your boat across all those miles to places the charter guests want to see, its engine will also serve as a generator. Even on windy days it’ll run for at least three hours.

Use your boat and participate in its care as much as possible: This is a great learning opportunity, and after all, it’s why you bought it.

Hire a really good maintenance professional: You’ll need the help. The right person can make or break your charter experience.

Be a good owner: Learn not to call the charter office on Friday when they’re prepping all the boats. Don’t sweat the little stuff. And don’t run your own boat aground. Did you know that the largest percentage of groundings in the San Juans, for example, come at the hands of owners, not charterers?

Learn from the company: We gained a lot of knowledge from its owners meetings, first-aid courses, and monthly newsletters.

Editor’s Note: This originally appeared as part of an article by David Kilmer called “A Charter Boat Goes Cruising,” which was originally published in the August 2011 issue of Cruising World.

Click here to read more about how to plan a charter vacation.

The post Owning a Charter Sailboat appeared first on Cruising World.