Help in deciding to do a leaseback

Greetings fellow pilots. I have a situaton at hand and am weighing some
options and thought that I have received good advice here before so I
figured I would try again. Here is my dilema..I am currently enrolled in
school to receive my commercial and CFI (as well as multi and CFII) I
have a great opportunity to purchase an airplane. I have talked to the
school about getting involved in the leaseback program. They are
encouraging that, however the plane I am looking at is a 1980 Piper
Dakota 236B. This plane has 235 horsepower. What I am wondering is if
the plane would fly enough to offset some of the cost of purchasing it.
I understand that it cannot be used for GA training. but I was wondering
if there was a big enough market out there on a rental basis that the
plane would fly enough to recoupe some financial outlay.
I am interested in what ya'all might think. Thanks for your help and as
always.....Happy Flying


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On 15 Dec 2003 23:06:15 GMT, Rgrmstd wrote:

. . . however the plane I am looking at is a 1980 Piper
Dakota 236B. This plane has 235 horsepower. What I am wondering is if
the plane would fly enough to offset some of the cost of purchasing it.
I understand that it cannot be used for GA training. but I was wondering
if there was a big enough market out there on a rental basis that the
plane would fly enough to recoupe some financial outlay.

What are rates and availability on local rental 182s? Can you match
or beat those rates and make money?

Don

You'd be better off having 1 or 2 partners.


Trip

In article , says...

Greetings fellow pilots. I have a situaton at hand and am weighing some
options and thought that I have received good advice here before so I
figured I would try again. Here is my dilema..I am currently enrolled in
school to receive my commercial and CFI (as well as multi and CFII) I
have a great opportunity to purchase an airplane. I have talked to the
school about getting involved in the leaseback program. They are
encouraging that, however the plane I am looking at is a 1980 Piper
Dakota 236B. This plane has 235 horsepower. What I am wondering is if
the plane would fly enough to offset some of the cost of purchasing it.
I understand that it cannot be used for GA training. but I was wondering
if there was a big enough market out there on a rental basis that the
plane would fly enough to recoupe some financial outlay.
I am interested in what ya'all might think. Thanks for your help and as
always.....Happy Flying


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The first question we always ask is, "What does your insurance company
have to say about renting the aircraft?"
What are the minimum insurance requirements for a pilot to rent the
aircraft?
How large a pilot pool is there to support the aircraft?
What other comparable aircraft are available?
How does your proposed rental rate compare to comparable available
aircraft?
How does the the equipment in your aircraft compare to comparable
available aircraft?
In the club I am in, price, equipment and insurance requirements
determine how many hours a given aircraft is flown.
For example, in my club, we have a 1978 PA32-300 ($115/hr), 1978
PA32T-201RT ($113/hr), and a 1986 C182R ($105/hr).
These airplanes are flown predominantly by a core group of about 15-20
pilots in a club with about 250 members.
The 182 will finish the year with about 250 hours.

Rgrmstd wrote in message ...
I have talked to the
school about getting involved in the leaseback program. They are
encouraging that ...

You should understand that a leaseback arrangement is a win-only
situation for the lessee (i.e. the school). They pay the lessor only
for the time the school actually uses the plane (for which they're
collecting from someone else). They have no expense burden or risk of
loss, only the lessor does. Essentially, they collect from their
student and give the lessor a "cut" of the "take". For the school,
it's like having a free airplane. Naturally, they're going to
encourage it.

I'm not saying that's a bad thing. I'm not saying that because the
school can only win, the owner can only lose. But, only the owner of
a plane put on leaseback bears a substantial risk of loss.

The best tool to use for determining your potential for success (or
loss) entering into a leaseback situation is a leaseback spreadsheet.
Use a search engine to find a suitable one on the web. If you're an
AOPA member, use their aircraft cost of operating calculator to help
figure out some of the amounts. Generally, there's an identifyable
break-even point. If you can be assured that the plane will be rented
more than the break-even amount of hours, you're golden!

I really do appreciate the responses, thanks for all the advice and
please keep the responses coming

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Besides the financial considerations of owning a leasedback airplane, you
must examine what type of person you are and what you find acceptable and
not acceptable. Are you a neat, meticulous, type-A personality who is
liable to have a heart attack if some renter's kid spills his sippy cup of
grape juice all over the rear seat of your Dakota? Can you handle it if the
renter pilots fail to complete the after landing checklist and leave
something un-done every time they fly it? What will you do when inevitably
some renter climbs in while bracing himself with his left hand on the head
rest of the passenger seat and it develops the famous Piper headrest
position? What about if they leave your airplane outside after night
flying? Depending on your area of the country, would they be permitted to
do touch and goes when the temperature is extremely cold? No matter how
hard you try, you won't be able to sufficiently control how they treat the
engine or the airplane.
--
Jim Burns III

Remove "nospam" to reply

There are numerous variables to a leaseback arrangement. If you goggle
on it you'll get most of the basic answers.

In my own experience, be aware that if the plane hasn't been on a
leaseback it's going to break as soon as people start flying it
regularly. Exhaust cracks, a weak jug, radios, etc. It all gets a good
workout and the weak links will go down. Remember if the engine goes
south your staring down 20k worth of repair bill while your plane sits
for a month or two. If those two months are prime flying season even
worse.

