Buying a plane as an investment...
- Thread starter atomic20v
- Start date
Why buy when you can get people to put them out there for rent?
Nihon_Ni
Well-Known Member
I'll start by saying that I've previously had an airplane on a lease-back.
You're assumption is flawed, because every hour an airplane flies it's worth less than it was previously because of life-limited items that depreciate by the flight hour. (Think engine overhaul, vacuum pumps, engine accessories, etc.) Every day it sits on the ramp, it's worth less because of calendar-based life-limited items that depreciate by the day. (Think paint & interior, annual & IFR inspections, etc.)
The trick to a successful lease-back is to have the airplane earn enough income to offset the depreciation by paying all the fixed & direct operating costs, cover the loan, and provide the return you require on your capital. In this case, you're looking for a 0% return, so that makes the equation somewhat easier.
Murdoughnut
Well sized member
In five years or so you'll be able to pick up a GA aircraft for a fraction of what they even cost today - I'd hold out personally. I'm saving for my Mooney.
Joe Gremlin
Well-Known Member
Mint condition vintage guitars can be worth $30k. Buy $100k and put them under the bed. Or buy $100k of rare comic books. If you buy a plane you're almost guaranteed to end up with -x% return.
Leasebacks can make some money but it will take a lot of work on your part to keep the plane clean and perfectly maintained so it will rent often. And it will have to rent often in order to offset the cost of insurance and 100hr inspections. Therefore, it will lose money if it sits in the form of costing you tons more in insurance/mx and it will lose money if the renters fly the snot out of it in the form of becoming a high time rental airframe. Plus your own recreational use of the plane will have to be minimal at best.
On the other hand, if you buy a plane for personal use it will cost you less than a leaseback to keep, but you will still lose money on paper unless you can find a way to value your own use of the plane. Hangars/tiedowns cost money. Annuals cost money. MX costs money. The plane will need to be flown regularly or it will lose value from lack of use.
By comparison, you can buy a 50's mint condition Les Paul for $25k, stick it under the bed and sink $0 into maintaining it for 5 years, then sell it for at least what you paid for it if not more.
Murdoughnut
Well sized member
Honestly, if I wanted to turn a plane into an investment, I'd buy an aircraft for X, and then sell shares of that aircraft for 1/Y(X)+Z ... where Y=the number of partners you want to include, and Z is the upcharge you profit from.
It's something I've thought about in the past. It's a bit difficult because you have to either manage the club yourself, or develop a structure to where you can buy yourself out of it.
It's something I've thought about in the past. It's a bit difficult because you have to either manage the club yourself, or develop a structure to where you can buy yourself out of it.
Whoa, there are a lot of conflicting opinions here! So you're saying the GA market will go down significantly in the next 5 years whereas a previous poster is saying that the GA market is already down and will rebound significantly over the next 5 years. :dunno:
I play guitar occasionally but know little about them. It is an interesting idea though, and certainly would be a lot simpler than buying a plane. You really think they hold their value well? The key would be selecting the right guitars for purchase and not overpaying for them, which I know nothing about. Would you say it's a sure thing that such a guitar is not going to go down in value over the next 5-10 years?
KSCessnaDriver
Well-Known Member
What's your thinking on this one? I'd like to know why you think the prices will continue downward?
Murdoughnut
Well sized member
1) Supply of existing used aircraft
2) Rate of current pilots losing medicals/leaving flying (or just aging out)
3) Lack of new GA pilots (excluding career track)
4) Rising costs (even excluding possible user fees)
5) Current production levels of new GA aircraft (past 10-years)
Take my opinion with a grain of salt - I'm looking at it from more of an economic perspective. The hayday of GA was the 70s and 80s. Back then, someone earning an upper middle class income could easily afford to purchase and maintain a new GA aircraft. Now these guys are looking to sell their investments - but not only can fewer of us afford to own our own aircraft outright (or maintain it), but next to no one is pursuing a pilot's license with the intent of staying in GA.
I don't know what the ratio of airworthy GA aircraft to current GA pilots is, but I have to think it's shifting towards more sitting aircraft. Without a new supply of GA pilots, I don't see this situation reversing itself.