Looking at a Partnership Offer. What should I look for?

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FlyingElvii

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flyingElvii
Going to talk to a guy about buying his share of a partnership.
7 Shares, decent older aircraft at the best GA airport in the area.
Reasonable buy-in, and seemingly reasonable monthly/hourly costs for a 4-place. Not the most popular aircraft around, but probably appropriate for my skill level.

Never done this before, and could use some advice as to what to look for.
 
I would look very hard at how you (and others) get in and out of the deal. If you decide to leave, do the partners have to approve the person who buys your share? If a partner leaves, what are the rules (if any) around who he can sell to?

How do you apportion usage and expenses?

What happens when 4 of the other owners really, really want to install a new nav/com, but you're happy with the one you've got?
 
Also make sure you know all there is to know about the plane. Damage history, TT, SMOH, etc. You ARE buying (part of) a plane. That last part bit me a little in my current club. I wasnt exactly told *all* the facts. Make sure the scheduling system works. Does one guy seem to hog all the holidays or good weekends.

Good luck!
 
7 shares seems like a lot for one aircraft, but given the right group of guys it could work. Ask what they do when there are scheduling conflicts.
The posters above me also made some good points.
I talked to the A&P and asked if there was anything he SUGGESTED the group should do/fix at annual that they refuse to.
 
How much money do they have in reserve. Have they raided their maintenance fund to buy "cool" stuff. How many hours does the engine have on it. When things need fixin and overhaulin, is the money going to be there? Meet and talk to all the members, not just the guy selling his share. Check around the airport and talk to other people, "wadda ya know about N#####? Maybe someone here knows something, what's the airport and N#? Look at the books. Do they keep good records or is it a pile of paper in a shoe box? When members want out are they still liable for paying their fixed monthly expense dues? Is there a loan on the airplane? If so, how much longer before it's paid off?
 
Lots of good advice. Scheduling for 7 people seems like maybe a challenge. With 4 of us we each had a dedicated week every month.

Money in the bank and what monthly expenses cover, make sure it all adds up. I know a guy who bought into an SR20 or 22. A couple months later the case was discovered to have a non-repairable crack. New motor was ordered. Only a couple months after buy in he had to stroke a ~$10,000-12,000 check.
Thats a pretty bad and rare case. But it can happen.

If nothing major happens partnerships are a great way to share the costs of owning a plane.

good luck,
 
IIRC @AdamB Had a share in a TB21 with 7(?) other people but he was the only one that flew it. Worked out super well for him.
 
Are you purchasing an existing share? Or are they adding a position for you? With that many people, it could be more of a club than a partnership.

How are decisions handled (big and small)? How are disagreements in operations handled? Are there any organizational documents (partner agreement, corporate documents, bylaws, and such)? If a member wants out, how is that handled and what are his obligations until he is out?

Review the financial health and history of the organization. How much is in the reserves? Is it enough to handle a major expense like an engine or airframe repair without draining to near zero? How well do they pay the recurring bills? What are the recurring bills? If a member leaves, does he take 1/xth of the reserves with him or do the organizational documents describe a different disposition? What are the monthly dues and what do they cover? Is this enough to cover fixed costs plus routine maintenance and inspections? Would there be times that where the group would ask you to write a large check that you had not personally budgeted for? If a member doesn't pay his bill on time or at all, how is that situation handled?

What are the rules for out of town useage? Are you permitted to take a 7 day vacation that puts only low amount of flight hours on the clock? Or is there a minimum usage per day? How are holiday weekends and well known fly-in events such as AirVenture, Gastons, and 6Y9 apportioned?

How is the "corporate structure" set up? What is in place so that if another member causes a loss to property or people, you have some protection? What type of protection is this?

Review the insurance details. Is the aircraft properly valued to the insurance company or over/under valued? (over valuation is an issue @JCranford and I are dealing with in our club). If a claim is made, how much is the deductible and who is responsible for paying? (group? or the individual who caused the damage)
 
luvflyin said:
Yup. No joke, that's a plus.
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ChemGuy said:
Lots of good advice. Scheduling for 7 people seems like maybe a challenge. With 4 of us we each had a dedicated week every month.

Money in the bank and what monthly expenses cover, make sure it all adds up. I know a guy who bought into an SR20 or 22. A couple months later the case was discovered to have a non-repairable crack. New motor was ordered. Only a couple months after buy in he had to stroke a ~$10,000-12,000 check.
Thats a pretty bad and rare case. But it can happen.

If nothing major happens partnerships are a great way to share the costs of owning a plane.

good luck,
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Sounds like they are a few months after having to do just that. New engine, less than 75 hours on it.
 
Going to "talk to a man about an airplane" this evening. We'll see how it all falls out.

So far, it sounds good, early 80's aircraft, mid-low time, recently rebuilt engine, older partners, etc. But you can't beat that eyes-on first impression.
 
