Charter Fleet Boat Ownership

Place a Yacht in Charter!

Let’s begin by agreeing the primary reason for purchasing a new boat should be enjoyment! It’s about fun, family, friends, and a fabulous lifestyle. That said, there are an unusual number of excellent financial reasons for boat ownership today, some of which could prove to be quite beneficial over the long term. Let’s have a look at these in no particular order:

Inflation Hedge

Most yachts are made of fiberglass and fiberglass is made of oil and unless you’ve been bunking with Rip Van Winkle, you know that the price of a barrel of oil is once again on its upward trajectory with all indicators pointing to new highs. Yachts are also made of steel (stainless usually), lead, iron, aluminum, teak, and all sorts of other commodities, which are becoming both scarcer and more expensive. All of this means that a yacht purchased today, may depreciate and then again, if these trends continue, may appreciate. Strange as it sounds, given the right chain of events, it happens. It’s happened before.

Another way to hedge against inflation is to use financing. Fortunately, there were no sub-prime marine lenders, so banks which specialize in boat loans have plenty of money. With the Fed cutting interest rates aggressively, we’ve seen fixed rate boat loans drop to historic lows below 5%. At some point, the combination of lower interest rates and the expansion of the money supply is going to result in increased inflation. If you financed your boat with a 4.99%, 15-year term, fixed rate loan, you may well be paying off your boat with dollars worth a whole lot less than a dollar is worth today.

Tax Shelter

That’s not a phrase that’s often used today, but you get the point. Savvy boat buyers have been placing new yachts into charter service for years and taking advantage of tax write-offs like interest deductions, depreciation, deducting expenses like berthing, insurance, maintenance, property taxes and more. The combination of charter income from rentals and tax savings has often resulted in positive cash flow for the yacht owner. For 2018 it just got a whole lot better! Current law includes several major improvements in the deductibility of a charter yacht including:

Section 179 — allows you to expense in the year of acquisition up to $500,000 of the purchase price of a charter yacht.
50% Bonus Depreciation — allows you to write off up to 50% of the value of the boat in the year of acquisition (after accounting for the Section 179 deduction).

Club Nautique now has an exclusive program with Beneteau and Jeanneau for the placement of new sailing and trawler yachts in charter service on San Francisco Bay. Contact us today for more details.