Investing in Your Vacation With a Yacht

Now is the time to think of upcoming plans and travel arrangements—whether you plan to travel abroad, spend time relaxing on the beach, or even set sail on the yacht of your dreams. A yacht is an extraordinary purchase, and owning a yacht can improve the overall vacation experience; serve as a personal oasis on the high seas; fulfill a life-long goal; or enhance an appetite for travel.

Investing in a yacht can be within reach if the buyer has a plan and the right team. Having a trusted advisor can smooth a complicated process requiring expertise in both the acquisition and financing. First-time yacht owners should take extra care when purchasing a vessel or having one built. Having an experienced guide to help navigate finances can make all the difference. Working with a firm, like U.S. Trust, can help determine if the time is right and make the process smoother, giving the buyer, seller and builder one point of contact. An advisor can help ensure that the buyers’ objectives are met with a credit solution aligned to ownership structures and cash flow.

Crafting a thoughtful plan is of the utmost importance when considering taking the next step in purchasing, refitting or building a yacht. With such highly specialized assets, there are several important implications to be aware of when making an investment decision. Each individual’s unique plan must carefully consider: the payment schedule, interest rate alternatives, competitive amortization schedules, revenue stream potential, flagging and additional costs like moorage.

Financing the yacht should reflect the owner’s lifestyle. Buyers should work with an advisor on a recommended approach to structuring credit, including loan terms, repayment options and amortization schedules. There are a number of possible approaches and solutions including risk management strategies or implementing a currency hedging approach for a foreign construction project. The owner, whether buying their first or trading up, should establish an appropriate credit solution aligned with their unique structure of ownership and cash flow.

Flagging a new yacht is another aspect with financial considerations. Some U.S. Trust clients choose to register their yachts in a foreign jurisdiction for reasons including crew hiring, estate planning issues and tax considerations. As with the financing, having the right team can help the purchaser consider all their options.

When building a custom yacht, be sure to keep in mind that construction projects require an added level of experience and knowledge. Managing all the parties involved—clients, surveyors, brokers and shipyards—can be a full-time job. Before embarking on a custom construction project, consider the vast amount of planning and funds required. It’s important to ensure that your advisors are familiar with the shipbuilding process and all its considerations.

When planning for the purchase of a yacht, it’s important to consider if the boat will be chartered, and if so, how it impacts the financing structure. Such considerations need to be addressed early in the process because they can change the structure of ownership. If charters are going to be a frequent occurrence, it may make more sense to establish a company to buy the yacht as opposed to an individual making the purchase. As with all aspects of finance, working with a dedicated advisor to help address such decisions can make all the difference.

If you’re thinking about turning a passion into a reality—remember just as you wouldn’t set sail without a seasoned skipper at the helm, setting out to buy or build a luxury yacht shouldn’t be done alone or without the knowledge and experience of a professional advisor.

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