What About Fractional Ownership?
February 5th, 2021 by team
by B.J. Porter (Contributing Editor)
Fractional ownership is the idea that you buy a stake in a boat to share with someone else, then you share ownership expenses and usage of the boat. It’s not a new concept – friends and family have been sharing ownerships as partners for years. What is newer is the idea of a third party management company setting up a partnership with strangers.
What it is not
Fractional ownership isn’t like a time-share – you own an actual piece of the boat, whereas in a time-share you own a right to use the underlying asset but don’t own it.
It isn’t a charter. Though some charter companies offer fractional ownership in charter boats, you will own your share of the boat. In the cast of charter companies, they will charter the boat when the owners aren’t using it.
The premier advantage to a fractional ownership is you can get ownership rights to a larger boat for a fraction of the cost. A 25% share in a $400,000 boat costs $100,000 to buy into, and your annual maintenance will be a quarter of what a full owner pays.
Most fractional ownership companies also deal with all boat maintenance. This saves a ton of headaches. You still have to pay for it, and it costs a little more for the servicing, but you will never have to bother with it.
What you get is less cost for the use of a boat than owning it yourself, and fewer headaches if all you have to do is pay a monthly maintenance fee instead of dealing with the headaches yourself.
Fractional ownership is not without a few caveats. You’re making a substantial investment, and it pays to know that it will be all that you expect it to be.
Sharing with Strangers
Your boat is like a second home. You set the decor, pick the dishes, the color of the cushions, and what you want hanging in the saloon. When you come back to her on Friday, everything is the same as it was when you got home the prior weekend. And she’s always there when you have a few spare hours.
Sharing a boat with someone you know, you can compromise. But sharing a boat with a stranger, you’re likely to have little if any input or control into how the boat is set up and maintained. And you’re coordinating a usage schedule with others.
You Only Get a Share of the Time
If you buy 25% of the boat, you get 25% of the boat’s time. If you live somewhere with year-round sailing, that’s less of an issue. But if your sailing season is four months long in a place like New England, you’re only going to be getting one weekend or week per month for a fairly short time.
Most fractional partnerships allow for last minute use of unclaimed time, but you can’t always count on that since you won’t know your partner isn’t using it until the day before. And one of your other partners may beat you to the punch.
While many partnerships make allowances for bad weather, learn the policy before you sign. If you lose a couple of your slots when it’s not safe to sail, it’s good to know there’s a way to recoup it.
The limited usage of the boat is an advantage to someone who doesn’t have time to boat every weekend, though. So it’s not always a bad thing.
Fractional Charter Boats
Several charter companies offer fractional partnerships on charter boats. If you charter one or more times per year, these may make some sense for you.
The typical charter arrangement has you (the owner) purchase the boat, while the charter company maintains it. They typically cover maintenance and may also cover insurance and other operational expenses. They rent the boat, and pay you a share of the income.
While it’s not really an investment, it is a way to buffer the costs of owning a boat in a nice, warm place while someone watches and maintains it for you. And you may do better than break even.
A fractional charter is a similar arrangement, except you go in with other strangers on the charter boat. All the benefits of the program are shared proportionally. If you charter a lot, a fractional charter may have some appeal, though sailing the same boat may limit you to one primary cruising ground unless the charter company moves the fleet.
Is Fractional Ownership for You?
That’s a question only you can answer, of course. But if you don’t see yourself using a boat every weekend and you can coexist with other people using your boat, it may be a good way to get on the water for a lot less money.