Owning and renting your aircraft through an FBO?

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DMD3.

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DMD3.
I’ve heard the idea of owning an aircraft and letting an FBO (or flight school, etc.) rent it to others and also maintain it, though the owner is responsible for the maintenance costs. While this wouldn’t likely be a money maker, it would help the aircraft pay for itself, and also ensure it’s flown regularly if the owner weren’t always able to fly (an OTR truck driver, perhaps).

How would this work? What percentage of the profit would the FBO keep? Would it be hard to find an FBO or other organization willing to do this? I like to think if you’d be purchasing their fuel and paying their A&P for maintenance, most FBO’s would jump at the chance.

You don’t have to flood the thread on why this would be a bad idea. Higher insurance premiums, plus student pilots (and some barely-current veteran pilots) doing hard landings would be a negative. Not to mention the fact that I as the owner would have to be on the schedule just like the other renters. Has anyone ever done this or know of someone doing it? Could this be a good idea to help mitigate the costs of ownership?
 
DMD3. said:
I’ve heard the idea of owning an aircraft and letting an FBO (or flight school, etc.) rent it to others and also maintain it, though the owner is responsible for the maintenance costs. While this wouldn’t likely be a money maker, it would help the aircraft pay for itself, and also ensure it’s flown regularly if the owner weren’t always able to fly (an OTR truck driver, perhaps).

How would this work? What percentage of the profit would the FBO keep? Would it be hard to find an FBO or other organization willing to do this? I like to think if you’d be purchasing their fuel and paying their A&P for maintenance, most FBO’s would jump at the chance.

You don’t have to flood the thread on why this would be a bad idea. Higher insurance premiums, plus student pilots (and some barely-current veteran pilots) doing hard landings would be a negative. Not to mention the fact that I as the owner would have to be on the schedule just like the other renters. Has anyone ever done this or know of someone doing it? Could this be a good idea to help mitigate the costs of ownership?
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https://www.google.com/url?sa=t&rct...ood-for-you/&usg=AOvVaw0rARoiZBVfTTZ5Y5VIumF8
 
It's called a leaseback, and it's very common.
 
You've certainly identified the negatives. Why not look at getting a vetted, named non-equity partner instead? You can fully own the airplane, and choose a partner with enough flying experience to not damage your plane or jack up your insurance premiums. Plus you aren't subject to 100 hour inspections if the plane isn't used for flight instruction.
 
I keep trying to convince @Rgbeard how much extra money he could make by leasing his Turbo Lance back to an FBO. I know for sure those students would be careful cooling that Turbo down after each flight! :stirpot:
 
Been there, done that with two aircraft. The biggest question is which costs are passed to you and which are paid by the FBO. The last lease-back I attempted failed because the FBO wanted me to pay all the insurance. The problem is that the FBO will rent your aircraft last, after all of his aircraft. So, you get stuck with 12-times the insurance but you are the lowest flying aircraft in the pool. Don't do it unless he pays all the insurance. For this to be a clean business deal (think IRS), you need to also be a renter of your own plane and follow all the normal rental rental rules with the FBO. The only exception would be a preset dry rate that you negotiate as part of the lease-back contract.
 
It worked out really well for us. We leased back our first airplane, a C172, and it pretty much paid for itself, but here are the caveats. My husband is very hands on and can perform a lot of the maintenance himself, and put his own time in getting the plane upgraded and kept pretty so that it was the most popular Skyhawk there and rented a lot. He knew what he was doing going into it and did his homework. It didn’t get beat up too bad, the renters treated it well, the theory is if you allow it to look like crap then people will treat it that way but if you keep it nice they’ll be less likely to trash it. That’s probably not always true but it seemed to be or we just lucked out. Also you have to do your homework about the FBO, flight school and location factors to consider.

Of course when we were financially able we took it out and were happy not to have strangers flying it anymore. But for us at the time it was the right thing to do, it allowed us to buy a plane. But this was many years ago and times may have changed.

I would say the same thing Steve Lehto says about buying an RV: Don’t do it! Unless... you really know what you’re doing.
 
thito01 said:
Been there, done that with two aircraft. The biggest question is which costs are passed to you and which are paid by the FBO. The last lease-back I attempted failed because the FBO wanted me to pay all the insurance. The problem is that the FBO will rent your aircraft last, after all of his aircraft. So, you get stuck with 12-times the insurance but you are the lowest flying aircraft in the pool. Don't do it unless he pays all the insurance. For this to be a clean business deal (think IRS), you need to also be a renter of your own plane and follow all the normal rental rental rules with the FBO. The only exception would be a preset dry rate that you negotiate as part of the lease-back contract.
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We had that situation with a vacation house we bought as a rental investment. The management company president promised us all this business but we didn’t know at first that she herself owned a house of similar square footage that was in direct competition with ours and she would guide the customers to hers first. Fortunately with the plane we had a great relationship with the FBO and ours rented the most, so part of the equation you have to figure out going in is what competes with you, what the market is, supply demand, that was the other mistake we made with that house, we had been lulled into thinking it would rent as much as our other house at the beach rented (this one was in the mountains) but that was not the case at all. Oh well live and learn.
 
