MX Reserve?
1975 model 172. How do you determine a price. This person would be third owner.
AOPA VREF, ASO and Controller for comparison (remember those are asking prices). How many hours and what avionics? If I were buying in, I would discount the value of any MX reserve by 50% or more. That represents time already flown and benefit already accrued to the existing owners and adds little to the value of the airplane once it is used for repairs and maybe 50% if used for upgrades/rebuilds.
?
It's cash. It should be a one-for-one as far as valuation goes.
That doesn't make any sense at all.
That doesn't make any sense at all.
1975 model 172. How do you determine a price. This person would be third owner.
I have been using the AOPA Vref to determine the value of the airplane plus taking into account any of the reserve funds... if there are any!
Funny, many that I am talking too are looking for a partner due to needing a new engine etc...... Not a partnership I want to get involved in.
This only works if you value the plane for the hours and condition it was in when the mx reserve was zero, before the usage.
I've never bought an airplane, but my guess is that if you pay less for an aircraft with a 1500 SMOH engine than you would for the same airplane with an engine with a 200 SMOH engine.
To put it another way, if you have two identical airplanes for sale, same condition, same usage, both worth $20,000 as they sit. If one of them came with a $10,000 reserve and the other came with no reserve, you most definitely would expect to pay $10,000 less for the one that didn't come with the reserve.
Not put in, took out.
The airplane is X.
X + $0 = $20,000
X + $10,000 = $30,000
It really is that simple.
I think it does. That money won't be spent on anything but, for example, replacing the engine. Replacing the engine is not going to increase the value of the airplane by the dollar amount spent.
So if you buy into a $40,000 airplane with a $25,000 mx reserve and you decide to value that at $65,000. That would mean you'd pay $21,600 for your third share.
If a week later the engine is overhauled because the owners feel that its getting to about that time and they have the money anyways you will not have a $65,000 airplane. More likely you'll have a $50 to $55 thousand dollar airplane.
Sell it after that week for that $50 / 3 at $16,600 and you just lost $5,000.
That would be OK provided they understand that you only recover in value about 50% of what that engine will cost you. If they are willing to work with you on that basis, it might be a fair deal.
In other words, you buy in at the VREF of the airplane with a fresh engine, not the VREF of the existing airplane plus the full cost of the rebuild.
So you would be willing to pay $65,000 for a $40,000 airplane with a runout engine that has a $25,000 reserve fund if the owners told you they were spending that reserve fund on a new engine the day after you bought your share? Because if they did you wouldn't be able to sell your share for $65,000 anymore. $50,000, maybe $55 if you're extremely lucky.The airplane is X.
X + $0 = $20,000
X + $10,000 = $30,000
It really is that simple.
To further complicate things. The current owner and I are 50/50. We bought the plane a year ago with 1000 hrs TSMO. We both knew going in the hours in the engine. We have split all costs 50/50 for everything regardless of fly time. I know the arguments here. If I fly it for 200 hrs and he flies 10 I should be paying more for expenses.
We decided at the very beginning not to do that. Our arrangement has been fine so far.
Plane in question has a fresh annual and I had someone approach me about buying a third. The current owner and I are fine with this because we will want to upgrade in the next few years and so does the guy who wants In now.
We do not have a reserve. If the plane has problems we pay half each. I don't care if its a tire or a engine. Now this is ok with us but not sure how a third party would feel.
Just trying to get something to tell this guy if he wants in on the plane.
To further complicate things. The current owner and I are 50/50. We bought the plane a year ago with 1000 hrs TSMO. We both knew going in the hours in the engine. We have split all costs 50/50 for everything regardless of fly time. I know the arguments here. If I fly it for 200 hrs and he flies 10 I should be paying more for expenses.
We decided at the very beginning not to do that. Our arrangement has been fine so far.
Plane in question has a fresh annual and I had someone approach me about buying a third. The current owner and I are fine with this because we will want to upgrade in the next few years and so does the guy who wants In now.
We do not have a reserve. If the plane has problems we pay half each. I don't care if its a tire or a engine. Now this is ok with us but not sure how a third party would feel.
Just trying to get something to tell this guy if he wants in on the plane.
I would tally up what the plane's worth, then add in a little bit of a factor for the extra pain in the ass of having a 3rd partner. More down time less availability, money issues, disagreements on upgrades etc... What's that worth to you? My current price to take on a partner is about 150% of what Vref says.
Is it in Bend?
To further complicate things. The current owner and I are 50/50. We bought the plane a year ago with 1000 hrs TSMO. We both knew going in the hours in the engine. We have split all costs 50/50 for everything regardless of fly time. I know the arguments here. If I fly it for 200 hrs and he flies 10 I should be paying more for expenses.
We decided at the very beginning not to do that. Our arrangement has been fine so far.
