Partnership Alternative

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Tmpendergrass

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Tmpendergrass
I have been looking into purchasing an airplane. I want something that's efficient, at least as fast as a 182, and fun, and IFR equipped. The RV 6/7/9 and diamond da40 all fit my mission profile. I have looked into partnerships but I'm nervous about finding the right people to make a partnership work. That got me thinking about this:

I own the airplane and get to make all the decisions.
I could then have a few "partners" that pay small initiation fee and then pay a monthly maintenance/insurance fee as well as a dry rental fee for each hour flown. Fixed operating costs for a DA40 seem to be around $15k/year right now, so 3-5 guys could pay $300-$500 per month plus $20-$25/hour dry "rental" rate.

Are these numbers realistic to expect? Does anyone have any personal experience with something like this?

Thanks,
T
 
I think a C182 or an Arrow would be more efficient than a DA40...since your purchase price for a DA40 is going to be quite higher than a C182 or Arrow.
 
What we do is simply pay a wet rate intended to cover maintenance and insurance, and split the bill with the Other Guy if there isn't enough of a balance to cover an annual or maintenance. Works fine and it's a whole lot easier on the pocketbook than owning outright.

In a couple years I've only had one scheduling conflict. I would say 2-3 partners is ideal. More and you will have scheduling conflicts.

$500 a month plus dry rental? F that. I wouldn't be interested.
 
Something like the club I am in and many other, I warrant. I pay $450 initiation + $25/month and then a low dry rate on the aircraft. I have no ownership interest. For $300-$500/month, I would have to be an owner.
 
If $300-$500 per month is too high, what is fair? Remember this is for a $125k DA40 not a old 172. My local FBO rents a 2004 DA40 for $191/hr, or $1810 for a 10hr block.

Lets say you were paid $300 per month, $20/hr dry, and $60/hr for fuel(10gph, $6 per gal). If you flew 50 hrs a year that would cost $152 per hour. At 100hr per year that would cost $116 per hour. All while getting as much scheduling access as you would if you were a partner. Seems like a pretty good deal to me. What am I missing?
 
Maybe get 4-5 people total...

Charge $30 per hour dry and $75 per month. I agree that $300-$400 per month is too much.
 
Tmpendergrass said:
If $300-$500 per month is too high, what is fair? Remember this is for a $125k DA40 not a old 172. My local FBO rents a 2004 DA40 for $191/hr, or $1810 for a 10hr block.

Lets say you were paid $300 per month, $20/hr dry, and $60/hr for fuel(10gph, $6 per gal). If you flew 50 hrs a year that would cost $152 per hour. At 100hr per year that would cost $116 per hour. All while getting as much scheduling access as you would if you were a partner. Seems like a pretty good deal to me. What am I missing?
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Personally, I would be happier with a low monthly fee and a higher hourly fee.
 
At $75 per month I'm better off just flying it myself. $75 per month probably won't even cover my increased insurance premium.
 
Diamond shares charges $995 per month for a brand new Da40.
 
Sounds like you want your cake and eat it too. You want to collect ownership monthly rates without giving up any ownership.
 
alfadog said:
Sounds like you want your cake and eat it too. You want to collect ownership monthly rates without giving up any ownership.
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Not sure what you mean by this. I think my numbers are very attractive compared to diamond share or renting. I just expect each member to pay there fair share of the fixed costs($15k/year). I'm not trying to start a flying charity.:wink2:
 
peevee said:
I was in a similar partnership to what you want to do. The deposit was $500. Monthly was 150 or 200 I can't remember and the tach time was $60 dry but your monthly cost was counted as credit towards flying so you basically paid for and accrued 2 hours a month. In the end it was too much when I could rent for the same or a nicer airplane for $20/hr more
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What was availability like with the "partnership" vs renting? Renting will normally be cheaper, but you pay for scheduling flexibility. I have lost my currency due to the fact that with the FBO I was renting from was so busy that you had to schedule 2+ weeks out if you wanted any chance of getting more than a 2hr block of time. Not to mention the overnight fees make it downright silly to take any trips.
 
