Sunset view from the deck of a yacht.
If buying a yacht sounds complicated, well, it is. But the good news is that you can turn much of the job over to a support team.

How to Buy a Yacht

The task is much like assembling a jigsaw puzzle: all the pieces must fit together perfectly. Here’s help.

You might think that all you need to buy a yacht is a loaded and cocked checkbook. That may be the case if you have a relatively modest appetite, but when you’re shopping for yachts larger than, say, 80 feet, the purchase process becomes challenging.

Among the things you need to consider are where you’ll keep your vessel, in which country you’ll register it and how you’ll finance it. You’ll encounter several layers of international rules that govern the construction, maintenance and crew, and you’ll face another set of regulations if you choose to charter the yacht to recoup some of your costs.

Start by deciding on the type of yacht that interests you (see below). Once you’ve done that, your next task is to find a yacht broker (see below). This is essential—anyone trying to buy a large yacht without a broker deserves his or her fate.

Your broker will help you establish a realistic budget that factors in the costs of crew, insurance and maintenance. The broker will also assemble the support team that will make your purchase successful. In the team, you’ll probably have a marine surveyor, a wealth-management adviser, a maritime attorney and a crew agent. 

The survey. A marine survey, for which the buyer pays, is much like a house inspection in real estate: a qualified individual or team goes through the yacht, evaluating everything from the quality of the paint to the state of the engines. 

Your finance company as well as potential insurers will require the report from this survey, which can run 200 pages for larger yachts. It will detail every defect, and can therefore be used as a bargaining tool. 

It’s wise to have representatives for both buyer and seller present during the inspection to discuss each finding as it surfaces. Some yachts will show the results of deferred maintenance, and repair costs should be factored into the selling price.

Your broker can recommend a surveyor, who will likely belong to one of several marine survey societies. Check to make sure that both your insurer and your bank approve the choice. 

The flag. You’ll see a country listed below each boat’s name on the sterns of yachts. Casual observers probably assume that’s their homeport but, in fact, it’s the country where the yacht is registered. The vessel is “flagged” in that country and flies its national ensign.

Each country has its own rules for yachts flying its flag. For a U.S.-flagged yacht, for example, the captain and crew must all be American citizens. Each flag nation also chooses the rules under which each yacht must be built. For a U.S.-flagged yacht, every cabin must have two legitimate exits in case of an emergency. For other flag nations, one door plus a large porthole with a hammer might suffice. The flag chosen for each yacht will also affect many other issues, such as taxation, financing, insurance, liability, the option to charter and even the number of boardings by the authorities. 

There are three types of flags. The “white list” includes flag states that generally maintain the highest standards, and yachts on this list tend to be left alone by officials. Yachts with flags on the “grey” or “black” lists can expect more inspections and may even be barred from some ports.

“Flag selection is serious business,” says maritime attorney Michael T. Moore. “Don’t buy into the sales pitch of an obscure country looking to create some cash flow with an offshore registry.” 

Finance. Financing a megayacht isn’t like buying a runabout with a bank loan. It’s a complex endeavor, and savvy purchasers involve their wealth-management advisers early in the game. 

There are several opportunities to maintain your liquidity while buying your yacht. The obvious method is with a loan secured by a preferred ship mortgage. But you can also set up the yacht to serve as collateral for a revolving line of credit to invest in other business ventures.

A portfolio loan is an advance based on substantial securities holdings that funds the yacht without requiring a mortgage on it, which therefore reduces closing costs. The downside is that if the portfolio declines in value, the bank may ask for added collateral.

Motivated sellers often provide flexible financing for large yachts, offering lower interest or down payment than banks, and a seller may even finance with a mortgage against real estate, giving you the opportunity to use the yacht as leverage for business or investment strategies. 

Corporate structure. “It’s foolhardy not to hold a vessel in a corporate structure,” says Moore. “No right-thinking person exposes his net worth to unlimited liability if he can avoid it.” 

But other pieces of the jigsaw come into play. The flag state chosen to register your yacht will have considerable impact on your offshore corporation in many ways: taxation, governmental control and privacy. Remember that the flag establishes the laws under which the yacht conducts business, so consider the effect of those laws on all aspects of your business structure.

