Buying into a club

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VA Aviator

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Looking into a couple of clubs right now...

Both have multiple members looking to sell their share. What's the etiquette here?

Start a bidding war and haggle?

Find the most desperate person and squeeze?

Or

Just ask everyone what they're willing to sell for, factor in any money owed to the club and go with the lowest $ amount?

Treat it like a "sealed bid" and keep my mouth shut about what others want for their share?
 
Guess it depends on the market where you are. If it were me I'd probably ask every one for their asking price then make a counter based on what you think its worth and what they will take. I probably not start a bidding war if I was given a fair price. Remember the guy who you don't buy from could very well be your partner at least for a while.
 
My club has a very similar situation. Of the 9 partners, 4 of them were talking about selling. I introduced a potential buyer to the first person that mentionned selling and left it to them at that point. Its really dependent on how you want to handle it. Know what you think it is worth and go from there. Be careful though if that many ppl want out. You may find that just after you get in, they discuss liquidation. I am dealing with that now.
 
AdamZ said:
Guess it depends on the market where you are. If it were me I'd probably ask every one for their asking price then make a counter based on what you think its worth and what they will take. I probably not start a bidding war if I was given a fair price. Remember the guy who you don't buy from could very well be your partner at least for a while.
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Fair enough. Of course, I say "bidding war" facetiously, but part of my concern here is that I will have to deal with potential sellers
once I'm in. If you're buying outright you can tell someone to pee up a rope and business is business, but when buying into a club you obviously need to tread carefully.



One club is a big club with multiple a/c and many members, the other is a one airplane operation.
 
I would want to see financials for either club. If many people owe the club money, I'd want to know the reason why? If 4 of 9 what out, why? Is there a pending big expense on the a/c? Understand each aircraft in the club.

I'd like to know that they are not tacking on super high reserves to the hourly rental making flying less affordable....You should understand every penny coming in and where every penny is going out. Where is the money for the reserves? Who is signer on that account?

Heck, you might even get in and help manage the club, hold costs down and improve its availability.

I would get each partners price, take the lowest price and go back to the highest partner and work them each down until I had the bottom dollar of each partner. Even if I had to go around and round a few times.... You do have to be courteous and friendly. I'd also ask each member why he is selling and see if I could not get an understanding of what is going on.
 
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Re negotiating, as others have suggested you can work for the lowest available price without being an ass. From experience, the guys you don't buy from will not look down at you for buying at a lower price. They will look down at the "stupid jerk" who undercut them and sold to you. Everyone understands and expects that a buyer will look for the lowest price. Why wouldn't he?

Yes; check financials. Assuming that your big club is a nonprofit (401c7), you can look at their tax returns by registering (free) at guidestar.org. (This is a site where you can look at any nonprofit's returns, from AOPA to the local incorporated knitting society.) If you look at several years, you will be able to see how stable the club is, whether they make periodic member assessments in addition to dues, who is getting paid if anyone, etc. Commonly, the officers are uncompensated but if you looked at one club I know of you would find that the officers are paying themselves from member funds every time they lift a finger. OK or not? Your call.
 
VA Aviator said:
Looking into a couple of clubs right now...

Both have multiple members looking to sell their share. What's the etiquette here?

Start a bidding war and haggle?

Find the most desperate person and squeeze?

Or

Just ask everyone what they're willing to sell for, factor in any money owed to the club and go with the lowest $ amount?

Treat it like a "sealed bid" and keep my mouth shut about what others want for their share?
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Sounds like Wingnuts, my old club in Chesterfield. Market forces are at work, so negotiation is fine, but make a fair offer. The aviation community is small and you never know when that member may want back in to the club. Sure, you can squeeze the poor guy who just lost his medical after suffering an MI, but how ruthless do you want to be?

I would be inclined to put out an offer to everyone with a share up for sale and see who might bite...hint it's not the guy with the lowest priced share.
 
Negotiate. There's really no harm and no moral turpitude in getting the best price you can. If the show was on the other foot in a seller's market, I'd expect the seller to do the same.

