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Follow the dream but avoid the pitfalls

So you’ve been chartering often and loving every minute of it. Now you are dreaming of buying your own charter yacht. Now comes the hard part: How do you go about doing this?

So you’ve been chartering often and loving every minute of it. Now you are dreaming of buying your own charter yacht. You’ve had many conversations with your significant other and the kids, checked your

finances a dozen times, and said to yourself, Hey, I can do this. You’ve made up your mind and announce to the family: “We’re buying a boat.”

Now comes the hard part: How do you go about doing this? So many boats, each one more tempting than the other. And you must choose a charter company and where to base your boat. You’re getting more confused by the minute. Charter companies have one thing in common: They all make lots of promises. It’s easy because they are selling a dream. But as you can imagine, they don’t all equally deliver, and there are things they won’t necessarily volunteer to tell you.

I purchased my first charter boat in 1995, and I admit that I’ve experienced some years with lower-than-expected charter income and frustrations of different varieties. Yet I never regretted buying my boat and I am now on my third.

Charter yacht ownership obviously has pros and cons. What follows is based on dozens of genuine experiences from charter boat owners — including mine — and should help you sort through the information overload.

The pros of charter yacht ownership

• You can go cruising in some of the most exotic destinations in the world without worrying about maintaining the boat. Showing up and grocery shopping is basically all you have to do.

• You’ll enjoy great bonding and leisure time with family and friends.

• The boat will be partly paid for by charter income after five years of enjoyment (the typical length of a management contract).

• It gives an opportunity to increase your boating abilities and self-confidence as a skipper.

• For some owners, it even gives bragging rights.

The cons

• Your boat may be roughed up by careless charterers.

• Selling a used charter boat at the end of the management contract may be a long, frustrating experience. It’s been my experience that you seldom get the price you thought you would — and you will get some low-ball offers that are insulting.

• It may take even longer to sell the boat if the market is saturated with charter boats similar to yours — for example, in the Caribbean.

• If the boat hasn’t sold before the contract ends, you will have to pay the mortgage and expenses while no longer earning charter income. That’s when some owners really start to panic and begin to get “upside down” on their mortgage — in other words they owe more money to the bank than the boat is realistically worth. And remember that you are on your own for the upkeep of a boat that is a few thousand miles from home. Not easy, even though there are solutions.

Now, weighing the pros and cons, would I give up the sunsets at anchor in the Virgin Islands or the phenomenal sailing in the Caribbean trade winds? No way. I can’t think of anything else I could have spent my money on and gotten so much enjoyment and fulfillment from over the years. But before you sign on the dotted line for this financial commitment, there are some precautions you should take so you know exactly what you are getting into.

Is buying a boat an investment?

Few charter companies actually say this, but if you have been led to believe that buying a charter boat is a profitable investment in any way, I’ve got some news for you: It’s anything but that. However, if done properly, buying a charter boat can be a way to:

• minimize your financial exposure

• enjoy fabulous and remote cruising grounds that you probably wouldn’t get to see otherwise and at a greatly reduced cost

• benefit from all of this with fewer of the headaches of traditional ownership (that’s fewer of the headaches, not none of the headaches)

• satisfy your ego (Telling acquaintances that you own a yacht in the Caribbean, the Mediterranean or the South Pacific is a guaranteed attention-getter.)

Does it make sense for you?

As with any large expenditure, you must do some significant homework beforehand. (My Web site,, offers spreadsheets for detailed financial projections on the purchase and financial management of charter boats.) And remember, don’t get emotional about this; deal with facts and numbers only. Here are three important questions you must ask yourself when deciding if ownership is for you.

Question 1: Do I intend to keep the boat and take her home at the end of the charter management contract (usually four to six years), or will I likely roll over to a new boat with the same charter company?

If you answer yes to either part of the question, that’s good. Charter boat ownership is a great way to enjoy sailing for a few years without major expenses, while charter income pays for some or all of the mortgage (more about income and finances later). And the yacht is yours at the end of the contract. If you answer no, that’s not good. If you don’t intend to keep the boat at the end of the management contract or trade in and roll over to a new boat with the same company, then you’ll probably sell her.

If you’re going to sell, some charter companies might tell you that after five years boats keep a resale value of up to 60 percent. And they might offer to help you sell the boat through their brokerage. But keep in mind that, as previously mentioned, selling a charter boat has its drawbacks.

