Student Pilot Buys a Plane for Leaseback to FlightSchool/Club?

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Patrick Lin

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Finally starting to see the light at the end of the tunnel of getting a PPL (weather has not been fun this year) and beginning. Not looking to make a profession out of this and if i'm realistic, weekend/ multi-day x-country trip warrior with friends is what i'm going for. Given that, thinking IFR is probably in my future as well...as such thinking about how to actually get access to a plane in a future to build hours/do additional training in the most financially effective manner.

Luckily...very fortunate to have the financial means to explore purchasing an airplane as opposed to just shelling out the full hourly rates to a club. Was thinking of finding something in the 50-75k range that checks the Complex/HP boxes. Primary mission is hours building, IFR training, and a handful of ~500 NM x-country missions. Basically a plane for the next 2-3 years

Pros:
1. Solves the low hour 6 seater/HP insurance problem for the next handful of years. (Flying club membership covers me)
2. FBO/Parking costs are non-existent (Leaseback covers)
3. Easy CFI access to keep building ratings (would like to do mountain as well) / Potential IFR cert in the future.
4. Thinking that since i'm looking at a HP/Complex airplane, this would inherently limit the flying base to more experienced folks at the club (club policies)...granted they'd still treat it like a rental.
5. Tax writeoff's?

Cons:
1. Might end up completely underwater from maintenance in year 1/2..but in theory the leaseback hourly should cover that (eventually)
2. Will have to compete against others in scheduling the plane so lose some freedom.

End Objectives:
1. Reduced training/hour building cost compared to rental (after i factor in leaseback rev + ownership/parts costs)
2. Keep the plane and take it out of leaseback...or sell it for ~about the same as what i paid for it

Is this a horrific idea? Am i missing something?
Only other options i can think of are find a partnership (but not sure anybody will take such a low hour pilot)
 
Keep in mind that a 6 seater + HP + complex isn't going to the rental hours like a 172 or Warrior would.

Is buying the airplane and then forming your own partnership out of the question?

Also, what 6 seat, high performance complex aircraft are you looking at that are in the $50k-$75k range?
 
Why would you buy a plane and lease it?
I am very particular with my stuff and don't let anyone fly my planes!
Other people don't take care of stuff.
 
Buy an arrow if you have to have a retract. Do NOT leaseback.

I've seen how rentals get treated, and there is no way in hell I'd let anything I own touch a rental line.

Not sure how knowledgeable you are in GA, but just because you have 6 seats doesn't mean you can fill them. IMO, go the route I did... 182 ticks your HP box and is a true 4 seater, and a P model or earlier is definitely in the cards at $75k. You can rent a complex for when you need it. A Piper 235/Dakota is the low wing equivalent of the 182 if you swing that way.
 
I bought and put a Cirrus SR20 on lease back. Worked fine. Check how the school treats existing planes first. Second, set expectations about how to treat the plane with the school. Have a policy you checkout the instructors and make sure they fly it correctly and do not abuse it.
Lastly and most importantly, in most markets this does not pay for the plane, it can reduce your costs though.

Tim

Sent from my LG-TP260 using Tapatalk
 
I bought my first plane, because of issues with rental / leaseback aircraft. I wound up with a great partner with our first two planes, a Tiger and a Cougar. Best bet, find a partner to defray some of the costs and fly it..Cause YOU OWN IT! Because you do...
 
I am involved in the volunteer management of a Flying Club with 15 airplanes in an active FTU - two twins, one taildragger, a Cirrus SR-20 and a bunch of 172s. Two, including the Cirrus, are leases from third party owners, all the others the Club owns outright. I see the numbers every month (and I own and fly my own airplane).

