Hangar as an investment?

dans2992

dans2992

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Dans2992
So, I own one hangar that I keep my plane in. (Functional).

Around the Phoenix area (and many other areas), hangars are in high demand from what I can tell. There are just not many for sale.

What do you all think of the “investment” opportunities with hangars? (strictly one you would not use personally - I have that covered.). Ie, the purpose is to make money - lease it out, sell it for more down the line.

Would it be better off to put that money into an investment residential property?

Like everything in aviation, I expect it’s not a great money maker, but curious if others feel the same.
 
I think the primary issue is risk. Hangars will always be in demand, but you don't own the land its on and the airport (land owner) can always have the option of taking it back and giving you nothing.
 
True. I mean, the one I do own has a 35 year ground lease, so not TOO worried about that.

Also, some are “private” where you also own the land. Usually at private airports.
 
Depends on the airport, the lease, the demand, etc. At my airport it was a good investment 20 years ago, now supply out ways the demand. The FAA can always come in and kick out the cars/boats/recreational vehicles that had tended to limit the space for airplanes. A few people had begun to use the hangars for apartments or storage of all sorts. All it takes is one person to involve a lawyer and or FAA and the supply/demand is changed.
 
dans2992 said:
So, I own one hangar that I keep my plane in. (Functional).

Around the Phoenix area (and many other areas), hangars are in high demand from what I can tell. There are just not many for sale.

What do you all think of the “investment” opportunities with hangars? (strictly one you would not use personally - I have that covered.). Ie, the purpose is to make money - lease it out, sell it for more down the line.

Would it be better off to put that money into an investment residential property?

Like everything in aviation, I expect it’s not a great money maker, but curious if others feel the same.
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I bought one for a 100k and sold it for a 125k 6 years later. Dunno how that compares to other investments because I don’t follow that stuff closely. But I’m satisfied.
 
I own a large port-a-port. (Executive II with extensions -- about 52' wide)

A hangar my size would rent for 800+/mo locally, and there are not very many of them around. Land rent is 327/mo. Arguably I could make my money back in 7 years which is a decent 15% cap rate. I'd also argue that I bought well under market value and probably. should have paid 50-100% more. My airport seems to be sneaking land rent up quicker than the inflation rate as well.

I think like a lot of things in aviation, there are a few deals to be had, but pilots are clever and the market for pilot goodies is pretty darn efficient. You'll want to do some due diligence, and be alert to "the right deal" when it comes along.

Just buying up anything for sale for the "going rate" seems like a fast-track to losses to me.

$0.02
 
schmookeeg said:
I own a large port-a-port. (Executive II with extensions -- about 52' wide)

A hangar my size would rent for 800+/mo locally, and there are not very many of them around. Land rent is 327/mo. Arguably I could make my money back in 7 years which is a decent 15% cap rate. I'd also argue that I bought well under market value and probably. should have paid 50-100% more. My airport seems to be sneaking land rent up quicker than the inflation rate as well.

I think like a lot of things in aviation, there are a few deals to be had, but pilots are clever and the market for pilot goodies is pretty darn efficient. You'll want to do some due diligence, and be alert to "the right deal" when it comes along.

Just buying up anything for sale for the "going rate" seems like a fast-track to losses to me.
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It's so crazy how variable the market is too. Can be hard to really gauge the market and the investment potential without a lot of local knowledge. For example, your land rent alone is well over double what I pay to rent a t-hangar. I'm only paying $125 a month for my hangar. Someone building a hangar at my airport expecting to be able to get $800 a month is gonna be pretty disappointed.
 
dans2992 said:
True. I mean, the one I do own has a 35 year ground lease, so not TOO worried about that.
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It doesn't happen very often, but there are usually stipulations in the Lease to allow the airport to terminate it given a set of circumstances. It could be as simple as the airport is redeveloping the apron and your hangar is in the way.
 
I find this to be an odd concept. Around here, and as far as I know, there is no private ownership...It's either all the hangars are owned by the municipality and are rented out....or in some cases maybe the FBO owns them and rents them out. I'm pretty sure that all around here are municipal.
 
Buying a hanger without ownership of the land, nfw.
 
FORANE said:
Buying a hanger without ownership of the land, nfw.
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Par for the course if the airport receives federal funding.

