Considering buying-in to the local flying club

Hobobiker

Hobobiker

Line Up and Wait
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Aug 2, 2012
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Montpelier, OH
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Hobo
1966 PA-28-180. Nice paint and interior. Maximum of 9 members and 2-3 want to sell their share. Plane is flown very little and is basically available almost anytime. Less than 500 hours on a new overhaul, and each member last year just put about $2500/each into a new radio stack - Garmin 650 included - which I'm told will also make it good for 2020. I'm getting a copy of the bylaws, but I know many of the members from the airport. All present and past members of the club seem to agree it's a good deal vs. renting and that the plane is a nice flyer. Buy-in is based on 1/9th of the planes valuation (approx 60K), but the owners are able to sell their shares for whatever they negotiate.

$75/hour to rent wet with very little restrictions, if any. $65/month per member for other expenses and engine overhaul fund. Club owns the plane, shares are just for membership in the club. Some pics are below. Just looking for some thoughts from the experienced "flying clubbers."









 
Sounds like a pretty good deal to me (as long as everything is as advertised). Two things I would want to know before buying a share:

1) Why are so many people leaving?

2) What is the process for charging member assessments (ie, the $2500 each they all paid last year)?

As long as you can stomach the answers to those two questions, it sounds like the finances are pretty close to how our club runs. As for what to pay for a share, I'd figure out a realistic value for the plane plus any other assets (electric tug, etc) and cash in the bank (presumably there's something being saved for routine maintenance, annuals and overhauls). Divide by 9 and I'd say the number you get is a fair price for the share.
 
I assume you blocked out the N number....I'd take a look at the logs to see if there's any substantial damage, when it happened and determine if you trust the shop that did the work. On my cherokee there was damage back in the 70s, but with 25 years of flying since then I didn't have any problems buying it.

Think of it as a prebuy and consider surprises.
 
mjburian said:
Sounds like a pretty good deal to me (as long as everything is as advertised). Two things I would want to know before buying a share:

1) Why are so many people leaving?

2) What is the process for charging member assessments (ie, the $2500 each they all paid last year)?

As long as you can stomach the answers to those two questions, it sounds like the finances are pretty close to how our club runs. As for what to pay for a share, I'd figure out a realistic value for the plane plus any other assets (electric tug, etc) and cash in the bank (presumably there's something being saved for routine maintenance, annuals and overhauls). Divide by 9 and I'd say the number you get is a fair price for the share.
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Thanks Marty. That's what I'm in the middle of right now. As for those leaving, two haven't flown the plane in at least a decade but remained members (lost medical, etc.). The third, I believe, is a divorce situation. I'm told the member who flys the plane the most right now averages about a flight every two weeks. Sounds like availability is a big positive...
 
I'm in a 5 way partnership in a 182 and the costs you are listing seem very low to me. I would really want to see the books for this operation before I accepted those numbers as real.
 
jtheune said:
I'm in a 5 way partnership in a 182 and the costs you are listing seem very low to me. I would really want to see the books for this operation before I accepted those numbers as real.
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I'll follow up on the details John. This club has been in existance for 20+ years, I believe with some of the original members still in place, so that's a plus - along with the fact that I have met many of them personally as we wrenched on other planes. Some of the members are local CFIs, and other members actually have their own personal planes (taildraggers usually) along with being a member in this club. Longevity of the club helps sell it to me. Also, we're in rural PA which is largely blue-collar in nature. That might be influencing the numbers somewhat as well.

Much of this will probably boil down the the risk, and my tolerance of that risk, of being placed into a situation where considerable cash outlay is required from all members in the event that the reserves are not sufficient to cover the needed expense(s). That's why I'll want to clarify how everyone entered into the $2500/each radio upgrade. Hopefully it was a democratic process where everyone had an equal vote.
 
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Sounds like a solid deal. Wet rate might be a tad low, but worst case is they might increase it $5/hr or so. Cherokee 180s are great planes - simple, good useful load and reasonable fuel burn.

