Buying a share of a plane.

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Mafoo

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Mafoo
So as I look around for a plane, my CFI has told me about a share he is setting up.

Looks like 5 or so people getting together, to buy a 182 RG.

What do you guys think of partnerships? In your experience, is it worth it, or more headache then anything else?

My biggest concern, is I want to fly often, and worry the plane will not be available much. Is that a valid concern?
 
valid concern, especially since one partner sounds like he is an instructor.
http://www.aopa.org/members/files/guides/multiple.html

lots of concerns to work out: storage, costs (fixed and variable) upgrades, insurance, etc.
The above referenced article is a good start. Many partnerships are very appealing and offer substantial cost savings. On the other hand, many partnerships go sour. Key is a good agreement up front and an established 'out' plan should a member want to leave. I think the agreement could easily specify a number of permitted hours a week/month with additional flight time if not reserved.

I'd be very cautious about a partnership with a plane used for training.
 
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Mafoo said:
So as I look around for a plane, my CFI has told me about a share he is setting up.

Looks like 5 or so people getting together, to buy a 182 RG.

What do you guys think of partnerships? In your experience, is it worth it, or more headache then anything else?

My biggest concern, is I want to fly often, and worry the plane will not be available much. Is that a valid concern?
Click to expand...

Yes your last sentence is the major concern. You won't have the freedom of using the aircraft anytime you want. You won't know how the aircraft is treated by the other owners. When the other owners slowly get out of the deal because of finances or moving who's left holding the bag?

I think a flight school lease back is the wiser choice. Generally they are paying for everything and you might break even at the end of the month. Then when your done with it sell it and possibly make a profit. Also good if you just don't have much time to worry about maintenance issues. The school will take care of it and most minor stuff they'll cover.

To me I wouldn't do either one. There is nothing like owning your aircraft outright. I go where I want when I want. I'm in tune with the health of my aircraft because I'm always involved with it. It requires more of your time but the flexibility and knowing how my plane is being operated is worth it.
 
It can be great or it can be a nightmare. I love my co-ownership setup, but some people would hate it.

Don't sign anything you don't understand, and make sure you know exactly what insurance covers, is it you or the entity that owns the aircraft?... For example.
 
Something else you should do is ask to see the scheduling system. Then pretend you are already in the partnership, and choose some dates that you would like to use the plane. See if those days are available. Don't take their word for it, ask to sit in front of what ever system they use and check it out for yourself. Do you want to take the plane for long weekends? See how that works out in their schedule.

In my case, I tried really hard to find a partnership or a club near where I live and it didn't work out for the number of hours that I want to fly a year and wanting to have access for 3-4 days at a time.

As for a CFI being a member, that sounds like a problem. I am visualizing a schedule pockmarked with lots of little two hour sessions, and the rest of the members having to squeeze in between all of them with long rentals having to be planned far in advance.

But every case is different. For those people who find a club or partnership that works for them, it is definitely a great way to fly and share the expense.
 
Velocity173 said:
Yes your last sentence is the major concern. You won't have the freedom of using the aircraft anytime you want. You won't know how the aircraft is treated by the other owners. When the other owners slowly get out of the deal because of finances or moving who's left holding the bag?

I think a flight school lease back is the wiser choice. Generally they are paying for everything and you might break even at the end of the month. Then when your done with it sell it and possibly make a profit. Also good if you just don't have much time to worry about maintenance issues. The school will take care of it and most minor stuff they'll cover.

To me I wouldn't do either one. There is nothing like owning your aircraft outright. I go where I want when I want. I'm in tune with the health of my aircraft because I'm always involved with it. It requires more of your time but the flexibility and knowing how my plane is being operated is worth it.
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I think a share would be VERY cool if you had a close friend or two that shared your similar goals. In fact I have a friend who has mentioned having a share in the future if we both ever get our training completed. Even though it's jumping the gun we both have expressed interest in a 182 or something as capable.
 
BTDT. Like any relationship it all depends on the people involved. It is impossible to give any meaningful advice because of that very fact. With that many partners it would seem imperative that a tightly controlled schedule system be employed so each partner could plan their flying with some degree of certainty.
 
Badger said:
valid concern, especially since one partner sounds like he is an instructor.
http://www.aopa.org/members/files/guides/multiple.html

lots of concerns to work out: storage, costs (fixed and variable) upgrades, insurance, etc.
The above referenced article is a good start. Many partnerships are very appealing and offer substantial cost savings. On the other hand, many partnerships go sour. Key is a good agreement up front and an established 'out' plan should a member want to leave. I think the agreement could easily specify a number of permitted hours a week/month with additional flight time if not reserved.

I'd be very cautious about a partnership with a plane used for training.
Click to expand...

