Good Deal or bail?

sferguson524

sferguson524

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FormerSocalFlyer
All,

I just got to go up in a cherokee6 300 the other day that's set up for a non-equity partnership. There are 2 other pilots on it, and they're asking 175/mo for fixed costs and 50/hr dry. My fiancee' and the kids went up with me, and she really liked the interior room. My only gripe is the panel.. The 430 isn't certified for IFR, it has a 696, an OLD turn and bank, and the DME is built into the VOR2 Head with a GS. The owner isn't instrument rated, so the older panel isn't a big deal to him. Being almost done with my instrument, i have concerns about flying PP on a TNB, rather than a TC. Am i being too picky?
 
How much is this deal going to cost?

Unless your mission needs 1800lbs of useful load and six seats, I personally would look elsewhere.

For the fuel burn, there are far sexier airplanes out there. :D
 
It sounds like a good deal. Do you know what it would take to certify the 430 for IFR? It might not be that big a deal. Maybe you could throw a little money at it. Does the 175 include insurance? Is there a hangar?
 
Insurance and hangar included. It's based out of AJO. there's a VOR and GPS approach into there, and it's about a 30 min drive from my house
 
My mission RIGHT NOW, a 182 would fill.. That being said, we are planning on having a baby after the wedding next september, so the 5th seat and cargo room would be a good thing.
 
IMHO you should have absolutly no concern abut flying Instrument on a Turn and Bank vs a Turn Coordinator. I find practically zero difference.

As for the 430, why is it not and IFR box? If its just updating the data base that is esay and inexpensive to fix. Other than that it sounds like a good deal. The one thing I think anyone who gets into a large family truckster such as the six needs to ask is "do I need this much plane?" Wayne has a great series of questions that he asks his customers to try and define their mission. Perhaps he will post it. Given that this is a non equity deal however it may not matter as much.
 
So, that's $2,100 a year in fixed costs, and another $7,500 a year for dry rental costs if you fly 150 hours per year (so nearly ten grand on your part for fixed and operational costs.) If there are 3 or more partners involved, someone is making out like a bandit.

A three way equity partnership is going to be more like $20K in recoverable equity buy in, plus 1/3 of annuals, insurance and engine reserve, which would run you more like $2,000 a year.

I'll pass.
 
Sac Arrow said:
So, that's $2,100 a year in fixed costs, and another $7,500 a year for dry rental costs if you fly 150 hours per year (so nearly ten grand on your part for fixed and operational costs.) If there are 3 or more partners involved, someone is making out like a bandit.

A three way equity partnership is going to be more like $20K in recoverable equity buy in, plus 1/3 of annuals, insurance and engine reserve, which would run you more like $2,000 a year.

I'll pass.
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This is more plane than most of us have or need. It is not the cheapest plane to own, rent or fly. But if you feel you need the seats and useful load then this is a good deal-imo.

But if you want or need a plane like this:

First you don't have to pony up $65k-75k for a plane of your own.

Second, you can walk away whenever the market and your needs change the owner cannot.

Third, if you think you can own a real airplane (not a 172 or Cherokee) for less you have not tried to do so.

I think this sounds like a great deal to the op. It is nothing to have a $6500 annual maintenance bill in high performance aircraft with constant speed prop. the 500 hrs prop ad itself is $3000, with the owner and 3 NEPs flyhing 150 hrs (is the example you used) comes to 600 hrs a year their would be a prop inspection every year plus annual.

Try getting insurance for a 6 seat aircraft based on the lowest hours of the lowest time NEP. $1800.

$175 is very fair. You can usually only have 3 NEP's on your insurance at one time.

Hangar in CA is easily $550 month or more.

IMO the high rent, Maintenance and insurance is more than the $175 x 3 NEPs. The owners investment is his payments on the plane or opportunity cost of value of the plane if he owns it outright.
 
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Sac Arrow said:
So, that's $2,100 a year in fixed costs, and another $7,500 a year for dry rental costs if you fly 150 hours per year (so nearly ten grand on your part for fixed and operational costs.) If there are 3 or more partners involved, someone is making out like a bandit.

A three way equity partnership is going to be more like $20K in recoverable equity buy in, plus 1/3 of annuals, insurance and engine reserve, which would run you more like $2,000 a year.

I'll pass.
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You are looking at this all wrong.

$175 a month club price to fly a Cherokee 6, insurance, hangar and maintenance/annual. That is great. Everything after that is 100% depending on his monhtly needs and uses. If he doesn't fly a month costs nothing if he goes on vacation 6 hrs then its $300 plus gas.

If you cannot afford this you should probably look at a lessor plane.

