Questions about buying airplane

[SkyHog]

Ok - I'm a few steps closer to buying my own airplane. Now I have a few big questions:

How do you determine how much to charge yourself per hour of flight?

It'd be stupid to go without it, but - is insurance mandatory?

Besides Insurance and Hangaring/tie downs, what other fixed costs should I plan on?

Any other advice to the very near buyer?

 

[wsuffa]

Ok - I'm a few steps closer to buying my own airplane. Now I have a few big questions:

How do you determine how much to charge yourself per hour of flight?

It'd be stupid to go without it, but - is insurance mandatory?

Besides Insurance and Hangaring/tie downs, what other fixed costs should I plan on?

Any other advice to the very near buyer?

1) You can figure out the cost per hour by adding fuel, oil, maintenance, hangar/tiedown, insurance, finance, and any other costs (gps updates?) per hour flown. Hangar/tiedown, insurance, finance, and annual costs are pretty fixed (i.e. don't vary by hour), maintenance will vary by airplane, and fuel, oil, etc. are hourly based. Add in a reserve amount for engine overhaul and any improvements (paint, interior, avionics) divided by the approximate life of each item (for example, an engine with 1800 TBO and $18,000 OH cost would be $10/hour),

2) In some places, insurance is mandatory. Generally a state issue, though sometimes your home airport will require insurance.

3) Finance costs, GPS database updates, engine and improvement reserves, basic annual costs, IFR certifications, hangar/tiedown, and insurance are the generally considered fixed.

4) Do your homework. Get a title search done. Have an annual done as a "prebuy". Always remember there is another airplane out there, so don't feel compelled to move faster than your comfort level. Look beyond the paint job.

Good luck! It's exciting.

 

[Anthony]

Ok - I'm a few steps closer to buying my own airplane. Now I have a few big questions:

How do you determine how much to charge yourself per hour of flight?

It'd be stupid to go without it, but - is insurance mandatory?

Besides Insurance and Hangaring/tie downs, what other fixed costs should I plan on?

Any other advice to the very near buyer?

To get a true hourly cost you have to add up your actual or forecasted operating expenses including reserves for engine overhaul/replacement,airframe hours, paint, etc. The other fixed costs are loan payments (or Opportunity Cost of the capital in the plane) hangar/tiedown, insurance, Annual Inspection, etc. Variable costs include gas, oil, maintenance, the reserves listed above, etc. I'm sure I'm forgetting some but I don't have my spreadsheet handy.

Instead of getting a "pre-buy" inspection get an Annual Inspection and have a pre-agreed strike price for sqawks were either you or the owner can walk from the deal or choose to correct and modify the price. Use AOPA agreement and guide on buying an airplane. Also use an escrow service for the transaction. Have a Title Search done and buy title insurance. All this is listed in the AOPA material. Have a lawyer review the agreement once you have filled out all the pertinent info. Get and insurance quote BEFORE you buy the plane and while insurance is not mandatory, your lender will require it if you are getting a loan and you'll want it anyway, especially for liability reasons.

 

[Ken Ibold]

1) Depends on how you plan to pay for it. Are you running it as a corp/LLC or just through personal finances? If the latter, why bother? If the former or if you plan to have a separate airplane bank account or other fund, start with the cost of fuel plus reserves for engine and maintenance. For a simple single, figure engine reserve by dividing the cost of an overhaul by engine time remaining until recommended TBO (or 80% of TBO if you're so inclined). For maintenance, start with about $25 per hour and adjust over time.

2) Insurance will be mandatory if you have a loan secured by the airplane.

3) I also include a $100/mo allocation for the annual inspection as a fixed cost.

 

[EdFred]

Any other advice to the very near buyer?

Run away. Far away. If you listen on quiet nights you can actually hear the money being sucked out of your accounts.

 

[Len Lanetti]

Here is a spreadsheet that may help, or not.

Len

 

[Lance F]

Nick, I'd get insurance, but the cost per hour stuff is problematic for more than just the psycholgical negatives. If the plane is kept as a personal asset, what do you do with the money you put into this "reserve" account? At best you'll get 1 or 2% in an interest type checking account, which isn't worth the trouble in my opinion. Cash is cash. When you need a repair or scheduled maintenance, you just do it like you would for your car or house.

If you set the plane up in an LLC and pay money into an account for these reserves, you're double taxing yourself. The money you pay into this account is after tax income. If the money stays in the account at the end of the LLCs fiscal year as is likely for longer term reserves like engine, then it is INCOME to the LLC. As a Member of the LLC this income will show up on a K1 form which flows to your 1040; at which point Uncle Sam will demand you pay income tax on it. So this approach doesn't work either. (It works, but you're paying income tax twice on the same money.)

I'm not an accountant, but this is how I see it and I'm a very fiscally conservative guy!

 

[Michael]

As long as its a mooney nick, nothing else matters.

 

[Ed Guthrie]

Ok - I'm a few steps closer to buying my own airplane. Now I have a few big questions:

How do you determine how much to charge yourself per hour of flight?

