Re: Leaseback FAQ?

[Robert Perkins]

On Thu, 24 Jul 2003 08:04:11 -0600, MikeM > wrote:

>If you have questions after reading about 1000 previous posts on
>this subject, ask again.

Thanks, Mike. I must be old-school; I searched for FAQ's for a
half-hour but didn't think to search the actual posting archive.

It might have been nice to have been clued in on some specific subject
headings, hmm?

Rob

[Robert Perkins]

On Thu, 24 Jul 2003 08:45:27 -0700, Pete > wrote:

>In article >, MikeM >
>wrote:
>
>> Robert Perkins wrote:
>> > ...asking for info on leasebacks.
>
>here is my FAQ on leasebacks:
>
>1. Should I lease my airplane to an FBO?
>
>A: No.

Yeah, after reading here a bit (thanks Mike) that seems to be the
consensus, if what you want is convenient access to an airplane.

If what you want is to be an airplane landlord, without having to run
an FBO or flight school though, it looks like a good approach.

I think I'll look for a partnership or flying club.

To that end, then, are there any in the PDX area?

Rob

[Ron Natalie]

"Robert Perkins" > wrote in message ...

> 1 -- How often to leaseback opportunities manifest themselves
> generally? If this guy is really looking to lease airplanes, he might
> favor me (or me and a partner) as a lessor, was my thinking. I'd hate
> to pass up a really good opportunity to own an airplane.

This is NOT a good opportunity to own an airplane, and I suspect favors
are going to be hard to come buy. Leasebacks are businesses. If he
owns these planes outright, his business is in trouble. Leasebacks
are not going to save him.

> 2 -- Is it ever even possible for low time private pilots (under 100
> hours, in my case) to get the insurance needed to do a leaseback
> arrangement?

That's easy. It doesn't matter how much time you have. The insurance
isn't covering you as a pilot, it's covering the rental use of the aircraft.
You don't even need to be a pilot.

> 3 -- Are there any really good general descriptions or guidelines out
> there of what it would take to put such a thing together?

The two major things are:
1. Keeping the aircraft available for the paying customers.
2. Keeping a handle on the maintenance.

If you're really serious about it, I can go further.

> 4 -- How does one go about assembling the spousal-persuasion
> presentation for such a harebrained idea like this? Any success
> stories?

Well, I have an uncommon situation. Margy owns the aircraft, she
just lets me fly it.

[Mark Astley]

Rob,

I just posted this on .piloting but you can find an index of clubs at the
landings page:

http://www.landings.com/evird.acgi$pass*55953646!_h-www.landings.com/_landings/pages/flying_clubs.html

cheers,
mark

"Robert Perkins" > wrote in message
...
> On Thu, 24 Jul 2003 08:45:27 -0700, Pete > wrote:
>
> >In article >, MikeM >
> >wrote:
> >
> >> Robert Perkins wrote:
> >> > ...asking for info on leasebacks.
> >
> >here is my FAQ on leasebacks:
> >
> >1. Should I lease my airplane to an FBO?
> >
> >A: No.
>
> Yeah, after reading here a bit (thanks Mike) that seems to be the
> consensus, if what you want is convenient access to an airplane.
>
> If what you want is to be an airplane landlord, without having to run
> an FBO or flight school though, it looks like a good approach.
>
> I think I'll look for a partnership or flying club.
>
> To that end, then, are there any in the PDX area?
>
> Rob

[BruceG]

At the FBO I fly out of, two of the owners own their own airplanes. Neither
leases back to their own business. To me, this speaks volumns about the
merits of leasebacks.


"Pete" > wrote in message
...
> In article >, MikeM >
> wrote:
>
> > Robert Perkins wrote:
> > > ...asking for info on leasebacks.
>
> here is my FAQ on leasebacks:
>
> 1. Should I lease my airplane to an FBO?
>
> A: No.
>
> That's it...Pete
>
> --
> Deixe-os odiar tão por muito tempo como temem

[Robert Perkins]

On Thu, 24 Jul 2003 15:13:43 -0400, "Mark Astley"
> wrote:

>I just posted this on .piloting but you can find an index of clubs at the
>landings page:
>
>http://www.landings.com/evird.acgi$pass*55953646!_h-www.landings.com/_landings/pages/flying_clubs.html

It's what I thought; there are precious few clubs in any part of
Oregon or Washington.

Rob

[Ben Jackson]

In article >,
Robert Perkins > wrote:
>
>It's what I thought; there are precious few clubs in any part of
>Oregon or Washington.

If I remember, that list didn't include the Hillsboro Flying Club.
I don't think the club makes sense economically (easier and cheaper
to rent from Twin Oaks) but members like the social aspects of the
group.

What's your home airport?

--
Ben Jackson
>
http://www.ben.com/

[Judah]

Robert Perkins > wrote in
:

<Snip>
> 4 -- How does one go about assembling the spousal-persuasion
> presentation for such a harebrained idea like this? Any success
> stories?

