I’m calling the peak

Discussion in 'Flight Following' started by AA5Bman, Mar 22, 2022.

  1. Terry M - 3CK (Chicago)

    Terry M - 3CK (Chicago) Line Up and Wait

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    We have college for 3, safety fund and retirement in ok spots. Current market doesn't help most of that, but I've saved my whole career.

    This would be a splurge on me, which I don't really do. Family of 5 won't fit in a Tiger even if they wanted to but in my 450+ rental hrs my wife has flown 6 hrs with me and my son maybe the same? 2 girls have never been up. So this would be my midlife crisis.

    The guilt is the hangup. I figured at $20k it wouldn't even be a discussion. No change on the home front etc. $50k seems different. You'll notice that missing from an acct.

    To clarify: wife was aware and on board at $20, just saying $20 didn't require as much thought.

    Where/how I grew up, folks didn't own planes (or boats, RVs etc.) Maybe a small fishing boat but not the $100k bass boats etc, more like $1,200 including the 12hp outboard.

    Rental: I've got a business trip Tuesday. 5 hrs by car or 2 by Skyhawk/Archer. All planes booked for some portion of that day when I found out last week.

    Last night - gorgeous here. All planes booked. Same this morning. Rental is the right way to go except I fly much less because when my schedule opens up, there are no planes.
     
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  2. WDD

    WDD En-Route

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    Funny- But between me and Dave, listen to Dave LOL!
     
  3. EdFred

    EdFred Taxi to Parking

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    I'm seeing the prices higher on PA32R's than they were 2 months ago.
     
  4. Morgan3820

    Morgan3820 En-Route

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    Sounds like you need to find a good partnership.
     
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  5. kaiser

    kaiser Line Up and Wait

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    My mission is different, but I agree with Ed on this.. valuation seems super high. Also, you're more than doubling your "planned outlay" - that's flag #2.

    Unless I see a deal, I'm sitting on my hands right now. I've hedged lack of access to aircraft by being a part of 4 sources of rentals now (1 club, 3 rental places/flight schools) across 3 airports, but I'm still tired of renting. Market is going to start affecting folks soon and there will be pain for those with too much leverage.
     
  6. Morgan3820

    Morgan3820 En-Route

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    Until you see layoffs in the news, people fearful for their jobs, I don’t see a lot of toy dumping. And layoffs in the news do not fit the current narrative. I am waiting on truck prices. They have come down some but not where they should be.
     
  7. WDD

    WDD En-Route

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    Sounds like you and I are alike in a lot of ways. If the terms are good and you can get the plane when you need it then continue to investigate. You’re using $20k as your benchmark/ reference - but as that was an uninformed swag I would not use that.

    lots of details to dig into. Do they have an engine overhaul account funded to the new costs of an overhaul and fully prorated for the amount of hours already used? What is your hourly rate you’d pay? Monthly? Exclusions on taking the plane for long periods of time?

    valuation ? I have no idea if the cost to buy in is good or bad.

    do they have a history of availability and usage they could show you?


    BTW / this is why you saved - no need for guilty feeling. Tigers are great planes - wish the place where I used to rent from still had theirs.
     
  8. WDD

    WDD En-Route

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    It’s already started ……..
     
  9. AA5Bman

    AA5Bman Line Up and Wait

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    Correct. I'm seeing layoffs at our client companies already. Didn't Tesla just announce layoffs?

    @Terry M - 3CK (Chicago) that sounds like a good partnership and all other things being equal I'd say go for it. But at a $200k valuation? No way. Well, no way unless you don't mind your $50k share being potentially/probably worth $25k in five years. Depending on your finances, that might not really be that big of a deal and in that case I would say you absolutely only live once and you should do it anyway, but you just need to acknowledge and process what you are signing up for.

    Actually, on that topic, it depend a little bit on what you're buying. For instance, if it's a $50k share but there's a $50k engine reserve fund that you're buying into - which there should be of some sort - that does change the calculation. If it's really just a $200k plane, not a $150k plane plus a $50k reserve, well... those are two very different things.
     