I don't understand the question. I charge myself the same hourly amount I charge myself to drive my car--nothing. Doesn't everyone?

It'd be stupid to go without it, but - is insurance mandatory?

First things first. Airports and hanger owners often require insurance (often hull and liability) as a condition of operating from or hangering at an airport. Check your favorite airport. Banks always demand hull coverage as a condition of an aircraft loan.

I'm a big proponent of self insurance. My theory is to self insure anything I could pay out of pocket--perhaps painfully--but out of pocket. For example, I carry liability only on my 2001 F150 pickup. I carried liability only on two airplanes I owned that were worth less than $10k at the time. However, my Mooney is fully insured with the largest deductibles I can fanagle out of my carrier (USAIG). The reason being that, as my experience back in 2001 taught me, through no fault of your own you can suddenly find yourself looking at $40k or more in damages (mechanical failure caused a gear collapse on take-off roll). On the other extreme, I carry liability since my Mooney could get blown into a G-V. Admittedly a slim possibility, but I can't afford the consequences. There are other scenarios that are less expensive but more proabable. Any way I looked at it, I couldn't pay the eventuality out of pocket, even painfully out of pocket, so I opted for insurance.

Besides Insurance and Hangaring/tie downs, what other fixed costs should I plan on?

Annual inspection. GPS or Loran updates? Biannual transponder/altimeter/static check.

Any other advice to the very near buyer?

Ed F. covered it nicely. After you purchase it, lie very still and you WILL hear the not to subtle sucking sound of your personal wealth siphoning away.

 

[Anthony]

Ed F. covered it nicely. After you purchase it, lie very still and you WILL hear the not to subtle sucking sound of your personal wealth siphoning away.

I hear it even without lieing still. Kinda like a Hoover sound. Hmm, maybe I SHOULD get that 310?

 

[EdFred]

I hear it even without lieing still. Kinda like a Hoover sound. Hmm, maybe I SHOULD get that 310?

If you do, just buy Bob G's. I think he beta-tested that one and got all the bugs out for ya.

 

[Dean]

Nick,

I was once told that the happiest two days of an airplane owners life are the days he buys it and sells it. I still enjoy the ownership and at this point don't look forward in selling.
Now to you questions:
As for operating cost, I just pay the bills as they come in, just like on my autos. I feel that if I pay myself for usage, that would be like trying to justify owning it. I there really is no justification, its a want.
Insurance is a must for me, I do not have big bucks to gamble away. If it gets storm damage, hanger fire etc. I can not eat that lose. Insurance if not that bad for most planes. AOPA quote for a 100 hr pilot with a 50K hull and 1Mil liability on a C172 is only about $1000.00 a year.
Hope this helps and good luck on your search.

 

[dogman]

All the above . High deductibles on all my insurance and put back the deduct so it is there when I need it. I handle ALL my ins. that way.

One thing I have thought about is the fact that if the engine quits insurance will not fix it unless you bend the airframe. So when looking to buy, I look at the cost of engine replacement. Remembering that it could happen tomorrow. Can I afford to fix/or replace the powerplant of the aircraft I am buying???

I am not sure how often it happens but it does.

Thats why I always consider this when buying and while I am flying, Take off, climb, cruise, decent, and approach. Plan for the engine to fail and $$ to replace it.

I just never want to be in a position of owning an airplane that I can not fly.

 

[waldo]

I used to put up my hourly rental cost to myself in a savings account to be used as needed. You can figure it pretty close in most cases if you try hard enough. AOPA has a cost of ownership form that is helpful. This is what I do now . . . . My annual cost me about $800 and my insurance cost me $1000. I don't have tie-down fees (public ramp). I put up $150/month into a savings account just for annual and insurance (fixed cost). Other than that the fuel/oil cost are about $30/hour which comes out of my "fuel budget" ($300/month). My wife says that I have bust my budget every single month this year, ooh well. I have a home equity floating line of credit that I use for expensive repairs or plane upgrades. My plane was also financed through my line of credit. With the sale of my previous plane I only had to finance $20k. I pay $250/month towards that line of credit. I fly about 150 hours per year so I figure it's costing me about $65/hour. I do a lot of my own maintenance. My mechanic is an old friend and he checks off my work as I am doing it and when I am finished he logs it in my log book. You can save a lot on things like oil changes, tire replacements, and annuals if you are mechanically minded and have a mechanic that will let you help out . . . . mine wants to hire me . . . . I don't think so

If you think about it just a little you can easily see why the FBO's charge so much for the rentals. You've got to get past that and realize that you are not going to really save any money by owning. You will however enjoy flying when and for how long you want to and not have to be back at any particular time. Good Luck!

 

[SkyHog]

Here is a spreadsheet that may help, or not.

Len

That is unbelievably helpful. Now I gotta find the numbers to plug in.

I'm wicked excited right now, even though this won't happen for about 2 months or so. I've picked the type/model of airplane, just gotta find one for sale and in good condition.

I've decided to avoid Ebay, because I don't think I can make an educated decision in 7-10 days, especially considering that I'd have to go see the plane in person and prebuy/annual it.

