airplane as an investment..different take

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Richard G.

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Richard G.
Hello Everyone,
New user here, but long time lurker. I am just finishing up my PPL checkride scheduled for a couple of weeks, and planning on getting my IFR ticket this fall. My end goal as a pilot is 1, have fun, I've always loved aviation, and just enjoy airplanes, and 2. have an airplane that I can travel in. The 500 NM cross country is a good rule for my location to be able to get to some interesting locations.

Anyway I'm not going to ask the what airplane should I get, that is a totally different discussion, but one that I think I might have a different take on is, is the aircraft itself an investment?

Over the years GA aircraft have not gotten cheaper, sure there have been increases and decreases in the market, but over the last 30 years, the certified GA aircraft pool continues to get smaller because of accidents, planes deteriorating etc. So the prices in general will always trend up, or at least stay the same.

The biggest holdup for me in purchasing a plane is the capital investment, but if you look at the plane as an investment property, or another way, diversifying your portfolio, is that a way to justify the capital expense? I know I will never get maintenance or gas back, probably wouldn't get full value for avionics upgrades either, but just the hull of the airplane, the single biggest expense in this hobby, does anyone look at it as an investment? I guess another comparison would be do you look at an aircraft purchase similar to a collector car? Sure your spending money, but you know you can probably at least get your money back out of it later if you needed to.

What are your thoughts?
 
There was a time when you could pretty much count on selling an airplane for more than your purchase price if you owned it for a few years, but I believe that time to be past.
 
No. At best it's a zero-sum game on the hull itself, the engine will depreciate the more hours you put on it. Sure, there are instances of recent with people getting a higher price now than they bought it for a year or two ago. However, in general, the aircraft values aren't going to even outpace inflation. It's not an investment. The only aircraft that may have that "investment" status are aircraft like old warbirds, but even then there are better "investements" than throwing several-hundred-thousand dollars at a WW2 bird.
 
A collector car can sit in a garage that you might already have. Keep it polished, start it up one a year and it will still be good. An airplane you have to pay for a hangar, and depending where you live can be big bucks. And a sitting plane is not something desirable. A p,and that has been sitting for 20 years and only has 20 hours on it, even though all polished and pretty will most likely have some problems that cost a pretty penny to fix.
 
You might sell the airplane for more than you paid, it is quite possible depending on the market. But an airplane is still a crappy investment, on the order of burning money on a fire. You pay to have the damn thing examined every year. You pay to have it housed or tied down. You pay to have it insured.

Even if you discount all the other fixed costs, you'll spend enough on maintenance to wipe away any profit you might ever realize. And if yo decide you want any kind of upgrade, you can count on 50 cents on the dollar tops when you go to sell. If you want an investment, buy land. Land will grow more valuable just sitting there. Let an airplane sit and it turns to garbage. Buy an airplane because you want to go fly.
 
I’d argue the statement that the airframe is the single biggest expense in flying. Hasn’t been my experience at all, but I bought a 50 year old airframe. Maybe if you buy something < 15 years old.
 
Salty said:
I’d argue the statement that the airframe is the single biggest expense in flying. Hasn’t been my experience at all, but I bought a 50 year old airframe. Maybe if you buy something < 15 years old.
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My thoughts exactly. Unless you're talking about very high hull value aircraft, most Bonanzas, Barons, 182s, 172s, the cost of the upkeep and operation can make the acquisition price look small. In some cases, the plane itself is the cheapest part. Sure, you might be able to resell the airplane for what you paid for it (or even a little more) even after 5+ years of ownership, but your costs over those 5+ years are going to far, far, far exceed any "return" you might see on the hull. Remember, airplanes are a world where a part that is "only" $500 seems cheap...if it's not a $1000 expense, it doesn't even move the needle.
 
You'd have to get very lucky. Examples:
A nicely kept Mooney 201 or 231 sells for pretty much exactly what it sold for new in 1981. Seems like it at least holds its value but the dollars aren't worth anywhere near what they were.

In 2019 to early 2020 the prices of the average C172 climbed into ridiculous territory, so if you had one and wanted a different ride you could have pocketed some walking around money.

Citabrias have gone up dramatically too. I owned one for three years and sold it for 50% more than I paid for it. I think more in terms of it not "owing me anything" for the experience than as an investment.
 
