Your boat is insured by our fleet insurance policy with a deductible equivalent to 2% of its hull value. Each charter client pays a damage deposit of $2,000/engine. If they damage the vessel, the first $2,000 (or $4,000 for twin engine boats) comes out of their deposit. The difference between that and the 2% deductible is paid by FYG. Your insurance company pays the balance.
It is certainly true for the large operators who send the boats out week after week to get themselves as much charter revenue as they possibly can. Some will charter your boat out, as many as 30 to 35 weeks per year and this much usage will certainly increase wear and tear while decreasing the value of your vessel. FYG is a limited charter program. Our owners break even or make a profit after as few as 10 weeks a year and we usually take a week between charters to maintain the boat. If you’ve ever chartered in the BVI’s, you’ll notice their 3-year-old vessels aren’t as in as good shape as our 10 year old vessels. It’s all about professional maintenance and yacht care.
In most cases, yes. FYG negotiates for 30 or more boats in its charter fleet. Each year we obtain at least three quotes from top rated insurers who all are after our business. Since we are negotiating for a large group we get much better savings than if you were negotiating for just your personal boat.
If you are using one of our recommended financing companies SGB, CGI, or Scott Financial and going into our charter fleet you will be on our fleet insurance policy and the finance company will understand it is a commercial loan. Florida Yacht Group is proud to be one of only 3 charter companies in the world approved for these types of loans. Most banks will not approve loans for charter yachts but the above lenders will for the FYG Charter program due to our rigorous maintenance and impeccable yacht care program. In other words, we take care of our boats and don’t allow them to get beat up. These banks know this because they have physically inspected our fleets and reviewed our maintenance records.
We caution you not to use typical bank financing because at closing the lender will review the charter insurance policy and may decline to close. Most “Bank Charters” do not allow them to lend money for commercial operations and a charter yacht is considered a commercial application. If you do wish to attempt to use normal bank financing you should inform them immediately of your intention to place it in our charter fleet. They may charge you a slightly higher rate but failure to disclose this information could result in them declining the loan, losing your deposit, or demanding an early payoff, which could create an undue hardship for you.
You certainly can but it may be unwise to do so. Since many of the larger charter companies have a reputation of abusing their boats, those charter vessels have a more difficult time being resold at the end of their charter life. If you mention the word “charter” in the name of your LLC, your vessel, or anything to do with your charter business a buyer may assume you had your boat in one of the larger abusive fleets. Florida Yacht Group is not one of these companies as we only offer “limited charter” and superior maintenance. We don’t want you to be negatively impacted when you decide to sell your vessel so please leave “Charter” out of your LLC’s and vessel’s name. Most of our charter boats are better maintained than private ones and we want you to get the full benefit of this when it is time to sell your boat.
Yes, as long as you obtain your Florida Sales Tax Certificate at least 72 hours prior to closing on your vessel. If you apply for and obtain the certificate after closing the State will insist on payment of Sales Tax with no exceptions.
At least 72 hours prior to closing you must obtain your Florida Sales Tax Certificate or you will be required to pay up to $18,000 in Florida Sales Tax on your charter yacht purchase. We can do this for you but we need your LLC documents prior to submitting the paperwork. Please provide those LLC documents to our administrative/accounting office as soon as possible but minimally 72 hours prior to closing to save the $18,000.
Active Participation is a requirement by the IRS to qualify for some additional Tax Benefits. It means simply that you are actively involved and participating in your business. For example, a “Guaranteed Income Plan” where you just buy the boat and put it in a charter fleet and do nothing but collect a fixed payment each month is considered a passive investment. Passive losses may only be offset against other passive activities. Losses in a business you actively participate in can offset other income from stocks, salaries, etc. Most Charter Yacht Owners prefer to be actively involved for the additional benefits although passive participation still allows you to write off expenses up to the income and depreciate the vessel although the benefits are not as great.
In conjunction with an independent CPA, FYG has developed a simple 3-page checklist showing the many ways you can demonstrate active involvement in your business. Ask your broker for a copy and be sure to follow the instructions and complete as many items as you can and document your activities to demonstrate your active participation.
Absolutely. You can still buy a yacht for placement in our fleet or one of our affiliated charter companies in the Caribbean or the Med. To qualify for the IRS Tax savings you must be paying taxes in the USA, which you will be doing on your charter yacht income. USA law requires all charter boats to be documented by the USCG. To do this you must have a friend or relative who is a citizen be an officer of the company or establish a trust to hold ownership of the vessel. Other excellent alternatives for non-US citizens are the Lease-Purchase option, Fractional Option, or simply base your boat in the Bahamas, BVI, or one of our affiliate locations.
Yes, FYG hires an independent CPA to research the tax law, and tax court cases for charter yachts. People have been buying charter yachts for over 50 years. Sometimes they get audited. When they do, some pass their audit and others failed. Our CPA researched these court cases and when the client won, determined why they won and when they lost, determined what they did wrong. The results are found in a 14 page “White Paper” written by the CPA. It may be one of the most boring reads you’ll ever have but it sheds excellent insight into the proper way to set up and manage your charter yacht to meet all IRS guidelines and requirements. This report is available upon signing a confidentiality agreement, which your broker can provide. You must agree not to share this information with any other charter company.
Your broker can supply this information which also happens to be a vital part of demonstrating your proper due diligence to the IRS. You need to prove your charter yacht acquisition is based on a profit motive and not motivated simply by tax savings, which would be illegal.
You can buy whatever vessel you prefer but keep in mind the more cabins you have the more money it will charter for. Four cabins charter more frequently than three, which charter more frequently than two, etc.
FYG is happy to have you stay in our fleet for up to 10 years and in some cases longer. You have the right to leave at any time with 6 months notice and you must honor all outstanding charters booked on the boat. Most of our owners stay with us for all 10 years and buy then they are part of our family so a few stay even longer than that.
You can buy from another dealership but we offer our clients a 60-40 split on charter income instead of the usual 50-50 split. Over a ten-year period of time with that extra 10% you are much better off buying from FYG unless the other dealer is giving you the boat for free. Besides, FYG is the largest sailboat dealer network in North America and can always beat any dealer’s price and are required to do so by our BEST PRICE GUARANTEE POLICY. In some cases we have even lost money of the sale of a boat because we know we’ll make it back on charter revenue. We are serious about our Best Price Policy. If you don’t believe it, give us a try.
Charter companies and charterers prefer new boats but we will allow certain select used boats into our fleet if purchased through a FYG broker. If not purchased through a FYG broker an inspection fee is required and the boat must be brought up to FYG standards through the FYG service department so we know the work is done to code, our safety, and industry standards. The commission split on a used boat is 50-50 so if you plan to keep it in the fleet for a long time you may be better off buying a new boat because it will charter more and you’ll earn 60% instead of 50% (that’s a 20% raise) on each charter. Over a few years the savings could more than justify the added expense of a new purchase.