Neps are great in that you get ownership like accessibility for a pittance of the real costs.
 
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These are all great points. As far as flying partial panel with a turn and bank, as opposed to a turn coordinator, i can't remember the differences.. someone clue me in?
 
I'm not an IR pilot, so someone else can chime in with the finer details, but the turn coordinator's advantage is that the gyro is mounted at an angle, allowing it to respond to roll (not strictly yaw). This allows the instrument to indicate a turn before it starts.
 
Tony_Scarpelli said:
You are looking at this all wrong.

$175 a month club price to fly a Cherokee 6, insurance, hangar and maintenance/annual. That is great. Everything after that is 100% depending on his monhtly needs and uses. If he doesn't fly a month costs nothing if he goes on vacation 6 hrs then its $300 plus gas.

If you cannot afford this you should probably look at a lessor plane.

Neps are great in that you get ownership like accessibility for a pittance of the real costs.
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Maybe I don't have a good feel for costs on that airplane. I'm comparing it to my Arrow. Which, costs me a hell of a lot less than that to own in a two-way partnership.

I think it's probably a good deal for a short term arrangement, but not a long term arrangement.
 
bqmassey said:
I'm not an IR pilot, so someone else can chime in with the finer details, but the turn coordinator's advantage is that the gyro is mounted at an angle, allowing it to respond to roll (not strictly yaw). This allows the instrument to indicate a turn before it starts.
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That's right.....
 
It's worth reading the written agreement and getting more detail. And ask about how expensive surprises are covered. For example, you're on a trip many hours away from home and the engine eats a valve or suffers some other expensive failure. Who's paying for what?

Make sure the agreement is as detailed as you need it to be. Good agreements will reduce the surprise factor and preclude lots of future arguments and stepped on feelings
 
Sac Arrow said:
So, that's $2,100 a year in fixed costs, and another $7,500 a year for dry rental costs if you fly 150 hours per year (so nearly ten grand on your part for fixed and operational costs.) If there are 3 or more partners involved, someone is making out like a bandit.

A three way equity partnership is going to be more like $20K in recoverable equity buy in, plus 1/3 of annuals, insurance and engine reserve, which would run you more like $2,000 a year.

I'll pass.
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So, $2,000 a year vs. $2,100 a year in fixed costs... Not a large difference.

With an engine reserve, the owner will likely lose money at $50/hr dry. In CA, hangars are expensive. This sounds like a pretty darn good deal to me!
 
Doesn't sound terrible to me!

My t182t costs or the short list

$650/month payment on $100,000 note
$255/month hanger
Insurance $1350/year

So none of the fuel or maintenance costs. Put it in perspective here, I agree what happens if it breaks down away from home? Then again looking back when I had a Cherokee six, I always had space to spare as opposed to wishing I had space for more!

Good luck!
 
sferguson524 said:
All,

I just got to go up in a cherokee6 300 the other day that's set up for a non-equity partnership. There are 2 other pilots on it, and they're asking 175/mo for fixed costs and 50/hr dry. My fiancee' and the kids went up with me, and she really liked the interior room. My only gripe is the panel.. The 430 isn't certified for IFR, it has a 696, an OLD turn and bank, and the DME is built into the VOR2 Head with a GS. The owner isn't instrument rated, so the older panel isn't a big deal to him. Being almost done with my instrument, i have concerns about flying PP on a TNB, rather than a TC. Am i being too picky?
Click to expand...

430 shouldn't be much to certify, throw out the T&B and replace it with an electric attitude indicator with a ball, if you're going to really fly in IMC.

Sounds like an alright deal (but no bargain) if you fly a lot and need the lifting capabilities of a 6.
 
Any time the decision hinges on the difference between two backup instruments, it's being sliced much more finely than any settings on my butcher-shop equipment.
 
Sac Arrow said:
Maybe I don't have a good feel for costs on that airplane. I'm comparing it to my Arrow. Which, costs me a hell of a lot less than that to own in a two-way partnership.

I think it's probably a good deal for a short term arrangement, but not a long term arrangement.
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I should have bought an Arrow....:) Unfortunately I do have an idea of higher maintenance. :)
 
wabower said:
Any time the decision hinges on the difference between two backup instruments, it's being sliced much more finely than any settings on my butcher-shop equipment.
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Wayne, you going to La Quinta this winter for a break? I am at the deciding point if I am going this season. If So it will probably be Jan 2.-??
 
Fearless Tower said:
In some places. Not necessarily at AJO. Probably more like $400, maybe $450 for a single engine hangar.