Are the other members current on their payments? Most partnerships success or failure depends on the ability to pay the bills by ALL the members.
 
7 seems like a lot, but if everyone is just doing hamburger runs, maybe about right.

You'll also want to consider the financial health of the other partners.

In our 3-way partnership, we purposefully don't keep overhaul or "extra" money in a shared account. When something happens, we all write a check.

Had a CAM start spalling after 400 hours or so a couple years back. That, plus some other "as long as we're here" items, and I'm writing a check for $8k...
 
coloradobluesky said:
Are the other members current on their payments? Most partnerships success or failure depends on the ability to pay the bills by ALL the members.
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Should added to my list:

Is the aircraft 100% paid for or on a note? If on a note, what does the banker want from you as a guarantee? If one or more of the existing partners default on payment, how much of the bag are you left holding?
 
dans2992 said:
In our 3-way partnership, we purposefully don't keep overhaul or "extra" money in a shared account. When something happens, we all write a check.
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If all partners are okay with that method, then it's perfectly okay... hopefully one of the others doesn't say, "I'll pay you February or my part of the hamburger today".

When I'm amusing myself about a small partnership, I am the sort that would rather pay a bit more each month and have a decent reserve built up. And declare that reserve part of the assets that I'm 1/xth owner of. Then if big expensive bill happens, the reserve can cover most if not all. But again, that's my thinking and YMMV.
 
AggieMike88 said:
If all partners are okay with that method, then it's perfectly okay... hopefully one of the others doesn't say, "I'll pay you February or my part of the hamburger today".

When I'm amusing myself about a small partnership, I am the sort that would rather pay a bit more each month and have a decent reserve built up. And declare that reserve part of the assets that I'm 1/xth owner of. Then if big expensive bill happens, the reserve can cover most if not all. But again, that's my thinking and YMMV.
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Yep. I can definitely see your point. I knew these guys quite a while before we did the deal and it was expressly stated upfront that if there's an issue, we fix it. There's a partnership agreement, and if someone doesn't pay, in theory their share can be encumbered and sold, with their amount due being debited. Of course, we've never had to try enforcing that!

Personally, I think the partnership "sweet spot" is 2-3 total shares. Any more and you start to lose more in scheduling than you gain in cost savings.
 
dans2992 said:
Personally, I think the partnership "sweet spot" is 2-3 total shares. Any more and you start to lose more in scheduling than you gain in cost savings
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I'd say 3 to 4, but it does depend on activity level.

@JCranford and I are in a group of 16 across 2 aircraft, and we have 3 that pay their dues on time, but haven't used the aircraft in at least 18 months. And the 4 or 5 more that fly less than 15-18 hours a year.
 
kyleb said:
I would look very hard at how you (and others) get in and out of the deal. If you decide to leave, do the partners have to approve the person who buys your share? If a partner leaves, what are the rules (if any) around who he can sell to?

How do you apportion usage and expenses?

What happens when 4 of the other owners really, really want to install a new nav/com, but you're happy with the one you've got?
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That question will come up soon, it appears. ADS-B WAAS is in the future planning.
 
FlyingElvii said:
That question will come up soon, it appears. ADS-B WAAS is in the future planning.
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Well, after looking at it, I'm more than intrigued.

Engine time is EXCELLENT (very recent OH), Radio stack is OK, but nothing to crow about. (WAAS upgrade will solve most of that issue.) IFR Certified, with works with future plans, LOTS of free schedule time. Partnership is 23 years old, still has 4 of the original partners, and has owned the plane since almost new. Logs seem good, but I know a good wrench monkey that can verify that for me. Some minor cosmetic issues, almost all interior trim.

All in all, it fits the needs, my skill level, budget, and it is near the house. Partner selling found an RV-8 share.
I'll speak with the Corp Prez later this weekend, and make up my mind, I think.
 
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FlyingElvii said:
Well, after looking at it, I'm more than intrigued.

Engine time is EXCELLENT (very recent OH), Radio stack is OK, but nothing to crow about. (WAAS upgrade will solve most of that issue.) IFR Certified, with works with future plans, LOTS of free schedule time. Partnership is 23 years old, still has 4 of the original partners, and has owned the plane since almost new. Logs seem good, but I know a good wrench monkey that can verify that for me. Some minor cosmetic issues, almost all interior trim.

All in all, it fits the needs, my skill level, budget, and it is near the house. Partner selling found an RV-8 share.
I'll speak with the Corp Prez later this weekend, and make up my mind, I think.
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Find out where the funds for the WAAS upgrade and future ADSB are coming from (I'm assuming it will all happen at the same time.) And their ideal time frame of getting it done. I'd hate for you to buy in and then have to foot a hefty avionics bill you weren't expecting.
 
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