In my experience, the ROI isn't there unless you are receiving the benefit of using the hangar. You have an asset that is depreciating rapidly as the remaining term on the lease diminishes every day.
 
I recently looked into a deal at my airport with a 4 hangar building. Even if I got a good price on the property and jacked the hangar rent up 100% over current, there was no way this was going to have any kind of reasonable payback. I don't expect the property to increase in value significantly any time soon either.

I'm sure there's probably a deal out there somewhere which could be viable, but it's likely to a one-off.
 
I'm convinced that (at least around here) hangars are the very tippy top of a highly overpriced real estate market. I recently saw $350k for a 40' "condo" T-hangar with HOA type fees, on a 50 year ground lease with only 20 years remaining. Pre-Covid, it would've been $80K.
 
dans2992 said:
What do you all think of the “investment” opportunities with hangars? (strictly one you would not use personally - I have that covered.). Ie, the purpose is to make money - lease it out, sell it for more down the line.
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I'd say it depends. Location, demand, ground lease terms, etc. Construction costs vary by location as well. Feel free to PM with any questions. Aviation Real Estate is my specialty.
 
dans2992 said:
What do you all think of the “investment” opportunities with hangars? (strictly one you would not use personally - I have that covered.). Ie, the purpose is to make money - lease it out, sell it for more down the line.
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Interesting question that I'm about to find an answer to. We live in California and rent a hangar at San Jose International. However, my recently graduated son has decided to live in New Hampshire. He loves New England, has a job in NH, and is getting married next year to his long term girlfriend who is from NH and whose family lives nearby. He's not coming back to California.

My wife and I are nearing retirement and are considering maybe moving to NH after retirement to be near our son and future grandkids. If we do decide to do that, we'll need a hangar for our plane. Hangars in southern NH are pretty much unobtainium, so I reached out to various FBO's and Airport managers to maybe get on waiting lists so maybe we would have a place for our plane if/when we decide to relocate.

That's how I found a hangar for sale at the Nashua airport. Closed on the deal yesterday. I now own a hangar 2300 miles away. The Nasha Jet FBO manager introduced me to the seller and feels confident that he can help me find a tenant at a rental price that will likely match or possibly exceed what I'm paying in California. Fingers crossed.
 
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Check your airport rules and regulations as well as your hangar lease. Some (many?) have terms precluding subleasing.
 
luvflyin said:
I bought one for a 100k and sold it for a 125k 6 years later. Dunno how that compares to other investments because I don’t follow that stuff closely. But I’m satisfied.
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Given your carrying costs, that’s not really a profit but you did break even minus interest or other investment potential it could have been in.
 
What is the rental market for the hangar you would buy? Around here it's going to cost you $120k for a decent T-hangar (it's f'n crazy right now). The general wisdom here says that you need at least 1% of purchase price for monthly rent - i.e. if you can't get $1200/month on a $120k hangar, it won't pencil out. The rental market here does not support that right now so investing in a hangar for financial gain is ill advised in Idaho right now. YMMV
 
EvilEagle said:
What is the rental market for the hangar you would buy? Around here it's going to cost you $120k for a decent T-hangar (it's f'n crazy right now). The general wisdom here says that you need at least 1% of purchase price for monthly rent - i.e. if you can't get $1200/month on a $120k hangar, it won't pencil out. The rental market here does not support that right now so investing in a hangar for financial gain is ill advised in Idaho right now. YMMV
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I can tell you as the airport, that is in large part why we have a hangar shortage here as well. We are building a new set of T's, but only because it is being funded by a grant. The ROI isn't there to make a business case to self fund hangars.
 
midwestpa24 said:
I can tell you as the airport, that is in large part why we have a hangar shortage here as well. We are building a new set of T's, but only because it is being funded by a grant. The ROI isn't there to make a business case to self fund hangars.
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Have you heard about the new T-hangar initiative that AOPA has helped push through? Sounds like it's going to happen and that will be a huge win for airports in need of T-hangars. Look for articles by Mike Ginter at AOPA.
 
EvilEagle said:
Have you heard about the new T-hangar initiative that AOPA has helped push through? Sounds like it's going to happen and that will be a huge win for airports in need of T-hangars. Look for articles by Mike Ginter at AOPA.
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I haven't specifically, but I know there is language in the new FAA Reauthorization bill to direct more infrastructure funding to GA facilities.