And what the heck is a NEP? Did I miss something?
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Non Equity Partner just pays the upkeep and sometimes reserves for maintenance. Helps owner to reduce his outflows during low flying periods and keep the plane flying and in good shape.

On a Cherokee 6,

AJO rent $400 is $4800 per year.
Insurnace lets say $1800 per year.
Annual inspection $1200 not including discrepancies or ad's.
Maybe $2500 is a good average annual maintenance with 3-4 guys flying it

That is about $10k there abouts with nothing unusal coming due maintenance wise. If you have 3 guys splitting the on going costs that is about $225-250 per month each.

Then on top of that fuel and if you want some level of engine/prop/avionics reserves.

I have seen it done two ways: First with the owner taking care of any overage on the maintenance if something big comes up (assuming it was not caused by another pilot in which case he should be liable). Second if the guys pay a monthly amount in as an estimate and then finalizing payments as actual annual, insurance and maintenance bills come in with the NEPs on the hook for the overages.

I found that most potential NEPs rather pay a bit more monthly but not be on the hook for some unknown AD or Cracked cylinder or Torque Tube/horn issue that might crop up.
 
flyingcheesehead said:
So, $2,000 a year vs. $2,100 a year in fixed costs... Not a large difference.

With an engine reserve, the owner will likely lose money at $50/hr dry. In CA, hangars are expensive. This sounds like a pretty darn good deal to me!
Click to expand...

Nooooo, $9,600 vs 2,000 by my math granted I did not include hangar fees.
 
Sac Arrow said:
Nooooo, $9,600 vs 2,000 by my math granted I did not include hangar fees.
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You were comparing your fixed costs to the cost of operating the plane for 150 hours in a year:

Sac Arrow said:
So, that's $2,100 a year in fixed costs, and another $7,500 a year for dry rental costs if you fly 150 hours per year (so nearly ten grand on your part for fixed and operational costs.) If there are 3 or more partners involved, someone is making out like a bandit.

A three way equity partnership is going to be more like $20K in recoverable equity buy in, plus 1/3 of annuals, insurance and engine reserve, which would run you more like $2,000 a year.

I'll pass.
Click to expand...

A cheap annual on an Arrow will run at least $1500, insurance probably at least $1800, and engine reserve on a 1978 Arrow III should be $13/hour, so at 150 hours a year on a 1/3 partnership you're talking $4,450 a year (assuming a $300/mo hangar split 3 ways). And that's WITHOUT any maintenance, which is still going to be in the same neighborhood as fuel.

For reference, we spend over $40/hour for maintenance alone on the 182 (fixed gear).

Engine reserve on a PA32-300 should be at least $19/hour. That leaves $31/hour for maintenance. No question in my mind that this is a good deal, since I'd bet that long-term maintenance cost averages well over $31/hour.
 
At first glance it appears to me like the owner(s) has found a slick way of being in the airplane rental business while avoiding the regulations, taxes, and costs of being in business.
It would be interesting to see how the plane owner(s) would fare in an IRS audit.
 
Tony, I'll be there for a month starting Jan 24. Condo is in Palm Valley CC, on Country Club east of Cook. Hope to see you.

Tony_Scarpelli said:
Wayne, you going to La Quinta this winter for a break? I am at the deciding point if I am going this season. If So it will probably be Jan 2.-??
Click to expand...
 
Dr. O said:
At first glance it appears to me like the owner(s) has found a slick way of being in the airplane rental business while avoiding the regulations, taxes, and costs of being in business.
It would be interesting to see how the plane owner(s) would fare in an IRS audit.
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I don't think so - There are a ton of non-equity partnerships out there. It's quite common. If it weren't legal, I doubt there would be so many.
 
What problem do you foresee? It's a simple rental activity reported on Schedule C. Rental revenues in, expenses out. Deductions claimed for ordinary, necessary and reasonable expenses. Why would they worry about an audit? What special regulations apply to part 91 rental?

Dr. O said:
At first glance it appears to me like the owner(s) has found a slick way of being in the airplane rental business while avoiding the regulations, taxes, and costs of being in business.
It would be interesting to see how the plane owner(s) would fare in an IRS audit.
Click to expand...
 
I must be doing something wrong. When I was doing the non equity partnership there were no profits.

We just split expenses. I was just glad not to have to pay the hangar rent, insurance and annual maintenance. I didn't record income nor deduct depreciation.

I might have been able to cover some other income but I don't want an airplane anywhere near my tax return....not worth the aggravation.

Besides my business has plenty of deductions as it is....I don't need to cover profits to any large extent in this market. Maybe later this year it will start to return to something approaching normal.
 
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