FWIW:
1. Separate your personal use goals from the lease back and assess each of those separately. At the outset, at least, do not let one influence the other.
2. Approach the idea of purchasing an aircraft to lease back as a pure, unemotional business investment decision (not easy, I know :D ). You are investing your precious capital savings with the objective of making the best return you can on that investment. Go back and read item 1 above.
3. In choosing a lease back plane, if the revenues (and desired cash profits) are coming from student pilots, ask yourself what kind of airplanes generate the most training hours usage each month, what kind of airplanes (simple or complex) have the most appealing operating costs (all in, including insurance, all of which influences rental costs) for students, what kind of airplanes (simple or complex) are likely to spend the least amount of time off-line (non-revenue generating time) sitting on the ramp waiting on a part or in the shop being fixed? How deep is the market and how broad the appeal of the airplane (e.g. residual value) if/when you decide to sell it and get out of the lease-back game? These are just a few of the factors you need to consider to address the decision in item 2 above. I'll give you the short answer in our experience (YMMV) - by the financial numbers we find it is near impossible to beat the lowly Cessna 172 on combined criteria - there is a reason it is the most popular training airplane of all time, and it doesn't have anything to do with the high wing. FYI, the 172 part of our fleet has largely been standardized on the "N" model. We just added two more "N"s earlier this year.
4. Never forget that aviation and student training is a seriously challenging business. It is subject to considerable regulation and oversight, the whims of the safety officers (unexpected ADs for example), weather dependent, somewhat tied to the fortunes of the economy as a whole, carries accident risk and so forth. As enjoyable and interesting as it can be, aviation training is generally not an area that is ever likely to deliver superior returns on the money you invest compared to other alternatives. Run the numbers so you have a model of what to expect for your investment, but don't be unrealistic.
5. For your personal training objectives start by identifying which airplane(s) are available for rent locally to achieve those, and calculate out what the full, all in cost will be using a suitable rental. That should be your baseline, against which you compare all other alternatives.
6. Offset the number in 5, with the expected cash in from your lease back plane investment. That'll tell you something. :D
7. Play out buying your preferred personal exclusive use airplane to train in, instead of renting as in item 5. To do this analysis properly you need to take into consideration the opportunity cost of the money you have tied up in this airplane (that money/savings tied up is not generating any revenue for you), and the residual value of same at the time of achieving your flight training goals (theoretically you sell the plane on that day). How does that compare to 5? Do not make the mistake of not really being able to afford to own and operate this preferred high performance, complex airplane, and assuming leasing it back to a training unit will magically make it affordable. It won't happen. Voodoo economics rarely works in aviation (unless you are a televangelist with a new Gulfstream).
8. You can run variations on these to see how they hunt - take a 50% partner in the lease back plane and split the risk and revenues; take a partner in the personal use airplane and share fixed costs. These are "tuning" the analysis, the core is first seven.

Good luck!
 
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Check with your insurer. When I ran the numbers to lease out an aircraft it looked like a money loosing proposition. Had the insurance not been so steep it would have been fine.
 
For every "works great" you read on leasebacks there are 3 "worse idea I ever had"

Also as others said, a big HP 6 seater won't get nearly the business as a little 172 or PA28 or something.
 
Patrick Lin said:
Is this a horrific idea? Am i missing something?
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Yes to both. Very few owners actually make any money on a leaseback. The ones that do have extremely popular airplanes at very busy schools. Most people end up with a fat stack of maintenance bills and an abused airplane that they have to compete to schedule. At that point, what the hell is the point of owning? I can nearly guarantee that it'll be cheaper for you to just keep renting someone else's airplane.
 
bradg33 said:
Yes to both. Very few owners actually make any money on a leaseback. The ones that do have extremely popular airplanes at very busy schools. Most people end up with a fat stack of maintenance bills and an abused airplane that they have to compete to schedule. At that point, what the hell is the point of owning? I can nearly guarantee that it'll be cheaper for you to just keep renting someone else's airplane.
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That.

Simply put, be a renter or be a owner.
 
steingar said:
Check with your insurer. When I ran the numbers to lease out an aircraft it looked like a money loosing proposition. Had the insurance not been so steep it would have been fine.
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It couldn't have been a Mooney though? Just curious. The insurance on Mooneys, especially short bodies, never seemed out of line. Never seen them as popular rentals anywhere, but I think that is due to some factors other than insurance costs.
 