I agree with everyone 100% that the whole expenses of owning an airplane is a losing situation financially. I agree with you.

I guess let me try this a different way,
I currently spend $135 an hour to rent a 172. I have to fight plane availability all the time and I think it would be impossible for me to rent this plane for a length of time for a trip. There is a $165 an hour 172 in the area that has a glass panel and more availability, but more money, same slow airplane. The next step up is an SR22 and thats $225 an hour. So lets just for discussions sake say I rent the $165 an hour 172 for 30 hours a year, and the $135 172 for 50 hours a year, thats $11,700 I'm going to be spending a year weather I own a plane or not.

If the capital expense of the airplane was say $100,000 and I could buy that up front with cash(I know easy money these days use someone elses money but for discussions sake) for a 182 or similar, then all I have is the hangar/annual/fuel/insurance costs. My area hangar is not expensive(central Arkansas) so I'm lucky there.

So, lets say 5 years into this deal, renting, I have spent $58,500. Owning I spend potentially more than that $58,500, but probably a lot more flying hours, more enjoyment, more flexibility, and a faster aircraft. I can also still probably sell the airplane for the $100,000 I paid for it, a $10,000 gain or loss is not a big deal, that is how I'm looking at the aircraft as an "investment" probably won't make money, but, if I'm going to spend that money renting or owning and the biggest difference is the capital outlay up front, then doesn't it make more sense to own not from the financial sense, but from the enjoyment sense?

Sorry if I'm all over the place, I guess I'm just trying in my head and here to talk through justifying aircraft ownership vs just renting, and it may not be possible from a financial sense.
 
Richard G. said:
a $10,000 gain or loss is not a big deal
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It is if you consider that you could roll that into a properly managed fund and spend someone else's money on a share in a useable, well-managed airplane at ridiculously low rates right now.

I would NOT bet $100k on a 45 year old 100 Series Cessna and expect it to hold value right now. The market is severely inflated.

The prices you are seeing on these airplanes are just simply not tenable for much longer. I've been warning people about this whenever it comes up: don't fall victim to the fear of missing out.

If you've got $100k and you really really just gotta have an airplane, build an RV10 with a partner. If you need to sell it, it'll hold value better than the 182 in the next 5-10 years without question. As long as you install good avionics that real pilots actually want to fly with. Don't spend $70k on a custom Thunderbolt engine just to slap some used steam gauges and a frickin AT-50 transponder and a tailbeacon in the thing.

I haven't had a single customer follow through on buying a newly built EAB. Not because the airframe was constructed poorly, but because the builder cheaped out at the end but demanded glass panel prices.

All this aside, I've been where you are. I can tell you definitively: trying to justify ownership with numbers means you either can't or shouldn't buy the thing. Retrospectively, I'm glad I passed on the last four airplanes I almost bought.
 
Der Fliegermeister said:
It is if you consider that you could roll that into a properly managed fund and spend someone else's money on a share in a useable, well-managed airplane at ridiculously low rates right now.
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I would buy into a partnership yesterday if one was available in my area. They just aren't, and I'm not the only one looking.

I appreciate your advice, and everyone's advice. I have thought about going the RV10 route..but..I'd much rather spend my free time the next 2-3 years flying than building a plane.

I also know the market is very inflated right now and buying now would be not the best decision 100% I'm in no rush to buy. Just trying to get advice from people who have been there done that.

By the way the last line of your message really makes a lot of sense.
 
Richard G. said:
…I'm just trying in my head and here to talk through justifying aircraft ownership vs just renting, and it may not be possible from a financial sense.
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Most of us have been there. Unless the airplane is actively making you money, ownership is emotional justification.

The dilemma your having is cost control…partnership is the answer. If there are no partnerships but two people are looking, then form a partnership.
 
Richard G. said:
I would buy into a partnership yesterday if one was available in my area. They just aren't, and I'm not the only one looking.

I appreciate your advice, and everyone's advice. I have thought about going the RV10 route..but..I'd much rather spend my free time the next 2-3 years flying than building a plane.

I also know the market is very inflated right now and buying now would be not the best decision 100% I'm in no rush to buy. Just trying to get advice from people who have been there done that.

By the way the last line of your message really makes a lot of sense.
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If there are other people looking for a partnership, why not approach them and for one? A good partnership is absolutely one of the best ways to own an aircraft. I have one that is working out well, so far.
 