Tmpendergrass said:
I have been looking into purchasing an airplane. I want something that's efficient, at least as fast as a 182, and fun, and IFR equipped. The RV 6/7/9 and diamond da40 all fit my mission profile. I have looked into partnerships but I'm nervous about finding the right people to make a partnership work. That got me thinking about this:

I own the airplane and get to make all the decisions.
I could then have a few "partners" that pay small initiation fee and then pay a monthly maintenance/insurance fee as well as a dry rental fee for each hour flown. Fixed operating costs for a DA40 seem to be around $15k/year right now, so 3-5 guys could pay $300-$500 per month plus $20-$25/hour dry "rental" rate.

Are these numbers realistic to expect? Does anyone have any personal experience with something like this?

Thanks,
T
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I have seen many posts with these types of proposals, I have yet to see this type of arrangement in my area of the country. Let's take a mid point for your values, $4800 a year and $25 dry.

To break even over renting a 172 at $125 and buying insurance, one needs to fly 43 hours year to break even. The average renter or club member flys 24. There's your problem.
 
Clip4 said:
I have seen many posts with these types of proposals, I have yet to see this type of arrangement in my area of the country. Let's take a mid point for your values, $4800 a year and $25 dry.

To break even over renting a 172 at $125 and buying insurance, one needs to fly 43 hours year to break even. The average renter or club member flys 24. There's your problem.
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Maybe my numbers seem high because of where I live. Here in social a 172sp goes for $154/hr, a G1000 equipped 172 goes for $164/hr, an old 152 goes for around $90-$100/hr.

I would kill to be able to pay $300-$400/month plus $25 dry for a steam gauge DA40.
Keep in mind you'd be paying a similar rate if you were a partner but would have money tied up in the airplane and would have to be ready to pay if something major broke.
 
Dr.Mack on this board is part of a 5 or 6 person shared ownership arrangement on a DA40 with a G1000. He might be willing to share how his setup is done and how well it works. IIRC it's been the same group for a few years now and all are happy with the setup.
 
You want it all,you want the other pilots pay fees like an owner but have no equity in the airplane,also no say on how it is maintained. Good Luck
 
frfly172 said:
You want it all,you want the other pilots pay fees like an owner but have no equity in the airplane,also no say on how it is maintained. Good Luck
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How is having no equity in a plane a bad thing?
 
At the rates your asking,would be cheaper to rent.. When you decide to sell you make all the money and your partners paid for the depreciation.
 
Tmpendergrass said:
Maybe my numbers seem high because of where I live. Here in social a 172sp goes for $154/hr, a G1000 equipped 172 goes for $164/hr, an old 152 goes for around $90-$100/hr.

I would kill to be able to pay $300-$400/month plus $25 dry for a steam gauge DA40.
Keep in mind you'd be paying a similar rate if you were a partner but would have money tied up in the airplane and would have to be ready to pay if something major broke.
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Ok, try this. DA40, $25 dry + $50 fuel, + $4800 per year vs a 172 @ $165 wet and $800 for insurance. You are at 44 hours to break even.
 
frfly172 said:
At the rates your asking,would be cheaper to rent.. When you decide to sell you make all the money and your partners paid for the depreciation.
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I disagree that I would be cheaper to rent if you fly more than 50 hours. If you fly less than 50 hours you are paying for availability and no minimum hours when you take a trip. All I'm asking is for the "partners" to cover their share of the fixed costs(insurance, hangar, annuals, and MX). At less than $100/mo that might not even cover the increase on my insurance policy.
 
You can rent a C172 for much less than $165 a month and insurance is much less than $800 a year. I have multi-engine renters insurance and that's $400 a year and I pay about $80 per hour for an IFR rated C172P.
 
Clip4 said:
Ok, try this. DA40, $25 dry + $50 fuel, + $4800 per year vs a 172 @ $165 wet and $800 for insurance. You are at 44 hours to break even.
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So if you fly more than 44 hours per year you can fly cheaper than renting and have the scheduling flexibility you would have if you owned. Again seems like a heck of a deal.
 
