leaseback questions?????

montanapilot

Well-Known Member
I was wondering if it is a good idea to buy a plane to put on leaseback or not. The airplane I was thinking about would probably be a 152 for about $20,000 or so. I was just wondering is it a way to make money or does it just end up being a money pit. I have talked to a few pilots about it and some of them like leasebacks and others say stay away. I was wondering if any of you guys have ever had planes on leaseback and what your experience is with the entire process and if you decide to do it where to get started which people to talk to. If you find a FBO that is pretty active would you be able to break even every month if you had a bank payment to make or not. Any insight would be most helpful.

thanks

Kelly
 

DE727UPS

Well-Known Member
That's a hard one. The more control you have over the leaseback, the better. You want to be able to insure it your way(maybe have the renters have renter's insurance), have maintanence done by whom you want (not necessarily the FBO), use the type of fuel you want(maybe autofuel), and you want to pay as little to the FBO as possible. I have a 152 on leaseback where the club owner takes 15% and I get the rest. I have total control over how the aircraft is operated. He gives me a place to operate the plane out of.

I think buying a plane, and renting it out at an FBO, can be a great way to go if you can instruct in it and want a plane to build time in.
 

pilot602

If specified, this will replace the title that
First, 20k for a 152 may be a little high. Grab a trade-a-plane and find comparable models and see what they're going for. Yours may be high it may be low I don't really know (no I did not try to make that rhyme) but getting a trade-a-plane or checking online (www.trade-a-plane.com) will get you in the ballpark.

Second, to answer your lease back question: NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO NO!!!!!!!!!!!!!!!!!!!

Most leasebacks are real dogs for the aircraft owner -generally it's the person leasing the aircraft that comes out ahead. The way it usually works is you buy the aircraft (and part of buying an aircraft anymore includes holding some level of insurance on it) so you are now making loan and insurance payments so you then "lease" it back to an FBO or school for X amount of dollars per hour. The money you make will offsetthe loan/insurance right? Well ...

That $X/hr is split via a certain percentage between the owner and FBO/school - so lets say you get 50/50 or even 70/30 split. The problem is the lease generally requires that the owner pay for mantenacne and that a) the leasee will be the party responsible for determing when maintenance will take place (above and beyond what is required via the CFRs - things like annuals, 100hrs, etc.) and b) that the said maintenance will be performed by the leasee's shop. So, now, that 50% or 70% you get from the FBO/school renting the aircraft generally goes right back to the FBO/school via the shop. The FBO/school gets essentially a free aircraft and the owner gets nothing but a higher time airframe when it's all said and done. Some leases go so far as to make the owner actually rent his or her own aircraft (or same make model)!

Lease backs, for the most part, are a losing proposition for the average owner. Now if you get lucky and can dictate the terms ofthe lease then theoritcally you could make some money or at least cover your loan/insurane payment. But regardless you're still going to get a lot of time and abuse put on YOUR aircraft.
 

Mr_Creepy

Well-Known Member
I know several people who have successful leasebacks here in Florida. Not all experiences are bad.
 

ready2fly

Well-Known Member
There are good and bad sides to leaseback options. One is that you get a little help paying for your plane in all aspects (payments, maintenance, hangar/tie-down, etc.).

One of the HUGE downsides is that you may not get to fly your plane very much if you lease it to a busy FBO.

There were two such examples at my FBO. One was a guy with a PA28-161 with a Garmin 430 in it. It got rented so much, he never got to fly it.

Ditto on a new Cessna 172SP. The guy took it out of the rental rotation in June because he just did not get to fly the thing - ever. My FBO does NOT bump renters from the rotation even if the owner of the plane decides he/she wants to fly it and has not scheduled it.

Talk to the FBO where you want to do the leaseback. Find out what your options are.

Good luck!

R2F
 

pilot602

If specified, this will replace the title that
Even if the leaseback gets you a few dollars ahead in the present term, at the end of the agreement you still have a higher time airframe (which means lower re-sale value not to mention the fact that it was used as a trainer which also lowers resale value), a lot of abuse on the airframe and an overhaul to pay for - if you're lucky.

I would venture to say there are very, very few leasebacks that cover the maintenance reserve the all owners should be charging themselves.

For example for gas and oil our aircraft runs about $40-45/hr. But by the time you add in the other expenses (not including the maintenance reserve) it works out to about $140/hr.

