HMY's 7-Step Guide To Buying Your First Luxury Yacht
Yacht owners are indeed a rare breed. These energetic, successful individuals are wealthy, usually well-educated, and looking to expand their business and social opportunities. Many yacht owners hail from the C-suites of leading companies or live a fast-paced entrepreneurial life.
If your career and/or lifestyle are leading you to consider buying a luxury yacht, then this guide is for you. We’ll walk you through the steps of owning a yacht, the cost of a yacht acquisition, and helping you to decide what you need to know and why.
The Yachting Industry
Today’s yachting industry showcases products categorized in three areas – standard yachts, mega yachts and super yachts. These naming distinctions are necessary as they correlate to, as you might have guessed, the size of the yacht.
Standard yachts range in length from 30 feet to upwards of 150 feet long. Next up is mega yachts which generally are categorized in the 100-200 ft. range. And then there are the super yachts, which range from 200 feet long and up. Way up.
These super yachts are usually the yacht sales that make the headlines. For example, remember the 536-foot M/Y Eclipse, designed for Russian businessman Roman Abramovich and worth about $475 million? Or perhaps you saw news about the 590-foot Azzam, estimated to be worth about $605 million. It was originally commissioned by the President of the United Arab Emirates. These two yachts are said to be the two highest-priced private yachts in the world.
But for those seeking to own their first yacht, the sights are more modest, which is a wise choice. Sales of yachts in the 40 ft.-70 ft. range are far more frequent than these types of extravagant super yachts. When it comes to used yachts for sale, a 25-50 foot “starter” yacht might even be found for $100K – $200K. This is partly possible because materials such as fiberglass have lowered construction costs and partly because a stronger market for yacht re-sale has broadened the market.
Yet, besides just the asking price, the costs of owning and maintaining a yacht can be daunting, even to someone with money. According to the U.S. Superyacht Association, the average annual cost to maintain and run a 180-foot yacht can cost $5 million. Included in this annual cost estimate is $400,000 for fuel, $350,000 for dockage, $240,000 for vessel insurance, $1 million for maintenance and repairs, and $1.4 million for crew salaries.
Baby Boomers, Gen X are Driving The Yacht Market
In today’s yacht market, demographic and income trends are pushing the average age of yacht owners upward. While retiring baby boomers are generally driving the so-called graying of yachting, American Boat and Yacht Council President John Adey observes that moneyed Gen X and Millennials are once again making themselves known, perhaps drawn by more accessible opportunities to enter the yachting market.
Indeed, yacht sales finally appear to be re- covering from the recent recession. Sales in 2013 topped 30,000 for the first time since the recession. Some industry insiders consider this to be the “new normal” for the yachting industry. According to Trade Only Today, March 2016 saw an uptick in the yacht brokerage segment with a 10% increase year-over-year.
For aspiring yacht owners, these influences present a strong window for a first purchase. Yacht ownership remains a significant mile-stone for successful individuals bent on playing as hard as they work. The yachting lifestyle and community represents a pinnacle of luxury, leisure and freedom, and at the same time, represents both a significant financial commitment and a step into an entirely new lifestyle. Let’s check how this lifestyle direction ties in with your yachting pursuits.
Diagram courtesy of BoatInternational.com
Test the Waters: Desire, Income and Lifestyle
The lure of the yachting lifestyle is obvious and exciting. Entertaining personal and professional colleagues on your yacht or sailing in balmy tropical breezes are driving desires of a presumed yacht owner. Depending on your plans, taking some time out to charter a yacht in different destinations can be a good test for not only what type of yacht you want to buy, but also whether or not you will nee a crew on board. Will you still want to spend time aboard your yacht for several years?
Or even after the novelty has worn off?
So how do you decide? It’s wise to spend some time on a yacht, of course, first. If you’ve never spent time on a yacht, you’ll discover firsthand what’s involved in the whole experience. Who manages the actual sailing of the craft? Are there yachting regulations that I need to become familiar with? What about safety and maintenance matters? Is the docking process difficult?
By accepting cruising invites from friends or business associates, you’ll eventually learn what type of yacht best suits you. Do you like the smaller, more easily maneuvered yacht? Or does your desire include a longer, more luxurious yachting experience? Simply experiencing the yachting experience on a more frequent basis will help you answer these kinds of questions below:
• What will I be doing on this boat? Will it be for business, pleasure or both?
• Will I live and work from here seasonally?
• Who will be with me? How many guests would I regularly like to bring along?
• What length of yacht works best?
• Where do I plan to cruise? What speed and range are necessary to do that?
• Where will I store my yacht?
• Is an on-board crew necessary?