Only downside is slightly cramped back seat.

I would ask more about the "membership". You say the club owns the plane. Does your "membership" buy you 1/9th share of the club? Examine the fine print on that to be sure you're happy with it. Look at how the insurance policy is structured too; be sure you'd be a named-insured.

If I were looking, I'd be all over a deal like this.
 
Hobobiker said:
I'll follow up on the details John. This club has been in existance for 20+ years, I believe with some of the original members still in place, so that's a plus - along with the fact that I have met many of them personally as we wrenched on other planes. Some of the members are local CFIs, and other members actually have their own personal planes (taildraggers usually) along with being a member in this club. Longevity of the club helps sell it to me. Also, we're in rural PA which is largely blue-collar in nature. That might be influencing the numbers somewhat as well.

Much of this will probably boil down the the risk, and my tolerance of that risk, of being placed into a situation where considerable cash outlay is required from all members in the event that the reserves are not sufficient to cover the needed expense(s). That's why I'll want to clarify how everyone entered into the $2500/each radio upgrade. Hopefully it was a democratic process where everyone had an equal vote.
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Our LLC is run much the same way, major additions/expenses need 4 out of the 5 partners to agree then everyone has to pay.
 
jtheune said:
I'm in a 5 way partnership in a 182 and the costs you are listing seem very low to me. I would really want to see the books for this operation before I accepted those numbers as real.
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My 1/15 of a 1977 172N model costs $60/month and $65/hr wet. So our club brings in $315/month more than the OP's numbers, but I assumed the insurance cost more for 15 members than for 9... and don't know the OP's location or cost for hangar space, etc. The hourly sounds like it breaks down to about $20/hr over fuel (assuming 9gph and $6 100LL, for easy math), which is about where we run. ($65/hr... 8gph x $5.79 at the home airport = $46.32, leaving $18.68/hr for maintenance reserves).
 
What are the rules for vacation? Do they have min Hobbs hours.
 
Marty, you're right on base with us and hangar space is pretty cheap.

John - I just spoke with one of the members and, yep, it's a democratic process here as well. That's what happened with the radio expense.

Saracelica - I'm hoping to clear up those concerns very soon.

Thanks for the input everyone...
 
mjburian said:
My 1/15 of a 1977 172N model costs $60/month and $65/hr wet. So our club brings in $315/month more than the OP's numbers, but I assumed the insurance cost more for 15 members than for 9... and don't know the OP's location or cost for hangar space, etc. The hourly sounds like it breaks down to about $20/hr over fuel (assuming 9gph and $6 100LL, for easy math), which is about where we run. ($65/hr... 8gph x $5.79 at the home airport = $46.32, leaving $18.68/hr for maintenance reserves).
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Marty I've got a fair amount of time in a Cherokee 180 and I was taught and always used 10 gallons per hour for flight planning. Given that it's more like 15.00 a hour for maintenance. They have a Garmin 650 IFR GPS installed. updates for that run 1000.00 per year. Annuals at 2k a year If they fly the plane 200 hours a year they just used up all the extra money and don't have anything left for oil changes or routine maintenance.
 
Interesting thread. I am looking at a somewhat similar deal. 1/5 share in a 1978 Archer, $35k valuation, decent plane but engine is near TBO. $70/mo fixed costs, and $80/hr wet. The downside is that the monthly only covers ongoing expenses, so there is no engine reserve fund.
 
F01LA said:
Interesting thread. I am looking at a somewhat similar deal. 1/5 share in a 1978 Archer, $35k valuation, decent plane but engine is near TBO. $70/mo fixed costs, and $80/hr wet. The downside is that the monthly only covers ongoing expenses, so there is no engine reserve fund.
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We had the O-470 in our 182 rebuild last year by Zepher Engines a well respected shop and the rebuild was 22K. I think it was about another 4K for shipping and install to give you a idea.
 