I leased my C172L to a flight school starting in 2016. My agreement with them is perhaps unusual. They are responsible for all maintenance and operation costs... up to a certain point. We split the cost of parts which are more than $1,000 each. I pay for engine rebuilds. I don't pay for damages caused by students. I pay for upgrades like four-point harnesses, better visors, better avionics. They pay for insurance. If I fly it I should have renter's insurance. That's less expensive than owner's insurance. My insurance agent wouldn't quote me an owners policy once it was leased. Redundant, she said. She also told me that I was legally insulated from lawsuits unless I was flying the plane. I rarely get a call asking for maintenance money. It's the most popular plane at the school and generates good revenue. So good that the school wants to buy it from me.

I joined the AOPA and paid for their aviation legal advice. They reviewed the contract and pointed out some possible problems which were fixed. The AOPA attorney said he'd never seen an agreement like mine, but thought it sounded like a good one.

The only downside(?) was that it was almost always reserved by students and renters. I found it difficult to reserve my own time in it. And multi-day trips? Forget about it because of the lost revenue. So, my wife let me buy a second, much nicer airplane! I recommend that strategy. LOL

Actually, the very real downside is that it puts a LOT of time on the airframe. Flight school aircraft usually are stuck in that role forever. And the commercial usage added property taxes.
 
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Interesting video on it if you haven't seen it.
 
I have been i many leasebacks. the only way to make it work is if you can do the maintenance your shelf. if your paying for 100hrs and upkeep it will eat you alive. renters are well know for trashing tires and brakes. It so nice when a renter flat spots a tire with 10 hrs on it, oh well there goes a 125 bucks plus labor. ect.. ect .. ect..
 
I've done it (with my 182-RG). I would never do it again through an FBO. The agreement ALWAYS favors the FBO. And if they have a maintenance shop, even more so. There will be exceptions but in my experience going through an FBO is a sure fire way to lose money. Some of the owners were actually looking to that so for them I guess it worked out.

After two years with an FBO, I hooked up with a club. They had 6 Warriors, 2 Arrows, 2 172's, my 182-RG and a Grumman twin. It was a very good experience. I actually made a little money a few times.
 
There has been some discussion of Lease-backs on this board. Search for the keyword(s) “lease back” and read away!

-Skip
 
My club is trying to talk me into funding a leaseback aircraft. Problem is they are not interested in a 6 place for insurance reasons - and if I’m forking over hard dough, my mission aligns more to a 6 place than a 4 place.
 
I've only seen one leaseback work long term. The main reasons for the success are due to the owner being a mechanic and also having some influence with the FBO itself. Every other leaseback deal that I've personally been involved with/around has fizzled after the first year. The reasons are always the same - the owner of the airplane thought they were going to have a deal where the airplane paid for itself but that didn't come true for various reasons. The reasons are often because of a lack of use, maintenance problems/costs, or insurance costs. Sometimes all three.

From a flight school/FBOs perspective, I'd be interested in doing a leaseback when it doesn't pencil out for me to own and operate the airplane I'm after myself. That's the opposite of what an owner is typically wanting, because that means they're likely going to subsidize everyone's flying.
 
dfw11411 said:
My insurance agent wouldn't quote me an owners policy once it was leased. Redundant, she said. She also told me that I was legally insulated from lawsuits….
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I can only tell you this could not be further from the truth…I am involved as a defendant personally in four different federal lawsuits because of an fatal aircraft crash… N7430J is worth a google for anyone who wants to leaseback…
 
Warlock said:
I can only tell you this could not be further from the truth…I am involved as a defendant personally in four different federal lawsuits because of an fatal aircraft crash… N7430J is worth a google for anyone who wants to leaseback…
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Wow. Sorry you have to deal with that.
 
Our flight school has two leasebacks. As the school we keep $25/hr. We manage the maintenance but we don't pay for any maintenance/tiedown/hangar costs. The aircraft are covered under our insurance policy (we have better coverage than they had as individuals too) but they pay their portion of the aircraft premium, we pay for 100% of the flight schools GL and work comp premiums which does include some of their portions. I'd say those two airplanes are used the same as the ones we own but one of them is a specialty (spins, acro, tailwheel) that's hard to find instruction in and the other is great for XC.

