training aircraft ownership/leaseback

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prancingmoose

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prancingmoose
I'm looking for some opinions from those that know far more than I do!

I'm just finishing up my commercial in a 141 school, and will be getting my CFI over the summer. Obviously, I've been thinking of what I plan to do with the CFI rating. I'm thinking of buying a small, relatively cheap plane, a 172 or Warrior, something like that. From what I have seen, $20-$30k will get you a decent one. It would certainly be nice to have my own plane to build time in, and not have to deal with the hassle of renting when I want to go somewhere.

But if I could get a job at a flight school, probably part 61, could I do a leaseback with them? That would allow me to teach out of my own plane, while at the same time earning some money back on my purchase towards maintenance, insurance, etc..

I haven't done a great deal of research yet, but could that be feasible?
 
Yes, but be prepared to work hard and be patient to find the right aircraft, otherwise you will likely regret it.

Ryan

Sent from my Nexus 7 using Tapatalk 2
 
I looked his article up, fantastic advice. I've never seen such a complete discussion on any topic lol. Lots to think about...
 
I guess you could do a leaseback if you just have a lot of cash to burn. But if you are on a budget it would be a lot more economical to buy the plane and keep it to yourself.
 
Take any advice that a leaseback will be profitable with a grain of salt. Most of the articles, including Hegel's piece, were written before many of the changes in economics and (some) changes in tax law.

Bottom line is that it was tough before and is even tougher now. The problem you'll face is that the return (if any) can only come after a lengthy period of ownership and you'll never be sure if you are winning or losing the game during the interim.

You might stumble into a special situation such as Ryan alluded to, but all of them are crapshoots until the fat lady sings. And FWIW, I do this aviation stuff for a living and have never for a minute considered any kind of leaseback deal.


prancingmoose said:
I looked his article up, fantastic advice. I've never seen such a complete discussion on any topic lol. Lots to think about...
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I would personally interview the school owner (look at their existing flight line and logs) and fly with any CFI before he could fly my plane (if I was going to do a leaseback).

ALSO be sure you're in the plane so you could sell it and make a profit, it's a money maker not your baby if you're going to go this route.
 
Zackly how does an owner assure himself of a profitable outcome upon the sale of an airplane?

NineThreeKilo said:
I would personally interview the school owner (look at their existing flight line and logs) and fly with any CFI before he could fly my plane (if I was going to do a leaseback).

ALSO be sure you're in the plane so you could sell it and make a profit, it's a money maker not your baby if you're going to go this route.
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This could make sense if you're going to be doing the bulk of the instructing in it AND using it as a time builder for yourself. Just recognize going in that it is not a money-maker....just a way to maybe reduce some of your costs.
 
The "maybe" factor works both ways. Margins are paper-thin and one oopsie can wipe out a year's profit. If the owner is well-insulated against such risks and is willing to participate in a deal where "I sure hope we break even because we really need the money" then a leaseback might be tempting.

LDJones said:
This could make sense if you're going to be doing the bulk of the instructing in it AND using it as a time builder for yourself. Just recognize going in that it is not a money-maker....just a way to maybe reduce some of your costs.
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NineThreeKilo said:
Buy it for less then the comps on barnstormers, ASO etc.

Same way a car dealer buys a car to sell it.
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just so i can get this straight, i think you're saying that all i have to do is to buy a good plane cheap and then re-sell it for more. It's amazing no one ever thought of this before now. Now i understand why all those people who tried leasebacks immediately were able to buy beach houses and condos at jackson hole.
 
On the leaseback what is the largest expense the owner should expect? Is it the maintenance, insurance, or both? Looking at a local flight school, 172 is flown around 15 hours a week at ~$120 wet, and twin Seneca is flown around 7 hours a week at ~$230 wet. Assuming $4/g AVGAS and 80/20 split, 172 will yield around $70 per hour, and Seneca maybe $100 per hour. Then the annualized gross profit for 172 is around $50k for 172, and $35k for Seneca before the maintenance and insurance expenses. It appears there is some room for the profit, but I don't have good expectation for annual maintenance and insurance cost.
 
it's both. If the operator expects you the owner to carry all the insurance burden, expect your $1k policy to add a zero and change. On maintenance, the operator will likely perform the maintenance and charge you for it. That gives him an alternative revenue stream (you) during times of bad weather, etc that cause low flight hours.

just remember, if it was viable to have the airplane in that operation, the operator would buy it himself.
 