How do you come up with $15,000 per year in fixed costs?

Hangar rental shouldn't be more than $200 a month, plus $100 a month in insurance that comes out to $3,600 a year tops.

The rest of the stuff should just be built into the flying time.

Get a total of 5 people including you...so $3,600 divided by 5 equal $720 each per year or $60 a month.

So you can charge $100 a month (leaving you with an extra $2,400 per year which should easily cover the annual and oil changes).

Instead of charging $25 per hour dry...you can now charge $40 per hour dry and it should cover the rest of the costs...but it all depends on how much people end up flying.
 
mcoflyer said:
You can rent a C172 for much less than $165 a month and insurance is much less than $800 a year. I have multi-engine renters insurance and that's $400 a year and I pay about $80 per hour for an IFR rated C172P.
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Maybe in florida but not in cali:no:

Like I said I pay $154 per hobbs hour for a 2004 172sp. The plane is in such high demand that if you don't schedule 2 weeks out you probably won't get more than a 2hr time slot on the schedule. Not to mention 3hr per day minimum for all day rentals. i love it here in cali but maybe I should looking a moving:rolleyes2:
 
mcoflyer said:
How do you come up with $15,000 per year in fixed costs?

Hangar rental shouldn't be more than $200 a month, plus $100 a month in insurance that comes out to $3,600 a year tops.

The rest of the stuff should just be built into the flying time.

Get a total of 5 people including you...so $3,600 divided by 5 equal $720 each per year or $60 a month.

So you can charge $100 a month (leaving you with an extra $2,400 per year which should easily cover the annual and oil changes).

Instead of charging $25 per hour dry...you can now charge $40 per hour dry and it should cover the rest of the costs...but it all depends on how much people end up flying.
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Leaky hangar at oceanside is 500/mo
Hangar at SNA is even more and requires a several year waiting list.
Shade tiedown at SNA I believe is $365/mo

Insurance;
$4k-$5k per year depending on the pilots

Annual;
I've heard any ware from $2k-$6k depending on how much needs to be done.

That puts yearly fixed costs at the very lowest to be $10380

A more realistic budget would be $6k for hangar, $4k for insurance, $5k for annual and MX reserve.
 
Tmpendergrass said:
I disagree that I would be cheaper to rent if you fly more than 50 hours. If you fly less than 50 hours you are paying for availability and no minimum hours when you take a trip. All I'm asking is for the "partners" to cover their share of the fixed costs(insurance, hangar, annuals, and MX). At less than $100/mo that might not even cover the increase on my insurance policy.
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We aren't the guys you gotta sell, so if you think you have enough valid interest in your idea, go for it.

I will just tell you I am currently flying a well equipped hp/complex single for $157 wet tach based on 50 hours annually. So a DA40 at $171 doesn't appeal to me.
 
Ok well good luck with that then…

As others have said, it sounds like you want to own a plane and want others to pay for it.

If you can find some suckers out there that are good with it then more power to ya!
 
Tmpendergrass said:
Maybe in florida but not in cali:no:

Like I said I pay $154 per hobbs hour for a 2004 172sp. The plane is in such high demand that if you don't schedule 2 weeks out you probably won't get more than a 2hr time slot on the schedule. Not to mention 3hr per day minimum for all day rentals. i love it here in cali but maybe I should looking a moving:rolleyes2:
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You are complaining about a 3 hr/day min on overnights? That is the low side of the norm in my experience and considerable research in S FL. My club has a 4 hr min. Where are you going to go on an overnight where you cannot figure out how to put three hours on the Hobbs?
 
Perhaps it's best to just avoid the numbers altogether and start at the high level.

You're willing to handle the acquisition costs of the airplane, then you're looking for an equal split of the fixed operation costs among the non-equity partners. That is more than "fair" because you're eating the cost of the capital (although with today's interest rates, that's not such a high cost compared to years gone by).

The term "rental fee", though, is probably not going to sit well. If your goal of that fee is to account for the variable costs of operating the airplane (ie, contribution towards brakes, oil changes and engine reserve) then call it a "variable maintenance fee."