Neither owner is getting rich but they make enough to cover all their maintenance, insurance and flying costs.
 
texasclouds said:
It’s gonna get beat on like a red headed stepchild…
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I was asked once if I was interested in a leaseback. I walked along a flight line of airplanes that get paint and interior every three years in rotation, and the most recent (within the last six months) still looked way worse than my airplane that had paint and interior 8 years and about double the flying hours prior.

I passed.
 
Warlock said:
I can only tell you this could not be further from the truth…I am involved as a defendant personally in four different federal lawsuits because of an fatal aircraft crash… N7430J is worth a google for anyone who wants to leaseback…
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Wow. I can see no reason why you would be named other than then usual name everyone who ever touched the plane. Is there something particular they are alledging?
 
Warlock said:
I can only tell you this could not be further from the truth…I am involved as a defendant personally in four different federal lawsuits because of an fatal aircraft crash… N7430J is worth a google for anyone who wants to leaseback…
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I had originally planned to leaseback my plane to the club I'm in. I'm about 9 months in, and reserve the right to change my mind after the first annual, but at this point I would say no way.

Not having to worry about the schedule is the biggest thing. I can go fly whenever I want. To take a trip in a club plane you have to schedule at least a month out (or 6 months for oshkosh) . We made the call to go to rough river about 2 days out.... just decided to go to osh last week. If there's a low ceiling when I wake up in the morning, I can go shoot some approaches.

Maintenance is another issue. I do my own oil changes and other small projects. Even if the club allowed me to do that, there's no way I could accept the liability. I'd have to be completely hands off; I don't know if I'd even want to be the maintenance officer for it. I'd also have to find some sort of liability insurance, as my umbrella policy excludes aviation.

The other thing, which I screwed up myself, is that I put the plane in my own name rather than an llc. I wish I had done an llc for privacy sake, and I wouldn't leaseback a plane without it. It's essentially too late to do it now, as illinois would require the new llc to pay the 6.5% use tax again.
 
luvflyin said:
Wow. I can see no reason why you would be named other than then usual name everyone who ever touched the plane. Is there something particular they are alledging?
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That and negligent entrustment basically through the leaseback agreement (AOPA suggested form) to the owner…then again they sued Garmin ( All King in the Aircraft) and an FBO that never touched the aircraft…just because your indemnified though LLC and leases does not stop you from having to defend yourself.
If you knew the details of this event you would realize that it’s not your every day CFIT it includes a Pilot FAA employee, Kidnapping, Arrest warrants, and the death of a six year old child who was incapacitated on most likely on Reds Apple Ale ( Empty and unopened bottles found in the wreckage with a receipt of purchase by the pilot)…NTSB report shows no issue with airplane or maintenance when he flew it into a 1800 ft transmission tower on a CAVU day…
 
Warlock said:
That and negligent entrustment basically through the leaseback agreement (AOPA suggested form) to the owner…then again they sued Garmin ( All King in the Aircraft) and an FBO that never touched the aircraft…just because your indemnified though LLC and leases does not stop you from having to defend yourself.
If you knew the details of this event you would realize that it’s not your every day CFIT it includes a Pilot FAA employee, Kidnapping, Arrest warrants, and the death of a six year old child who was incapacitated on most likely on Reds Apple Ale ( Empty and unopened bottles found in the wreckage with a receipt of purchase by the pilot)…NTSB report shows no issue with airplane or maintenance when he flew it into a 1800 ft transmission tower on a CAVU day…
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Think I remember this now. There was a thread here about it. They wanna say the FBO or club or whatever should have protected him from himself and not rented the plane to him. And you should have known that something like this might happen someday so you never should have leased the plane to the FBO/club.
 
Ahhh, the perennial leaseback thread.

Like rental properties, people see it on youtube or TV and say "anyone can flip houses or do rental property", when in fact, there's a lot of unspoken work, risk and hazard that goes into it.

WAY back in the day, call it the 70s-80s, when FBOs were "one stop", meaning the fuel service, aircraft sales, maintenance, flight training, rental, hangars, etc were all under one corporate entity. If you cut a lease back deal, the offer was usually fuel & MX under wholesale prices with the FBO, and they'd probably cut you a deal with financing and get on their insurance policy as well. There were some fairly attractive tax rules as well. You could fall down a set of stairs and make money.

