Math on rent vs buy on hangar (municipal airport)

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Cardiff_Kook

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Cardiff_Kook
I have an opportunity to buy a hangar on a municipal airport in a busy metropolitan area.

Hangars in the area rent for $400-$600/mo.

The hangar currently has 150 months left on the lease. Rent to the city is currently $95/mo with nominal increases annually (inflation/cpi I think.)

The seller wants $27k for the hangar and the lease is assignable.

I am told there are no taxes due, nor property tax, nor insurance requirements. Nominal electricity ($25/year or something.)

Assuming this is correct. And assuming when the lease ends it won't be renewed.

Is the ballpark math to use on this:

Hangar cost/mo= (purchase price/150 months) + monthly rent
$27,000/150 + $100/mo= $280/mo

Obviously this doesn't take into account the time value of money...

I still need to read all the details of lease...
 
No.

the right calculation is the figure out what the monthly cost to you of tying up 27K of your money is. you're losing 12 years of interest on that last month of use. If your money is worth 8% to you, then the math says that a payment would be $285/month PLUS the $95 land fee = $380/month all in cost to you.

It might still be a good deal, and if there's upside that the lease might be renewed, then that tilts it more in favor of buying. I personally would buy it given this opportunity, but you have to look at what tying up money is worth it to you. Also, the 400-600 that hangars go for in your area will go up with inflation, so there are advantages to buying and "locking in" your price for the next 12 years. Just realize that the last few years of your lease you'd probably have a tough time selling it to someone if you move or otherwise want out of it.
 
What is status of hanger after 150 months? If you’re purchasing it (minus land) don’t you have the retained value of an asset which you can later sell?


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Why would someone sell a hanger for $27K that rent alone values it at $45k?
 
Cardiff_Kook said:
What's the math on that?
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$400 for the "average hangar rate in the area" times 150 months remaining on the lease.
Of course he forgot to decrease the obligation to pay the ground lease.
Then you have the "I want the money now" factor.
 
Based on the info you provided, I’d buy. I love spending other people’s money. :)

*We did the math in our area and bought ours
 
I’m curious why there would be no insurance requirement.
 
Are you buying a single stall of a larger block of hangars? We are doing that and the numbers are also very nice! In a sense we are buying a share. Perhaps your city purchase is much like our LLC. So, not as cool as a big standalone hangar but much, much cheaper. Our monthly bill will be about $105 which includes the lease, insurance, electricity and snow removal. So the number you give monthly is actually just about identical to ours.

I think its a no-brainer at that cost. My concern would be if you need to pay for removal of the structure at the end of the lease. The 2 biggest risks are that they kick you out and you are back to finding a expensive rental. Or they agree to rent it to you for.....$400...$600 a month :)

I would do more research on the assignable part. If you want out can you just as easily assign it to the next guy. If its part of a larger corporation/LLC would you have to pay 1/nth of any building upgrades. Put another way, would it be like a townhome. Everyone agrees it needs a new roof and now your $27K becomes $47K.

I would definitely insure it if it does not have insurance. Just because your plane is insured doesn't mean a fire starting in your hangar (from something other than your plane) is then under your airplane's insurance. The same goes for storm damage. The hail, tornado, whatever maybe destroy the hangar and not the plane inside it.
 
Cardiff_Kook said:
The plane has to be insured and I have to carry general liability insurance.
Click to expand...

There is no requirement for the hangar itself to be insured, just as you say a general liability policy? Most municipal airports require hangar insurance and for them to be named a co-insured. Interesting.
 
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