Thanks all for the answers!

1. I have no whims of trying to actually make money on this, and opportunity cost of the money sitting in the plane for a handful of years isn't a big deal to me so i've kind of written that out of the equation (thats assuming i can more or less sell it for about what i got for it) so i'm really only looking at annual fixed costs of payment+mainentance. All i'm looking to do is to see if those fixed costs in 1 year + lease back revenue would be cheaper than trying to build the next 100 hour block renting (wet lease in a 182 or something in that range is about ~160 an hour here)...my initial math says it would be.

2. Everything i've read has been that with the hours i will have coming straight out of a PPL (i'll probably be right around ~40-45 when i do the check ride) I can't buy basically anything and actually fly it on my own and will probably need a lot more hours of Dual in whatever type i get. Does a partnership change this equation because in theory another pilot will have way more hours? Or is my fear of insurance on a first plane completely unfounded. Thats honestly the main reason i'm considering this because in my head i need another good chunk of hours before i can even enter in a partnership..and since i have the means for the initial capital outlay..it may make sense.

3. re type: my final (mature pilot) mission would primarily be about ~4 adults plus baggage (e.g. skis/backpacking gear) so 6 seater was just a proxy for a plane that would actually have enough space + useful load to do that :). Regardless, i think it would need to be a complex/HP plane of some sort hence my thought of just finding something now to build the hours in.
 
Patrick Lin said:
1.All i'm looking to do is to see if those fixed costs in 1 year + lease back revenue would be cheaper than trying to build the next 100 hour block renting (wet lease in a 182 or something in that range is about ~160 an hour here)...my initial math says it would be.
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Pardon the bluntness, but your initial math is probably wrong. Lots of folks "initial math" (usually supported by inflated numbers and optimistic assumptions from the entity that wants to lease the plane) tells them leaseback is a good idea; it usually turns out it isn't.

Patrick Lin said:
2. Or is my fear of insurance on a first plane completely unfounded. Thats honestly the main reason i'm considering this because in my head i need another good chunk of hours before i can even enter in a partnership..and since i have the means for the initial capital outlay..it may make sense.
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Yes, it's unfounded. Lots and lots of folks buy things like Bonanzas, Mooneys, Cirrus, etc. right after getting their PPL. They get insurance just fine. Sure, they may need 10/15/20/25 hours of dual before they can solo, but that little bit of instructor time is worth avoiding a leaseback.

Patrick Lin said:
3. re type: my final (mature pilot) mission would primarily be about ~4 adults plus baggage (e.g. skis/backpacking gear) so 6 seater was just a proxy for a plane that would actually have enough space + useful load to do that :). Regardless, i think it would need to be a complex/HP plane of some sort hence my thought of just finding something now to build the hours in.
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You'll save yourself a lot of money by purchasing that plane now, rather than buying a "time builder."
 
OP should get a simple U206 with a 550, less on insurance, easier systems, easier to load, lots of space, holds value well as its a working plane, etc
 
If letting your money sit for a few years doesn't bother you, I'd just buy something outright. You said rentals in your area are $160/hour wet. If you fly it for 100 hours that totals $16,000. If you can buy a plane, put fuel, maintenance, hangar rent, insurance, etc into it. Then sell it and take loss of less than $16,000 plus all of your other inputs, you're money ahead. I would think that would be hard to do.

If you're buying to try and save money, you won't get it done. If you're buying to own, then money doesn't matter. ;)
 
James331 said:
OP should get a simple U206 with a 550, less on insurance, easier systems, easier to load, lots of space, holds value well as its a working plane, etc
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Big agreement here.

Well equipped ones might mean a bit more purchase budget for the OP, but it will definite fit the mission parameters and hold its value over time.

Several 206 owners I have met say it was the best aircraft they have owned.