  10. WDD

    WDD En-Route

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    Would your $50k be to pay for the current owners cost to put in the panel and - or funding a currently empty engine and annual fund?

    When it comes down to it, it is whatever the market - in this case the current owners - will accept and what you’re willing to pay, in context to whatever your alternatives are.
     
  11. Tom Wells

    Tom Wells Pre-takeoff checklist

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    @Terry M - 3CK (Chicago)
    Reading your "stream of consciousness" post, I totally feel it.
    It sounds like you've been patiently waiting for the right deal and you diligently set a budget. Unique opportunities you can't consider ahead of time have a way of smashing budgets ;)

    My thoughts:
    - I'd find out exactly what I'm buying. As others suggest, buying into a partnership with a well stocked reserve fund (i.e., there's money in there before you buy in) is a lot different than you cashing out an existing member and the small remaining balance of your buy-in making a minor dent in replenishing an empty reserve fund (those avionics upgrades probably were not cheap...). Same goes for availability. Is the a/c usually available so you can take those enjoyable impromptu sunset flights when the weather is nice? Or will it be like the rental situation where it's usually tied up? I'd want to know about the partnership I'm buying into...
    - I wouldn't try to time your purchase with the market's peaks/troughs (stock, job or aircraft market). Those things are outside of your control. I tried doing that with a house, a boat AND a car... the net result was just sitting on the sidelines for years (a decade in the case of my house). Turns out there is rarely an ideal time for big ticket purchases (except when you have the benefit of hindsight). If you're fairly secure at your job, have a marketable skill set in case of job loss, and have a rainy day fund to cover expenses should anything happen, that's all you can ask for. You just don't want to be in a situation where you're going to be looking for liquidity right away after buying it. But I think the worst case scenario is psyching yourself out for a long period of time -- because life is short.
    - 50k$ is the buy in, but not the only expense. At this particular point in time fuel is also very expensive. If the buy-in smashes the budget, are you going to feel comfortable spending the additional $300 to refuel it? Would hate to stretch the budget and then have guilt at the gas-pump that keeps you from flying...
    - If the a/c checks all the boxes for you (close to home, modern avionics, lots of availability, dream airframe, etc) and the only complaint is price, perhaps you can negotiate with them? They probably pulled that round 50k$ number out of thin air b/c it sounded nice. Perhaps you can let them know what you had budgeted and see if they can help close the gap? I know if I was in a partnership -- getting the right partner who is a competent pilot, easy to work with and respectful would be worth sacrificing several k!
     
  12. WDD

    WDD En-Route

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    Tom has a great point. If a partner and I had a plane that cost us $100k, but we could get someone to buy a share for $200k, well - yes, I would take the money. Negotiate.

    BTW - $25 / hour dry? How does that cover the engine fund, the annual fund, the normal maintenance (oil, tires, brake pads, spark plugs, burned out light bulbs, etc.) that should be on a prorated basis?

    What is the monthly charge for sharing the fixed costs, like hanger, insurance, property taxes, database updates, etc.?

    Do a Pre Buy as if you were buying the plane with your mechanic. Any delayed maintenance? Missing log books? Odd looking entries?

    Get a good look at the finances. Are they unfunded?
     
  13. Terry M - 3CK (Chicago)

    Terry M - 3CK (Chicago) Line Up and Wait

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    @AA5Bman there is a reserve and the valuation is a swag.

    Much more digging to do on my end. These are all good thoughts and I think time could be on my side. I'm not rushing.

    Layoffs - there was an article in the WSJ yesterday about companies rescinding offer letters. Seemed to be limited to new college grads and more techy focused. We are starting to hear a few borrowers announcing cuts / strategizing cuts (or planning for what if).


    ETA: @WDD and @Tom Wells thank you. Those last few posts are very helpful.
     
