Mechanisms to rent out a privately owned airplane

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mxalix258

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mxalix258
If I were to buy an airplane for my own use, but recoup some of the costs of ownership through renting out, what are my options? The way I understand it I have a few options:
  • Flight School leaseback
  • Flight club
  • Direct rental...?

The 3rd option is the one I'm least sure about from a legal stand-point, as it feels like it would be getting into FBO/Commercial territory and require licenses etc that wouldn't make it worth it.

On the 2nd option, is it common to setup an LLC and then setup a flight club that leases the plane? Seems to be some conflict of interest issues there, but I feel like I've heard this setup enough times that it must be possible.

Would love to hear everyones thoughts - thank you.
 
More interesting...

Do all three require 100 hr inspections and greater insurance costs? Does leaseback put your insurance cost to the school while adding wear and tear?
Do all of these options reduce your access to your plane?

Ownership has costs. And attempting to defray those costs have unintended costs.

There's a thread out here about a new owner's leaseback experiences. Might want to search that one.
 
The problem is insurance. Co-ownership is the way to go. Leasebacks are only good if you are doing the maintenance also (you are IA or have one working for you). Some leasebacks work.
 
On renting out, there may be some state business law requirements and insurance issues to worry about with, but, generally speaking, no special FAA rules unless you are making it available for flight instruction or carrying passengers or property for hire.
 
About that first option. I don't know what you're motivation for ownership is. For many owners, I think it's control over the aircraft, how it's equipped, how it's flown, how it's cared for. If you leaseback, those last two concerns could give you some leaseback remorse.

Our FBO got a nice 172R through leaseback, back about 2001/02, I think it was a 97 model. Nice plane. Leather interior. All instruments and lighting worked properly. Had an approach approved GPS (KLN 89B?) and an autopilot. The airframe was straight and rigged correctly. The plane flew like a dream, it seemed impossible to do a bad landing in it. And it was the fastest out of 4 172's. But shortly after putting it out on the line, it began to suffer all kinds of premature wear and tear. Arm rests and handle pull-cups breaking due to doors being slammed too hard. Someone's kid (presumably) scribbled on the upholstery, carpet stains, things like that. Things that might not have occurred with private ownership. The plane was eventually totaled after a student drifted off a runway and ran it over the segmented circle, stripping the landing gear off. Probably much of the exposure to that kind of treatment had to do with a 172 being an entry-level aircraft; I'm fairly certain that a more advanced airplane, perhaps complex-hi performance with steep insurance prerequisites wouldn't have suffered as much misuse.

I'm not trying to talk you out of your idea, or be a Debbie-downer on a way to defray cost. I'm just trying to help recognize a potential reality by relating an actual experience.

Whichever approach you take, I wish you the best. The world needs more aircraft owners.
 
I have a friend whom I trust greatly rents from me. I added him as a named insured on my policy (only went up $70/yr, and the following year it dropped $100), so basically cost nothing to add him. I give him a fair dry price and it helps me do extra's to the plane. So far nice new concorde battery, and an airtex interior has been ordered. He gets a good deal on a rental, and basically all his fees go right back into a nice airplane for him to rent.

Granted hes just 1 person, and doesn't rent much.. You may be looking for a larger pool. You might check with your insurance and see how many people you can add? I would think if you had a small group (4-5) you could recoup a fair amount.
 
Better to just find some non-equity partners.
 
For a pretty good discussion of leasebacks, search for "Captain Jason's leaseback advice" here on POA.
 
Don't need 100hrs unless you're also providing the CFI

Don't need insurance, it's a option based on who you're renting to and your risk analysis.

Personally ideal would be direct to people you know.

A small club would be second

A large school, I wouldn't do unless I really didn't care about the plane and they paid for insurance, mx, etc.

I'd just keep it simple.
 
Salty said:
What's the different between non equity partner and a renter?
Click to expand...

Effectively none, however typically in a non equity partnership the non equity partner agree to pay a fixed amount per month and then pay a per hour charge on top of that.
 
Salty said:
What's the different between non equity partner and a renter?
Click to expand...
The "non-equity partner" usually has an ownership interest, although minimal. The primary difference typically relates primarily to some of the technicalities of insurance contract and their coverage. Just as an example, a policy might list as the primary insured, "N1234X LLC and its members." The non-equity "member" would be treated as a primary insured. The renter might not.

The other difference is an intangible - the sense of ownership can make a difference in how one treats the airplane, even without substantial skin in the game.
 
As soon as you get a pilot that can fly your plane and he's NOT an co-owner, what happens is he starts whining about wanting expensive upgrades. "You really should put is this, or that, or the other" is what you will typically hear. Why not, he doesn't have to pay for it. Upgrades are a source of conflict with ownership partners also.
 
coloradobluesky said:
As soon as you get a pilot that can fly your plane and he's NOT an co-owner, what happens is he starts whining about wanting expensive upgrades. "You really should put is this, or that, or the other" is what you will typically hear. Why not, he doesn't have to pay for it. Upgrades are a source of conflict with ownership partners also.
Click to expand...

That's when you say sure, we'll put that in next year, and oh yeah, your rental rate just went up... LOL. I don't see the problem. :)
 
coloradobluesky said:
As soon as you get a pilot that can fly your plane and he's NOT an co-owner, what happens is he starts whining about wanting expensive upgrades. "You really should put is this, or that, or the other" is what you will typically hear. Why not, he doesn't have to pay for it. Upgrades are a source of conflict with ownership partners also.
Click to expand...
As you say, even with co-owners, they are probably unavoidable, although some co-ownership agreements make provisions to help minimize the problem.
 
Bobanna said:
Just a quick thought on reflecting about this.... I would suggest that if your arrangement is solid and honest, you demand that the renter pony-up half the up-grade cost immediately in exchange for a reduced rental rate for a set period of time. Otherwise, what's to keep the renter from bailing if you bear the entire upgrade cost?
Click to expand...
And if he does, what's to keep the owner from bailing after getting half of the new Aspen/Avidyne paid for?

Yes, of course there are ways to deal with it if the parties actually want to deal with it.
 
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