And if the OP is trying to keep the impact of ownership costs to a dull reasonableness, then co-ownership with two or three others is advised over leaseback. IMO much simpler arrangement to manageable and you won't have uncaring strangers doing damage to airframe and engine.
 
@Patrick Lin ... where are you located... knowing this can help us steer you toward helpful resources
 
Denver but would be pretty flexible in which airstrip to base a plane out of. (Currently fly out of Rocky Mountain Metro)

Sounds like a partnership is the best option :), might need to post a classified haha.
 
Since your in Denver, be sure to find @murphey, @denverpilot, @Clark1961, and @G-Man. They and other PoA members in the area can help plug you into the regional aviation community and help you find folks that can help you.

Be sure to visit Nate's 182P to get a feel for what that offers. 182's can definitely do the mission you describe and really good ones can be had in the $65k to $95k range.
 
GRG55 said:
It couldn't have been a Mooney though? Just curious. The insurance on Mooneys, especially short bodies, never seemed out of line. Never seen them as popular rentals anywhere, but I think that is due to some factors other than insurance costs.
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This was a Cessna 150 about 20 years ago. I actually got it because the insurance rates went up, the previous owner had it on leaseback, but the increased insurance costs soured the deal. My FBO wanted it on the line when I went to sell it, but I couldn't justify keeping it that way. It wouldn't make me any money and would slowly depreciate.
 
full rental power, hard landings, side loading, and god knows what other types of abuse pretty much makes lease back a deal for the flight school not for the owner. you are pretty much lending your plane to the renter and making a profit to the operator. not a good deal imho.
 
So you have never owned a plane and you are going into the aircraft lease business?
 
I think the one way a leaseback might make some sense is if it's your personal airplane you're putting on the line and you aren't too airplane proud. You'll loose money on the deal, but you won't spend quite as much as if you just operated it yourself, if the numbers work the same as they did 18 years ago. That said, you'd better be happy flying a trainer, since that's what most of your renters are going to want. You'll loose on the depreciation, but you spend money owning an airplane, so I think in the worst case scenario it's a wash. The one thing you loose is the ability to fly when you want, which is the reason to own an airplane in the first place. If you have your aircraft on leaseback you are just another renter.
 
Patrick,

I’d take a long look at the leaseback in this area before doing it. There’s no shortage of trainer aircraft for rent anywhere.

Leaseback is a business first and foremost and insurance is going to be your highest expense that isn’t directly recoverable by operating hours. Club insurance is typically four to five times the price of personal insurance.

Hangar or shelter is also high for fixed costs around here unless you go out to FTG and even then, not exactly “cheap”. You need to calculate how much it will have to fly to cover fixed costs and then realize it’ll need 100 hour inspections and more maintenance if it’s flown that much.

That said... if you were thinking about leasing back a NICE Skyhawk, I know of someone at APA you should talk to. I don’t think he’d be interested in average airplanes, it’d have to be pretty nice with an upgraded panel and would be used mainly for Instrument training. He’s looking for a very specific airplane and maintenance would be top notch.

Next thought... no matter how good your instructor is, you’re going to do some rough things to the airplane as a new student. Mainly if things go well, you’ll do things that will lower the longevity of your tires. Ha. But loads imparted on the aircraft from early landing practice and other things as well.

My advice? Beat up someone else’s airplane until you’ve learned to fly. :) There’s plenty of airplanes around here to do that in. Also if you rent a while you can get checked out in a number of types and see what you really like at essentially no capital outlay costs to you, and that’s a big deal before purchasing also.
 
Thanks :). I think the main reason i'm looking is that the club/school i'm at (c172) has a pretty limited selection of planes that are good for weekend x-country trips with friends + useful load (think like 1 182, and 2 beat up pipers) which is the main reason i'm even getting a license. Maybe i just should change clubs but still makes multi-days tough.

Would love to chat to your guy at APA if for no other reason than to get a better sense of the economics...i think i'm definitely missing something. Again, i have/can get the spare capital right now and to me as long as i can save money compared to straight renting, for the next 1-200 hour + IFR block then to me its worth it.
 