Although I am not an expert in spousal-persuasion, nor in airplane Leasebacks
(although I too considered it for about a week), I believe that I am an
expert in Harebrained ideas.

Here's the way I look at it. If you continue to remain married after
purchasing a plane, your wife will probably hold it over your head for a very
long time and a variety of favors.

OTOH, if you simply divorce your wife, you may be able to reduce the total
divorce settlement by up to 50% of the money that you drain into your
airplane. Perhaps you can give the house to your wife, and keep the plane
outright, and live in the plane for a while.

The bad news is that divorce will probably be nearly as expensive as the
plane.

It is still not completely clear to me, though, which expense is more "worth
it"!

[Ray Andraka]

My wife has this "theory of equal and opposite spending". I'll be paying for my
ne wengine overhaul for a long time <g>

Judah wrote:

> Robert Perkins > wrote in
> :
>
> <Snip>
> > 4 -- How does one go about assembling the spousal-persuasion
> > presentation for such a harebrained idea like this? Any success
> > stories?
>
> Although I am not an expert in spousal-persuasion, nor in airplane Leasebacks
> (although I too considered it for about a week), I believe that I am an
> expert in Harebrained ideas.
>
> Here's the way I look at it. If you continue to remain married after
> purchasing a plane, your wife will probably hold it over your head for a very
> long time and a variety of favors.
>
> OTOH, if you simply divorce your wife, you may be able to reduce the total
> divorce settlement by up to 50% of the money that you drain into your
> airplane. Perhaps you can give the house to your wife, and keep the plane
> outright, and live in the plane for a while.
>
> The bad news is that divorce will probably be nearly as expensive as the
> plane.
>
> It is still not completely clear to me, though, which expense is more "worth
> it"!

--
--Ray Andraka, P.E.
President, the Andraka Consulting Group, Inc.
401/884-7930 Fax 401/884-7950
email
http://www.andraka.com

"They that give up essential liberty to obtain a little
temporary safety deserve neither liberty nor safety."
-Benjamin Franklin, 1759

[Judah]

You must be newleyweds! ;)

Seriously, though, if you have "ulterior motives" for purchasing a plane
and helping support the flight school, that's great! I would recommend you
try to figure out realistically what the total risk is, perhaps best-case,
worst-case and a "realistic expectation forecast" that is somewhere in
between. Then balance that with the reward of having a plane and keeping
the school open. Of course, this means you need to put a real $$$ value on
your reward ratio. You may also want to consider other financial
expenditures that you may use to help protect your investment (ie: perhaps
you will spend money on marketing/advertising flight training at that
school once you have a vested interest).

The nice thing about approaching it this way is that you can also prepare
an "out-plan". Basically, you can give yourself a cut-off point in advance
that says if after xxx number of months, if you are losing $yyy, it is time
to cut your losses and sell out...

Hopefully, you hit best-case, and everything works out - maybe you even
make a few bucks. But if not, and you have planned it all out, you can
protect yourself from worst case...

Essentially, as with any business, you are likely to have the most success
if you have a plan with accurate forecast models...


Robert Perkins > wrote in
:

> On Sat, 26 Jul 2003 00:54:41 GMT, Judah > wrote:
>
>>Robert Perkins > wrote in
>
>>Here's the way I look at it. If you continue to remain married after
>>purchasing a plane, your wife will probably hold it over your head for
>>a very long time and a variety of favors.
>
> Not her. I've got her scheduled for a Stearman ride in August. I'm
> proselyting! Perhaps the day will come when she looks in my office and
> says, "Have a look at this used Piper 6X! That looks like the airplane
> for us!"
>
> That's mostly what I'm going for. The leaseback thing was an idea to
> keep an airplane (A Piper Cub!) on the ramp. Two other members of my
> family want to learn flying, so I have a vested interest in keeping
> this school alive. It's one of only two flight schools in Clark
> County, Washington, and both are threatened by various levels of
> apathy and animosity.
>
>>OTOH, if you simply divorce your wife, you may be able to reduce the
>>total divorce settlement by up to 50% of the money that you drain into
>>your airplane. Perhaps you can give the house to your wife, and keep
>>the plane outright, and live in the plane for a while.
>
> Divorcing my wife is out of the question. I'm far too fond of her.
> Fonder than I am of aviation.
>
> Rob
>

[Judah]

Robert Perkins > wrote in
:

> On Sun, 27 Jul 2003 03:10:06 GMT, Judah > wrote:

<snip>

> I considered offering a kind of sweat-equity arrangment, in which I
> exchange a certain number of hours per year on the airplane, and agree
> on times when I won't have it out for personal use, for all the
> maintenance and parts it will require (the flight school includes a
> full service maintenance shop). For rented hours, they cover
> consumables. For my hours, I do.
>
> Then the risk is that they don't sell the hours needed to pay for the
> maintenance, but they basically take that risk.
>
> Then I pay the aircraft loan and insurance.
>
> Would a flight school go for something like that, I wonder, if it got
> them an airplane they could rent out without the insurance?
>
> (Bear in mind that this also has the intent of keeping an airplane on
> the ramp for them to rent, so they don't go out of business for lack
> of airplanes to rent. In that sense it's about more than just money
> for me; I want the school available for my parents, siblings, and kids
> to learn flying. The alternatives around here are pretty bleak; all
> centered at an airport clear on the other side of the biggest city in
> the area.)
>

Admittedly, I have never done a leaseback, so I am no expert. But I
expressed interest and spoke about it extensively with the sales rep at my
flight school, and I do know someone who some years ago had two planes on
leaseback (from another school in another state), and talked about it with
him as well.