Know Your Yachting Affordability
How much yacht can you afford? That question seems rhetorical to many, but for those who are considering buying their first yacht, it’s not an unreasonable question. The best way to understand pricing for yachts is to search yacht brokerage listings by length of craft, year, build, or price.
The size of a yacht is an important consideration in the overall investment. Smaller yachts are usually more plentiful on the market, and you’ll find a wider range of features suited to your budget and use expectations. Try checking some of the 40-50-ft. long yachts for a comparison at the start of your buying process, and then work your way up to larger models. Larger yachts almost always mean more living space, more desk space for play and relaxation, and more luxury features. Other considerations in affordability include the make and model of the yacht, coupled with its market resale value. These will affect the price in various ways.
Paying for a yacht is in many ways like paying for a high-end, luxury car. If you are able to pay for the full price of a yacht, then go ahead and pay cash. If you need to finance your yacht, many first-time yacht owners tend to put 20%-40% down as the initial payment and then pay monthly usually with a 20-year loan term.
Here are some other factors that a prospective yacht owner will need to take into consideration for yachting adventures.
• Insurance: Protect your investment with insurance. It will almost certainly be a requirement if you’re financing your purchase. But depending on your yacht’s accommodations, it might qualify as a second home eligible for a tax deduction. Consult a professional tax advisor.
• Registration: Registering your yacht involves choosing whether to register in your state of residence, federally as a U.S. flag vessel (generally applicable to craft over 30 feet) or internationally. Your broker can advise you on the legal requirements for the type of craft you’re buying and the location where you plan to regis- ter it.
• Berthing: Know where you intend to berth or moor your yacht. Will your yacht physically fit at the storage location? You may need to research this. Choose wisely.
• Yacht Survey: A yacht survey is akin to a house walk-through at the time of purchase. Seek out an experienced yacht broker or marine finance specialist to help you with this or other purchasing considerations.
New yacht owners who do their homework in advance take these elements in stride upon negotiating cost payments. After all, many of us do the same steps with smaller recreational boats all over the US. Whether you’re buying a 20-foot pontoon boat or a 60-foot yacht, you’ll still need to register your craft, pay insurance and find a berthing location. It’s better to handle these steps the right way than not at all.
Quality Pre-Owned or Custom-Designed Yacht?
Part of the excitement for many yacht owners is the design process itself. If you design your own craft, you and your broker will visit the shipyard to inspect various aspects as they are built and assembled. The process can extend from months into years, especially if you have to wait on a spot at a high-demand shipyard, but there’s no denying the thrill of helping usher your yacht into the world from the very earliest stages.
On the other hand, you’ll save significant money by choosing a production model to customize (the so-called “semi-custom” approach) or by buying a quality pre-owned yacht. In either case, an experienced yacht brokerage firm like HMY will help you reach and obtain whatever you desire, and for significantly less money.
Yacht Maintenance and Management
The size of your yacht and your interest in running and maintaining your yacht will be factors in deciding your approach to both. A DIY approach for much of the maintenance will not only help you understand your yacht inside and out, but will also save a bit of scratch on the side. Let’s further explore the elements of yacht maintenance and management.
DIY vs. Crew-staffed
When deciding to hire a crew, you can research available crews at sites like Crew Unlimited or Crew Finders International. You’ll need to have a good idea of the kind of crew you want. How large a crew will be needed to run the yachts you are considering? Does the crew include food staff and chefs? Most professional crews contract to maintain a particular yacht year round, although the size of the crew may fluctuate during the off season or when no charters are scheduled.
Fuel & Oil
Fuel fees vary vastly according to the type of yacht you own, where you tank up and just market volatility. No one likes to overpay for fuel costs, even yacht owners. So the savvy owners make it a point to fuel up at bargain port stops. This chart that shows fuel prices around the Bahamas is an example of the type of leg work you can do online to find competitive fuel prices for your yacht.
Yacht Location and Docking
As we’ve already mentioned, briefly, docking and storage is an important consideration for yacht owners. Will you dock and store your yacht close to where you live? Will it be docked in warm or cold climates? It’s also important to plan where to dock your yacht during the off season. Thrifty insiders suggest that it may be less costly to cruise down to the Caribbean at the end of boating season to store the yacht, than keep the yacht stored in a northern marina for the winter.
Securing a berth at a popular city marina or sea entry marina can be a time-consuming task. Adding up the times and energy to secure a yacht club membership, with initiation fees and monthly dues, can be a taxing dilemma to some yacht owners. The lucky ones might have access to a private dock — the more fellow yacht owners you know, the more likely you’ll encounter someone with room for a friend.