I was once looking a group but the airplane was more airplane than I wanted. In that case, the share owner ultimately offered me a 0$ buy-in - no charge for the share itself; just the future maintenance, loan, etc payments.

My theory is that, even when friends do business, they should do business in a business way. One of the worst lawsuits I ever handled involved two childhood friends. Both were very successful, but when one fell on hard times, the other came to his assistance. Unfortunately, they had very different views of whether that assistance was to be paid back and the end of a 40-50 year friendship was the result. If only they made their deal like businessmen up front...

OTOH I once represented part of an aircraft co-ownership group that was involved in a very nasty breakup. But it went smoothly because the members had the foresight to retain an attorney at the beginning (not me) who put together an excellent agreement that covered the situation without much fanfare.
 
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Beware of guys looking to you to be the savior in making them whole again.

I looked at a 5 way partnership on a BE55D, three guys bought in with the original owner. They didn't do their homework and were sold a pig in a poke. When taken to a Beech expert many things were found and they dropped over $40k on the first annual. THEN they put in new Garmin G600 avioinics.

But, when appraised the aircraft came back at about $85k hull value, and were offering me a 1/5th share at $45k.

Uh, no.
 
Get a fair value for the aircraft before making any offers.Check for any ADs coming due.Also discuss what the members may have planned in the future. If a few members want out there must be a reason.
 
Our club has established, published rules for buying in and selling out, as well as established Share Value, so no negotiations... sometimes there's a waiting list to get in, sometimes a wait list to get out.
 
Thanks for the input guys. First one I'm looking at has a single 172 with 180 conversion, GNS 430 but original interior. First asking price I got was close to $7K for 1/10th. That seems a bit steep to me, but I still need to verify AFTT and SMOH times, and figure out how much the club has in reserves.

Going to try to look at it this weekend, and go from there.
 
Tony_Scarpelli said:
I would want to see financials for either club. If many people owe the club money, I'd want to know the reason why? If 4 of 9 what out, why?
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Be sure to remember, though, that in this economy there are more people leaving aviation than coming into it, so if there are multiple shares available that doesn't necessarily mean the club is in bad shape.

I'd like to know that they are not tacking on super high reserves to the hourly rental making flying less affordable.
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What's "super high"? I'd suggest that a club with no reserves is worse.

We have an engine reserve tacked on to our hourly rates based on the overhaul cost (minus R&R) divided by TBO, plus $5/hour for upgrades. Is that "super high"? (Engine on the fixed-gear 182 was $18/hr.)
 
I'm in a club with 6 other partners. I had heard about a share in it for sale about a year before I bought into it(wife found out we had twins on the way). Anyway, two members had shares for sale. One was 2k less than the original guy I talked to. I offered the original guy I talked to the lower price and he took it. Our club doesn't track the share prices. But once a year we are given valuations. Of the 7 of us, I've only met three other members in the year and a half I've been in it.
 
midlifeflyer said:
OTOH I once represented part of an aircraft co-ownership group that was involved in a very nasty breakup. But it went smoothly because the members had the foresight to retain an attorney at the beginning (not me) who put together an excellent agreement that covered the situation without much fanfare.
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If most attorneys made their money this way, helping craft agreements that resolve disputes well should any dispute arise, we would have a much better reputation. Oddly enough, it is the client who drives the attorneys away from prevention, which looks too expensive up front, into resolution of murky disputes, always a costly affair unless both parties, despite their differences, recognize that a mutual solution is still less costly in the end. that happens way too seldom. In any venture where you have a lot of skin in the game, talk to your attorney early and frankly. It really is a lot less expensive in the end.
 
When I joined my first club (a "market price" club) I was so excited to join I paid the first guy I talked to his asking price. I do not recommend this approach ;-) The club was great and I definitely got my money's worth out of being in the club, but when I sold my share I only got about 70% of what I paid (granted, that was 8 years after joining.) My share was priced to move, but it still took me 6 months to sell.

The club to which I currently belong is a set price in/out club. The club buys the share from a departing member and new members then buy their share from the club. I FAR prefer this option, even though compared to my last club the buy-in was more expensive, because I don't have to mess with trying to sell my share OR worry about having over-paid when I bought in.