F01LA said:
Interesting thread. I am looking at a somewhat similar deal. 1/5 share in a 1978 Archer, $35k valuation, decent plane but engine is near TBO. $70/mo fixed costs, and $80/hr wet. The downside is that the monthly only covers ongoing expenses, so there is no engine reserve fund.
Click to expand...

The hourly is supposed to cover the engine fund, monthly should cover the non operational costs. If there is no engine fund, what are their current plans? Does the plane fly frequently enough to be a viable 4000hr candidate? How will failure to make this goal be met? There's $25k hanging in the wind that will eventually need to be spent, that's $5k a member. Can the rest of them do it?

Then there is the question, "If they charge $80hr, where is the engine kitty money?" If the club has no engine reserve, either they had some other major unexpected expense and drew from that fund rather than an assessment, or they have some really poor management, or both. Or, they are a club that prefers to do everything by assessment and not have any reserve funds. Regardless what it is, make sure you are comfortable with it because you may need to come up with $5k tomorrow.
 
jtheune said:
We had the O-470 in our 182 rebuild last year by Zepher Engines a well respected shop and the rebuild was 22K. I think it was about another 4K for shipping and install to give you a idea.
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Thanks. The O-360 ought to be a little less than that, but I'm not sure what route they're thinking for sure. Field OH might come in closer to 20k. I'm just not sure I want to buy in and face another $4k-$5k right off the bat. :dunno:
 
Henning said:
The hourly is supposed to cover the engine fund, monthly should cover the non operational costs. If there is no engine fund, what are their current plans? Does the plane fly frequently enough to be a viable 4000hr candidate? How will failure to make this goal be met? There's $25k hanging in the wind that will eventually need to be spent, that's $5k a member. Can the rest of them do it?
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Maybe that's how it "should" be, but not the way it's done here. Plan is to monitor the engine, fly another year or two, overhaul, everyone pitches in their share. I know the other owners and am not concerned that there will be a shortfall.

Henning said:
Then there is the question, "If they charge $80hr, where is the engine kitty money?" If the club has no engine reserve, either they had some other major unexpected expense and drew from that fund rather than an assessment, or they have some really poor management, or both. Or, they are a club that prefers to do everything by assessment and not have any reserve funds. Regardless what it is, make sure you are comfortable with it because you may need to come up with $5k tomorrow.
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The monthly and the hourly (minus fuel) together pay for the annual, maintenance, insurance, and hangar. It has so far been about right, with no assessments for a number of years.

There are actually 4 members now-- I would buy in to be the 5th. 4 members are putting in $70 per month. That adds up to $3360. And the $20/hour (after subtracting fuel) * 100 hours comes up to $2000. So that's $5360/yr.

Again, this may not be how it's supposed to be done, but that's how they do it. This is my only chance to fly in my area other than sole ownership, which I do not desire right now.

Didn't mean to hijack the thread.. To the OP, what is their current engine fund?
 
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I too would have questions about the reserves.

You said buy-in is 1/9th value of the aircraft. But who sets that? Is it an official take to the bank evaluation or just someone's S.W.A.G.?

Do make the math easy, let's say Aircraft is really $54,000 so your buy in share on aircraft value is $6000. But what if there was $27,000 in cash reserves? This puts the total value of assets held by the group at $81,000. So are the exiting members "abandoning" that $3000 of their share?

What if while you're a member, the cash reserves grow to $36,000, and then it's your turn to leave the group... What money do you get back?


Is there any debt? If yes, how much? And how does any (if any) responsibility for that debt affect you, in whole or in part?

------------------------

But if all these questions get answered positively, I think you have found a good situation to get you started.
 
I like a club with no debt on the aircraft. Sounds like a great deal, as long as you're comfortable there is an adequate engine reserve. Obviously, you don't want to be in the situation where there's a regular capital call to the members to cover extraordinary costs. How often do "special assessments" arise?
 