Thanks for that link... This worries me:

Q: Can a co-owner be held liable for damages if another co-owner is involved in a mishap?
A: Generally, yes. As an aircraft owner, you may be held liable for any aircraft operations regardless of who is flying the aircraft.
 
Threefingeredjack said:
With that many partners it would seem imperative that a tightly controlled schedule system be employed so each partner could plan their flying with some degree of certainty.
Click to expand...

Right now, the plan is to do some sort of weighted list. So if I am on the top, and there is a conflict, I can trump the other partner, and I then end up going to the bottom.

It's definitely not my first choice. I would rather own the plane outright :)
 
Mafoo said:
Thanks for that link... This worries me:

Q: Can a co-owner be held liable for damages if another co-owner is involved in a mishap?
Click to expand...

Not if the aircraft is in an LLC in most states. Yours may vary, so talk to an attorney.

First, you do not want to be in a partnership with a CFI. He (or she) will fly way more than you, so you're just subsidizing a work expense. You do want to be in a partnership with an A&P if you can manage it. Save bucks on labor.

5 sounds like too many for a partnership on one aircraft. I suspect the insurance rates will be quite high. I've found three to be the magic number myself.
 
Insurance and deal structure are your friends regarding financial exposure.

Scheduling priorities can be established for training vs. non-training usage. CFI cannot be given carte blanche access to the book. If it's an RG, the training will probably be other than PPL.

Sharing fixed costs is a huge advantage in any ownership deal.

The percentage of airplanes that are over-utiilized is infinitesimally small. After the new wears off, the usage will shrink dramatically.

I've been a co-owner in 20+ deals since 1964 and still have one that's 30+ years old. As previously stated, the people involved are the key to success.

Bottom line is that all of the problems can be addressed.

Mafoo said:
Thanks for that link... This worries me:

Q: Can a co-owner be held liable for damages if another co-owner is involved in a mishap?
A: Generally, yes. As an aircraft owner, you may be held liable for any aircraft operations regardless of who is flying the aircraft.
Click to expand...
 
steingar said:
Not if the aircraft is in an LLC in most states. Yours may vary, so talk to an attorney.

First, you do not want to be in a partnership with a CFI. He (or she) will fly way more than you, so you're just subsidizing a work expense. You do want to be in a partnership with an A&P if you can manage it. Save bucks on labor.

5 sounds like too many for a partnership on one aircraft. I suspect the insurance rates will be quite high. I've found three to be the magic number myself.
Click to expand...

I'm in a 5 way partnership with a CFI. The plane is not used for instructing and the insurance is not a problem as 5 is the magic number between partners and a club.
 
The CFI will not be an owner. He is just setting it up. He also happens to be part owner in the flight school, and the reason he is setting up the co-ownership, is so the school can use it on a lease back kind of deal. The other owner of the flight school (not a CFI) will be one of the owners.

Owners will always take priority over the school, but the school will help pay for a lot of the fixed costs of the aircraft.

I think one of the owners is an A&P, but not sure. Lots of details to find out about, because this is really a backup option to owning my own aircraft. I want to exhaust all options before make a decision on something.
 
It sounds to me like there are too many people involved, as well as the flight school's use, for you to really enjoy the benefits of ownership. I co-own a plane (actually, an LLC that owns the plane) with 2 other folks and it seems like a great number of people. The plane is pretty much always available if I want it, and if there's a date conflict it's a small enough group that something can be worked out.

It sounds (to me) like your situation will be more akin to renting but with extra work and possibly extra expenses thrown in too. Ask yourself -- what am I getting out of this arrangement? For me that was availability for frequent weekend/holiday trips, knowledge of who flies the plane, and directly control over maintenance and upgrades. With 5 co-owners leasing a plane back to a flight school I don't think those advantages would exist and I personally would choose to pass.
 
dukeblue219 said:
It sounds (to me) like your situation will be more akin to renting but with extra work and possibly extra expenses thrown in too. Ask yourself -- what am I getting out of this arrangement? For me that was availability for frequent weekend/holiday trips, knowledge of who flies the plane, and directly control over maintenance and upgrades. With 5 co-owners leasing a plane back to a flight school I don't think those advantages would exist and I personally would choose to pass.
Click to expand...

Yea, all good points.
 
Everyone has real good points. When I thought about buying my plane, I looked at it from three viewpoints. Single owner, partnership, and leaseback. I ultimately, and quite quickly, decided on sole ownership. There are disadvantages and advantages to each type or even combinations. For me it was a real easy decision, when I looked at my reason for wanting to own my own plane.. I have a chaotic schedule and can not predetermine with any certainty when I can and cannot fly. Not a good recipe for a successful partnership. I ultimately decided against lease back because I have seen the treatment that flight school planes are given, and it is not too pretty. I felt that the economic advantages of the lease back were not worth it. I am very happy with my decision.