A gas is more than 4.00 per gallon I don't kno what it is there but it's almost 7 here I can't imagine it being 4 there..
 
marcoseddi said:
A gas is more than 4.00 per gallon I don't kno what it is there but it's almost 7 here I can't imagine it being 4 there..
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It's out there but you have to really look. I filled the Baron up at Granbury Texas last Sunday for $4.00 a gallon. Overall, seems like $5.50-$6 is the typical range these days.


Sent from my iPad using Tapatalk HD
 
marcoseddi said:
A gas is more than 4.00 per gallon I don't kno what it is there but it's almost 7 here I can't imagine it being 4 there..
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The quote was from a flight school at LVK. However airnav for LVK shows the fuel price at $5.63. I assume flight schools and FBO gets fuel discount? Anyways, I agree the potential for the profit margin gets thinner at $6/g gas.
 
With these things ....breaking even is making money ...make sure you really have a passion for being an owner ..some times it can get salty with the expectation of realizing profits ..it took me and my partner 5 years to actually start getting ahead with several planes.
 
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JHW said:
just so i can get this straight, i think you're saying that all i have to do is to buy a good plane cheap and then re-sell it for more. It's amazing no one ever thought of this before now. Now i understand why all those people who tried leasebacks immediately were able to buy beach houses and condos at jackson hole.
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You seem the type that thinks aircraft are special huh?

Simple put it's a machine, people ALL OVER THE WORLD buy and sell machines for a living, there are people out there that REALLY need MONEY more then their plane, of that bunch there are some that need that money NOW!!

Having cash and finding those people takes time and a little travel (also knowing aircraft helps).

We got our trainer for the school for a really good deal (and it's a solid 8.5/10 plane, low hours across the board), all the comparable planes are EASILY 4-5k more then we are in ours.

As for a lease back, you pay for overhaul, the leaseor pays insurance (you're obviously in the policy if there is a wreck on the plane), they pay for 100hrs and annuals and you ALWAYS lease DRY, they handle fuel.
 
Do you use apply that same philosophy when you go to the track?
"Gosh, I hope I break even today because I really need the money."

taters said:
With these things ....breaking even is making money ...make sure you really have a passion for being an owner ..some times it can get salty with the expectation of realizing profits ..it took me and my partner 5 years to actually start getting ahead with several planes.
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wabower said:
Do you use apply that same philosophy when you go to the track?
"Gosh, I hope I break even today because I really need the money."
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Not really... I just apply that to things in my profession, not sure how buying and selling airplanes compares to gambling like a fool at "the track" :dunno:

You should google "aircraft dealers license" this is something people get who professionally buy and sell planes. "OMG!" you say? Yes! People can make a living buying and selling planes, it's crazy but you can even google such impossible terms such as "used aircraft sales" and you will find these magic people who seem to do this impossible task that I speak of.

Heck Ive seen folks on this board go all crazy over repainted near runout 172s and PA28s listing near 30k!
 
NineThreeKilo said:
Not really... I just apply that to things in my profession, not sure how buying and selling airplanes compares to gambling like a fool at "the track" :dunno:

You should google "aircraft dealers license" this is something people get who professionally buy and sell planes. "OMG!" you say? Yes! People can make a living buying and selling planes, it's crazy but you can even google such impossible terms such as "used aircraft sales" and you will find these magic people who seem to do this impossible task that I speak of.

Heck Ive seen folks on this board go all crazy over repainted near runout 172s and PA28s listing near 30k!
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Big difference in someone who buys a plane and then tries to sells it themself for a profit versus a dealer who is going to get a commission off the sale regardless of the final selling price.

The topic wasn't about dealers making money off commissions.
 
How does a person go about becoming one of those people? What kind of license is required? Who issues them? How much money can those people make? Can they work on big airplane deals too?

NineThreeKilo said:
Not really... I just apply that to things in my profession, not sure how buying and selling airplanes compares to gambling like a fool at "the track" :dunno:

You should google "aircraft dealers license" this is something people get who professionally buy and sell planes. "OMG!" you say? Yes! People can make a living buying and selling planes, it's crazy but you can even google such impossible terms such as "used aircraft sales" and you will find these magic people who seem to do this impossible task that I speak of.

