Yachtsharing: how does it work?

The idea of shared or fractional ownership is not new at all

It has long been used in real estate industry. It is believed that it was invented by American real estate agents, who specialized in resort properties. In the second half of the 20th century, they realized that rich customers often refused to buy villas in Florida or ski chalets in Colorado for a very banal, but sensible reason. It is irrational. Why should you spend millions of dollars on a house where you can spend just three to four weeks a year at most? 

That is how the idea of shared ownership came into being. As opposed to timeshare where you buy only the right to live in a house or an apartment, fractional ownership makes all the participants of the project full-fledged owners of the asset. Thus, the risks go down and you can share the maintenance expenses with other owners. 

Other spheres picked up the idea from realtors. For instance, in business aviation, Richard Santulli is considered to be the godfather of shared private jets ownership. On leaving Goldman Sachs, in 1986 he set up a company of his own, NetJets, which did not sell jets, but only fractional ownership. Skeptics were sure it would not work: sooner or later customers will face the situation when they need to fly, but all the jets are busy and they’ll leave the program. But Richard used the data on customers’ flights and developed a modelling program, which could distribute jets efficiently, providing replacement planes when necessary, and in the end, he managed to save the participants lots of money. 

The yachting industry, which is known as extremely conservative and customer-centric, started introducing this idea quite recently, around the middle of noughties. The issue here is similar: most yacht owners use their boats no more than a month and a half a year, so it would be logical to share the purchase price and reduce the maintenance expenses in the long run. 

What is shared yacht ownership like? 

As a rule, a special company is set up to purchase an asset, and the customers buy its shares. This protects the investors and simplifies all the paper work on the transfer of ownership in case a co-owner decides to sell their part. Most often there are two or three co-owners, with eight being the “threshold” of efficient work. Despite looking financially appealing, the projects with 10-12 participants are almost 100% unlikely to work out. 

All the ownership expenses like maintenance, repairs, crew salary, insurance, moorage, etc. are shared among the co-owners. This kind of approach is particularly beneficial for fresh yachtsmen. With a relatively small investment, it will take just a few years to understand what is suitable and what is worth changing, starting from the size of the yacht and finishing with a holiday style in general. And based on this experience later one can go on a free voyage and buy a boat of their own. 

Not only a ready-made yacht can be purchased like this. One can also invest in a yacht at the construction stage, agreeing on all the features of her equipment, layout and interior with other participants of the project. Today a lot of shipyards offer programs specially developed for fractional ownership. 

Of course, it is more profitable for the companies specializing in fractional ownership to work with large and expensive boats. But there are quite a few examples of people making a joint purchase of 12-metre cruisers, too. 

If any of the co-owners buys their share with loan funds, there is a need for extra risk insurance, so that the lenders will not be able to get the yacht if one of the owners goes bankrupt. 

How are usage periods distributed among the co-owners? 

As a rule, the usage periods are distributed equally among all the co-owners, taking into account the “high” and “low” seasons and deducting the time necessary for regular maintenance and repairs. The co-owners are also free to sublet the yacht for the weeks that they don’t want and spend the money they get on the annual fees. 

Although a yacht is movable property, she can’t move to different parts of the globe instantaneously, so some people buy shares in different boats, with one being in Europe, one in the Caribbean and one in Asia, for example, which ensures that there will be a boat at their disposal regardless of the season.

Subtleties

You should not expect a huge return on a modest investment. If there are five or six co-owners, it will probably not be possible for you to have a holiday on this yacht each July or August, as other owners will want that, too. That is why it is important to plan the usage periods well in advance. At the same time, you should not forget that some things just can’t be scheduled for a long time ahead, as plans and circumstances may change. 

If there are just two co-owners, it is much easier to come to an agreement. If there are three or more, it is better to turn to a managing company, which will take care not only of the schedule, but of all the rest, too. Keep it in mind that your holiday plans might be ruined by a need for some urgent repairs (although it does happen to your own yacht, too, but a little less often). In this case, large managing companies could offer you a replacement boat from their fleet. Make sure you read the agreements very carefully.

As a rule, shared ownership is attached to a particular location or area. If you want to go somewhere further, you will have to pay for it and take care of bringing the boat back. If the majority of the co-owners make a decision to move the boat somewhere new, the minority will either have to agree or sell their shares. 

If most of the co-owners opt to leave the project, you will either have to buy their shares or sell the boat and distribute the income among the participants. 

BENEFITS OF SHARED YACHT OWNERSHIP 

• Considerable savings due to shared purchase and maintenance expenses
• Opportunity to afford a larger boat than if you purchased it alone 
• The yacht is operated and maintained regularly, so it is in a better condition
• The crew is never idle, they work for their money and improve their skills
• Co-owners can make a decision to charter the yacht out, which will not only cover the operational expenses, but bring some extra income

DRAWBACKS OF SHARED YACHT OWNERSHIP

• You can’t personalize the boat 
• Your holidays depend on the agreed schedule 
• Despite the plans there might be some disagreements among the co-owners (particularly if there are many of them), regarding the usage period, for example at the time of some major, high-status events
• Compromises are inevitable on many issues like the home base of the yacht, hiring the crew, etc. 
• It is not always possible to find the model that you like best for a shared purchase, so sometimes you have to choose out of what is available 
• If you share a boat with your friends, this purchase can become a real test of your friendship