new plane owner wanting to reduce costs right away...

posted this just now in rec.aviation.piloting, but now thinking this
might have been a better place, apologies for the dup posting

I'm a new plane owner, and in an unusual stroke of luck I own the plane
outright. The problem is that financially I'm not in a position to
maintain it (or own it for that matter...), so I'm looking into various
partnership setups to help offset costs such as fractionals,
co-ownerships and leasebacks.

Thought I'd post "yet another question" about which of these
partnerships might be more viable than the others given my ownership.
most of the reading that I've done thru this group and in various other
articles thru out the web seem to be geared towards a partnership where
the plane is still being paid for by the partners. I'd assume that a
partnership where the plane is already paid for would allow for a more
attractive buy in given the possibility of a lower buy in price to
cover the operating expenses, as well as a lower cost per hour to the
partner.

If I form a partnership where the other partners pay some amount in to
a general fund as the seed money how would my share get paid in? I'm
not interested in putting X grand into the pot since I'm placing the
plane into the partnership with a paid in full status and wanting to
keep my share of the valuation - how would this work?

these questions and more I'm sure, thanks in advance

wrote:
posted this just now in rec.aviation.piloting, but now thinking this
might have been a better place, apologies for the dup posting

I'm a new plane owner, and in an unusual stroke of luck I own the plane
outright. The problem is that financially I'm not in a position to
maintain it (or own it for that matter...), so I'm looking into various
partnership setups to help offset costs such as fractionals,
co-ownerships and leasebacks.

That's the right idea.


Thought I'd post "yet another question" about which of these
partnerships might be more viable than the others given my ownership.
most of the reading that I've done thru this group and in various other
articles thru out the web seem to be geared towards a partnership where
the plane is still being paid for by the partners. I'd assume that a
partnership where the plane is already paid for would allow for a more
attractive buy in given the possibility of a lower buy in price to
cover the operating expenses, as well as a lower cost per hour to the
partner.

If I form a partnership where the other partners pay some amount in to
a general fund as the seed money how would my share get paid in? I'm
not interested in putting X grand into the pot since I'm placing the
plane into the partnership with a paid in full status and wanting to
keep my share of the valuation - how would this work?

The right number of other partners is, IMO, one. Each additional partner you add
reduces your expenses by a smaller amount, and the amount of communication
required among the partners goes up as n-squared.

Find a partner with similar ideas about how the plane should be used and
maintained.

Form a corporation and sell the airplane to the corporation. Sell stock in the
corporation. If you have just one partner, you'd want to sell him or her half
the stock, you retain the other half.

Keep in mind that your ability to sell is affected by the partnership. Unless
your partnership agreement says something different, you're probably going to be
limited to a local market to sell your share, whereas you have a global market
for selling the whole airplane. Consider selling this plane and using the
proceeds to buy into an existing partnership.

Another possibility is leasing to a flying club while you retain full ownership,
or forming a new flying club around the plane. I did this for a few years and it
worked out nicely for me. If you have doubts about your ability to soak up the
shocks of highly variable maintenance costs, this is not a good idea.

IMO a lease to an organization where the lessee will perform maintenance is also
a bad idea. "Leasebacks" to FBOs are often structured like this. You want to
stay in control of maintenance.

Scour the AOPA website for partnership suggestions. I think they have
boilerplate partnership agreements on the web site.


these questions and more I'm sure, thanks in advance

wrote in message
oups.com...

I'm a new plane owner, and in an unusual stroke of luck I own the plane
outright. The problem is that financially I'm not in a position to
maintain it (or own it for that matter...), so I'm looking into various
partnership setups to help offset costs such as fractionals,
co-ownerships and leasebacks.

There was a flying club I joined a few years back. It worked like this:

There were no more than 10 members.

The plane was a Warrior II.

Each member paid $250 for their portion of the corporation that owned the
plane. I think you bought 1% with that.

Monthly fees were $50.

Hourly fees were $60/hour wet (Hobbs).

The plane was extrememly well maintained. When I was a member, it had just
gotten out of the paint shop, had a 400 hour 180HP engine, full IFR, and had
a wing leveler installed just before I dropped out.

I think the plane flew close to 500 hours per year.

The $250 purchase price also happened to be the same amount as the insurance
deductable. Because everyone was an owner, we were covered by owner's
insurance. (This has probably changed - the insurance company probably
couldn't make any money off us).

When I dropped out, I got my $250 back.

I ended up getting a 1099 at the end of the year, because the corporation
had made a small profit, and I was taxed on 1% of that. The profit was only
a few thousand dollars, so my 'taxed income' was under $50.

All scheduling was done with the owner. He always carried the schedule
around, so all you had to do was call his cell phone.

Everyone got their own set of keys.

The reason I dropped out was due to availability. I could not plan in
advance to schedule the plane. By the time I figured out I had a slot open
(I can fly NOW), it was usually booked. I figured out I was paying $98 per
hour after all was said and done. I think I flew less than 20 hours in that
year. This was my fault for poor planning, not the fault of the club.

I know there are a lot of people with bad partnership arrangements but
I'd like to say that there are great ones. My partner and I fly less
than 100 hours per year combined. In the 5 years together I don't
think we've ever shown up at the airport at the same time to go
flying... he'll pay for the hangar lease, i'll pay for the insurance,
etc, etc... and at the end of the year we're pretty close. We charge
ourselves $20/hour when we fly... so if I fly 50 hours and he flys 20,
then i owe 30 x $20 more at the end of the year. That money just goes
towards the annual and new toys we buy.