In both cases, the way it was described to me was that it was expected that
ALL charges and fees were "property" of the owner, not the FBO. That
included mortgage, insurance, maintenance, AND consumables. And that
included times when the owner was flying.

At my FBO, maintenance and consumables that are provided by the FBO are
offerred at a discount to owners. Consumables come right out of the hourly
rate. And Mortgage and Insurance come out of the monthly net. But
maintenance is the biggest variable. Clearly, it would be good for you to
be able to take that part of the risk out of the equation for you.

OTOH, in the two cases that I have seen, the FBO basically had no risk. If
the plane doesn't fly, they don't collect their commission, that's all... I
suspect that if I were to approach my FBO with your approach, they would
flat out reject it.

Of course, my FBO has 7 172s that are all fairly well booked every weekend
in the summer, and reasonably booked pretty well all year round. Your FBO
is in a different situation, and may be more negotiable.

In the "standard" leaseback arrangement that I have seen, the FBO has
almost no risk, with some reward. Once you ask the FBO to take on a bigger
risk, you will need to increase the reward for him to buy in...

I assume this will come in the form of a bigger commission than normal. I'm
not an accountant, but I would suspect that the FBO probably accounts for
the employees in their shop as overhead (assuming they don't lay off their
mechanics when there's not enough work). If so, you can try to sell them on
the idea that if they have flight training and renting at that school, they
will likely have a more steady use of their maintenance overhead and be
able to keep more people on. If they lose their flight training and renting
business, they stand to reduce the flow of business into their shop, and
either have idle hours on their mechanics, or have to start laying off. So
for them, you are helping to cover overhead in their maintenance business.

It was explained to me that in a good leaseback situation, you will collect
money at the end of each month, except maybe during the month in which an
annual was performed. But after a couple of years, the plane's engine will
require an overhaul that will drain all of the profit from the previous
months... I'm sure the FBO won't want to be liable for that if their upside
isn't very big... But it can't hurt to talk to the FBO owner and find
out...

Everything in life is negotiable...

<snip>

> That would make me a partner in the business.

Actually, in the "standard" leaseback arrangement, you are in the business
of renting airplane time, and the FBO is just a commissioned sales rep and
manager. It's comparable to owning an apartment building and having an on-
site building manager who lists the apartments, shows them, and takes care
of the building for you, for a commission. The difference is it's easier to
forecast the P&L in an apartment building, and it would seem to me that
apt. buildings are usually more profitable.

<snip>

> Bear in mind, too, that I probably won't do this. I'll probably find
> an old 172 for $40,000 or whatever and a partner or two to bore holes
> in the sky with. Then a few years later we'll step up to a six-place
> turbocharged one. Or something like that. There's a surgeon in the
> family...

See - if you were in this neighborhood, I might offer to go in with you!
I'm looking for almost the same thing. :)

Unfortunately, the doctor in my family is a diagnostician, and we don't
really get along so well these days...

[G.R. Patterson III]

Judah wrote:
>
> In both cases, the way it was described to me was that it was expected that
> ALL charges and fees were "property" of the owner, not the FBO. That
> included mortgage, insurance, maintenance, AND consumables.

The agreement with which I was familiar was that the owner was responsible
for the loan and insurance, but the FBO paid for the maintenance and
consumables.

George Patterson
The optimist feels that we live in the best of all possible worlds. The
pessimist is afraid that he's correct.
James Branch Cavel

[Robert Perkins]

On Sun, 27 Jul 2003 21:53:08 -0400, "G.R. Patterson III"
> wrote:

>
>
>Judah wrote:
>>
>> In both cases, the way it was described to me was that it was expected that
>> ALL charges and fees were "property" of the owner, not the FBO. That
>> included mortgage, insurance, maintenance, AND consumables.
>
>The agreement with which I was familiar was that the owner was responsible
>for the loan and insurance, but the FBO paid for the maintenance and
>consumables.

That's the kind of thing that would make it make sense to me, since
there is, it seems, considerable risk on the maintenance end of
things, unless there's a pile of money somewhere to cover the worst
case. And in my case, there isn't.

It's obviously more expensive than just renting airplanes, but again
the point would be in part to keep an airplane on *that* ramp at
*that* flight school, rather than seeing the airplane go elsewhere,
since I'd have a vested interest in family and friends getting flight
instruction there.

Rob