People treat your plane like crap. I installed new visors and vents.
It took one flight before some yahoo broke them. Plan on a stained
interior, scratched windows and fading unwashed paint.

Most leasebacks are sold on the idea of using the debt service and
depreciation as a schedule C loss on your taxes. If you don't have the
income to post against the loss your out of luck on that. (I did and
made sure I documented so I had no trouble here) Plus you have to be
wary of the passive loss audit and recapture of depreciation at sale.

It's not impossible and it can be done, but like I've heard it put
elsewhere you have to go at like a business.


Just a guess at some numbers:

Rental $110/hr, subtract FBO fee avg $15/hr, fuel $40/hr(renters burn
gas), maint $20/hr. So were already down to $35/hr without
reserves(One way to go is to just always finnance the
engine/paint/interior replacements), without training use 200 to 250
hours a year is pretty good, lets be nice and say 250 hours, which
gives $8750 per year. Out that comes the insurance and tie down. Not
much left, eh?

Now this is a pretty pesimistic estimate but it gives a basic idea of
how fast the money evaporates, pay attention and make sure you go in
well informed.

Rgrmstd wrote in message ...
Greetings fellow pilots. I have a situaton at hand and am weighing some
options and thought that I have received good advice here before so I
figured I would try again. Here is my dilema..I am currently enrolled in
school to receive my commercial and CFI (as well as multi and CFII) I
have a great opportunity to purchase an airplane. I have talked to the
school about getting involved in the leaseback program. They are
encouraging that, however the plane I am looking at is a 1980 Piper
Dakota 236B. This plane has 235 horsepower. What I am wondering is if
the plane would fly enough to offset some of the cost of purchasing it.
I understand that it cannot be used for GA training. but I was wondering
if there was a big enough market out there on a rental basis that the
plane would fly enough to recoupe some financial outlay.
I am interested in what ya'all might think. Thanks for your help and as
always.....Happy Flying

Light GA planes have a difficult time making money on leasebacks. You
should do a dejanews.com search on the rec.aviation.* archives for
leasebacks. This subject has been discussed several times, and there
are a lot of good posts.

My take is: between insurance, depreciation, expected maintenance,
and unexpected maintenance, leasebacks are difficult to breakeven on,
let alone make money.

Also, I don't think a Dakota would do that well on the flightline.
Most pilots want something cheap to fly/train in like a
152/172/Cherokee 140.

Last, if you put YOUR plane on leaseback, YOU become a renter just
like everyone else. You can't leave your headsets, charts, personal
items in the plane. You have to schedule to fly. You don't know how
the plane was treated on the last flight, if the radios were acting
flakey, or if the engine made odd noises... Yet you still have all
the financial liabilities - in my opinion, the worst of both worlds.

One question for the legal types on the group. If you own a plane on
leaseback(incorporated or otherwise) and a renter crashes killing all
aboard, is there any way to shield against the upcoming lawsuits?
Would the plaintiffs have access to your personal assets? If so -
that alone would be reason enough for me to skip a leaseback.

BTW, is the school selling the Dakota, or are you buying it somewhere
else?

-Nathan

Roger:

Your insurance company may have lots to say about your ability to lease back
your plane.

We were leasing back our Warrior to the FBO flight school most successfully.
The flight school folded when Piedmont Hawthorne's insurance company wanted
them out of the flight school business. Two weeks later came 9-11. At the
beginning of 2002, a new flight school came on board. I was told by the
insurance company that they would NOT write me a policy that would allow me
to lease the plane. This was a month after they quoted $8500 a year for
insurance (for leasing). We were paying $2150 before.

The insurance company would write insurance for the flight school to cover
the plane, but not the owners.Still the cost was between $8000 and $9000 a
year per plane. We had a basic trainer, and could not get enough income to
cover expenses with the higher insurance rates. So we don't lease back any
more.

Your next problem will be trying to get enough rental hours to cover the
expense. Don't forget, with leaseback comes 100 hour inspections, 50 hour
oil changes and lots more maintenance.

You will have a tough time finding lots of folks with a High Performance
sign-off to rent your plane. Your insurance company may even throw in a
"hours in type" requirement for potential renters. This may keep you below
your break even level.

Good luck,

Jerry Malin
Warrior N82045



"Rgrmstd" wrote in message
...
Greetings fellow pilots. I have a situaton at hand and am weighing some
options and thought that I have received good advice here before so I
figured I would try again. Here is my dilema..I am currently enrolled in
school to receive my commercial and CFI (as well as multi and CFII) I
have a great opportunity to purchase an airplane. I have talked to the
school about getting involved in the leaseback program. They are
encouraging that, however the plane I am looking at is a 1980 Piper
Dakota 236B. This plane has 235 horsepower. What I am wondering is if
the plane would fly enough to offset some of the cost of purchasing it.
I understand that it cannot be used for GA training. but I was wondering
if there was a big enough market out there on a rental basis that the
plane would fly enough to recoupe some financial outlay.
I am interested in what ya'all might think. Thanks for your help and as
always.....Happy Flying


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