Decent Leaseback FBO/Flight School/Club

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BrianK

Filing Flight Plan
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BrianK
I’m looking to purchase at least one single engine aircraft for leaseback to an FBO/flight school/Flying Club. I am coming at this solely as an investment and will not be flying the aircraft. I am buying a plane for my personal use as well, but it will not be part of any leaseback. Looking to find a reputable business to do the leaseback(s) with.

Regards,
Brian
 
If leasebacks are such a good idea, why don't more FBOs own aircraft and put them into a leaseback at their own business?
 
murphey said:
If leasebacks are such a good idea, why don't more FBOs own aircraft and put them into a leaseback at their own business?
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They do, for the core money-makers. 70s/80s/early restart Skyhawks make cash. Schools leaseback the rest.

The margins are too thin to support financing planes generally (that 5-7% note will be all of the profit), so FBOs can only do this to the limit of their pocketbook -- and there are a LOT of shoestring operators out there with shallow pockets.
 
murphey said:
If leasebacks are such a good idea, why don't more FBOs own aircraft and put them into a leaseback at their own business?
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I’m just looking to find a reputable company to lease a plane too. There are certainly folks who have made it work quite well. Do yo have any personal experience with leasebacks?
 
I have 2 equestrian horses, what’s that have to do with finding reputable flight schools/FBOS?
 
The best way to make a million dollars with horses or airplanes is to start with two million.
 
texasclouds said:
The best way to make a million dollars with horses or airplanes is to start with two million.
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Great, so you made your million? What FBO/Flight School did you do your leaseback with?
 
BrianK said:
I am coming at this solely as an investment and will not be flying the aircraft.
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Of all investment opportunities, why this?

Might I suggest reading up on the Law of Diminishing Returns prior to making this investment.
 
BrianK said:
I’m just looking to find a reputable company to lease a plane too. There are certainly folks who have made it work quite well. Do yo have any personal experience with leasebacks?
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I was talked out of what turned out to be a pretty good leaseback opportunity by a few pilots who sounded expert but were actually wrong. So my suggestion is to find a good deal, find an accountant and a lawyer to help you set it up and help you figure out if it's a good deal.
 
BrianK said:
I have cash for a plane, I decided to buy less plane for myself and potentially get 3-4 planes and experiment with different business models. I enjoy aviation and accept that I may or may not lose my ass on an aviation related business deal. After “running the numbers” I have decided that I can accept the level of risk that comes with a leaseback. Now, I just need to locate a flight school/FBO/Flying Club that I can negotiate a fair deal with. That’s the point of this thread.
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So, uh, where ya at??? Kinda hard to find out what might be a good flight school situation without knowing the market.
 
PaulS said:
I was talked out of what turned out to be a pretty good leaseback opportunity by a few pilots who sounded expert but were actually wrong. So my suggestion is to find a good deal, find an accountant and a lawyer to help you set it up and help you figure out if it's a good deal.
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Thank you, I have been in talks with my lawyer already and have broker I am using for the purchase. I am trying to avoid cold calling flight schools and would like to find a quality school with a proven track record. That will likely be the biggest factor in whether or not I proceed.

Sorry to hear that you missed out on a good opportunity. If I left it up to this forum, I would sit in my house and hope the money I had stuffed under my mattress magically turned into wallet full of Bitcoin.
 
RyanShort1 said:
So, uh, where ya at??? Kinda hard to find out what might be a good flight school situation without knowing the market.
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Local market does not matter. I am open to any opportunities in the US. I travel frequently and will be monitoring my aircrafts activity regularly.
 
Planes need to fly to earn. Over 100 hours/mo ideally.

This means fair weather, busy schools.

Look near the class B airspaces in the sun belt. Find the little delta airport that's packed. You want to lease to their busiest school.

Call around. Schools don't advertise this stuff because their students buy nonsense all the time and try to lease it back.

In my area (SFO) it would be PAO, SQL, HWD, LVK and possibly CCR. Generally in that order.