    Last edited: Jun 23, 2022
  14. ConstaP67

    ConstaP67 Filing Flight Plan

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    starting to see alot more advertisements with "REDUCED"...in the headline.....and even some planes I've been following on TAP for a month or two are suddenly showing lower prices. Hope it's the start....
     
  15. Bob Noel

    Bob Noel Touchdown! Greaser!

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    hope it's gentle (movement/corrections...)

    (I don't have a dog in the fight...)
     
  16. TCABM

    TCABM En-Route

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    I try to stay out of other people’s golf bags and check books.
    I’ve been where you are. The conversation you need to be having is with your wife and not us. But the $50K CAPEX isn’t your real money suck. How well is the partnership financed if the new motor catastrophically comes from together on a strange ramp with no A&P? What’s the airplane insured at, especially with all the new equipment?

    When we bought into our partnership, we looked at the insured value and added the cash reserves to it, divided by the shares and said here’s our offer.
     
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  17. Ed Haywood

    Ed Haywood Cleared for Takeoff

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    My own obsession is real estate. Got a bag of cash burning a hole in my pocket to get a ski condo. But can't get past the sense that something is about to break, so I have been reading every article I can that tries to analyze the market.

    A month ago, all the experts were saying it will slow down but not to expect a price drop. They were all very confident that this is not the same as 2007, mismatch between supply and demand, fundamentals, blah blah blah.

    Fast forward 30 days and the same experts are clearing their throats and nervously saying there maybe, might, possibly be a correction.

    Point being, there are limited historical references for this kind of situation, and everyone is just spitballing. At least those of us on POA admit it.

    You and I have similar financial outlooks. I say if you can negotiate a more realistic valuation that you are comfortable with, go for it. Other than the price it sounds like a great fit for you.
     
  18. FancyG

    FancyG Pre-takeoff checklist

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  19. strangebird

    strangebird Pre-takeoff checklist

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    We are in a recession already, no one wants to admit it, but will finally be announced come December or next January 2023,after the dust settles. SIGH
     
  20. MIFlyer

    MIFlyer Cleared for Takeoff

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    The partnership owns a hangar too, it seems


    Sent from my iPhone using Tapatalk
     
  21. Terry M - 3CK (Chicago)

    Terry M - 3CK (Chicago) Line Up and Wait

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    They do own the hangar. Ground lease, I understand, is still $200 or $250/month.

    There is an engine reserve. I don't know how much. I haven't seen books or docs.

    They have it insured for $125 as that was the max their carrier would offer.

    Lots for me to learn and consider. Some digging to do for sure. Thank you for clarifying and directing my thoughts.
     
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  22. Ed Haywood

    Ed Haywood Cleared for Takeoff

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    Hmmm, then perhaps the valuation is not quite as far off as it seemed.
     
  23. kaiser

    kaiser Line Up and Wait

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    3CK? With ground lease that much, hangars go for 30?40? (Just trying to help value the deal)

    Definitely go crack open the books, maybe there’s more.
     
  24. Eldorado

    Eldorado Pre-takeoff checklist

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    Stock market down 20%+ in 6 mos, fed only starting to tighten the screws. planes and boats will follow. Seen this before many times. There is no such thing as a soft landing. Right now owners don’t have to sell, but sooner or later they will. I would of sold my 172 for 35t 5 yrs ago, now I feel it’s worth 80,000, but I doubt I would come close to 80,000 in 6 mos.
     
  25. Ed Haywood

    Ed Haywood Cleared for Takeoff

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    Speaking of which, during the last peak in 05-06 several of my neighbors got HELOCs to finance their toys. When the housing market cratered, they were upside down and wound up losing their homes. I just kept paying the mortgage. Soon to be fully paid off.
     
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  26. cowtowner

    cowtowner Pre-takeoff checklist

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    FIFY
     
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  27. charheep

    charheep Cleared for Takeoff PoA Supporter

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    I know and heard of a few people getting HELOC;s and when their house was underwater, they walked away. Either took the foreclosure or declared bankruptcy and somehow had decent enough credit to buy a new house in the next 5 years. Rented in between at a lower price than their original mortgage payments, and didnt have to wait for their house to appreciate enough to buy something else. Somehow, the credit bureaus understood a BK or foreclosure on their record and looked past it.
     
