Financing for buying into partnership

[Njonl]

I'm looking at buying into a 182. The owner of the airplane has been in a partnership before, but the previous partner moved on. It would be a 50/50 partnership, so I'm needing 50% of the planes value to buy in. It's an older 182, but I'm guessing the value will be somewhere in the $50K-$60K range. That is a substantial chunk of cash up front. Are there banks that will finance that as an aviation loan? Or would I be needing to go the personal loan route? I'm just wondering what my options are here. It would be an excellent partnership as the owner is meticulous with the maintenance and maybe uses the plane 30 hrs a year. Any input is welcomed! Thanks!

 

[DJTorrente]

First, many here will advise you against borrowing to pay for a discretionary item like a personal aircraft.

Beyond that, yes, there are many lenders that make aircraft purchase loans. Your problem there is that the lender will always want a lien on the entire aircraft, including your partner's half, to cover the loan should you default (your half interest is far less marketable and valuable). If I were in your partner's shoes' that would be a deal breaker, but maybe not.

You're probably best off looking to a personal loan if you can find one in sufficient amount at a rate you're willing to pay. If you have any significant equity in your home, a HELOC will probably have a more attractive rate (caveats about borrowing for toys apply here as well, particularly with your house as collateral).

 

[Van Johnston]

If I understand the situation, the current owner owns 100%, and you are looking at buying 50% from him. Is that right?

If that is the case, see if he will provide you seller financing.

 

[AggieMike88]

If that is the case, see if he will provide you seller financing.

I'd ask about that... any lending institution is going to want something as collateral, and I doubt the current owner will permit a lien against the aircraft.

And before you commit any money to the current 100% owner, ask for, review, have your aviation lawyer review, a well written co-owner financial agreement and Joint Operation Agreement.

You both need to be more than crystal clear how all things from the dirt simple (who sweeps the floor) to the outright insane (he passes away, what happens to your money or his shares?) affect the two of you. Being over the top on the list of items is a good thing. It might look like too much now, but having a "Sheldon Cooper Roommate Agreement" level of a contract from the get go can solve many issues in the future.

"But we already agreed upon what happens if Godzilla invades, or your turned into a pod person that ... "

 

[JOhnH]

If I understand the situation, the current owner owns 100%, and you are looking at buying 50% from him. Is that right?

If that is the case, see if he will provide you seller financing.

At first, I scoffed at that idea, but the more I think about it, the more I like it. As a sole owner of a plane, if I financed a partner and he made a few payments and then defaulted, I would still have the plane, plus the payments he made. And if he kept making paymetns, so much the better. Of course, the contract would have to be authored by a competent lawyer.

 

[Sam D]

At first, I scoffed at that idea, but the more I think about it, the more I like it. As a sole owner of a plane, if I financed a partner and he made a few payments and then defaulted, I would still have the plane, plus the payments he made. And if he kept making paymetns, so much the better. Of course, the contract would have to be authored by a competent lawyer.

On the other hand, there are plenty of others expenses besides the initial buy in. If I had a potential partner that said "sure, I'd like in. can I borrow the money from you?", I might flash ahead to the next annual or avionics upgrade "can I borrow some more money?" etc.

 

[AggieMike88]

On the other hand, there are plenty of others expenses besides the initial buy in. If I had a potential partner that said "sure, I'd like in. can I borrow the money from you?", I might flash ahead to the next annual or avionics upgrade "can I borrow some more money?" etc.

Which is why the idea of a very solid JOA. You can include something about expensive surprises; and upgrades that are planned, both desire, or only one desire to have.

 

[frfly172]

Most owners are not ready to finance a partner since that is usually why they are looking to share ownership.if after your buy in are you prepared to buy out the partner if they decide to sell their share.check the true value of the aircraft in the real world .good luck

 

[wabower]

Yep. Selling a share is thought to be a way to take some money off the table, not a way to continue on the same path.

Most owners are not ready to finance a partner since that is usually why they are looking to share ownership.if after your buy in are you prepared to buy out the partner if they decide to sell their share.check the true value of the aircraft in the real world .good luck