If I were you, I would look at my reasons for wanting to own a plane and see which scenario fits your situation best.

Good luck.

Doug
 
steingar said:
Not if the aircraft is in an LLC in most states. Yours may vary, so talk to an attorney.

First, you do not want to be in a partnership with a CFI. He (or she) will fly way more than you, so you're just subsidizing a work expense. You do want to be in a partnership with an A&P if you can manage it. Save bucks on labor.

5 sounds like too many for a partnership on one aircraft. I suspect the insurance rates will be quite high. I've found three to be the magic number myself.
Click to expand...
I am trying not to get off on a tangent, but when you put the aircraft into the LLC can you deduct expenses from person taxes? I assume that the LLC will never "Make" a profit so is it ok that the LLC shows a lose every year. I know many have done it, but I cant see the IRS liking the idea.
 
Now that you've added that it'll be on leaseback. I'd walk. Rental planes are treated like rental cars.
 
I would never put an airplane on leaseback, ever. It raises the insurance to hellacious levels, and your airplane gets treated like garbage by CFIs and renters alike. I remember selling what happened to the leasebacks at my airport. That isn't happening to any aircraft of mine, ever.
 
steingar said:
I would never put an airplane on leaseback, ever. It raises the insurance to hellacious levels, and your airplane gets treated like garbage by CFIs and renters alike. I remember selling what happened to the leasebacks at my airport. That isn't happening to any aircraft of mine, ever.
Click to expand...

Yea, you kind of lose the feeling of ownership a little. Feels like your renting at a reduced rate.
 
In terms of operations, this sounds like being a renter who pays a share of the ownership expenses in return for preferential scheduling.
 
steingar said:
I would never put an airplane on leaseback, ever. It raises the insurance to hellacious levels, and your airplane gets treated like garbage by CFIs and renters alike. I remember selling what happened to the leasebacks at my airport. That isn't happening to any aircraft of mine, ever.
Click to expand...

+1

I feel the same way
 
flyingmoose said:
I am trying not to get off on a tangent, but when you put the aircraft into the LLC can you deduct expenses from person taxes? I assume that the LLC will never "Make" a profit so is it ok that the LLC shows a lose every year. I know many have done it, but I cant see the IRS liking the idea.
Click to expand...

I believe the short answer is: Not if you're still flying it for personal use, whether you "rent" it from the LLC or not.

.... but I'm not even close to being a lawyer or tax professional ...
 
Tax consequences are typically a pass-through to the owners.

flyingmoose said:
I am trying not to get off on a tangent, but when you put the aircraft into the LLC can you deduct expenses from person taxes? I assume that the LLC will never "Make" a profit so is it ok that the LLC shows a lose every year. I know many have done it, but I cant see the IRS liking the idea.
Click to expand...
 
I've been in two-, three, and four-way partnerships. I would go over three again. It is the "sweet spot" for lowest cost with fewest hassles. Two-way is better but the plane will sit idle A LOT after the first year unless you're using it regularly for business travel.
 
We have four co-owners on a 2007 DA40XL. We formed an LLC to own it. We have a rotating "priority pilot" schedule in which each pilot gets a week (Tues-Mon) to have right of first refusal. We horse trade days all the time and have never had a conflict. Our LLC has an article that requires sale of the airplane after 3 years unless all agree to extend it. We each paid cash for our shares so there is no note. All of us are instrument rated and the insurance is very reasonable. We do not allow it to be used for PPL instruction. Use in a school is a no-go for us. We even excluded airplanes used in schools when we went looking for one to buy.

We each pay $375/mo to cover fixed costs and $30/tach-hr dry for variable costs. The scheduling, money paid and owed, and maintenance squawks are managed with an online system called ShareZen.

After the novelty of ownership wears off you will see that scheduling conflicts are practically non-existent, even with four partners.

Critical advice: hire the best aviation lawyer you can find in your area. Every penny you pay to them will be worth it's weight in gold.

Co-ownership of a low utilization asset as valuable as an airplane makes more sense than sole ownership for most of us working stiffs. It allows us to buy way more airplane than we could alone and all the costs of ownership are shared. I fly our airplane as much as I would one that I owned solo and my partners are all the same.
 
DrMack said:
We have four co-owners on a 2007 DA40XL. We formed an LLC to own it. We have a rotating "priority pilot" schedule in which each pilot gets a week (Tues-Mon) to have right of first refusal. We horse trade days all the time and have never had a conflict. Our LLC has an article that requires sale of the airplane after 3 years unless all agree to extend it. We each paid cash for our shares so there is no note. All of us are instrument rated and the insurance is very reasonable. We do not allow it to be used for PPL instruction. Use in a school is a no-go for us. We even excluded airplanes used in schools when we went looking for one to buy.

