Bman.
Pre-takeoff checklist
Ok folks – I am looking for an opinion and options to help me either push the process along or camp out until something changes. Here is the deal.
My boss has an 79’ Archer II (3050 TT / 700 SMOH). Antiquated avionics and lacking the ADS-B out updates. I started my primary training in this plane and about to start instrument training Jan 2017. My boss has been very generous in allowing me to use the plane in general. Knowing what I know now (low time just over 100 hours), I would fear the student pilot and what comes along with it for the plane. I wasn’t too hard on the plane but still – there is nothing smooth and graceful starting off.
The plane is hangared 4 miles from my house (new hangar) for $335 a month.
I pay a dry rental rate of $75 per tach hour. Currently I fly around 60 hours a year. That’s a low expense of $4500 without putting anything else toward the plane maintenance or hangar. So again, sweet deal for me. The annual was just completed and that alone was more than my entire rental expense for the year.
The plane is almost always available. My boss and I are the only ones who fly the plane. He flies about 30 hours annually and that is usually on a handful of long cross country trips. Unlike me where it’s a few times a month at 1.5 hours per flight. So here we are – pretty cheap / average rental rate, fresh off annual, new hangar, available and all around a good plane. What question could there possibly be?
Here is the thing, I know the owner isn’t going to be flying forever or for too many more years. Given his current flying frequency, I would give it a year or two before he decides he is tired of pouring money into the plane. Me, however, I will be kicking off my instruments training, need new avionics, need ADS-B and want a new paint job. A few needs and a want. I really don’t think the owner will spend the cash on those items to make me happy! So to get the ball moving with some upgrades a 50/50 ownership has been proposed. Take the plane, get new avionics with ads-b, get a new paint scheme and then get a new loan for the plane. He currently owns the plane outright so the plane would be sold to a new entity / llc.
While this would be great and get the ball rolling with the new stuff, it would certainly cost me much more per hour than what I am currently paying. Monthly loan payment, hangar, annual, per hour usage rate to cover future expenses etc.
This is how I see the new costs:
$50,000 base aircraft cost
$20,000 avionics (I have quote for a 650 GTN / Nav / Com / MD200-306 Nav Indicator / Garmin GTX-344 ADS-B in/out transponder
$10,000 new paint
Total = $80,000 (20% down) = 64,000 loan
That breaks down to $725 note payment per month (10 year) / $325 hangar = $1,050 per month or $525 per person per month.
As I see it, I would have to fly at least 8+ hours a month to break even relative to my rental rate. I would only own 50% of the plane and would have another 50% to pick up so partner up with someone in the future. But I would own a plane and could capture whatever equity there may be. Will a 1979 plane at the end of 10 year note be worth anything? Surely something but I imagine a 47 year old plane Archer II quickly starts to lose value. Another bonus is I could fly without the constant rental rate looming over my head. Most importantly, the plane would be updated, ADS-B compliant and look prettier with the new paint.
So back to the original question, should I push this forward and be a fool for investing in a low time but old by year 1979 archer? Or be a fool to rock the boat currently in place with a flat rental rate and nothing else to worry about?
What concerns me is eventually he is going to sell out. There are no planes to rent around here for the most part so I would either be buying a plane then or simply stop flying.
At least now, there would be someone helping to cover 50% of the avionics upgrades and 50% of the immediate avionics depreciation.
Hmm...
Benjamin
My boss has an 79’ Archer II (3050 TT / 700 SMOH). Antiquated avionics and lacking the ADS-B out updates. I started my primary training in this plane and about to start instrument training Jan 2017. My boss has been very generous in allowing me to use the plane in general. Knowing what I know now (low time just over 100 hours), I would fear the student pilot and what comes along with it for the plane. I wasn’t too hard on the plane but still – there is nothing smooth and graceful starting off.
The plane is hangared 4 miles from my house (new hangar) for $335 a month.
I pay a dry rental rate of $75 per tach hour. Currently I fly around 60 hours a year. That’s a low expense of $4500 without putting anything else toward the plane maintenance or hangar. So again, sweet deal for me. The annual was just completed and that alone was more than my entire rental expense for the year.
The plane is almost always available. My boss and I are the only ones who fly the plane. He flies about 30 hours annually and that is usually on a handful of long cross country trips. Unlike me where it’s a few times a month at 1.5 hours per flight. So here we are – pretty cheap / average rental rate, fresh off annual, new hangar, available and all around a good plane. What question could there possibly be?
Here is the thing, I know the owner isn’t going to be flying forever or for too many more years. Given his current flying frequency, I would give it a year or two before he decides he is tired of pouring money into the plane. Me, however, I will be kicking off my instruments training, need new avionics, need ADS-B and want a new paint job. A few needs and a want. I really don’t think the owner will spend the cash on those items to make me happy! So to get the ball moving with some upgrades a 50/50 ownership has been proposed. Take the plane, get new avionics with ads-b, get a new paint scheme and then get a new loan for the plane. He currently owns the plane outright so the plane would be sold to a new entity / llc.
While this would be great and get the ball rolling with the new stuff, it would certainly cost me much more per hour than what I am currently paying. Monthly loan payment, hangar, annual, per hour usage rate to cover future expenses etc.
This is how I see the new costs:
$50,000 base aircraft cost
$20,000 avionics (I have quote for a 650 GTN / Nav / Com / MD200-306 Nav Indicator / Garmin GTX-344 ADS-B in/out transponder
$10,000 new paint
Total = $80,000 (20% down) = 64,000 loan
That breaks down to $725 note payment per month (10 year) / $325 hangar = $1,050 per month or $525 per person per month.
As I see it, I would have to fly at least 8+ hours a month to break even relative to my rental rate. I would only own 50% of the plane and would have another 50% to pick up so partner up with someone in the future. But I would own a plane and could capture whatever equity there may be. Will a 1979 plane at the end of 10 year note be worth anything? Surely something but I imagine a 47 year old plane Archer II quickly starts to lose value. Another bonus is I could fly without the constant rental rate looming over my head. Most importantly, the plane would be updated, ADS-B compliant and look prettier with the new paint.
So back to the original question, should I push this forward and be a fool for investing in a low time but old by year 1979 archer? Or be a fool to rock the boat currently in place with a flat rental rate and nothing else to worry about?
What concerns me is eventually he is going to sell out. There are no planes to rent around here for the most part so I would either be buying a plane then or simply stop flying.
At least now, there would be someone helping to cover 50% of the avionics upgrades and 50% of the immediate avionics depreciation.
Hmm...
Benjamin
