Good deal?

[sferguson524]

All,

Have a good friend here who has asked me to join up in a 3 way partnership on a cherokee 180. ~400 SMOH IFR panel, but not ready for 2020. I will assume basic /A instrumentation. Including debt service at 0%, we're looking at 300/month fixed costs. $20/hr goes into the maintenance fund, and all airworthiness issues and upgrades are split 3 ways. I have about 200 hrs, most of it retract time, so I am sure insurance will be dirt cheap. Depending on useful load, this should fit my mission for the time being while the kids are small-ish (3 and 10). What do y'all think

 

[frfly172]

What is the original by in ? Do you get along with the other partners,how much do they fly? Do you have any idea what upgrades are planned. Partnerships can be a good thing.

 

[Ravioli]

could be good if you're ready for those "one third" bills to come.

$20/hr to the maintenance sounds pretty good for overhaul and general mx. Personally I'd add an another $20/hr for an improvement fund.

Point of comparison: Our club charges $60/hr dry tach. $18 goes to the engine reserves. $42 goes to the operating fund for all other maintenance and upgrades.

 

[eman1200]

"insurance will be dirt cheap"....I 'think' if you get combined insurance they'll quote you based on the person with the least experience, or something like that. I guess you could split it differently among yourselves. just saying, it might not be what it would cost ONLY YOU for insurance. I could also be completely wrong.

 

[GRG55]

Partnerships in airplanes can be great. Given how much many of us fly in a year they can make a lot of sense.
But you should avoid the potential of wrecking a good friendship by papering up the arrangement clearly.

 

[Ravioli]

"insurance will be dirt cheap"....I 'think' if you get combined insurance they'll quote you based on the person with the least experience, or something like that.

You're kind of on track. There is likely a factor but in a partnership I think it is based on the experience of the named pilots.

Different from that is a club, where it is based on the minimum experience required, regardless of whether everyone is more experienced. This was explained to me as a protection against a 8000 hr ATP selling a share to a 110 hr PPL who's about to get a complex endorsement.

 

[rtk11]

But you should avoid the potential of wrecking a good friendship by papering up the arrangement clearly.

Absolutely this.

Plus be clear on use of the aircraft. Since there’s a cost per hour component for maintenance, I think that may work. But I agree that you should increase that amount to cover upgrades, insurance, hangarage, and reserves as well.

I’ve been in a partnership where the plane was always in use and usually unavailable when I wanted it. Given that, I would add to any agreement: 1) All costs not covered by the maintenance fund will be apportioned by the percentage of total hours flown by the partners since acquisition; 2) “Loaning” or letting others fly the aircraft is an absolute “no go” unless all partners agree, and the partner loaning the aircraft takes full accountability for the hours and any damage incurred by the pilot he loaned the aircraft to.

 

[AggieMike88]

I also very much agree to "papering up the arrangement" in a very clear manner.

Today, all of you are in good spirits and are looking forward to affordable ownership.

Paper is for when things get ugly due to someone getting butt hurt, a big expense happening that wasn't properly planned for and one partner shouting he won't pay his share, someone dies (or worse, divorces), and more.

An AOPA template that is a good start to the discussion can be found here: https://www.aopa.org/training-and-s...ip-co-ownership-and-flying-clubs-part-1#chap2

Once all parties have agreed to the terms, running it past an aviation attorney in your state is also a good idea. This avoids having something in there that might not be allowed and thus jenga's the entire thing.

 

[GRG55]

A well drafted agreement will distinguish between fixed and variable costs, and most partnerships apportion the former on ownership % and the latter on hours flown by each member.

Although most costs are easy to split into one of the two buckets, some can make for some interesting discussion. Example, annual inspection is a fixed cost, but what about repairs? Is a 500 hr magneto servicing a fixed cost, or one that should be split & paid for based on hours flown?

 

[sferguson524]

Great points. The friend that asked me to partner is acquiring the aircraft from a friend of his with a 0% interest note. I am not sure yet how title will be taken, if the partnership will be an LLC or what. I know I'd like to know what the exit strategy is in the event of job loss, etc.

 

[AggieMike88]

Great points. The friend that asked me to partner is acquiring the aircraft from a friend of his with a 0% interest note. I am not sure yet how title will be taken, if the partnership will be an LLC or what. I know I'd like to know what the exit strategy is in the event of job loss, etc.

The “acquisition with a 0% note” needs to also be properly papered in its own way. Ask questions such as: Will the seller maintain a lien? Is the friend who asked you to partner going to be 100% owner and rent to the rest of you? Or are you being asked to take up part of the debt?

If the latter, what protections are you afforded if another partner vanishes and never pays his part of the note?

Finally if it were me, if I would take appropriate measures to make sure I am not investing in a pile of aluminum that isn’t airworthy or has an undeclared and expensive maintenance item that will bite you.

There are many ways for this to go well and you all are happy owners. But there are more ways for this to go wrong and become a mess that hurts finances, friendships, and more. Exercise all appropriate due diligence, documentation, and agreements to protect the ones around you and yourself.

 

[GRG55]

Great points. The friend that asked me to partner is acquiring the aircraft from a friend of his with a 0% interest note. I am not sure yet how title will be taken, if the partnership will be an LLC or what. I know I'd like to know what the exit strategy is in the event of job loss, etc.

Excellent points being made in the other posts here.

A good partnership agreement should cover things like how does one partner exit, what happens if a majority, or all partners decide to sell or dissolve the partnership, what happens if a partner is unwilling or unable to fund their share of costs, and so forth.

The scenario to avoid is no agreement ("we are all friends, who needs an agreement"), or a poor agreement. It sets the stage for the airplane to be managed "to the lowest common denominator"; everything becomes based on the person that wants to spend the least, often because they use it the least, and the airplane slowly deteriorates as the the other partners either get frustrated or start carrying costs.