There are some possible solutions to this scenario. Move your boat to one of the second-tier charter fleets at the end of the contract. They accept used boats coming out of first-tier fleets. Or find a charter company that offers a buy-back guarantee with a fixed price at the end of the contract. Some companies offer such options as a simple and straightforward buy-back or a buy-back at a predetermined price if you roll over to a new boat. Of course, you can opt to not buy a boat and keep chartering as in the past.

Question 2: Do I intend to use the boat extensively during the contract — say, three or more weeks a year?

If you answer yes, good again. Using the boat a lot will make ownership less expensive than chartering, not to mention the enjoyment you’ll get. If you answer no, not so good. If you don’t intend to use your boat a lot but answered yes to Question 1, proceed to Question 3. However, make sure you consider all negative factors carefully.

If you answered no to Questions 1 and 2, then I suggest you seriously reconsider buying a charter boat. You’re much better off simply chartering, since charter ownership won’t present any advantage in your situation, except satisfying that ego. This fact has been recognized over and over by charter boat owners.

Question 3: Do I need to overborrow to afford the boat — for example, taking out a home equity loan to come up with the down payment — or will the monthly payments exceed the yacht’s potential income?

If you answer yes, don’t do it. Stop reading and forget it. However, you might consider a smaller boat, and the numbers might fit. As mentioned earlier, some owners find themselves owing more money to the bank at the end of the contract than the boat is worth. Similarly, don’t count on the charter income for anything other than paying the mortgage. This is a fatal mistake. Apply all charter income toward your mortgage or note, including any cash flow surplus you may get.

If you successfully passed these questions, you’re in good shape. Now it’s time to make choices. Let’s assume you will acquire a bareboat (meaning with no crew). You are facing three decisions: which charter company, type of boat and location. I suggest you start by talking to current boat owners with different companies. Attend a major boat show (Newport, Annapolis, Fort Lauderdale, Miami, Oakland) and ask someone in a charter company’s booth to put you in contact with current owners. They should be more than happy to do this. Also, use the Internet. You will learn a lot in such forums as, and .

The charter companies

You will find many companies on the market, from small operations to large, and there are pros and cons to each. I should note that different charter companies have different management contracts. These aren’t simple and are often vague in some areas. I cannot stress enough the crucial importance of reading the contract extremely carefully and negotiating any clause you don’t understand or feel 100 percent comfortable with. If you’re not satisfied with clauses that are important to you, consider walking away. (Again, has entire sections dedicated to contract negotiation and also offers consulting services for that purpose.)

There are two large charter companies for the U.S. market: The Moorings, with around 850 boats and 30 bases (, and Sunsail, with 1,000 boats and 25 bases, plus several land resorts ( Although they are distinct companies, both now are owned by TUI Travel PLC.


• They have been operating for a long time.

• Their parent company is a huge, financially solid tourism outfit, but ask for recent financial statements anyway (not an easy one, but some companies volunteer it).

• They offer a large selection of boats and locations worldwide.

• You can sail boats similar to yours at bases around the world at no extra cost. (Sunsail even offers exchanges with its land-based resorts — a huge benefit.)

• They guarantee your income, and handle and pay for the maintenance, docking, insurance, etc. You pay nothing except the turnaround costs when you use the boat. Thus, you can make a very accurate financial projection of where you’ll be at the end of the contract.

• They use proven, standardized maintenance and hurricane procedures.

• They use proven, standardized phase-out/refurbishing procedures when the boat leaves the fleet, which allows the owner to take possession of a boat in excellent shape at the end of the contract.


• There’s no flexibility if you want a boat make or model they don’t offer, or if you want additional custom features or equipment.

• The owner’s use of the boat is limited to six to nine weeks a year, plenty for most of us but not for some. Also, there’s some limit on usage in high season.

• Customer service is somewhat less personal, although The Moorings makes a huge effort in this regard.

Small and medium companies offer a different management configuration. The ones I prefer are TMM Yacht Charters ( ), Horizon Yacht Charters ( ), The Catamaran Company ( ), Voyage Charters ( ), and VIP in the U.S. Virgin Islands ( ). These companies typically have fleets of around 20 to 60 boats, maintain a close relationship with owners, and provide excellent customer service.


• Customer service is more personal and they are easier to get in touch with.

• They limit the fleet to a manageable size so they can take excellent care of their customers and boat owners.

• Though some companies have been in business for a long time, this is an active industry. Some might be under new management. Verify this.

• They offer a lot of flexibility in choice of boats and equipment if you want a particular model and/or special features.