Heck Ive seen folks on this board go all crazy over repainted near runout 172s and PA28s listing near 30k!
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Fearless Tower said:
Big difference in someone who buys a plane and then tries to sells it themself for a profit versus a dealer who is going to get a commission off the sale regardless of the final selling price.
*
The topic wasn't about dealers making money off commissions.
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Most folks I know selling planes, cars, stay in business by making a profit, not just charging a fee, but that's the difference between how many play the broker game vs the dealer game. *Think of it as a realtor vs a car dealer.*

*Also it's 100% on topic, best way to buy something is using business sense not emotion, best people at doing that are people who make a living doing it. I can not see paying retail for a aircraft ever, it's just not that hard to find someone who needs money and can't wait.*

wabower said:
How does a person go about becoming one of those people? *What kind of license is required? *Who issues them? *How much money can those people make? *Can they work on big airplane deals too?
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*Get a license from your state and FAA(easy), alot of states require a bond though, if I were going to spend time doing this I'd 80% broker deals and only play the dealer game on a sweetheart deal and I just don't have the time to hunt those down all the time, for me or friends and family I'll do it. *I'd just rather spend my time making money in the air vs on the phone... heck that's why I am a pilot not a sales guy.*

Also to be a good dealer (small scale) you really need to also be a A&P.*

http://www.faa.gov/documentlibrary/media/form/ac8050-5.pdf

http://www.wsdot.wa.gov/aviation/Registration/AircraftDealerLicense.htm
 
I keep wondering when NineThreeKilo is going to get the joke...maybe never at this rate.
 
JHW said:
By all means, please continue. I'd like to see someone lecture wayne about the airplane trading business.
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Ive done well at it too and that's super part time


Had no idea Wayne is in the business, I really don't spend enough time on this site to get into every screen names's details.


Only brought it up to demonstrate that it is possible to buy a aircraft and be in it well enough to sell it for more then you paid for it, if that wasnt the case no one would apply to be a aircraft dealer.
 
Oh I love how entertaining threads can get lol.

Like someone said earlier, I think the only way this would make any sense is if I do most of the instructing in the plane and using it as a time builder, which is what I intend to do.

How realistic would it be to be a "freelance" instructor, and just try to pay for the plane that way? Instead of going through a flight school..
 
The only advantage from using a school is increased utilization, assuming that's what you want. If you can keep it busy yourself, you'll be able to prevent a lot of the dumb**** damages and wear and tear ("no ma'am you don't need to rare back quite that far to slam the door shut, it only weighs a few pounds. Here, let me demonstrate it for you") and monitor the operations much more closely.

prancingmoose said:
Oh I love how entertaining threads can get lol.

Like someone said earlier, I think the only way this would make any sense is if I do most of the instructing in the plane and using it as a time builder, which is what I intend to do.

How realistic would it be to be a "freelance" instructor, and just try to pay for the plane that way? Instead of going through a flight school..
Click to expand...
 
prancingmoose said:
Like someone said earlier, I think the only way this would make any sense is if I do most of the instructing in the plane and using it as a time builder, which is what I intend to do.

How realistic would it be to be a "freelance" instructor, and just try to pay for the plane that way? Instead of going through a flight school..
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You have to build your business first - or expect to lose a lot of money on the overhead initially. I have an established customer base in San Antonio, but not so much yet in Austin - which means that my airplane hasn't flown as much as I would like for it to. That means the margins are a LOT thinner. For example, it costs me nearly $4K a year to insure the aircraft and at least $1K for the annual. Also, I have to pay, let's say a cheap amount of hangar rent for $100. Every hour that the plane doesn't fly in a month, means a bigger chunk of the rental rate is going for the annual, insurance, and hangar rent in addition to the fuel, oil, and 100 hr costs. If I only fly 10 hours in a month in the aircraft, I am loosing quite a bit of money for an instructor's salary even at $100/hr on the rental rate.

I figure if I hadn't moved up here (for good reasons) I might have 20+ % greater flight time on the aircraft I've been using. Of course, I wouldn't have bought it down there because I had an aircraft to use. I bought it up here because I didn't have a taildragger to teach in available.

Ryan
 
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If you're going to purchase an airplane, work something else full time and instruct in it on your days off. Did the leaseback deal last year and the owner always gets screwed. I thought I'd be the exception but I wasn't. Lack of maintenance due to needing to keep the plane flying to "make money" cost me $3000 for my plane's last annual from negligent/non-existent maintenance practices because of the greed of the flight school....making money for it was more important than a safe airplane. Guess what, I've also seen it as a CFI for a flight school too. Cutting corners, half ass maintenance....

Save yourself the heartache
 
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