We each pay $375/mo to cover fixed costs and $30/tach-hr dry for variable costs. The scheduling, money paid and owed, and maintenance squawks are managed with an online system called ShareZen.

After the novelty of ownership wears off you will see that scheduling conflicts are practically non-existent, even with four partners.

Critical advice: hire the best aviation lawyer you can find in your area. Every penny you pay to them will be worth it's weight in gold.

Co-ownership of a low utilization asset as valuable as an airplane makes more sense than sole ownership for most of us working stiffs. It allows us to buy way more airplane than we could alone and all the costs of ownership are shared. I fly our airplane as much as I would one that I owned solo and my partners are all the same.
Click to expand...

Now that's the way to do a co-ownership. You guys planned well in setting this up. If I could get in a group that organized the ownership like that I'd think about it. I guess like you said, get a good aviation lawyer and with everything in writing you can't go wrong. :wink2:
 
bbchien said:
Inspect the partnership agreement!
Click to expand...

This is the key thing. And Sheldon Cooper has the right idea.

All major items, from the easy/simple to the oddball/difficult to the "may only happen in a million years" should be covered in the agreement.

Hopefully the oddball and million year stuff never comes up, but when it does, you guys have already addressed what will happen before the stress of the event occurs and someone's feelings or opinions get stepped on.

It also makes dealing with the financial issues much simpler.


Come to think of it, we might be a happier culture if we would adopt the same approach to marriage... ;)
 
DrMack said:
Our LLC has an article that requires sale of the airplane after 3 years unless all agree to extend it.
Click to expand...

This is the first I have heard of this interesting idea... Care to share the thinking about this?

PS. If that aviation lawyer is in DFW, PM me his name for addition to my rolodex.
 
wabower said:
Tax consequences are typically a pass-through to the owners.
Click to expand...

Just like a sole-proprietorship right? But I am sure that I am missing something here. The LLC is a business entity which can either be profitable or not. Maybe I should start a new thread about this topic. I just don't see how it's being done.


Sent from my iPad using Tapatalk HD
 
LLC is usually a pass-through entity taxed as a partnership. If it's a sole owner LLC, with no employees, the IRS now assigns the individual's SSN as the LLC's tax ID.
flyingmoose said:
Just like a sole-proprietorship right? But I am sure that I am missing something here. The LLC is a business entity which can either be profitable or not. Maybe I should start a new thread about this topic. I just don't see how it's being done.


Sent from my iPad using Tapatalk HD
Click to expand...
 
For those of you looking into this and wanting to write off business expenses, don't forget that some states levy a property tax on planes if used for business purposes...That was a minor little detail that was not mentioned to me when I bought a plane. :rolleyes:
 
I wouldnt buy in on a deal like that, but would pay dues like you would expect out of a club. Why give them 1/5 purchase price if someone can come off the street and rent "your" plane?
 
Yep, and in TX it's not allocable based on percentage of business use. You're either fish or fowl.

Gubbins said:
For those of you looking into this and wanting to write off business expenses, don't forget that some states levy a property tax on planes if used for business purposes...That was a minor little detail that was not mentioned to me when I bought a plane. :rolleyes:
Click to expand...
 
Mafoo said:
Owners will always take priority over the school, but the school will help pay for a lot of the fixed costs of the aircraft.
Click to expand...

I don't see how this could possibly work out for everyone. If a half dozen renters have lessons over the weekend and one of the owners decides he wants to go somewhere on that Friday, does he take priority? I am in a 4 person partnership and it works great for me. I am also not opposed to doing a lease back as a business investment. Mixing the two sounds like a bad idea.

Ryan
 
n12365 said:
I don't see how this could possibly work out for everyone. If a half dozen renters have lessons over the weekend and one of the owners decides he wants to go somewhere on that Friday, does he take priority? I am in a 4 person partnership and it works great for me. I am also not opposed to doing a lease back as a business investment. Mixing the two sounds like a bad idea.

Ryan
Click to expand...

Well, this plane would only be used for a commercial or CFII training, and where we live, that's not many people. Also, the owner of the flight school will be a partner, so if I have a conflict with him, he will just take a school plane, and he will offer up the school planes at cost if we have a conflict.

So there won't ever be a case where 6 people in a weekend get bumped, and I am sure there will be some sort of notice required (like 12 hours), but yea, they get bumped.

I went out the other day to start the 172, and it would not turn over. They had to replace the starter, and everyone with a lesson for the next two days got bumped. No notice for the guy flying after me (even less notice for me).

No different then that.
 
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