Patrick Lin said:
Thanks :). I think the main reason i'm looking is that the club/school i'm at (c172) has a pretty limited selection of planes that are good for weekend x-country trips with friends + useful load (think like 1 182, and 2 beat up pipers) which is the main reason i'm even getting a license. Maybe i just should change clubs but still makes multi-days tough.

Would love to chat to your guy at APA if for no other reason than to get a better sense of the economics...i think i'm definitely missing something. Again, i have/can get the spare capital right now and to me as long as i can save money compared to straight renting, for the next 1-200 hour + IFR block then to me its worth it.
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Which flight school are you at? McAir?

Try Western (Aspen), not as pretty of airplanes, but VERY well maintained and at pretty reasonable prices. There's also Rocky Mountain Flight School, I know fantastic instructors there, but not sure I can say their planes are fantastic... sure are cheap though.
 
I'm actually at western. Agreed about their maintenance which is why i was considering exploring a leaseback with them in the first place...wanted a gut check to see if entire premise was wrong though.

As for planes...for an x country mission with 4 ppl and bags, i would really say they only have those 3 planes. They have some diamonds which are gorgeous but i'm 6'2 and 230...i'm not cramming into one of those with 3 friends and bags haha.
 
haha i tried to do my first flight in the DA 40..me and the instructor (who's also a good sized dude) both got in it, looked at each other then said.."nope".

i didn't even have full stick movement with somebody else in it.
 
Patrick Lin said:
Would love to chat to your guy at APA if for no other reason than to get a better sense of the economics...i think i'm definitely missing something. Again, i have/can get the spare capital right now and to me as long as i can save money compared to straight renting, for the next 1-200 hour + IFR block then to me its worth it.
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He’s out of town for a bit but I can give you a number.

Which part is confusing you on the economics of it? Jason’s post that was linked is a bit out of date on pricing but not out of date on how to analyze it.

@jesse could also probably share some light on numbers having started a flight school and rental place and then shut it back down.

In horribly round numbers it would be something like this:

Acquisition cost of the airplane.
Insurance.
Hangar/Cover (in CO if you just tie it down it WILL be destroyed by hail, and some people I swear know that and are looking for that final insurance check to “get out” of their airplane they can’t afford).
Maintenance including mandatory 100 hour inspections.

Most folks I talk to say 400 hours a year is the sweet spot for a leaseback. Maybe if you’re lucky 300 but it won’t pay for the engine replacement unless the rental rate is high.

And here’s the thing with a nice cross country cruiser versus a trainer... the trainers will also work as wimpy cross country airplanes so a pilot will both train and fly places in them.

A time builder doesn’t care if it flies slow. Slower is more hours in the logbook if they don’t care about the destination.

Whereas a nice cruiser will be used by pilots on a rental line only when they want to go places or barely stay current. Often not proficient, just current. Minimum standards.

So the least proficient pilots in your airplane will now be taking it hundreds of miles away and you’ll need a reasonable overnight stay policy that doesn’t dig too hard into their wallet or they’ll just rent the Skyhawks and go slower.

For a day trip to lunch they will probably forego your snazzy cross country cruiser altogether. If they wanted a nice cruiser and travel that much they’d just buy one themselves. That’s the number you have to hit. How to make your nice fast cruiser acceptable as an alternative to buying their own. In other words, cheaper.

Start to see the problem here? If it costs you X to maintain it properly and nicely and it would cost them X to do the same, they’ll just buy their own. Just like you’re looking at doing.

Anyway back to the numbers.

Acquisition cost is the same whether you only fly it or it’s a rental fleet airplane.

Insurance charges about $1000/year for private insurance on most common models people will fly, which jumps to anywhere from $3000-$5000 a year as soon as it’s a commercially operated aircraft with instruction taking place in it for non-owners.

Hangar/cover is the same.