  28. frfly172

    frfly172 Touchdown! Greaser!

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    Looks like it might be leveling off, I wouldn’t say the bubble had broken. There will always be some distressed sales around if your patient and follow the market.
     
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  29. Todd82

    Todd82 Line Up and Wait

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    Even if the peak has hit or whatever, 1/4 share at $50k in a 78 Tiger sounds crazy. That's not a $200k plane even if it came with full fuel tanks
     
  30. Chrisgoesflying

    Chrisgoesflying Pre-takeoff checklist

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    The peak has passed. Opened the classifieds today and found:

    1. A Piper Tri-Pacer, 3,300 TTSN and under 300 SMOH for $22,000.

    2. A Beech Musketeer, 2,300 TTSN and under 400 SMOH for $37,000.

    3. A Beech Bonanza, 5,000 TTSN and 1,800 SMOH for $39,000.

    And that’s Canadian Dollars! Haven’t seen those kind of prices in a while. On the flip side, I filled up the tanks of my Cherokee today for a whopping $11/gallon.
     
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  31. Bob Noel

    Bob Noel Touchdown! Greaser!

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    or we are in a local minima and things will rise...
     
  32. Jim K

    Jim K En-Route

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    Holy moly... where at, Midway? Or is it just more expensive in America's hat?
     
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  33. jbarrass

    jbarrass Cleared for Takeoff PoA Supporter

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    I've never heard of this valuation model, but dang, it makes sense to me.
     
  34. TCABM

    TCABM En-Route

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    Our area is starting to se an increase of “just take over the payment” in private party listings. I’m not talking about high end stuff, either. Latest listing this morning was from somebody that financed a Peloton bike and some other higher end fitness equipment.

    Houses are listing at lower prices and staying listed much longer. Just over six months ago my neighbors sold their house over asking to the first showing and had 45 more showings and five backups at the elevated price.

    Car dealer lots, while not full, aren’t mostly empty.

    So I think our little corner of the woods is cooling down some.
     
  35. mondtster

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    I interpret that $11 to be in Canadian dollars, but yes, that sounds in line with what I’ve heard from a couple of fish camp owners I know up there.
     
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  36. Walboy

    Walboy Pre-takeoff checklist

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    Another data point:

    I saw "priced reduced" on Van's Air Force classifieds for a RV-9A. If I recall correctly, it was $10k reduction on +/- $150k .
     
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  37. wilkersk

    wilkersk Pattern Altitude

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    When I hear this, I always wonder, "what changed?" If they could afford the 1st mortgage, and the HELOC payments, what happened to cause them to "(lose) their homes"?

    The reason I ask is that during the 08-09 panic, I had a couple of co-workers that did that. One just turned the keys in and defaulted, the other worked out a bank-sale. But, in both cases, they still had their jobs and their monthly payments were the same. They just freaked out about suddenly being upside down on their mortgage. " I tried talking them out of it. But, they said something about not throwing good money after bad. And that was that. I just never understood. Those same houses today are worth nearly 3 times what they were less than 20 years ago.
     
  38. WDD

    WDD En-Route

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    Demand and supply - probably less buyers in the market. And with the price of gas and everything else those that are in the marke, demand is lower even with them. Not sure about job as once was, what will prices be, etc. Batten down the hatches
     
  39. Mahneuvers

    Mahneuvers Line Up and Wait

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    Could just be working the system. Maybe having lousy credit for 5-7 years (or however long it lasts) is worth getting out from a property where you're substantially underwater.
     
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  40. Chrisgoesflying

    Chrisgoesflying Pre-takeoff checklist

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    CYLL in Alberta. Stopped there for fuel on the way to Edmonton thinking it might save a few bucks over the large FBOs in Saskatoon and I’m sure it did. But still, $11 a gallon is tough. I’m leaning extra hard these days lol.