Instead, let your fingers do the walking and try some online sources. Search for the right length needed for a slip at USABoatSlips – you can search from 40 ft. long yachts all the way up to 100-ft. plus or more. Having a good idea where dock availabilities are will also help you plan your trip down the line.
A side note about choosing a docking area or yacht storage – find out water depths, or any obstacles for longer crafts. Try to avoid issues getting your yacht in and out of storage. Fixed bridges, shallow water depth, unmarked areas for water access — any of these can effectively block you from reaching your berth or ultimately damage your yacht. Make certain that your yacht’s hull or overall size permits safe, reliable passage to your berth of choice.
Use an Experienced Yacht Broker
You might say we’re biased here, but this is very important. A yacht broker is a real estate agent for yachts. Your yacht broker will help you identify the type of yacht that fits your needs and then find and purchase the right one. If you’re pursuing a custom design, your broker will accompany you on shipyard inspections and water trials to make sure everything is completed to your specifications and satisfaction.
One of the tasks you should work with your yacht broker on is negotiating the very best deal, and overseeing the completion and filing of all the proper legal agreements and documents. As with a traditional real estate transaction, the seller typically pays the broker’s commission and fees, al- though yacht brokers maintain a duty to both buyers and sellers. HMY Yachts has the advantage of having a staff of highly-trained yacht closing assistants that know the ins and outs of all of the paperwork. This can help you avoid any unforeseen problems in the purchase process.
In contrast to brokers, boat dealers work for a particular company selling new yachts. Because they frequently accept pre-owned yachts or boats as trade-ins toward new sales, dealers can be a fruitful source for the first-time yacht buyer who plans on starting small. Many boat dealers refurbish trade-ins and offer warranties on pre-owned vessels. HMY Yachts is unique as we not only are a professional brokerage firm, but also have the advantage of selling new yachts as well like Viking Yachts, Princess Yachts, and Cruisers Yachts.
Resale Value of a Yacht
“A boat is not an investment; it’s a lifestyle choice,” TJ Stowers, a partner at Newmar Private Risk Management, told The Wall Street Journal. “A boat will always depreciate in value.” What Stowers goes on to say is that while the dollar value will go down it can become one of the most valued possessions you have – the vehicle for new experiences you wouldn’t otherwise have had. With that in mind, if resale is a concern going in, consider purchasing a smaller yacht to start, and then consider selling when you are ready for an upgrade. This strategy is more a case for hedging your bets than a formula for success.
Whether or not your yacht holds its value depends on a number of factors. These may include:
• The quality of the yacht’s overall build and finish
• How well the craft has been maintained over time
• The current market conditions for your make and model
If you’re free to cherry-pick the optimal moment to upgrade, it’s possible that you could maneuver your sale into a small profit. In most cases, unless you’ve managed to get your hands on one truly exceptional craft, your yacht — like your car — is destined to depreciate.
Finding the right yacht broker is all about trust, reputation, and reliability. Using personal referrals from other yacht owners can lead you to finding an experienced yacht broker to handle your transaction. Talk to many yacht owners to collect leads on trusted brokers. Learn about why they succeed and how they help the customer.
Once you’ve identified a candidate, ask for an initial consultation and a list of clients you can speak with to get a feel for how the broker handles business. Seeing a sampling of the broker’s client base should give you enough of a feel for the type of circles in which the broker moves through.
Yachting for The Neophyte
Yachting is an option that should bring prestige and pleasure. If you aspire to more of the benefits of yachting and fewer of the respon-sibilities of yacht ownership, a charter service may provide the luxury and service you want without burdensome financial and time commitments. Select a yacht and destination that suit your current schedule and mood, then relax with the personal service and attention you expect on board a yacht.
Online sites have opened up the possibilities of new boat rental locations that aim to serve as a sort of Airbnb service for yachts, connecting boat owners and allowing them to rent boats directly from one another. The concept has proven especially suitable for chartering smaller yachts, which is typically less profitable for charter companies.
When you’re looking at buying a yacht, it’s more than just a financial transaction. You are joining a rarified group of enterprising individuals seeking a boatload of adventure and some relaxing, privacy on the water.
How can HMY Yachts help make your first yacht purchase a fulfilling reality? Contact us at the location that’s most convenient for you to take the first steps toward that dream. We appreciate your trust in our professional brokers, and we look forward to escorting you into this new phase of your life — owning your mansion on the water.
Learn more about Purchasing a Luxury Yacht with the help of HMY with this video.
For more useful articles about boating and yachting, visit some of our resource pages below.
View the desktop version of HMY's 7-Step Guide To Buying Your First Luxury Yacht