Maintenance is higher. If you’re doing that magic 300-400 hours a year, that means essentially three annual inspection costs. A 100 hour isn’t all that much cheaper than an annual if things are found broken and fixed. The good news is, if you buy some hot rod and it sits unused by the renters, this goes down.

But that also means you have to raise rental rates to cover that massive insurance jump. Just take that worst case $5000 a year number and that translates into over $400/mo.

The rest of the analysis is easy. Take what normal insurance would cost and do the difference between that and commercial insurance. Also take the additional maintenance visits and do that difference.

Now divide that by number of hours flown and that’s the hourly cost of going commercial vs owning it and flying it yourself.

For fun, pick your own numbers, but let’s play with that insurance worst case and a made up maintenance number.

5000 insurance vs about 1000 in rough numbers.
5000 in maintenance vs 1500 in rough numbers.

5000-1000=4000 extra in insurance.
5000-1500=3500 extra in maintenance.

The rest of the costs are the same.

At 300 hours a year this is $25 extra per flight hour just to be allowed to operate it as a commercial aircraft versus private.

Lower hours, maintenance changes linearly for the most part. Higher hours also.

Insurance gets better per hour the more it flies, worse the less it flies.

Now let’s talk schedule. How fast are you trying to get those 1200 hours? If you fly an hour a day that’s still almost three years and you need the airplane every day. It won’t be available every day even just in maintenance downtime but now you’re contending for it against your renters also.

Do you have weekdays off? Because that’s the best case when you’re renting to weekend warriors. You don’t want to block the weekends or they can’t rent.

If you go by weekends only, you’ve got 52 of them in a year. How many hours a year are you planning on flying? 100 hours a year is two hours every single weekend. 200, four. 300, six. You get the idea.

If you’re flying and can afford 300 a year out of pocket and only on weekends your airplane is only available to rent 26 days a year for single day trips for renters. Knock out maintenance days and weather days and it’s down to 20. Easy.

If that’s all on weekends you could eat up all of the daylight rental time. Remember a fast cruiser, people want to take on trips and disappear for a week, and they want to start on a Friday and return the next Sunday weather permitting. That’s what they’ll book. Two weekends. They’ll maybe fly it ten hours in that trip.

So... ten hours IF it rents for weekend trips every two weekends gets you to your magic 300 or so total, but you can’t fly it on weekends at all in that scenario.

We haven’t even talked about engine replacement costs yet. That’s roughly linear IF your renters are treating your engine right. And all the other time limited items on the aircraft. Those costs are the same as ownership assuming good pilots using your airplane. Certain types of operations are also harder on engines than long distance cruising.

Anyway. You get the idea. You can play with the numbers to see if it is worth it to you to share your airplane. Besides the financials, look at the TIMES when people actually rent in the scheduling system at your current club. You’ll see there’s long weekday gaps where most of the rental fleet sits unused.
 
Clip4 said:
Ok, I have sat flown one and I am 6 ft. Not comfortable airplane unless you are anorexic.
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5' 10" and 230 ish. I fit in the Diamond DA-40 and DA-42 just fine. I prefer the optional bigger canopy though. My shoulder is in the door, just like in a Cirrus, a Mooney, a Bonanza.... (I wear a 50 short jacket, so broad shoulders).
About the only single piston plane my shoulder was not in the door was a PA-46, but that was rather interesting to climb into.

Tim
 
tspear said:
5' 10" and 230 ish. I fit in the Diamond DA-40 and DA-42 just fine. I prefer the optional bigger canopy though. My shoulder is in the door, just like in a Cirrus, a Mooney, a Bonanza.... (I wear a 50 short jacket, so broad shoulders).
About the only single piston plane my shoulder was not in the door was a PA-46, but that was rather interesting to climb into.

Tim
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Yes, I have flown all those aircraft, a Diamond cockpit is the most uncomfortable airplane I have been in.
 
I rejected a lease back plane when I realized I couldnt leave my sunglasses in the plane and they would be there next ttime
upload_2018-6-6_22-6-28.pngl
 
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