In a situation where the prices aren't fixed by the club, I see no reason why you shouldn't offer below asking price. Each situation is different but you could try to find out what a couple of potential sellers are asking, then offer each of them 70-80% of the lowest asking price (or less if you're comfortable with that.) After all, people often set their price based on what they paid, even if others shares have recently sold for much less. So the market price very well could be below their asking price.

If a potential seller thinks your offer is too low, they can counter, or not sell to you. If you don't need in the club *right now*, nothing wrong with letting your offer age for a while. You can always reach back out in a couple of months to see if a potential seller feels differently. And in most clubs the current owner is also paying monthly dues of $50-250, which they will continue to have to pay for every month they don't sell to you.
 
Frank said:
If most attorneys made their money this way, helping craft agreements that resolve disputes well should any dispute arise, we would have a much better reputation. Oddly enough, it is the client who drives the attorneys away from prevention, which looks too expensive up front, into resolution of murky disputes, always a costly affair unless both parties, despite their differences, recognize that a mutual solution is still less costly in the end. that happens way too seldom. In any venture where you have a lot of skin in the game, talk to your attorney early and frankly. It really is a lot less expensive in the end.
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Amen!
 
happypilot876 said:
When I joined my first club (a "market price" club) I was so excited to join I paid the first guy I talked to his asking price. I do not recommend this approach ;-) The club was great and I definitely got my money's worth out of being in the club, but when I sold my share I only got about 70% of what I paid (granted, that was 8 years after joining.) My share was priced to move, but it still took me 6 months to sell.

The club to which I currently belong is a set price in/out club. The club buys the share from a departing member and new members then buy their share from the club. I FAR prefer this option, even though compared to my last club the buy-in was more expensive, because I don't have to mess with trying to sell my share OR worry about having over-paid when I bought in.

In a situation where the prices aren't fixed by the club, I see no reason why you shouldn't offer below asking price. Each situation is different but you could try to find out what a couple of potential sellers are asking, then offer each of them 70-80% of the lowest asking price (or less if you're comfortable with that.) After all, people often set their price based on what they paid, even if others shares have recently sold for much less. So the market price very well could be below their asking price.

If a potential seller thinks your offer is too low, they can counter, or not sell to you. If you don't need in the club *right now*, nothing wrong with letting your offer age for a while. You can always reach back out in a couple of months to see if a potential seller feels differently. And in most clubs the current owner is also paying monthly dues of $50-250, which they will continue to have to pay for every month they don't sell to you.
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Which club? Only one I know of in the area that operates like that is the one based at PHF.
 
Frank said:
If most attorneys made their money this way, helping craft agreements that resolve disputes well should any dispute arise, we would have a much better reputation. Oddly enough, it is the client who drives the attorneys away from prevention, which looks too expensive up front, into resolution of murky disputes, always a costly affair unless both parties, despite their differences, recognize that a mutual solution is still less costly in the end. that happens way too seldom. In any venture where you have a lot of skin in the game, talk to your attorney early and frankly. It really is a lot less expensive in the end.
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I'm not so sure about the "oddly enough" part. After all, according to Websters', "penny wise, pound foolish" has its roots in the 1600s.

I'm guessing most folks make a risk/benefit calculation. They believe the risk of a problem is low, so the benefit of up-front planning isn't worth it.
 
$18 is not ridiculously high.... but it depends on what is built into the monthly fees as well. IMO-High fees are where some low or no flying partners get unfairly enriched by the upgrades to the airplane at the expense of active flying members.

flyingcheesehead said:
Be sure to remember, though, that in this economy there are more people leaving aviation than coming into it, so if there are multiple shares available that doesn't necessarily mean the club is in bad shape.



What's "super high"? I'd suggest that a club with no reserves is worse.

We have an engine reserve tacked on to our hourly rates based on the overhaul cost (minus R&R) divided by TBO, plus $5/hour for upgrades. Is that "super high"? (Engine on the fixed-gear 182 was $18/hr.)
Click to expand...
 
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