Owning a vacation rental (read as: yacht)

11 Replies

I think a strong argument can be made for a yacht to be considered real estate. Perhaps not by some standards, but an argument could certainly be made... 

Does anyone own a yacht? Do you charter it? Has anyone done this? I'm not talking the 250M one at F1 races in Abu Dhabi, I'm talking say a 1M one. If you can get it to cash flow then you have a viable business asset.

Location is obviously important. Me being in the Pacific Northwest, I think location would not be an issue so I haven't put much thought into it. There's many years worth of places to go here. (RE!?)

A good certified captain Captain would have to be found, another title for him could perhaps be property manager... (RE!?)

Depreciation. This is the only area that's really tough. It's never going to increase in value.. it just isn't. But the income in produces perhaps could.

Anyone!?

@Loren Thomas

I'm not sure I understand what argument you could make - Real Estate by definition is land and the stuff attached on or below it. A yacht is not land, therefore, is not real estate. I really don't see any similarities at all and view them as two completely different assets, with real estate being a positive asset and a yacht being a negative.

At the very core, there is a finite amount of real estate in areas that are appealing to live, which is what drives the market and appreciation. Everyone has to live somewhere. Chartering a yacht is a superfluous activity by those looking for please and relaxation.  This isn't a requirement for anyone and I suspect is very dangerous during bleak economic times. 

Both assets are subject to changes in value, but real estate typically appreciates because the amount of land in the world doesn't increase, but our world's population is on the rise and people are living longer. More demand for a specific commodity yields higher prices. A yacht will always be a depreciating asset and the more it is used, the faster it will depreciate. Doesn't sound like a good investment to me. 

I wouldn't even want to speculate how hard it would be to manage a fleet of captains. There are many captains that make a good living doing charters, however, I don't think this would be an easy business to scale or expand.

-Christopher

You make valid points. The definition of real estate would have to be modified in order to include it. Definitely a high risk asset. But if cash flow positive, certainly an asset. Banks finance them nearly the same as houses, you can even write them off as a second home on taxes.  To be honest I'm not looking to scale a huge business. I'm trying to own a yacht! (many years from now)

Here's a real example.

2.5M Yacht 

http://www.yachtworld.com/boats/2001/Sovereign-Pil...

~50k/Wk income 

Comps: http://www.infinityyachts.com/site/browse_yachts/alaska_and_pacific_north_west.html

There are many yacht owners that lease there vessels back to the brokerage company they bought the yacht from for use in a charter fleet.  When the owner wants use of the vessel, they notify the charter company and the vessel is removed from the availability for charter for that time.  It's not a bad way to own a yacht.  Especially if like most boat ownership, your personal use of it is going to be sporadic at best.  The charter income can eliminate a lot of the costs of ownership and in an active charter fleet all of them.

@Loren Thomas

Just for fun, I put the boat you linked into a yacht cost calculator. With a Mid-grade Crew (4), the expenses to own this yacht would be around $770,000 per year. At your suggested rate of $50,000 a week and with a 20% Charter/Agent Commission, you would need this yacht to be on the seas for 20 weeks a year to break even, without covering debt service. 

I have no idea what yacht financing looks like or what yachting season looks like, but if you paid cash for the boat, you could probably cover the annual costs through the charter service and enjoy it the rest of the year. I think you would be hard pressed to cover the  debt service, unless your yacht was in serious demand.

-Christopher


I think a crew of 4 is too big for the example given, that alone reduces costs quite a bit. 

20 weeks is a lot. Lots of wear and tear, and the prime weeks would likely be around when I'd want to use it.

Actually my company just rebranded because we've seen so much demand for things like yachts and planes! We were formerly called VacationFutures and were a platform for owners to get guaranteed, fixed rental incomes from vacation rentals, but so many people started coming to the site looking to get managers for their yachts, planes, cars, etc. that we decided to rebrand to "rented." 

As someone who works in the sharing economy, I can say that there's definitely demand both from property managers and owners looking to rent out their assets. The sharing economy is also expected to grow to insane numbers, so there really is potential there. 

While we've never considered boats/planes to necessarily be "real estate," they're definitely assets. And while I might not recommend purchasing one for the sole purpose of renting it out to make money, if it is for personal use, there's no reason you shouldn't be able to make a little extra when it's not being used.

@Monika Haebich

You mention high demand for managers and owners, how much supply would you say there is in your experience?

If it doesn't cash flow it definitely would go in my liability column. Depending on what the annual cash flow is, I'd have to decide how much money I'm willing to part with to live a dream of mine.

Speaking of dreams, I'm been looking up boat names. So much pun. I'm trying to think of something edgy but no so much as to turn off vacationers. My favorite so far:

Hi @Loren Thomas ! Sorry for the delay in my response. :)

Based on the supply/demand in our marketplace, I'd say we currently have more owners looking to make money from their boats when they're not using them than we have property managers looking to manage yachts. 

I do love the boat names btw! :) 

Hi Loren,

It is often said, "A boat owner's two happiest days are the day he buys it and the day he sells it."

Sure, Carnival Cruise Lines has figured out how to make money through boat ownership, but the average Joe (even the above-average Joe) will almost certainly find boat ownership to be a financial liability.  If you want to buy a boat, save up and buy one.  Don't waste your time trying to convince yourself that it makes good financial sense.