I'm in a three airplane ownership that is somewhat similar. We had our Warrior motor overhauled about two years ago, I don't recall the exact price, but it was in the ballpark of about $23K after Penn Yann's charges and local installation charge.

$75 an hour wet seems low after insurance, engine reserve, routine maintenance, and hanger rents.

If the group isn't accumulating an adequate engine reserve that's OK, as long as everyone knows to expect an assessment for that when the time comes.

The plane looks sweet, and your downside isn't that huge if it doesn't work out.
 
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jtheune said:
Marty I've got a fair amount of time in a Cherokee 180 and I was taught and always used 10 gallons per hour for flight planning. Given that it's more like 15.00 a hour for maintenance. They have a Garmin 650 IFR GPS installed. updates for that run 1000.00 per year. Annuals at 2k a year If they fly the plane 200 hours a year they just used up all the extra money and don't have anything left for oil changes or routine maintenance.
Click to expand...


That fuel burn rate and GPS cost might change things a bit (though I don't know actual cost of 100LL in that area).

I was taught the "rule of thumb" that an engine (almost no matter it's application) burns an average of about 5% of its HP in gph. For our 160HP 172N, that would indicate 8gph, which is pretty accurate (if maybe SLIGHTLY higher than the 7.8gph I tend to find in actual usage). So I assumed a 180HP engine would burn 9gph. Of course, like any rule of thumb... it's just going to get you in the right ballpark, not necessarily right on the actual numbers.

Also, we don't have an IFR GPS, so that's not an expense I considered. I'm not aware of any expenses for our 496 beyond the XM weather subscription, but then again I don't pay the bills.

I think it behooves the OP to dig a little deeper into how the money shakes out in this club. Only he can decide if the way the club's finances works fits his risk tolerance and financial situation. On the surface, though, this looks like something I'd definitely be interested in enough to dig deeper.
 
Looks like a good deal,would want to know why a third of members want to sell their shares.
 
GMA 340, MD 200 , SL 30 and GTX 327. Lots of good stuff going on there if you are thinking about instrument training.
 
Well, vote is happening tonight for me to buy a member's share...

After all the due diligence, club is voting tonight for me to acquire a member's share. The club always has first right of purchase at the agreed-upon price, but they never do because they would like to have the monthly revenue from the member instead. Turns out that two of the "selling" members have lost medicals and/or flight reviews, although one has changed his mind and is not selling because he would like to get current and pursue his instrument. Time and life got in the way for the third member selling (divorce situation). Some active members have been in this club for 20+ years and state that it's the best investment in flying that they've ever made. One CFI member of the club recently needed his BFR, so I got to ride along in the back seat while my CFI had fun making him sweat. It was also the first time I've ever got to experience some of the maneuvers that you CFII/Commercial/Instrument rated guys get to do.

Sorry for the long diatribe on basically nothing but my excitement to join a club and fly a nicely equipped old plane at cheaper-than-renting rates...
 
Cool!

Now remember, provide photos of your first flights in the club aircraft, or we'll claim they never happened.
 
Glad this worked out for you. I expect we'll hear later tonight or tomorrow that you're a proud new (1/9) owner of a Cherokee 180!
 
All worked out. Thanks for the online and offline advice everyone. Great group of guys and the club has been in existence for over 20 years with some of the original members remaining. The long of the short is this:

Club owns the plane above with the updated radio stack.
$70/month dues
$75/hour wet rental. $12/hour of this goes to engine reserve
Less than 500 hours on remanufactured engine
Repainted about 10 years ago
Interior is clean, but dated. Least of my worries.

Now I need to get my keys and have the club CFI check me out - he says it should take all of about 45 minutes. Just my luck that the gorgeous weather was the last two weeks and new now have this crappy/windy/sleet-hail-rain/overcast kinda PA day. Ugh...
 
Sweet deal there! Congrats!
 
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