Plane in question has a fresh annual and I had someone approach me about buying a third. The current owner and I are fine with this because we will want to upgrade in the next few years and so does the guy who wants In now.
We do not have a reserve. If the plane has problems we pay half each. I don't care if its a tire or a engine. Now this is ok with us but not sure how a third party would feel.
Just trying to get something to tell this guy if he wants in on the plane.
Not complicated at all and glad to see this arrangement is working for you.
This is a similar story of two gents I was talking too about a AA-5B... They split the cost 50/50 on everything regardless of who and how long they fly it. They are talking to me because the engine is getting a little long in the tooth along with a few other things that they don't have a reserve to done. Neither of them want to come out of pocket and they were pretty upfront about this which can be appreciated..
Nice guys, but they wanted a little more than what the Vref was telling me, and like you they don't want to levy a hourly fee for using the plane which to me is only fair...
That said, could I recommend that maybe you take a third of what your thinking of asking and starting a reserve fund, as well, start charging an hourly rate... If anything when all three of you decide to upgrade, you can use the cash towards the new plane if not the maintenance of the current one..
Why the hang-up on the reserve? If the plane is fairly valued with a run-out engine, why does it matter whether you pay less for the plane and then pay your portion of the O/H cost when the time comes? Won't the total investment be the same either way?
Many long-tooth engines run for a looong time and well past Mfr-recoomended interval prior to requiring O/H, in which case all those hours are essentially free.
So you would be willing to pay $65,000 for a $40,000 airplane with a runout engine that has a $25,000 reserve fund if the owners told you they were spending that reserve fund on a new engine the day after you bought your share? Because if they did you wouldn't be able to sell your share for $65,000 anymore. $50,000, maybe $55 if you're extremely lucky.
Or you could buy that same airplane for $55,000 with a brand new factory overhaul. Save $10,000 and have the same result. Think about that.
Yes, I am very well aware of these engines running long beyond their TBO time.. I was using a 152 that had 3040 on the engine before the rebuild.. That was a dam good little airplane.....
The key words here are fairly valued... but that is not what I am finding..
I would love get a plane with a run out engine, and get it rebuilt with the comfort of knowing I have some fresh hamsters up front... But, let's talk a fair price... not a pie in the sky this is what they are advertised for price..
Regarding my hang up on the reserve.. not so. I have more of a hang up on not stipulating an hourly rate. To me this is the only fair way to plan for future maintenance..
And the financial guys say the plane should trade for a little less when co-owned due to all the constraints, so you have effectively eliminated a large portion of the potential market. If that's your goal, all is well.
When I'm confronted with these situations in the turbine markets, I advise both sides that the purchase price is chump change anyway, and to be willing to make the deal if the price is somewhere in the ballpark. 50% over clearly isn't a number anybody with a lick of sense would pay.
Supply and demand. http://www.barnstormers.com for the supply heavy place to get a plane. How many nice birds are sitting at the airport with a for sale sign on them for 1/3 interest? That supply just took at hit if that's what you need. If you're not flying much and market it, maybe the price needs to be right to get the fish on the hook. If he's already on the hook and you weren't even fishing... It better be worth the effort. My $0.02
I think it does. That money won't be spent on anything but, for example, replacing the engine. Replacing the engine is not going to increase the value of the airplane by the dollar amount spent.
So if you buy into a $40,000 airplane with a $25,000 mx reserve and you decide to value that at $65,000. That would mean you'd pay $21,600 for your third share.
If a week later the engine is overhauled because the owners feel that its getting to about that time and they have the money anyways you will not have a $65,000 airplane. More likely you'll have a $50 to $55 thousand dollar airplane.
Sell it after that week for that $50 / 3 at $16,600 and you just lost $5,000.
No, what this means is that you didn't have a $40au airplane to begin with. If you spent $25au to put a new engine in it and you only have a $50au airplane afterwards, that means the airplane was only worth 25au and you overpriced it at the buyin.
When I'm looking at an airplane, I always seperate out the engine and the airframe. Yes, sometimes that means the airframe isn't worth much in a smaller airplane. That's the reality with old airplanes and expensive engines, the engine really is 70% of the value of the airplane.
Is the OP looking at a specific airplane? Can you give us the year, model, total airframe time, total engine time and any exceptional electronics?
What I also see frequently in partnerships is a group that says "well, we each pitched in $5,000 to buy into the airplane. Each new owner has to pitch in $5,000 too." Pretty soon, they're asking 5k to buy into a 1/10th share of a $20,000 airplane, if they got that many people on board. A buyin should be distributed to the current owners so you keep equity equal to value.
I see the logic and I suppose I'm coming out on the better end of the deal cause I fly more............. We flew it 36 hours total last year. I flew 31 and he flew the
Miami. Is that too far a commute?
And what if this new owner flies more than 300 hours a year? What would be your position on that?