When most of us are children, we dream about the things we will buy when we are older and successful. So when we finally make it to the point where we can actually afford our dream “toy”, we pretty much have known exactly what it will be for years. We make it a goal in life to own THAT thing. Though most of us never get it…some of us do. For most people that ‘thing’ is a car… but for some people, that toy will be a boat.
Now, almost everyone reading this can drive. But unless you come from a boating family, even if you come from money, you might not have a clue how to go about getting a yacht. So, if you are self-made, and it’s time to buy your first yacht, and know nothing about boats or the ocean, what do you do?
You buy a fraction.
I know it might seem a little counter-intuitive at first, but bear with me for a minute.
If you didn’t grow up around the water and boats, you have a lot to learn about them. But there is one universal truth about yachts: they cost a lot of money. And it’s not just the purchase, which can easily run into the tens of millions, it’s the maintenance, upkeep, storage, mooring, crew etc. If you spend $2,000,000 on a small yacht, you can expect to spend 15-20% per year to keep it in proper running order.
Now, all of that is fine and dandy if you love the boat and you use it all the time and it’s great and you’re happy. However, the fact of the matter is that you are going to use that yacht about five weeks per year.
UNLESS YOU COME FROM A BOATING FAMILY, EVEN IF YOU COME FROM MONEY, YOU MIGHT NOT HAVE A CLUE HOW TO GO ABOUT GETTING A YACHT.
So most of the time, you are paying for a boat you don’t use and a crew who stays home playing video games. Enter the fractional yacht program.
A fractional program is designed to let you pay for what you use, while still having ownership of a tangible asset, and is beneficial in several ways.
First, there is the financial benefit. Let’s say that instead of 100% of a yacht for $2 million you buy a 1/6th share (i.e., 8 weeks) for $400k. I realize that $400k is more than 1/6th of $2 mil, but there are sales and management expenses with a fractional program. You will still be way ahead in the end. After the initial investment, you have monthly fees that cover the same things you would have to pay for yourself: crew, insurance, mooring, etc. Let’s use the same number from before and call it 20% or $80k/ year. So we have brought our baseline down from $2,000,000 and $400k per year to $400,000 and $80k per year.
A FRACTIONAL PROGRAM IS DESIGNED TO LET YOU PAY FOR WHAT YOU USE, WHILE STILL HAVING OWNERSHIP OF A TANGIBLE ASSET, AND IS BENEFICIAL IN SEVERAL WAYS.
Now, fractional programs have a management component that oversees the operation, making your life easier. They take care of paying all the bills, scheduling maintenance, and making sure that all the owners have an enjoyable time on their yacht. They also take care of scheduling when each owner gets to use their time on the yacht. The only downside to fractional ownership is you can’t use your yacht whenever you want. You have to plan a little, and you have to be a little flexible.
If you have 8 weeks, you can probably take them 2 weeks at a time in each season. It depends on the program. But the bottom line is this: fractional ownership allows you to pay for the time that you use, and not worry about the time that you don’t.
But that’s not the benefit I want to talk about.
I want to talk about the unique opportunity fractional yacht ownership gives the future yacht owner.
YOU MIGHT THINK THAT 20 METERS IS PLENTY OF YACHT, AND THEN DECIDE YOU CAN’T POSSIBLY LIVE WITH LESS THAN 30 METERS.
Yep. The opportunity to try out yacht ownership for a fraction of the cost. To see what you like, what you don’t like, what you would do different, what you wouldn’t do at all. Fractional yacht ownership gives you the chance to make all of the same mistakes everyone makes with their first boat, without making the biggest one, the financial one.
If you have never owned a yacht before, how do you know what you like? You might hate sailing, or you might love sailing and not know it because you’ve only ever been on powerboats before.
You might think that 20 meters is plenty of yacht, and then decide you can’t possibly live with less than 30 meters after spending 8 weeks on a 20 meter. The key is that you actually spend time on the boat as an owner; not a charter, not a friend’s yacht, but your yacht. And it gives you a different perspective. It also gives you someone (the program director) to ask silly questions. You can ask me anything you want, and I won’t judge you. My job as Program Director is to design a program that fits your needs, then educate you on the program and the yacht…make sure you understand every aspect of the boat, the program, the bills and how they are paid and why we pay for “anti-fouling”. You might never ask the guy in the next berth what anti-fouling or bunkering means, but with fractional, you’ve got someone who has a vested interest in making sure you know everything you want to know about your boat.
Most fractional programs have a 3 or 5 year expiration date. This means that after the allotted time, there is a call to action. Depending on what you agreed upon in the beginning, you either sell the boat and go your separate ways, sell the yacht and buy another (usually bigger) boat, vote to keep it and then vote again in a year, or keep it and buy another bigger boat and add more people to the group. The latter seldom happens, but I have seen it. Four of the six owners loved the yacht and had adult children old enough to use it, so they kept the 52’ and bought an 82’. Why choose one when you can choose both?
Another wonderful part of the fractional program is that with the limited use comes the opportunity to keep more than one yacht around the world. Let’s say you live in London, so you keep your Sunseeker moored in the Mediterranean. But it’s a fraction so you have it 4 weeks per year. You send your darling children to the British International School in Phuket, and travel to see them throughout the school year. You could buy a fraction in Thailand, and use it with your kids and their friends from school, and you’d be the coolest parents in the school, because you have 2 yachts; even though you only paid for about a third of one. Plus, that would give you the opportunity to have a motor yacht and a sailing yacht.
IN THE END, FRACTIONAL IS THE BEST, EASIEST AND LEAST EXPENSIVE GATEWAY TO THE MAGNIFICENT WORLD OF YACHTING.
In the end, fractional is the best, easiest and least expensive gateway to the magnificent world of yachting. As more and more people in Asia and across the globe become interested in the sea, more and more people will be able to gain access to the significant benefits of fractional yachts with considerably less commitment than a whole-ownership yacht.
by: Michael Aumock
Michael Aumock is the Director of Sales and Marketing, Absolute Fractionals Marine Division
Follow Michael on Twitter @mjaumock