Non-Equity partnerships.

Challenged

Challenged

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Challenged
So far I've comfortably single-owned my aircraft, but I was speaking to a gentleman today and he brought up the idea of a partnership in another airplane that I have a purchase agreement on. The vast majority of my flying is a once a week flight after work to exercise my piloting skills so I can keep sharp for when I do use the plane to travel with my family. So from a time standpoint, it seems like a partnership would work okay.

I guess the reason I would like a non-equity partner instead of a full partnership is because I tend to get emotionally attached to my airplanes, so I want complete freedom with the maintenance, avionics, painting, etc... and I want to feel like it's my airplane when I go out to fly it. Does that financially make great sense? Probably not, but neither does owning an airplane.

Since I'm so used to single ownership, am I setting myself up for disappointment with anything outside of that? Would another person flying it and paying me for that privilege leave me better or worse off in regards to taking good care of the plane? There's a lot of unknowns there, I imagine, greatly depending on the person I'm in partnership with. I know people generally frown upon lease-backs to offset costs, are non-equity arrangements in the same category?
 
I think you probably nailed it on the head with the "...greatly depending on the person I'm in partnership with" line.

Others may say you're riding a line with regard to "renting" the plane and the FAR's, but not sure how that pans out. I know that I've been seeking someone to let me have a non-equity partnership in their plane, but have had no dice in my area. I'd certainly be having a chat with you if you lived here!
 
Partnerships are always a risk emotionally, while removing some financial risk.

How’s that for a vague answer? Ha.

Only you can judge if you want to be “married” to your prospective co-owner, and he or she is evaluating you the same way.

Why not just talk to them about this particular worry of yours about control of things? They may have the same concerns, or they may want to think about it also. It also may expose a part of your makeup that THEY don’t want to deal with, and it would be better for them to know about it up front.

:)
 
I can be a little OCD sometimes, so if there are Baby Ruth wrappers in the plane when I go to fly it, I don't think that would be ideal for me, but perhaps there's my answer. Although if I can find someone who also dislikes Baby Ruth wrappers...hmm, maybe it's not as clear cut. I do appreciate the input here.
 
Depends on the partner. I had partners who didn't won an equivalent share of the aircraft. However, we equivalently shared expenses and availability. When he aircraft sold they got paid their share. But while we owned it it was our airplane, we had to agree on any upgrades and all participated in the maintenance. It was a superlative arrangement.
 
Challenged said:
I can be a little OCD sometimes, so if there are Baby Ruth wrappers in the plane when I go to fly it, I don't think that would be ideal for me, but perhaps there's my answer. Although if I can find someone who also dislikes Baby Ruth wrappers...hmm, maybe it's not as clear cut. I do appreciate the input here.
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Wait till you find a bottle full of yellow liquid.
 
Challenged said:
I can be a little OCD sometimes, so if there are Baby Ruth wrappers in the plane when I go to fly it, I don't think that would be ideal for me, but perhaps there's my answer. Although if I can find someone who also dislikes Baby Ruth wrappers...hmm, maybe it's not as clear cut. I do appreciate the input here.
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Things like that can be mitigated by rules and access to proper cleaning tools. One airplane I flew that was always immaculate years ago, was in a nice hangar with a vacuum cleaner always at the ready on the wall just behind the left inboard wing. And the owner expected it to be used or he called you and told you to go clean up his airplane that you left dirty.

He made it easy though. Vacuum and cleaning stuff was always right there and always stocked. He took care of that so people would take care of his airplanes.

Super guy. Did it right.

Complaining about dirty airplanes when the thing is tied down outside, no cleaning materials, and no way to do it easily or at all, is just utterly annoying. Taking the trash out is always easy, but a little mud on the shoes and on the carpet and no way to clean it, sucks.

bnt83 said:
Wait till you find a bottle full of yellow liquid.
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LOL. Now you’re just messing with his fears. :)
 
Just to be technical, a partner or "partnership" is a "for profit" venture.

Two or more private owners opting to share an airplane are co-owners, not partners.

I only know that because I have been researching that lately to help find suitable "co owners" to help share the expenses. My problem is that we occasionally like to take 3 or 4 week trips.
 
JOhnH said:
Just to be technical, a partner or "partnership" is a "for profit" venture.

Two or more private owners opting to share an airplane are co-owners, not partners.
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Yup. An aviation attorney friend mentions that all the time.

I’m technically a 50% co-owner of a Limited Liability Corporation that happens to own an airplane. The other guy owns the other 50% of the LLC.

It’s just colloquial to say “partner”.