Between then and now, everything has split and the FBO is really only a place that sells gas and rents space. All the other entities are outsourced. That means when you get fuel, MX, insurance, etc, its at full retail. Further, whoever you are leasing back from is going to want a bigger cut, because THEY now have overhead they need to cover as well.

There is probably a very specific set of circumstances you can break even on a leaseback, and maybe build some equity, but it's going to require you to have access to some wholesale/at cost portions of the expense side of the ledger.
 
Warlock said:
I can only tell you this could not be further from the truth…I am involved as a defendant personally in four different federal lawsuits because of an fatal aircraft crash… N7430J is worth a google for anyone who wants to leaseback…
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Geez this is the first I’ve heard of this. (I’ve been off this board a while.) So sorry this happened to you. Massive destruction in many people’s lives caused by this scumbag. And why does our “justice” system allow innocent people to be financially and emotionally punished for the crimes of one psycho nut? It’s not going to bring back that little girl. I understand the family’s grief but I will never understand that reasoning.

Edited to add the bolded words. Makes me so mad.
 
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What’s interesting is some are watching but those who should really be paying attention to these lawsuits are not…just think of the precedent that would be set in Federal Case Law, if these suits succeed. Flying Clubs, Partnerships under LLC’s and leasebacks will never be able to afford the new cost to insure the risk…just my take of second and third order effects not unlike GA costs due to manufacturing lawsuits of the 80-90’s…
 
Warlock said:
I can only tell you this could not be further from the truth…I am involved as a defendant personally in four different federal lawsuits because of an fatal aircraft crash…
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Well, Warlock, you really got my attention with this! I have AOPA Legal Services so I called. Here's what I learned. Normal disclaimers, this is only informational and applies to me. You may be different. And so forth.

The federal law is this. Abbreviated here.
49 U.S. Code § 44112.Limitation of liability
(b)Liability.—A lessor, owner, or secured party is liable for personal injury, death, or property loss or damage only when a civil aircraft, aircraft engine, or propeller is in the actual possession or operational control of the lessor, owner, or secured party, and the personal injury, death, or property loss or damage occurs because of—
(1)the aircraft, engine, or propeller; or
(2)the flight of, or an object falling from, the aircraft, engine, or propeller.​

The attorney told me that this particular law has never been fully challenged. He said that aviation lawyers are watching several cases which are contesting this law. I suspect yours may some or all of them. He also said that anyone can sue anyone for anything. They may not prevail, but you, as a defendant, may have to pay many thousands in legal fees to ultimately be released from a sue-everybody-with-a-pulse lawsuit or be found not responsible.

He reviewed my lease-back agreement and advised me that I need to review the FBO/Flight School's insurance policy each year for compliance. Specifically, he said that the aircraft owner (the LLC formed by me and my wife) and both of us individually, must be additionally insured, or "named", on the policy. Indemnification is not enough. Being named in the policy requires the FBO/Flight School's insurance company to defend us in any lawsuit. My agreement includes naming the LLC, but not us personally and I have not verified compliance in years.

He also told me that, while the insurance agent a few years ago was "mostly correct", a commercial aviation liability policy is available but is probably so expensive as to be unaffordable for me. In effect, the same type of policy that the FBO/Flight School has.
 
I was a an additional insured on my policy along with the LLC…as I happen to be in the insurance business (now retired) as a second career after the military. The company probably regrets using that policy form but reading the contract in Aviation Insurance is important as there is nothing standard…
 
dfw11411 said:
The federal law is this. Abbreviated here.
49 U.S. Code § 44112.Limitation of liability
(b)Liability.—A lessor, owner, or secured party is liable for personal injury, death, or property loss or damage only when a civil aircraft, aircraft engine, or propeller is in the actual possession or operational control of the lessor, owner, or secured party, and the personal injury, death, or property loss or damage occurs because of—
(1)the aircraft, engine, or propeller; or
(2)the flight of, or an object falling from, the aircraft, engine, or propeller.
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Laws like this make me sick to my stomach
 
I have seen beautiful planes go on leaseback, and it only took a year to see the planes become beat up, abused. If you want to do a leaseback of your plane, you just have to basically not care about it. If you are only in it for the money, you can be good.
 
Anyone can sue anybody for anything. "Sue successfully" is a different matter.
 
Ed Haywood said:
Anyone can sue anybody for anything. "Sue successfully" is a different matter.
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You are absolutely correct. But the cost of defending yourself against even an absurd lawsuit is punitive. So, even if Warlock is eventually found "not responsible" for the tragedy, he may be required to waste tens of thousands of dollars for legal fees.
 
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