 

[SkyHog]

Thank you to everyone in this thread for the advice, even if it was kinda scary

I don't like the sound of vacuums sucking - I'm sure the sound of money sucking is worse....but seems its worth it to me.

 

[PoAdeleted5]

deleted.

 

[Anthony]

If you do, just buy Bob G's. I think he beta-tested that one and got all the bugs out for ya.

IIRC, he never got all the bugs out. It was always something, then something else, then more big $$$. That's why there are two 310 on my ramp that I haven't seen move in the year I've been here.

 

[Bill]

IIRC, he never got all the bugs out. It was always something, then something else, then more big $$$. That's why there are two 310 on my ramp that I haven't seen move in the year I've been here.

There is one on tiedown at 3M3 that hasn't moved in two years, tires flat, sad sad looking bird.

 

[Michael]

I've picked the type/model of airplane, just gotta find one for sale and in good condition.

What did you decide on Nick?

 

[SkyHog]

What did you decide on Nick?

My final decision is a Beech B23 Musketeer, late 60s model, preferrably with 180hp engine, or possibly a 160hp, if the price is right.

Don't get me wrong, I loved the Mooney, but the Musketeer seems like an awesome airplane.

 

[Len Lanetti]

Don't get me wrong, I loved the Mooney, but the Musketeer seems like an awesome airplane.

What aspects of the Musketeer do you like?

From what I've read and heard the large cabin and generous fuel capacity are its best features.

Len

 

[Len Lanetti]

There is one on tiedown at 3M3 that hasn't moved in two years, tires flat, sad sad looking bird.

C-310 was parked on the tarmac near the maintenance shop sans engine for several months, I note that it was recently moved to the grass a bit farther away from the shop.

I figure it is like the scene in "Rocky" where Rocky comes to the gym to find his stuff moved out of his locker.

Len

 

[SkyHog]

What aspects of the Musketeer do you like?

From what I've read and heard the large cabin and generous fuel capacity are its best features.

Len

The biggest thing for me is the large cabin. I'm fat. I also like the fact that the door looks to be pretty big. I saw one picture that looked like it had 2 doors, but I don't think thats right. If it is, then thats a bonus.

I really like the fact that the range of the plane is longer than the range of my bladders. Means in a pinch, I can get the heck out of a place I don't want to be.

I also like the cruise speed. The 180hp looks like it does 120knots (145MPH, I read somewhere). That's plenty fast for me.

Another big one for me is that it is cool looking. I know that looks aren't really important in the long run, but it helps a lot.

Overall, the bird fits my mission and my budget. That's important to me.

The biggest downside from what I can tell from reading about it, is that parts are not really easy to come by if something does go wrong. That could be a major issue, and one I'd like to research more throroughly. I also notice that there are not a lot of them around Albuquerque, so they're not too popular out here, I'll have to see why. Obviously, theres a lot of Cessnas and Pipers, but those that are not Brand C or Brand P are mostly Bonanzas and others.

 

[gkainz]

...there are two 310 on my ramp that I haven't seen move in the year I've been here.

On the other hand, I'm happy to report a friend of mine has a very nice 310 at BJC that he flies quite regularly...

 

[Dean]

The biggest thing for me is the large cabin. I'm fat. I also like the fact that the door looks to be pretty big. I saw one picture that looked like it had 2 doors, but I don't think thats right. If it is, then thats a bonus.
Nick, You are correct, it does have two doors like the Sundowner.

I really like the fact that the range of the plane is longer than the range of my bladders. Means in a pinch, I can get the heck out of a place I don't want to be.

I also like the cruise speed. The 180hp looks like it does 120knots (145MPH, I read somewhere). That's plenty fast for me.

I agree here as well, I would give up a little speed for the room

Another big one for me is that it is cool looking. I know that looks aren't really important in the long run, but it helps a lot.

Overall, the bird fits my mission and my budget. That's important to me.

The biggest downside from what I can tell from reading about it, is that parts are not really easy to come by if something does go wrong. That could be a major issue, and one I'd like to research more throroughly. I also notice that there are not a lot of them around Albuquerque, so they're not too popular out here, I'll have to see why. Obviously, theres a lot of Cessnas and Pipers, but those that are not Brand C or Brand P are mostly Bonanzas and others.

Let me know how the hunt goes.

 

[tom.]

Any other advice to the very near buyer?

Hmmm... lesseee....

Do a complete annual, not a prebuy. I just bought an airplane and got a prebuy, then an annual six months later. It was like paying for 3 annuals. If you have lots of money (I think I must be the only one who doesn't) this won't matter to you.

If you're in a community hangar, lock your plane.

Prepare to receive a letter asking you to pay tax on the airplane you just bought with after tax income.

As an airplane owner I get to experience the best and the worst life has to offer -- all at the same time. No kidding, it's like everyone just discovered they have a rich uncle, and they're all standing in line. If I had it to do all over, I would rent. Then if the engine quit I would just snicker and look for a field.