Some lawyers suggest never saying it to maintain the corporate liability veil of the aircraft, but also caution that everybody is getting sued anyway if your co-owner starts dropping baby grand pianos on people with the airplane, so in practice it doesn’t really matter much. :)
 
I'd suggest you look into block leasing time to the other person and add them to your insurance. Then you still have full title, and if things don't work out you can refund his unused time and be done with it.
 
These are indeed the type of terms that I'm investigating Ravioli, and it does seem like the easiest way for both parties to split ways if need be. Thanks!
 
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As others said, it's mostly about who your partner is.

The knock on leasebacks is typically in the flight school context. You are letting the flight school operate thecairplane and use it as a rental and trainer. That's not an issue in a non-equity partnership where you get to select the partner and make the rules (in writing).

@DrewG, what is the FAR problem you see? There typically aren't any in this scenario.
 
@midlifeflyer It's not anything I'd take issue with. When I was seeking out a non-equity partnership earlier (I still am, FWIW), I had some folks state that they worried that entering into a "non-equity partnership" would be towing the line of being "renting their plane while skirting the regulatory requirements of doing so."

And, based on what you said, I guess that isn't really an issue. Especially since it's not being held out for rental in a commercial fashion.
 
I can offer a bit of perspective from the non-equity side.

I was in a great non-equity 172S partnership before I moved to orange county last year (I'm still open to one at SNA, btw...PM me if you're willing!). The aircraft owner only flew a few times per month (if that) and let a couple of us use his aircraft. We were named on the insurance and had our own keys and access to the hangar. We used a simple online scheduling system and there were almost never any conflicts in scheduling.

We paid a reasonable refundable deposit (refundable after 12 months), a dry hourly rate, a monthly rate, and would return the plane with 15g aside. The expectation was that you would treat the equipment properly and as if it were your own. The plane was always clean, but no one else (even the owner) really went and REALLY took care of it. With the owner's permission, I would occasionally wash the thing, clean the hangar, etc. I even brought an old clean couch since the hangar was pretty bare. I once bought a bunch of wash-wax-all because I found that the owner was using Windex (!!!) on his windshield, and he deducted it from my monthly tab. Personally, I just enjoyed seeing a nice clean plane ready for use and I didn't mind spending so much time keeping it clean.

It was a great arrangement and I wish I still had it. I would definitely make sure the other pilots are on the same page in terms of being clean and taking care of your machine and belongings though.

Edit: I will add that my effective cost per hour if I flew even only 3 hours in a given month, including the monthly rate and fuel, was more than $40 / hour less than the rental rate around here for the equivalent machine. It was a no-brainer deal, not to mention the benefit of having 24/7 access (assuming it wasn't scheduled).
 
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The three most important things to a good working partnership is: the partner, the partner and the partner. I've been in a few. I've co-owned planes and rented a friend's plane. All worked out great because we were 100% compatible. Get the know the other person and how they fly. Know how they keep current. Understand how they make go/no-go decisions. If they're the same or close to you, explore it further. If you're at opposite ends of the spectrum, keep looking. The least important part is the airplane, the hanger, the rate, etc.
 
I did a non equity partnership with a local pilot. It worked out very well. He was very well qualified with all of the ratings. I had control of the plane. He subsidised my ownership while putting relatively few hours on the clock. I would only do this with a well qualified individual.. If it doesn't work out, just ask for the keys back.
 
Do you guys have any ideas of what a reasonable dry rate would be on a V35A (STEC 50 w/hold + JPI 900 + Aspen + 430W). Assume the purchase of block time, which is certainly worth some sort of discount.
 
You'll get all kinds of numbers on that.... my WAG is ~$90 dry tach
 
Challenged said:
Do you guys have any ideas of what a reasonable dry rate would be on a V35A (STEC 50 w/hold + JPI 900 + Aspen + 430W). Assume the purchase of block time, which is certainly worth some sort of discount.
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Does the non-equity flyer pay for his share of the insurance/hangar/databases ?
 
weilke said:
Does the non-equity flyer pay for his share of the insurance ?
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That is entirely up to the individuals. For my Arrow II I am charging $200/month plus $25/hr. dry. It all works out to about ~$3-4000K/yr, which almost covers my fixed operating costs. As the owner, I get scheduling priority. Just the way we worked it out. Others will do things differently.
 
I was a non-equity partner in an airplane owned by a friend. The arrangement was, we split the fixed costs (insurance, annuals, etc.) and the cost of any required maintenance, and we each paid for the consumables we used (fuel, oil, etc.). The cost was MUCH less than renting a comparable airplane, and it would have been a great arrangement for both of us, except that she started flying less and less and I was flying the same amount as always, which usually comes to about 100 hrs per year. So she began to feel that she was subsidizing my flying, since the plane was requiring more maintenance on a per year basis than when she was the only one flying the plane.