Docking. Unlike the runabout on a trailer in a backyard, a 150-footer can’t be parked just anywhere. Large yachts require an infrastructure that includes ample electricity and fuel plus support services such as maintenance, security and skilled tradespeople. Even the depth of water matters: no matter how much you like a marina, if the water depth is eight feet and your yacht requires 10, it’s not going to work.

Dockage also brings the ogre of taxation, since many U.S. states levy property tax on any yacht that remains in “its” waters for more than a few months, regardless of where the vessel  is flagged. It’s for this reason that many yachts take regular cruises offshore before returning to their marina to restart the tax clock.

Insurance. Just as important as bringing your financial team into the project early is finding someone who is experienced in the intricacies of large-yacht insurance. 

Basic coverage is fairly straightforward, although it’s important to understand all the clauses. For example, coverage for large vessels usually excludes much of the Caribbean during hurricane season, which is why many yachts leave there in early summer, with most headed for the Mediterranean until November. 

Water toys—including everything from jet skis to water slides to even mini-submarines—have brought new liability risks to yacht owners and this is one reason to have good insurance coverage. (It’s also another reason to have the yacht owned by a limited-liability corporation.) A yacht guest who climbs aboard a 60-miles-per-hour jet ski after a few hours in the sun with some rum punches presents the kind of liability risk that makes insurance agents’ toes curl. 

Crew. Even if you’re an experienced yachtsman, you’ll need a crew, if only to  maintain the vessel. Smaller yachts may have just a couple, while larger yachts may have staffs of a dozen or more. A used yacht will usually come with a captain and crew who will be on their best behavior in order to keep their jobs. It’s generally a good idea to keep them aboard at least initially as you become familiar with the yacht. If you need crew, you can turn to crew agencies, which can help you find qualified and properly licensed candidates. 

“The factor that most ensures happy ownership of a large yacht is good crew,” says Rupert Connor of Luxury Yacht Group. “There is no point buying one of the finest superyachts in the world if you do not put a first-rate crew onboard. Many owners buy great yachts, crew them badly, and then wonder why their cruising and charter objectives are not achieved.”

If buying a yacht sounds complicated, well, it is. But the good news is that you can turn much of the job over to a support team. Do that and you may soon be sitting comfortably on deck, champagne in hand, pondering the horizon and where you want your captain to dock next.

Chris Caswell is a former editor of Yachting magazine. He reviewed Tesla’s Model S car for our October/November 2014 issue.

Choosing a Broker

“Find a broker who knows the yachts in the category you want,” says Mark Elliott, a former yacht captain and a broker with International Yacht Collection. “A good broker follows the ­market closely and not only knows the yachts already for sale but is privy to ones not yet listed.”

Ask friends, colleagues, bankers and attorneys to ­recommend brokers. If you’re interested in a yacht from a specific builder, ask that builder for names of brokers familiar with its brand. Walk the docks at boat shows, where you can meet and interview brokers.

Your broker should belong to one of the major associations, such as MYBA (Mediterranean Yacht Brokers Association) or FYBA (Florida Yacht Brokers Association) and should have references from clients. The broker should also be able to provide a list of yachts in your category that he or she has sold within the past year.—C.C.

Choosing a Yacht
A yacht perfect for a weekend run to Nantucket with friends probably won’t be suitable for long-range cruising. The first decision is sail or power, of course. For both, there are yachts that regularly spend their summers in the Mediterranean and winters in the Caribbean and have no problem crossing oceans. There are expedition yachts for venturing into the far corners of the world that are tough and self-sufficient. And there are yachts designed for fair-weather outings and entertaining dockside.

You need to be brutally honest about what you expect from a yacht. And you need to consider how you’ll use it. How many guests you’ll take will dictate the number of staterooms you’ll need. More deck area will allow for al fresco entertaining, and professional galleys will make it possible to produce gourmet cuisine.

Consider your needs carefully. Remember, a great deal on the wrong boat is actually a bad deal.—C.C.