You will need a break on maintenance or a mechanic in your pocket somehow to make this work. Paying shop rates on a plane will kill a leaseback dead.

You will need this mechanic to know when to shop for parts, and when to use boneyards. Students destroy airplanes. No STC upgrades, good-enough avionics to meet capabilities of a VFR and IFR renter. Students buy on cosmetics. A lousy plane with good paint flies more than a solid plane with uggo paint. About 2x more.

A break on avgas too if the field has high margins. This is less critical because you can pass these costs to the renter.

Insurance is going to be high, but insurance is for a fixed calendar term of commercial usage. Your job and the entire arbitrage opportunity here is to outfly the actuarial assumption/average of about 40 hours/mo. Big number theory says you're going to ruin planes at about 2x the rate the insurance company bet on. You might want to silo the planes in their own corps/LLCs so that you don't get "branded" as an owner with a crash record.

Also you will need to be prepared that the only profit your plane may make in primary instruction is from the hull loss claim that results. Over-insure your hull so that you can go RIGHT back into the market and buy a replacement and possibly put 5-10k in your pocket.
 
RyanB said:
Of all investment opportunities, why this?

Might I suggest reading up on the Law of Diminishing Returns prior to making this investment.
Click to expand...
I have cash for a plane, I decided to buy less plane for myself and potentially get 3-4 planes and experiment with different business models. I enjoy aviation and accept that I may or may not lose my ass on an aviation related business deal. After “running the numbers” I have decided that I can accept the level of risk that comes with a leaseback. Now, I just need to locate a flight school/FBO/Flying Club that I can negotiate a fair deal with. That’s the point of this thread.
 
schmookeeg said:
Planes need to fly to earn. Over 100 hours/mo ideally.

This means fair weather, busy schools.

Look near the class B airspaces in the sun belt. Find the little delta airport that's packed. You want to lease to their busiest school.

Call around. Schools don't advertise this stuff because their students buy nonsense all the time and try to lease it back.

In my area (SFO) it would be PAO, SQL, HWD, LVK and possibly CCR. Generally in that order.

You will need a break on maintenance or a mechanic in your pocket somehow to make this work. Paying shop rates on a plane will kill a leaseback dead.

You will need this mechanic to know when to shop for parts, and when to use boneyards. Students destroy airplanes. No stupid STC upgrades or nonsense. Students buy on cosmetics. A lousy plane with good paint flies more than a solid plane with uggo paint. About 2x more.

A break on avgas too if the field has high margins. This is less critical because you can pass these costs to the renter.

Insurance is going to be high, but insurance is for a fixed calendar term of commercial usage. Your job and the entire arbitrage opportunity here is to outfly the actuarial assumption/average of about 40 hours/mo. Big number theory says you're going to ruin planes at about 2x the rate the insurance company bet on. You might want to silo the planes in their own corps/LLCs so that you don't get "branded" as an owner with a crash record.

Also you will need to be prepared that the only profit your plane may make in primary instruction is from the hull loss claim that results. Over-insure your hull so that you can go RIGHT back into the market and buy a replacement and possibly put 5-10k in your pocket.
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Thank you, insurance quotes are in, LLC created, and I factored in a 10% margin on the hull. I have an IA that I work with regularly. I am an AP as well, unfortunately probably won’t have time to do my own work. I’ll save some money on paint and just plasti dip the hell out of them. ;)
 
Do
schmookeeg said:
Planes need to fly to earn. Over 100 hours/mo ideally.

This means fair weather, busy schools.

Look near the class B airspaces in the sun belt. Find the little delta airport that's packed. You want to lease to their busiest school.

Call around. Schools don't advertise this stuff because their students buy nonsense all the time and try to lease it back.

In my area (SFO) it would be PAO, SQL, HWD, LVK and possibly CCR. Generally in that order.