I think this kind of arrangement works well provided both of the partners fly approximately the same amount, but can be a source of friction when one partner flies much more than the other. Of course, apportioning contributions to non-fixed costs such as maintenance and oil changes based on usage is another way to split things up, and would probably have worked better in our case.
 
Morgan3820 said:
That is entirely up to the individuals. For my Arrow II I am charging $200/month plus $25/hr. dry. It all works out to about ~$3-4000K/yr, which almost covers my fixed operating costs. As the owner, I get scheduling priority. Just the way we worked it out. Others will do things differently.
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Ok, so you are paying the fixed cost (hangar, basic annual, insurance, nav-data) out of the monthly contribution. So no need to amortize those on the per-hour charge.

Then its down to putting away money for an overhaul and for the maintenance that goes by the hour.

For a V35A (which was the plane in question):
$35,000 for an overhaul and $2500 for the prop / 2000hrs is 18.75/hr for 'rotables'.
$150/50hrs for an oil change is $3/hr for lubricants
Add another $20/hr for 'misc **** that falls off' (gear transmission, gear motor, flap motor, bushings, pressure pump, tires, brakes, starter adapter, alternator adapter)

Unless you want to subsidize your non-equity flyers hobby, I would charge at a minimum $41.75/hr dry for a V35A.
 
I look at it differently. If I get say, 4 years out of the partnership, that is $12-$16K that I would not have had. If he flys say 160 hrs in those four years, I get $90/ hour. It is not a killing but that is not my goal. Besides, this particular guy spends nearly half of the year in the Bahamas on his boat, while I still collect the monthly $200 and have no schedule competion.
I guess by your reconing I am being to generous and maybe I am.

What do others in the group say?
 
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This is a subject I am interested in as there is a '77 114 Commander I wouldn't mind being a non-equity 'partner' in. Pilot doesn't really fly it much at all. I wouldn't mind eventually being an equity partner (or owning), but just looking at this right now. He did tell me it might be for sale in a year, so this would be a way to work my way in and see if it's really something I wanted to continue or buy. I assume there is more than one way to approach it. Monthly fee and hourly dry rate. Another I saw here where someone else was actually help paying half the insurance, etc.

Those of you that are experienced in this, what would be a good/fair offer to the owner with this plane?
 
DrewG said:
@midlifeflyer It's not anything I'd take issue with. When I was seeking out a non-equity partnership earlier (I still am, FWIW), I had some folks state that they worried that entering into a "non-equity partnership" would be towing the line of being "renting their plane while skirting the regulatory requirements of doing so."

And, based on what you said, I guess that isn't really an issue. Especially since it's not being held out for rental in a commercial fashion.
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Wild guess - the folks who said that think a "commercial" aircraft rental requires 100 hour inspections. Common misconception.

Other than that I'm not sure what they meant. Doesn't mean there isn't a problem I haven't thought of.
 
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BTW, I was a "non-equity partner" in an airplane for a number of years. I've also been a "private renter" more than once. Terms are in quotes because they mean different things to different people (especially "non-equity partner"). Which makes sense because the number and types of arrangements are pretty wide.

But, at least in mine, the essence was similar. An owner with an airplane willing to give access to it to someone else at a reasonable fee, while still maintaining full control and making the rules. In all the cases, either party was free to terminate the arrangement.
 
midlifeflyer said:
Wild guess - the folks who said that think a "commercial" aircraft rental requires 100 hour inspections. Common misconception.

Other than that I'm not sure what they meant. Doesn't mean there isn't a problem I haven't thought of.
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One concern would be to stay within the goalposts for a regular 'business and pleasure' insurance policy. As long as the pilots are listed on the insurance, I don't believe the companies care very much whether you own an equity stake in the insured plane or not. Hell, you can list a contract pilot on your policy.
 
weilke said:
One concern would be to stay within the goalposts for a regular 'business and pleasure' insurance policy. As long as the pilots are listed on the insurance, I don't believe the companies care very much whether you own an equity stake in the insured plane or not. Hell, you can list a contract pilot on your policy.
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Insurance coverage is definitely a concern (but not a FAR issue). Some allow for some degree of co-use (my term to cover all the variations) before considering it, say, a commercial operation or flying club with different requirements and premium structure. But you have to check the policy to know what you can and can't do and that can even affect the form the co-use takes.
 
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