Investing in Yachts Is Not Just for the Very Rich
Web Producer, CNBC.com
Sick of the dry world of charts, valuations, stocks, bonds, commodities or currencies? You can literally sail away—investing in yachts is not just for rich elites.
When buying a boat, there is but one fundamental principle to follow, according to those who already have some cash moored somewhere nice: enjoy it.
"You’re going to buy a boat because you want to be on it, you want to use it," businessman Theo Paphtistold CNBC.
"See, what you have to realize is I actually use my boat. I don’t have it as a status symbol. I don’t have it as an investment. I spend 10-12 weeks on board every year and I like to drive," Paphtis added.
Yachts have always attracted the rich and powerful, but during the recession they have also offered a safe haven, according to Dominic Smulders, Managing Director of Bray Marine Sales.
"Two years ago when the banks were crashing we had customers phoning us saying 'is my boat OK?'" Smulders recalled. "They had a £100,000 ($160,000) asset, they knew exactly where it was and nothing was going to happen to it, so from that point it was very secure. They weren’t going to lose their money in any bank collapse."
The biggest yacht in the world likely belongs to Russian magnate Roman Abramovich and is called Eclipse. If that is not the biggest, then the title should probably go to the boat owned by the Dubai ruler Sheikh Mohammed Bin Rashid Al-Maktoum. (See the 10 largest yachts in the world in our slideshow.)
But for investors with fewer funds at their disposal, there are smaller boats—or even shares in boats, or buy-to-hire boats, according to experts.
If you want a bigger boat but can't finance it all, you can enjoy it for a specified period each year, rather like the concept of timeshare on holiday homes.
This is a "relatively new phenomenon" which "seems to be gaining some traction" but it's too early to say whether it is a success or not, Stewart McIntyre, Chief Operating Officer at UK-based Sunseeker, a builder of yachts, told CNBC.
Sunseeker builds boats to specification, so customers can use them just part of the year, and charter them for the rest.
"If you have a lower budget, and the buyer is concerned about the operating costs and running costs, then certainly the opportunity to charter would help them make a decision and indeed help him specify the other things he wants built in a boat to cope with the charter demands," McIntyre said.
Investors should however treat yacht buying with care. Like with any purchase that requires a lot of money, they should pay extra care to what papers are needed.
"The key issue is title,"Bray Marine's Smulders explained. "Does the person selling you the boat own it and do they have the right to sell it? For instance, if they have finance on that boat they can’t sell it because it actually technically belongs to the finance company."
Buy a boat that is made by a well known builder, and choose a good design to make sure you sell it quickly second hand, he added. Or, if you don't have the funds to go for a new boat, buy a second-hand one and improve it.
"People do make money on boats," Smulders said. "We’ve sold quite a number of boats over the years for customers who may buy something that’s a little bit rough and they do it up, they’re quite savvy about prices and tough negotiators, if they keep it a year and sell it on."
"It’s all about condition, same as a house. If you improve a house you will generally see money back on it," he added.
—Reporting by CNBC Producer Erin Conroy