If you have been following these blogs, you probably have heard by now, that placing a yacht into a charter fleet can be a way to lower your operating expenses, and offset the typical costs of ownership such as dockage and routine maintenance. There are different programs or charter income strategies that vary from charter management company to company. The charter income strategy you chose, may also be contingent upon the size of your motor yacht, and where you intend to keep her.
The two most popular types of charter income programs for your yacht that you are likely to run across are either a “guaranteed income program” or a “variable income program.” Variable yacht charter income programs may also be referred to as “sharing,” or “performance” charter programs. In either type of program, the yacht owner must own the boat outright, or qualify for financing, subject to the details of the program.
Guaranteed Charter Income Program
In a guaranteed yacht charter income program, the motor yacht will be delivered to the charter fleet’s marina, fully equipped and ready to go.
Generally speaking, in a guaranteed charter income program, the charter management company will cover all of the yacht’s operating costs, including: insurance, dockage, and maintenance. Some programs offer offsetting credits for maintenance and repair work done to your yacht. Either way, the owner pays little or nothing towards the routine operating costs of the vessel for the duration of the income program.
Programs vary, but the monthly guaranteed payment is based on a percentage of the boat’s value, usually between 9-10%. If the boat is financed, that typically amounts to enough to cover the monthly mortgage payment, so these types of charter income programs are “cash neutral.”
Variable Charter Income Program
In a variable charter income program, rather than covering all of the expenses for the boat as in a guaranteed income program, the owner is “credited” for the full net charter income. Then, the charter management company invoices the owner for services, and pays the bills by using the offsetting credits.
Since in these programs the charter company and the owner share income, they are sometimes called “sharing programs, and/or “performance programs” because income is based on how well the yacht “performs” as part of the charter fleet. The income is shared, as the owner is usually credited in a 65%-35% split of the net charter income, but the split can be as high as 80% to the owner, and 20% to the charter company.
Boat owners considering these types of programs need to look past the split however. Even though it seems that the percentage highly favors the owner, the most important aspect of this kind of charter income program, is not the split, but the costs that the charter company intend to charge back to the owner for services.
Either way, remember, the main idea of a yacht charter income program is not so much to make you profits, but to reduce the operating and maintenance costs of your vessel.
What is the Right Charter Income Strategy for my Yacht?
Understand that what we have provided here, is a general overview of the charter income programs typical of the industry. Programs can vary significantly, and each type of program has its particular pros and cons.
At FYM we have been placing new and pre-owned motor yachts in charter for a number of years. We would be happy to discuss our charter income programs with you at length, and match you with one that is the most ideal for your motor yacht and your boating lifestyle.
Operating a motor yacht can be costly. Putting your boat in Charter can earn income, and defray some of the costs of ownership. On Demand Yachting from FYM can show you how. If you would like to learn more, or if you have any questions or comments about this blog post, do not hesitate to contact our Yacht Management specialists, or call us at (954) 900-9968.