• The owner gets unlimited use of the boat with most companies.


• Financial status of the companies must be checked. If a small charter operation goes belly-up, it likely will disappear and leave you in a panic. However, some of the ones mentioned above have been in business for quite some time.

• There is no guaranteed income; your income will be roughly 60 to 75 percent of what it costs to charter the yacht. And your financial projections always remain hypothetical. Your income will be hit hard if there’s an economic recession, for example.

• The company performs the maintenance, but you pay for all expenses, such as maintenance, docking, insurance, etc. Also, there’s a markup on parts. This is a big difference compared to large companies, and this is where it can get tricky: It may be tempting for the charter company to bill an owner for repairs he or she has no control over (remember, you are far away).

• Your choice of locations is limited. Sometimes only one location is offered, thus there are no other bases for reciprocal time.

• Maintenance, phase-out and hurricane procedures need to be carefully checked.

In a nutshell, big companies are better suited for owners who are happy with limited use of the boat and want a headache-free, financially predictable, not-too-emotional/personal kind of ownership. The boats aren’t personalized, and they all look the same. Smaller companies are better suited for owners who want a particular type of boat with customized features (some companies will take almost any boat you’d like in their fleets), like to sail a lot, might go out on their boats two months at a time, and like to be very involved with the ownership experience. So as you can see, your choice here can drive you in two very different universes. Carefully assess which is best for you.

Choosing a boat

Obviously, your choice of boat will stem mainly from your budget. And although you might find some price differences between companies for similar boats — mainly because of equipment differences — it usually comes down to, “You get what you pay for.”

Once your budget is defined, several criteria should guide your choice:

• Will you sail mostly with only one other person? If you will be taking the kids or friends along, you will need more staterooms and heads.

• Would you consider the roominess and stability of a catamaran — great for young kids — or are you a hardcore monohull sailor?

• Assuming you will keep the boat at the end of the contract, will she suit your sailing goals, whether back home or if you intend to do some extended cruising?

A very important point: Not all boats bring in the same charter income. Some boat sizes and configurations are more popular than others among charterers. For example, catamarans are becoming the workhorse of the Caribbean charter fleet. Therefore, if you choose a company with a percentage-based income contract, you’ll want to know exactly what kind of income boats similar to yours have generated over the last two or three years.

During the course of your contract negotiation, ask the charter company to show you the listings of real bookings in boats similar to yours and at the base you will choose. Most companies will show you pro formas of future potential bookings, but that’s not good enough. Pro formas can be deceiving, vague and optimistic. Insist on the documented real thing. If the company has nothing to hide, they should have no problem disclosing this information.

The boat’s location

This is a matter of personal preference, but here are some criteria:

• If you plan to base your boat in the Caribbean, bear in mind that sailing and anchoring in the southern Caribbean (the Windward Islands, such as Grenada, St. Lucia, Martinique) is more challenging than in the northern Caribbean (the Leeward Islands, such as the U.S. and British Virgin Islands, St. Martin).

• The northern Caribbean offers an almost unlimited diversity of cruising grounds and anchorages in a relatively small area. (This area is my longtime favorite.)

• In the Bahamas and Florida Keys, waters are much shallower, so catamarans are better adapted to the grounds and will let you go places monohulls cannot.

Like boat types, not all chartering areas bring in the same charter income. Some bases are more popular than others. Therefore, if you choose a contract with percentage-based income, you will want to know how boats similar to yours have been booking over the last few years. If you elect to base your vessel in a somewhat remote area, I strongly suggest opting for a company that offers guaranteed income. Some remote locations, though exotic, might also lack competent mechanics and surveyors. Even parts could be hard to come by.

Also, if you won’t be bringing the boat home at the end of the contract, it may be very difficult or impossible to sell her at a very remote base. Finally, check how practical and pricey airline access is from your hometown to the base you’d like.

You have done your homework, made your choices and you feel comfortable. You are armed to the teeth and ready to take the next step. Contact several charter companies and start getting a feel for the real thing. But, as I hope you understand by now, this is not a simple process and I urge you to carefully take all the steps above.

Michel Benarrosh is an independent consultant for charter boat buyers and owners. His Web site,, provides objective chartering information, including discounted charter weeks and in-depth guidance for charterers. Benarrosh has been a charter-boat owner for many years and was president of the Moorings Owners Group, an independent association of 250 Moorings charter-yacht owners, for 10 years. He also is a yacht broker licensed in Florida.