Buy a plane to lease to flight school?
Posted by slayerabc@reddit | flying | View on Reddit | 29 comments
Thinking to purchase a plane to lease back to my flight school I really enjoy, and am now employed at as the main office manager.
I toyed with the idea of purchasing a nice warrior 2 or archer for myself to build time in, and fly for fun but I was presented an offer by my flight school.
Free hangar placement out of a busy airport just outside LAX, I keep 90% of plane rental rate (wet), and pay for 100 hr, maintenance, annual and insurance.
My flight school is in an area with good weather 95% of the year, and current fleet of 8 piper warrior/archer with 14 CFI's are booked minimum 3 weeks out.
I'm considering 50% down, 7.5% 10 year. I have no other debt aside from a low mortgage. The math shows me 2 days of full rentals nets me back this cost, and I could fly almost free with the net. What am I missing?
dat_empennage@reddit
I would counter the school:
Owner charges XX/hour rented regardless of fuel price. About $70/tach hour for an average trainer.
School pays 40% of 100 hours, 30% of annuals and 50% of the difference between a competitive quote for insurance just for you vs the commercial insurance you’ll have to carry for their operation (aka if your personal premium runs $1500/year hull vs identical hull coverage for commercial ops being $4500/year the school pays half of the $3000 additional premium)
TalkAboutPopMayhem@reddit
This is a fantastic plan IF you are an A&P with a shop. Otherwise, don't do it.
vtjohnhurt@reddit
If you buy 10 planes and lease them back to flight schools, get lucky and set the rates right, and you'll have a good chance of coming out ahead, even if one of those planes encounters a major expense. If you try it with one plane and that plane has a major expense... you're screwed.
DDX1837@reddit
Nope. Nope. Nope.
Been there, done that.
I'm not saying it can't work. But it's the exception rather than the rule. For example, have you priced the annual insurance cost if you're renting it out? Because the number hours the plane has to fly just to cover that is impressive.
Look up the owners of the other planes there. Talk to them. That will give you the best chance of knowing if it will work.
ltcterry@reddit
Think about this - sounds great, doesn’t it? If it’s so great then why doesn’t the FBO do and take all the profit and depreciation? People often ask that in these cases. It’s not just about profit, but also risk and realistic return on investment.
I know a guy whose airplane has been in annual for 18 months. If this were you then you would have made all those monthly payments out of pocket with no lucrative lease back income.
I know a guy whose airplane needed an engine almost 1,500 hours earlier than expected. If this were your airplane…
Another guy had a great, solid airplane. That got hit by Hurricane Helene. Six months later he’s back in the air. If this were your airplane…
A guy bought a 206 from a big name broker. A couple weeks later it needed a vacuum pump. Which took months to arrive. If this were… You get the picture.
You might get a better return if you simply loaned the money for the airplane.
Anola_Ninja@reddit
If there was money to be made, the flight school wouldn't need you.
The extremely high risk for the opportunity of little reward doesn't make sense. You have insurance, maintenance, and repairs from students treating it like a rented mule. If it's not flying, it's not making money. Bet your ass that the school will rent out one of their own planes before they'll rent out yours. And if yours is down from a failure or accident? You have no income until you pay to fix it.
Spend some time looking into the cost of ownership. It's not just annuals and oil changes. If a mag packs it in 'just because', that's a $1-2K hit. An AD just got issued that requires a $1K inspection? Oops, it failed the AD and now requires another $10K for repairs. Engine overspeed? $20K to pull the engine and get it inspected. Of course the engine shop has a 16 week turnaround.
tl;dr: It's a bad, bad, idea.
12-7@reddit
https://www.reddit.com/r/flying/comments/11y2lxp/buying_a_plane_and_leasing_it_back_to_a_flight/
https://www.reddit.com/r/flying/comments/17d8mzh/aircraft_owners_that_have_leased_your_aircraft_to/
https://www.reddit.com/r/flying/comments/swi19y/aircraft_leasebacks/
slayerabc@reddit (OP)
Thank you for this will read these.
FLAviation@reddit
I’d pass.
Lease backs are not going to be money makers like you’re thinking. The airplane is going to be rode hard and put up wet, and that’s not necessarily a bad thing because it is for a training purposes but your post is looking at it with rose colored glasses. It’s not just going to be used a little bit when you don’t need it, it’s going to be used a lot and when you need it you’re going to be SOL because it’s being flown by the school. If that’s not enough to dissuade you, I managed a Lear Jet for a few years and prior to my management of it, the owner purchased it under the same pretense to lease back to a 135, the deal fell apart because the operator demanded they have full signatory access to a bank account with no less than 100k at any time for maintenance costs. If you do move ahead I would get a very good attorney to review any deal with the school.