Richard G. said:
Hello Everyone,
New user here, but long time lurker. I am just finishing up my PPL checkride scheduled for a couple of weeks, and planning on getting my IFR ticket this fall. My end goal as a pilot is 1, have fun, I've always loved aviation, and just enjoy airplanes, and 2. have an airplane that I can travel in. The 500 NM cross country is a good rule for my location to be able to get to some interesting locations.

Anyway I'm not going to ask the what airplane should I get, that is a totally different discussion, but one that I think I might have a different take on is, is the aircraft itself an investment?

Over the years GA aircraft have not gotten cheaper, sure there have been increases and decreases in the market, but over the last 30 years, the certified GA aircraft pool continues to get smaller because of accidents, planes deteriorating etc. So the prices in general will always trend up, or at least stay the same.

The biggest holdup for me in purchasing a plane is the capital investment, but if you look at the plane as an investment property, or another way, diversifying your portfolio, is that a way to justify the capital expense? I know I will never get maintenance or gas back, probably wouldn't get full value for avionics upgrades either, but just the hull of the airplane, the single biggest expense in this hobby, does anyone look at it as an investment? I guess another comparison would be do you look at an aircraft purchase similar to a collector car? Sure your spending money, but you know you can probably at least get your money back out of it later if you needed to.

What are your thoughts?
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If you invested $100K today in the stock market at an modest 6% annual rate of return, you'd have over $320K in 20 years, with no other financial outlay. That won't happen with a plane, and you'll be shelling out $10K/year or more to keep it airworthy and re-sell-able (that's why airplanes don't depreciate like cars; we pay out the depreciation cost in upkeep instead).

On the other hand, you can't fly an ETF or mutual fund. So buy a plane for fun, not profit.
 
If you find the right aircraft at the right time you can make a little profit but as others have said an aircraft isn't a good investment. Now isn't the greatest time to get into a C172. But who knows, prices may not come down and life is short.
 
Owning a plane is an investment; I’m investing in my mental health.

Financially smart? No, no, no.

I love flying and I’ll give a portion of my retirement up to enjoy it now. I can’t justify the expenses and certainly try to mitigate them. It is a losing scenario, but a winning lifestyle.

I warned the wife from the jump and personally think you are setting yourself up for disappointment with your theory. Go fly, spend some $$$.
 
30 years ago, yeah, maybe. Not now. We bought our first, C172 that needed some TLC and put it in leaseback which in that case worked out very well (it doesn’t always, and that was back then) plus, and here’s the thing, my husband is very hands on. His own labor is the investment. If you save a bunch doing your own fixing up, and the market is right, and you have some luck, you could sell at a gain or at least break even. But my opinion right now today? No way. Find something else to invest in. But buy a plane for your own sake.
 
Mtns2Skies said:
HAHAHAHAHHAHAHAHAHAHAHAHHAHAHAHAHHAHAHAHAHAHAHAHAHAHAHAHAHAHHAHAAHAHAHAHAHAHHAHAHAHAHA
:rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl::rofl:

That's funny. Best joke I've heard in a good while.
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You’re right of course, airplane ownership is like boat ownership, just a black hole into which you pour money, with some carefully timed exceptions.

But in defense of OP, if the pool of GA aircraft gets smaller, the laws of supply and demand should in theory raise the value. But the mistake is assuming the demand side stays the same. GA airports are closing, boomers are aging out and the cost of certification and training is rising so the pool of new GA pilots will shrink.

OP didn’t state his age but if he’s a young guy it’s understandable to try to think of various money making strategies for his future. Many such young people’s schemes are doomed to fail but at least he’s trying. For most people though, the key ends up being to get a good degree and a good job, stick with working hard and living below your income, saving as much as you can in a well diversified portfolio. At least that’s how it used to be up til now. Going forward I’m not so sure I trust the dollar or the stock market anymore. Maybe Bitcoin is a better investment.

No, I’m not looking for a fight about cyber currency. I know it’s only invisible electrons. With dollars at least you can burn the physical paper for fuel when it crashes.

But I digress. Back to the topic, no, don’t buy a plane as an investment. Buy one though, and account for its drain on whatever you do invest in.
 