You will need a break on maintenance or a mechanic in your pocket somehow to make this work. Paying shop rates on a plane will kill a leaseback dead.

You will need this mechanic to know when to shop for parts, and when to use boneyards. Students destroy airplanes. No STC upgrades, good-enough avionics to meet capabilities of a VFR and IFR renter. Students buy on cosmetics. A lousy plane with good paint flies more than a solid plane with uggo paint. About 2x more.

A break on avgas too if the field has high margins. This is less critical because you can pass these costs to the renter.

Insurance is going to be high, but insurance is for a fixed calendar term of commercial usage. Your job and the entire arbitrage opportunity here is to outfly the actuarial assumption/average of about 40 hours/mo. Big number theory says you're going to ruin planes at about 2x the rate the insurance company bet on. You might want to silo the planes in their own corps/LLCs so that you don't get "branded" as an owner with a crash record.

Also you will need to be prepared that the only profit your plane may make in primary instruction is from the hull loss claim that results. Over-insure your hull so that you can go RIGHT back into the market and buy a replacement and possibly put 5-10k in your pocket.
Click to expand...
Do you have experience with leasebacks?
 
If I was going down this path, I’d probably try to find the best moneymaker airframe at Plus One and see if I could make that work as an investment.
 
BrianK said:
Do

Do you have experience with leasebacks?
Click to expand...

I ran a flight school for 7 years in Los Angeles. I was on the other side of that table. :)

I would absolutely do a leaseback currently under the right circumstances. Anymore though I think there is more money to be found by arranging flying clubs or fractionals, but that's like herding cats and I don't have the energy these days. :)

At our peak we had 12 planes in the fleet, 7 were owned by us, and we were at 10 or 11,000 hours per year.

Once things stabilized we were averaging 2 claims a year and 1 total loss. It made insurance expensive over time. For a leaseback, that's the flight school's problem :)
 
TCABM said:
If I was going down this path, I’d probably try to find the best moneymaker airframe at Plus One and see if I could make that work as an investment.
Click to expand...
Thanks, I will put them on the shortlist.
 
schmookeeg said:
I ran a flight school for 7 years in Los Angeles. I was on the other side of that table. :)

I would absolutely do a leaseback currently under the right circumstances. Anymore though I think there is more money to be found by arranging flying clubs or fractionals, but that's like herding cats and I don't have the energy these days. :)

At our peak we had 12 planes in the fleet, 7 were owned by us, and we were at 10 or 11,000 hours per year.

Once things stabilized we were averaging 2 claims a year and 1 total loss. It made insurance expensive over time. For a leaseback, that's the flight school's problem :)
Click to expand...
Excellent perspective, thanks for the info! Almost 1000 hours a year would be ideal.
 
BrianK said:
I have cash for a plane, I decided to buy less plane for myself and potentially get 3-4 planes and experiment with different business models. I enjoy aviation and accept that I may or may not lose my ass on an aviation related business deal. After “running the numbers” I have decided that I can accept the level of risk that comes with a leaseback. Now, I just need to locate a flight school/FBO/Flying Club that I can negotiate a fair deal with. That’s the point of this thread.
Click to expand...

I know Flying Tigers based at EFD in Houston is always looking for more planes. They stay busy and can’t seem to get enough airplanes. The owners are great dudes. I did my CFI there. Well ran operation. Good luck with your leaseback.


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Fly Corps Aviation out KSAV in Savannah is a top-notch school that does a ton of RTAG work. They are usually hurting for airframes and have their own IA on staff.
 
BrianK said:
I’m looking to purchase at least one single engine aircraft for leaseback to an FBO/flight school/Flying Club. I am coming at this solely as an investment and will not be flying the aircraft. I am buying a plane for my personal use as well, but it will not be part of any leaseback. Looking to find a reputable business to do the leaseback(s) with.

Regards,
Brian
Click to expand...
Don’t listen to the naysayers I think it’s a great idea. I know lots of people have made huge amounts of money doing this.
 
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