Start with those concepts, then the numbers are what they are. You can certainly vary the accommodations, the maintenance practices, level of insurance, etc...but I still think you're best bet is to start off getting someone on board with the concept of splitting fixed costs among partners and then charging the variable costs on a per hour basis, then take it from there.

Someone proposed this to me when I was looking for a non-equity partnership in 172 on the field (he simply didn't have the time to fly the airplane more than once every 4-6 weeks). The numbers were all "fair", but I flat out couldn't afford eat half of his ownership costs, so we came up with a number that I could live with which still helped offset his costs (I think it was around $150/mth and a higher dry rate, ie, one which covered more than the true variable costs). He had scheduling priority and per the agreement, I couldn't fly it on w/ends unless it was coordinated with him in advance. There was also an annual cap in terms of how many hours I could fly.
 
peevee said:
why is it so hard to find a partnership?
I've been looking for the right fit for a decade, I found a super nice guy with an M20E, PERFECT, he's close to my house, PERFECT, he wants 3 total partners, PERFECT.
After I pay my part of the $40k airplane he wants to spend another 10-20k or MORE in the next year to upgrade avionics, replace the prop and hub, reseal the fuel tanks.. am I crazy or wouldn't I just buy an airplane for 40k that's already had all that done?
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I know the drill...trying to get a partnership done here in the northern burbs of Chicago. Sometimes I think I should just go it alone. Do you have an agreement in writing?
 
I'm can rent a 2006 172G1000 for $135/HR wet. Just sayin. I also have access to one of the finest AA-5s I have ever laid eyes on for $25/dry. Just sayin. Good deals are out there to be had.
 
peevee said:
he scared me off before we got that far. I think it's almost easier to buy the plane then sell the shares than it is to try and find an existing partnership.
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That's what I'm starting to think. I'm a little nervous about partnership but there seems to be a lack of interest in "zero equity" partnership.


Sent from my iPhone using Tapatalk
 
4-5k per year insurance sounds really steep.

I'm in two of these zero equity partnerships right now. Here is how it works...

Fixed costs (hangar, insurance) are totaled up and split by the number of pilots. Say, this partnership is yourself and two others.

Your hangar is $6000/yr and insurance 3000/yr. One note on insurance, the insurance company will price each pilot's share out based on experience. So if someone in your group is causing you to have a high premium, you can divy it up accordingly.

So, your monthly fixed costs are $750/mo. Divide this three ways. $250/month per pilot.

Now, you tackle the variable costs. Split these up separately into maintenance and overhaul reserve. TBO on your DA-40 is likely 2000 hours and a good overhaul and labor + small stuff... figure $35k. $17.5/hr

Maintenance... depends heavily on the plane and your shop. I'd guess a diamond would be conservatively on average, about $4000/yr. With three pilots flying 80hrs/yr each, that maintenance comes to $16.50 / hr

So your pilots should pay you about $250/mo plus $34/hr dry.


PS I noticed that you put the annual in your fixed costs. The annual inspection itself is only about $800, its the maintenance that is done at annual due to wear and tear (tires, brakes, new hoses, rebuild mag at 500 hours etc..) that makes your average annual cost a few grand. I would lump the annual inspection into one expected annual maintenance estimate and then divide it by the expected number of hours flown.
 
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mcoflyer said:
How do you come up with $15,000 per year in fixed costs?

Hangar rental shouldn't be more than $200 a month, plus $100 a month in insurance that comes out to $3,600 a year tops.

The rest of the stuff should just be built into the flying time.

Get a total of 5 people including you...so $3,600 divided by 5 equal $720 each per year or $60 a month.

So you can charge $100 a month (leaving you with an extra $2,400 per year which should easily cover the annual and oil changes).

Instead of charging $25 per hour dry...you can now charge $40 per hour dry and it should cover the rest of the costs...but it all depends on how much people end up flying.
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You are forgetting the Reserves and the P&I.
Of course, it TMPendergrass decides that he is THE owner and that He makes THE decisions, then you are correct ---
If something breaks, the whole nine yards and freight will be on TMP's back as will be the entirety of the mortgage, so the minions need only chip in for the parking and insurance.