Lot of Afghan's right now wish they had had a plane on Friday of last week and a local GA airport to fly from. It may not be a winning financial investment... but I can tell you this much, a fully fueled GA aircraft can take you from one part of the country to another quicker than any other form of transport and in a way that even roving bands of warlords will have a hard time intercepting. You may not be getting a return on your investment, but in my mind it is VERY CHEAP black swan bugout insurance with tangible side benefits in regular usage.
 
gov98 said:
Lot of Afghan's right now wish they had had a plane on Friday of last week and a local GA airport to fly from. It may not be a winning financial investment... but I can tell you this much, a fully fueled GA aircraft can take you from one part of the country to another quicker than any other form of transport and in a way that even roving bands of warlords will have a hard time intercepting. You may not be getting a return on your investment, but in my mind it is VERY CHEAP black swan bugout insurance with tangible side benefits in regular usage.
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Hadn’t thought of it that way, but yes. Also the reverse, when we owned a vacation home at the beach and a hurricane came through and the authorities were not allowing anyone in, not even property owners, we were able to fly over our house and see that it was still there and appeared undamaged.
 
Rushie said:
But in defense of OP, if the pool of GA aircraft gets smaller, the laws of supply and demand should in theory raise the value. But the mistake is assuming the demand side stays the same. GA airports are closing, boomers are aging out and the cost of certification and training is rising so the pool of new GA pilots will shrink.
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Absolutely right, and there's also the risk of a market disruption that makes our planes (more?) obsolete. For example, someone might come up with the $50K personal-transportation electric drone in 10 years, where you just type in your destination (up to 200 miles away) then sit in a pod for two hours while the quadcopter flies you there.

That's a little far-fetched, technologically, but the idea is that we don't know what's coming next. It could be as simple as a change in the FAA regulatory environment that makes it possible to build a certified $75K 120 kt composite plane using a next-gen efficient car engine. Whatever it is, the next disruption could reduce the value of our used planes to close to zero (except for collectors). Money from selling my plane some day definitely isn't part of my retirement planning.
 
MauleSkinner said:
There was a time when you could pretty much count on selling an airplane for more than your purchase price if you owned it for a few years, but I believe that time to be past.
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Real Estate prices are leveling in not tapering off a bit with the exception of certain markets. I would imagine the same is going to happen with airplanes, however I do see the trainer (certain markets) staying strong.
 
Ok, I read your long explanation post and I'm going to summarize it a little bit: you want to own a plane for a variety of reasons. You're trying to "justify" it by calling it an investment.

My advice: stop all that nonsense of "justifying" ownership. Absent some unusual circumstances where the plane really is a true business tool, they're not even close to financially justifiable. I could or join a flying club for a LOT less money than I spend on my airplanes. But I enjoy owning them, I like the flexibility, I like that they're mine and I can upgrade or change them as I see fit. So, if you want one, and you can afford it, just buy one and be done with it. Once you own it, don't add up the expenses (or you'll sell it).
 
gov98 said:
Lot of Afghan's right now wish they had had a plane on Friday of last week and a local GA airport to fly from. It may not be a winning financial investment... but I can tell you this much, a fully fueled GA aircraft can take you from one part of the country to another quicker than any other form of transport and in a way that even roving bands of warlords will have a hard time intercepting. You may not be getting a return on your investment, but in my mind it is VERY CHEAP black swan bugout insurance with tangible side benefits in regular usage.
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Probably wouldn't have worked so well in Afghanistan, but the bugout potential is one of my justifications for owning a motor home.
 
Coming out of college I wanted to own an aircraft or more specifically a sailplane for cross country soaring. A friend explained that despite the initial cost/investment required, once ‘in’ I would discover that I’d be able to remain an owner from that point on. When if I wanted a more expensive aircraft, I would probably only have to pay the incremental cost over the first, etc.

Forty two years later, that’s basically held true through 2 used sailplanes, 1 used airplane and the RV10 I built and fly now.

Good investment? No. Is ownership the best way to have fun flying? Absolutely!

e.g. Sunday I flew from my back yard in Durham NC to White Plains to pickup my wife, then to Pittsburgh to care for an elderly relation and have a bit of fun in my old home town. This morning I flew down from Pittsburgh back home and even got an instrument approach logged. Since Canada recently opened up, we needed to get home to prepare for a trip to Nova Scotia for a bit of golf, drinking and eating. Not only are the trips to worthwhile destinations for worthwhile activities, they are fun to actually fly. Try that on the airlines!

