You will hear it said that boating makes little or no financial sense. Boats require a large initial expenditure, continue to drain their owner's pockets for annual maintenance and in most cases the vessel is depreciating all the while.

While it may be impossible to dodge these costs, it is possible to structure them differently. That is the concept behind fractional ownership, an arrangement in which several owners form a Limited Liability Corporation (LLC) and share a boat, each using it several weeks during the boating season.

The arrangement has caught on in recent years, allowing owners to pay for only the time they use, buy a larger boat than they might otherwise afford and "try on" different vessels until they determine their needs.

For someone who has money to invest, but isn't sure yet about boating as a long-term commitment, fractional ownership may be an attractive option that occupies the middle ground between renting and owning.LONG ISLAND YACHT SHAREThis Sunseeker has a Share Price of $195,000 Plus $800 per Month. It's pricey, but a lot less than what it costs to own the boat by yourself.

"As long as they are realistic and well-informed about the total costs," says William Mirguet, a well-known consultant to companies in the fractional yachting business.

HOW IT WORKS

Fractional ownership programs come in many shapes and sizes, and they can be applied to boats ranging from large express cruisers to superyachts. In a typical fractional program, a yacht is offered to a limited number of part-owners, anywhere from two to 10, depending on the size of the boat. A fixed investment, proportional to the owners' share in the boat, is the typical starting point.

For example, if a yacht costs $1.2 million and there are four "shares" in the boat, the initial investment would be $300,000. Some companies will add management fees on top of that price, and there will always be additional fees paid monthly to cover expenses for fuel and other incidentals. Some companies will include all the other basic expenses – captain, dockage, insurance and routine maintenance – in the basic share price.

Mirguet says these programs have great potential to suit the needs of a certain segment of the boating market. "It's a good way for some people to test the water," says Mirguet. "It's also a great way to get into a bigger boat than you might otherwise be able to afford."

That is because you are essentially paying only for the time you use. If you own a one-quarter share, you will basically have the boat for one-quarter of the year, minus whatever time the management company schedules for routine maintenance and relocation. Most bigger boats are moved from a winter location to a summer location under these programs.

At the extreme end of the financial scale, there are some fractional ownership programs that claim to have boats that are 200 feet or larger. Mirguet says he knows of several superyachts just under 164 feet that are that are fractionalized. There are many more in the 80 to 100 foot category.

Another option is to participate in a fractional yachting program such as the one offered by The Moorings, where the emphasis is on access to a fleet of well-known, well-maintained boats in specific vacation destinations, such as the Caribbean or Mediterranean.

WINDPATH SAILINGWindPath Sailing's Catalina 387. Fractional programs are available for both power boats and sailboats. Fractional programs also typically have a time limit. Most stipulate that after a set period – typically 3-5 years – the yacht will be put up for sale and the proceeds distributed to the shareholders. At that point, the shareholders can decide whether to reinvest in a new boat or walk away. In most arrangements, the boat is put on the market at the end of the term, and there is no guarantee how long it might take to sell or what the final sales price might be, Mirguet says.

DUE DILIGANCE

Fractional ownership does not necessarily make buying easier. Mirguet says an investor must perform some due diligence – and not just on the fractional program. Mirguet says too many fractional participants don't understand anything at all about boating and the expenses involved, and have unrealistic expectations.

"You can't start by looking at the fractional ownership program," Mirguet says. "You have to really look into whole-ownership first; understand what it costs to own a boat on your own. Then you will have a better understanding of the expenses involved – maintenance, repairs, dockage, insurance and so forth – that you will still have to pay for in the fractional program."

He also suggests evaluating the people you do business with. "You have to have confidence in the people who are running the program, and you have to try to get to know them a little," he says. "If they seem reputable; if they know what they're doing and if they have real testimonials from prior clients and you get a good vibe from them," that's important, says Mirguet. Unfortunately, there are still some fly-by-night operators out there who throw up a website and "try to convince you they are for real," he says.

Mirguet says there are many other things to consider, not the least of which are boat and location. "Many potential investors don't realize that most of these larger yachts change location from season to season," says Mirguet. He says you have to understand something about the specific boat you will be getting, too. Mirguet says some owners are enamored of a specific boat. "They are buying into this special boat for the prestige of it," he says. "They want to be able to say they own this boat."

In a typical fractional ownership program, the LLC owns the boat so a shareholder will not be able to take a "second-home" interest tax deduction on the loan that might have been available in a traditional purchase. That may or may not make a difference depending on your tax picture.MIRACLE YACHTSA Cheoy Lee 72 Available from Miracle Yachts for a Share Price of $240,000. Buying this much boat in good shape on the used market would cost far more.

For boaters just beginning to get their feet wet, Mirguet recommends a boat club with a relatively modest monthly fee, so that a potential boater can see how the lifestyle fits.

One well-known example is the Freedom Boat Club, which has fleets of boats based in many cities both in the U.S. and abroad. It's largely a rental opportunity, but the fleet will typically include some larger boats, including runabouts, ski and fishing boats, and even cruisers up 30 feet. Club members typically pay a monthly fee, for which they are guaranteed access to a boat in the fleet.

Mirguet says the future of the fractional yachting industry seems positive, but that many companies that offer fractional programs don't have adequate marketing budgets.

"There needs to be more visibility of the industry in general," he said. "People need to know what's out there and what options are available."