As much as we need hangars though, I am a little skeptical on this politically. If aircraft owners and pilots aren't willing to pay what it cost to build hangars, should the taxpayers be funding them? Its one thing to subsidize the airport as a whole because of the economic impact to the community, but building T-Hangars that are majority occupied by hobbyists owners?

I know our own state DOT is trying to help airports increase hangar rental fees to make things more sustainable. If a mini storage in my area is renting for $500 per month, and boat docks are $800 per month, why are airports leasing T-hangars for $100 per month?

Now as an aircraft owner and pilot myself, I don't want to pay any more than I have to. But as a manager I see the business case, and when we have a hangar shortage and massive waiting lists why are we charging bottom dollar?
 
Exactly. Money to pay the rent is not the issue, the issue is no supply.

Note that this applies to smaller GA hangars. Our airport has some large hangars, available for lease only, at $15k per month. Word is they’re not exactly selling out. I have no idea why you’d build big hangars when the demand seems to be in T-hangars/smaller hangars.
 
midwestpa24 said:
I haven't specifically, but I know there is language in the new FAA Reauthorization bill to direct more infrastructure funding to GA facilities.

As much as we need hangars though, I am a little skeptical on this politically. If aircraft owners and pilots aren't willing to pay what it cost to build hangars, should the taxpayers be funding them? Its one thing to subsidize the airport as a whole because of the economic impact to the community, but building T-Hangars that are majority occupied by hobbyists owners?

I know our own state DOT is trying to help airports increase hangar rental fees to make things more sustainable. If a mini storage in my area is renting for $500 per month, and boat docks are $800 per month, why are airports leasing T-hangars for $100 per month?

Now as an aircraft owner and pilot myself, I don't want to pay any more than I have to. But as a manager I see the business case, and when we have a hangar shortage and massive waiting lists why are we charging bottom dollar?
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Of all the government waste that we subsidize... I'm ok with some of it going to small airports/airplane owners instead of big businesses, niche lobbyists, etc. I'm with you that we all have to be better stewards of government funds and try to shrink the budget - until there are some big strides in that area, I'm good with this amount of budget dust going to GA.
 
EvilEagle said:
What is the rental market for the hangar you would buy? Around here it's going to cost you $120k for a decent T-hangar (it's f'n crazy right now). The general wisdom here says that you need at least 1% of purchase price for monthly rent - i.e. if you can't get $1200/month on a $120k hangar, it won't pencil out. The rental market here does not support that right now so investing in a hangar for financial gain is ill advised in Idaho right now. YMMV
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I’m curious where the 1% comes from or is it just easy math? On straight acquisition cost, you are at 8.3 years before break even. Thrown in taxes, airport fees, maintenance and I could see that adding 4 years to break even.
 
masloki said:
I’m curious where the 1% comes from or is it just easy math? On straight acquisition cost, you are at 8.3 years before break even. Thrown in taxes, airport fees, maintenance and I could see that adding 4 years to break even.
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I think I read that somewhere that for real estate investments a quick rule of thumb is you should be able to rent it out for 1% per month to determine if the rental yield meets the minimum standard to consider this asset as an investment. Every investor can adjust this number to suit their objectives.

Of course with more desirable assets, you won’t be getting this type of return in normal conditions. 1% per month return is considered a good deal (minus costs).
 
The dearth of hangars and cost of rent on a non existent hangar is why we built a lift. They go for 20k…but I know a guy (me) that does this stuff for a living and built it for the cost of steel. As long as you have the height it works out well. Fits my pa28 and my dad’s pa32.
 
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masloki said:
I’m curious where the 1% comes from or is it just easy math? On straight acquisition cost, you are at 8.3 years before break even. Thrown in taxes, airport fees, maintenance and I could see that adding 4 years to break even.
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Easy math generally. If you can get that or a bit better you should be able to make money in a decade or so...
 
Racerx said:
The dearth of hangars and cost of rent on a non existent hangar is why we built a lift. They go for 20k…but I know a guy (me) that does this stuff for a living and built it for the cost of steel. As long as you have the height it works out well. Fits my pa28 and my dad’s pa32.
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One of the main reasons I hate my 16' ceilings when the row in front of me has 18'. That 2' makes a huge difference when you want to stack airplanes.
 
RE: Flocker

50% of the revenue? That's insane. Even 50% of the profits would be criminal, but, well... we already allow that in other areas, so....
 
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