If you can do it, do it!


Sent from my iPad using Tapatalk Pro
 
Just buy an airplane. Love it when it treats you right, lavish it with monetary gifts of maintenance and upkeep, upgrades and care when it treats you poorly. Owning an airplane will fill your heart with happiness and pride, and that same airplane can (will) someday break your heart and your budget. And then there’s the weather…
 
Remember the 3F rule. But, if you rent you don’t have control nor ready availability. I’m just starting my SP and can see the one LSA at my FBO is really hard to schedule for a two hour lesson, not to mention a weekend getaway. And they soak you for the privilege! I plan on getting an IFR trainer LSA sometime after I solo, maybe after I get my SP and get all the endorsements available for a Sport Pilot.
 
The only thing stupider than buying a boat is buying an airplane.

Can you afford a full replacement engine if something lets loose? $30k? $60k?

After you’ve justified buying a plane, put the spreadsheet away.

I bought a plane in 2017. No regrets. It’s the cost of entertainment. I earned it or owe it to myself. I would do it again. It’s just plain fun to fly it, clean it, and sit in it and make airplane noises. Got instrument rating in it. Used it for personal trips, transporting doggies, sightseeing, and taking new people flying. Fun.

I’m up 81% on my investment based on sold prices this year, if I don’t count hangar, insurance, routine & non-routine maintenance, and upgrades. If I do count those things, I’m still up pretty good. It would take a prop and engine replacement to send me back to even.

Do it (I’m the little red dude on your shoulder)
 
Mikey B said:
Probably wouldn't have worked so well in Afghanistan, but the bugout potential is one of my justifications for owning a motor home.
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You better have a lot of cash to pay the impromptu road tolls :eek:
 
455 Bravo Uniform said:
The only thing stupider than buying a boat is buying an airplane.
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I don’t know about that. It took 8 hours in our sailboat just to make it across the sound but our airplane got there from halfway across the state in an hour and a half. At least airplanes can get you places. :)

Or maybe the only thing stupider than buying a boat is buying one with sails.
 
If you have to find ways to justify it, then plane ownership may not be for you. I own an airplane because it makes me happy. I can't believe how many people ask me how much it costs to own an airplane. I don't care. The day I start caring about the cost, is the day my love of aviation has started to slip away, and I hope that day never comes. The owning/renting comparison based on how many hours per year never rang true with me. There is a lot to be said for going when you want, for as long as you want, in a machine that you are very familiar with. I always know who the last guy to fly my plane was. I've had some big ticket expenses over the years (engine overhaul & new prop, paint job, new interior, upgraded avionics, re-sealed the fuel tanks, etc.) I don't have to justify those expenses to anyone. It makes me happy. That's justification enough.
 
pburger said:
If you have to find ways to justify it, then plane ownership may not be for you. I own an airplane because it makes me happy. I can't believe how many people ask me how much it costs to own an airplane. I don't care. The day I start caring about the cost, is the day my love of aviation has started to slip away, and I hope that day never comes. The owning/renting comparison based on how many hours per year never rang true with me. There is a lot to be said for going when you want, for as long as you want, in a machine that you are very familiar with. I always know who the last guy to fly my plane was. I've had some big ticket expenses over the years (engine overhaul & new prop, paint job, new interior, upgraded avionics, re-sealed the fuel tanks, etc.) I don't have to justify those expenses to anyone. It makes me happy. That's justification enough.
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I do care about the cost, because while I love to fly, I don't want it to come at the cost of shortchanging my family. That doesn't mean I calculate it right to the penny (or even to the nearest $2,000), but I do try to fly economically:
  • own a simple, low-maintenance plane (Piper PA-28-161)
  • tie-down outside instead of paying $$$ for a hangar
  • learn to love my steam gauges
  • never borrow to buy anything for the plane (I saved up to add an autopilot, a few years later, an IFR GPS)
If I were more affluent, perhaps I'd own a twin, pay $700++/month for a hangar in a big city and $50K++ for a retrofit all-glass panel , but the way I fly now, my average flying cost (even as a sole owner) is roughly equal to the annual cost of owning a second car (which we don't). That lets me enjoy a lot of flying while still knowing that we can afford to help our kids financially when they need it and keep our house after we retire. If my flying put any of that in jeopardy, that would be the end of it.
 
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