All in all its pretty loosey goosey and a great relationship.

When I bought into the plane with him he gave me one piece of advice...
"just remember, its not air that keeps these planes in the sky... its
money -- and lots of it".

I hope you find yourself a partner as easy going as mine!

-dr

Your partnership sounds like the one I'm currently in except that we
charge ourselves more.

Our partnership started out without even an airplane in the hanger. The
first Mooney we looked at ended up not being what we were looking for.
We found 43H an discovered that she was what we were looking for even
though she was double in price of the previous Mooney.

So we started out with exactly the same investment. We formed a LLC for
liability, ponied up 10% down (5% each), taxes and the first years
insurance. From there we dumped 10% of our purchase price (just like
everyone said we would) into getting the maintenance squawks brought up
to snuff. Then we added a STEC-30 with GPS Steer... We now have a nice
'79 Mooney 201 that we use for traveling and $100 burgers.

As far as our partnership goes we have the same values as far as
maintenance and upgrades go so there has never been any issues there. We
both pay our monthly bills on time so no issues there either. We have
owned the plane going on 2 years now and have not had any scheduling
issues either. With a 2 person partnership you can pretty much have the
plane any time you like. At least that has been my experience.

Since the OP already owns the plane he can pretty much structure the
deal any way he wants. He can have a lump sum buyin for half the value
of the plane or any flavor thereof. The important thing is the
personalities of the partners. If they don't see eye-to-eye on issues
than it could be a miserable experience.

Myself, I wouldn't fly enough (50 or so hours a year) to keep a plane
well used so a partner was the best solution for me and the plane. Of
course your mileage may vary. Good luck

Jon Kraus
'79 Mooney 201
4443H @ TYQ


Dico wrote:
I know there are a lot of people with bad partnership arrangements but
I'd like to say that there are great ones. My partner and I fly less
than 100 hours per year combined. In the 5 years together I don't
think we've ever shown up at the airport at the same time to go
flying... he'll pay for the hangar lease, i'll pay for the insurance,
etc, etc... and at the end of the year we're pretty close. We charge
ourselves $20/hour when we fly... so if I fly 50 hours and he flys 20,
then i owe 30 x $20 more at the end of the year. That money just goes
towards the annual and new toys we buy.

All in all its pretty loosey goosey and a great relationship.

When I bought into the plane with him he gave me one piece of advice...
"just remember, its not air that keeps these planes in the sky... its
money -- and lots of it".

I hope you find yourself a partner as easy going as mine!

-dr

Dico wrote:

All in all its pretty loosey goosey and a great relationship.



So is mine, but we knew each other for a few years before we bought the
plane.

1) Run an evaluator on the plane on Trade-a-plane's or AOPA's website. You
need to know it's value first
2) Find out how much it will cost to store it (hangar or tie-down)
3) Find out how much it will cost to insure it for a year
4) Find out how much it will cost to have all required inspections and
recurring replacements (annual, pitot-static, ELT)
5) Add that up and that will be your Fixed Costs
6) What is the price of fuel at your airport? How many gallons per hour
does your plane burn? Multiply these figures together
7) How many hours does the engine have left before it will require an
overhaul? How much does a newly overhauled engine cost? Take the cost of
the newly overhauled engine and add $3,000.00 to that for removal,
installation, tax and shipping, then divide that figure into the hours
remaining. This will give you the hourly rate for your engine amortization.
8) Figure on 25 to 30 dollars per hour for oil changes, general unforeseen
maintenance and repairs
9) Add up the price for fuel per hour, the general maintenance hourly rate
and the engine amortization hourly rate and that sum will be your Variable
Rate. It will tell you how much it will cost you to fly the plane per hour

10) Based on the fixed costs and hourly rate you can now determine how many
hours per month can afford to fly per month with zero partners
11) If that figure is too low or zero itself, then start dividing the fixed
costs by some number of partners until you reach an amount that leaves you
with enough money to fly the number of hours you deem appropriate to your
flying habit

You should notice that 3 partners is about the limit of effectiveness for
reducing fixed costs. After 3 the fixed costs do not drop much, but the
flying time drops dramatically and maintenance will start to climb.

Lastly, take the value of the plane and divide it by the number of partners.
That is the figure they will have to give you to buy in. That money is
yours. Do not mix it with the funds for the airplane.

Good luck,

Kobra





wrote in message
oups.com...
posted this just now in rec.aviation.piloting, but now thinking this
might have been a better place, apologies for the dup posting

I'm a new plane owner, and in an unusual stroke of luck I own the plane
outright. The problem is that financially I'm not in a position to
maintain it (or own it for that matter...), so I'm looking into various
partnership setups to help offset costs such as fractionals,
co-ownerships and leasebacks.

Thought I'd post "yet another question" about which of these
partnerships might be more viable than the others given my ownership.
most of the reading that I've done thru this group and in various other
articles thru out the web seem to be geared towards a partnership where
the plane is still being paid for by the partners. I'd assume that a
partnership where the plane is already paid for would allow for a more
attractive buy in given the possibility of a lower buy in price to
cover the operating expenses, as well as a lower cost per hour to the
partner.

If I form a partnership where the other partners pay some amount in to
a general fund as the seed money how would my share get paid in? I'm
not interested in putting X grand into the pot since I'm placing the
plane into the partnership with a paid in full status and wanting to
keep my share of the valuation - how would this work?

these questions and more I'm sure, thanks in advance