Realistically I’d search for a partnership, which shouldn’t be too hard in SoCal.
slayerabc@reddit (OP)
I'd hope to make some money from a leaseback, would a partnership work in this sense as well?
FLAviation@reddit
No, a good partnership would help cut costs but not make money. 4 partners on a nice bird, you’re only on the hook for 1/4 of the costs, and much more availability of use, greater care taken by other partners etc etc.
Many have to tried to make money in aviation and many many more have lost money in it, it’s a hobby or a means to a career, a lease back isn’t the way to make it.
Guysmiley777@reddit
What you're missing is:
There's no guarantee you won't get saddled with 5 or 10 or 20 AMU bill out of the blue. You might come out ahead, sure. But it's not a guaranteed thing and the cost (and lead time) to fix GA squawks is not going down.
slayerabc@reddit (OP)
What's an AMU bill?
x4457@reddit
AMU is an old airplane owner’ism for Aviation Monetary Unit. $100.
So they can say things like “oh that’s only 20 AMUs” instead of $2000.
slayerabc@reddit (OP)
Thanks for clarifying, with a solid prebuy done, and a trusted mechanic company shared in the hangar, can these AMU's be slightly mitigated, or just plan for the worst case of an overhaul 20k cost every year?
x4457@reddit
No, airplanes cost money. Training airplanes cost more money because students beat the shit out of them.
Careful using the word “overhaul” because that typically refers to an engine, which is closer to $40K not 20.
Sharp_Experience_104@reddit
Make that $60K
x4457@reddit
If you’re buying factory new or a six cylinder, sure.
But run of the mill overhaul for a trainer? Nah.
Infamous-Ad-140@reddit
A boat buck is similar, but floats
phxcobraz@reddit
Leasebacks generally don't work out in the airplane owner's favor. You might break even if nothing major happens, but due to the amount of hours going on it, you probably have to pay for an engine/prop overhaul every couple years vs every couple decades if you just flew it. That doesn't count constant little things, or students porpoiseing down the runway and prop striking it or cratering the nose gear.
On the other hand, if you are a CFI, you might see better use of leasing for only students you train in the aircraft. I have considered using my Mooney for complex endorsements once I get my CFI someday. You can be selective and get students that aren't new to landing or general airmanship.
Infamous-Ad-140@reddit
90% is a great deal for you
Anthem00@reddit
you are a customer just like everyone else. maybe with a little more scheduling convenience, but you cant just take it and go. Also, insurance will be 4x your regular rate.
You will make money if you arent unlucky. But if you somehow suffer an premature overhaul, then be prepared for the 35K check to be written. Leasebacks make money most of the time. But they also lose money some of the time as well.
Make sure they have maintenance on staff or nearby to cut down on the 100hr cost. Run it as a business because thats essentially what it is.
slayerabc@reddit (OP)
Yes we share the hangar with the largest maintenance company at the airport and get discounted maintenance because of the volume of work we have them do.
N546RV@reddit
It's unclear what you mean by "this cost," but I suspect it doesn't include a generous maintenance fund for fixing the stuff caused by daily student slam-dunk landings. At least that's the first red flag that comes to mind at the suggestion that it's so easy to cover costs.
Put another way, think of the potential big-ticket maintenance items that make owning any aircraft a bit of a crapshoot, and consider how more likely they might be with heavy usage.
slayerabc@reddit (OP)
Cost of financing the plane vs outright cash purchase. Factoring in insurance at $400/month, annual at $300/month and overhaul/maintenance at $1000/month. All in I'm estimating $3000/month cost to own this plane.
yoda690k@reddit
They're gonna beat the shit out of your plane
Fragrant-Setting4041@reddit
Such a bad idea.
Beaker48@reddit
If it was that good of a deal, the school would just buy the plane themselves. Your plane will be flown hard by students and never available when you want it.
rFlyingTower@reddit
This is a copy of the original post body for posterity:
Thinking to purchase a plane to lease back to my flight school I really enjoy, and am now employed at as the main office manager.
I toyed with the idea of purchasing a nice warrior 2 or archer for myself to build time in, and fly for fun but I was presented an offer by my flight school.
Free hangar placement out of a busy airport just outside LAX, I keep 90% of plane rental rate (wet), and pay for 100 hr, maintenance, annual and insurance.
My flight school is in an area with good weather 95% of the year, and current fleet of 8 piper warrior/archer with 14 CFI's are booked minimum 3 weeks out.
I'm considering 50% down, 7.5% 10 year. I have no other debt aside from a low mortgage. The math shows me 2 days of full rentals nets me back this cost, and I could fly almost free with the net. What am I missing?
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