(($200 for a hangar? Wow, I can't remember when ours was that cheap))
 
dell30rb said:
4-5k per year insurance sounds really steep.

I'm in two of these zero equity partnerships right now. Here is how it works...

Fixed costs (hangar, insurance) are totaled up and split by the number of pilots. Say, this partnership is yourself and two others.

Your hangar is $6000/yr and insurance 3000/yr. One note on insurance, the insurance company will price each pilot's share out based on experience. So if someone in your group is causing you to have a high premium, you can divy it up accordingly.

So, your monthly fixed costs are $750/mo. Divide this three ways. $250/month per pilot.

Now, you tackle the variable costs. Split these up separately into maintenance and overhaul reserve. TBO on your DA-40 is likely 2000 hours and a good overhaul and labor + small stuff... figure $35k. $17.5/hr

Maintenance... depends heavily on the plane and your shop. I'd guess a diamond would be conservatively on average, about $4000/yr. With three pilots flying 80hrs/yr each, that maintenance comes to $16.50 / hr

So your pilots should pay you about $250/mo plus $34/hr dry.


PS I noticed that you put the annual in your fixed costs. The annual inspection itself is only about $800, its the maintenance that is done at annual due to wear and tear (tires, brakes, new hoses, rebuild mag at 500 hours etc..) that makes your average annual cost a few grand. I would lump the annual inspection into one expected annual maintenance estimate and then divide it by the expected number of hours flown.
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Those numbers are about what I came up with. I personally like to have higher fixed costs and lower per hour costs... It encourages me to fly more:) Is there an advantage to grouping the ~$5000 per year for MX and annual into the dry rate vs monthly fixed costs?

It seems like I'm getting ripped off as I would still be paying all the mortgage and have to eat any unexpected MX. It seems it's hard for one side not to feel ripped off with this zero-equity stuff.


Sent from my iPad using Tapatalk HD
 
Hangar rental shouldn't be more than $200 a month
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Sigh. I wish. Central Texas is in general a very low cost of living area, but in the unlikely event you could find a hanger that could contain a DA-40 you'd be lucky to get it for $500/month. Plus property tax.
 
The monthly in a non-equity deal should be higher than that in a true partnership because well, you don't contribute equity.

Some of these are run as a charity, those usually involve someone who has more planes than they need and just wants to keep their plane moving while reducing the fixed expenses somewhat. Great if you can find one of those, but not something you should expect to happen.
 
Tmpendergrass said:
It seems like I'm getting ripped off as I would still be paying all the mortgage and have to eat any unexpected MX. It seems it's hard for one side not to feel ripped off with this zero-equity stuff.
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As far as paying the mortgage goes, yeah if you are buying a newer plane for a crap load of money and paying interest on a loan.. I can see your issue. The non-equity partnership typically works out best for the guy who buys an older GA airplane that does not lose 100k of value in 3 years. Someone who does not really care about having some money tied up in the plane, but wants to make sure he is not getting eaten alive on operating expenses for a plane he flies 70 hours a year.

Unexpected MX... just set the annual maintenance costs conservatively in your favor. You might get stung once or twice with a big bill, but you set the hourly rate so that it works out over time.
 
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weilke said:
The monthly in a non-equity deal should be higher than that in a true partnership because well, you don't contribute equity.
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Agreed but I think it depends on the airplane and the situation. Some newer airplanes are going to be depreciating at an alarming rate and I would expect to recover some of that depreciation from non-owned partners. That is a premium they should be willing to pay for a newer plane.

In the case of a $40,000 Cessna, it might be a bit different. If you hangar it, keep all of the maintenance up to date and have guys paying into an engine overhaul fund, you can sell it a few years down the road without losing any money.
 
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My T hangar in a relatively low cost part of Florida is $400/month. And my friend's DA40, with it's 39 ft wingspan, won't fit.
Insurance for my C172n is just under $800/year.

This thread is interesting. I have been thinking about taking on a couple of partners to help with those types of expenses myself.
 
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