The mantenance reserve on ours is quadrupled because it's a complex, multi engine aircraft. Money, in aviation, is like airspeed and drag it's all exponential and not simple doubling.


For instance, an overhaul on the O-320s we have run (on the cheap side) 18k and for a new Mellinium overhaul you're looking at probably more along the line of at least $22-25k. So, if you figure, for a 20k overhaul, your hourly reserve equates to (over a 2,000 TBO) roughly an extra $11/hr and that's on a single 160hp engine - and I'd be surprised if a trainer aircraft would make the recommended TBO. The more HP you add the higher the overhaul goes exponentially. In our case it's an additional minimum of $22/hr because we have two engines. And that overhaul reserve is not going to cover new avionics, wires, hoses, and the various multitude of other little things that must be paid for (like recurring ADs, new ADs, mag overhauls, starter replacements, vac pump replacements et., et.c ad nauseum).

On top of this add in the fact that you may not be able to use your own aircraft as much as you like (see R2F's post) and it's still a losing proposition because now you are not able to fly, or fly as much, and your aircraft is racking up time/abuse and you aren't the one logging that time.

Now, if your sole purpose is to just buy aircraft and lease 'em out that's one thing but if you're looking to help pay for a personal aircraft I think it'd be better to go partners than go the leaseback route. Just my opinion.

And, yes, there are ALWAYS exceptions but in general I think the leaseback is great for an FBO but lousy for the aircraft owner.
 

EatSleepFly

Well-Known Member
[ QUOTE ]
My FBO does NOT bump renters from the rotation even if the owner of the plane decides he/she wants to fly it and has not scheduled it.


[/ QUOTE ]

Same with the FBO I work at. And, from what I understand, most FBO's operate this way. After all, they get more of a profit if its flown by someone other than the owner.

We only lease one aircraft, a new (well, 1998) C-182S. Its owned by a 777 Capt. for AA. He gets to fly it pretty much at his leisure, because the price is so high, only a few people fly it! Seriously though, so far there haven't been too many scheduling conflicts with it. It just depends on the owner and the FBO.
 

ready2fly

Well-Known Member
[ QUOTE ]
Same with the FBO I work at. And, from what I understand, most FBO's operate this way. After all, they get more of a profit if its flown by someone other than the owner.

[/ QUOTE ]
That's kind of what I thought, but I didn't want to make an assumption that all were like that.

Thanks!

R2F
 

Mr_Creepy

Well-Known Member
While I have heard of that abominal practice I am hoping it is not the norm. The local FBO here understands the "Golden Rule" of aviation - they guy with the Gold makes the Rules.

Owners have bump rights (as far as I know.)
 

ready2fly

Well-Known Member
[ QUOTE ]
While I have heard of that abominal practice I am hoping it is not the norm. The local FBO here understands the "Golden Rule" of aviation - they guy with the Gold makes the Rules.

Owners have bump rights (as far as I know.)

[/ QUOTE ]

^^That's what I THOUGHT was the norm when I first started flying, but at our FBO, it's not. I guess they see it as bad business to bump paying customers.

I'm on the fence on the issue, really. Should owners have exclusive rights to bump those who have a good faith expectation to rent the plane or should they (owners) put themselves on the schedule if they want to use the plane?

There are good arguments for both sides.
 

ananoman

New Member
I think that if you are an owner you should not be able to bump someone whenever you want to go flying. If you put your aircraft on leaseback and someone schedules it for a lesson or a flight, they expect it to be available. I don't think it is too much to ask to have the owner schedule time they want the aircraft.

Before you put something on leaseback you should figure out your fixed and variable cost. Fixed cost are loan payments, insurance, tiedown, etc.. They are cost that do not change no matter how much you fly. Variable cost include fuel, oil, and maintenance reserve. Since you will not be paying for the fuel when someone else is flying your aircraft you are mainly worried about maintenance reserves. This includes an engine reserve, prop reserve, unscheduled maintenance, and cash for paint, avionics and interior refurbishment. As others have said, it is relatively easy to determine engine and prop reserve. Just divide cost for overhaul by TBO. It would also be wise to call some shops and find out what it cost in parts and labor to install a new engine. This should include new hoses, and overhauled mags, vacuum pump, etc.. Include this in your estimates. If you talk to a mechanic they should be able to tell you some ball park figures for how often mags, vacuum pumps, alternators, etc need replacing and what 100 hr and annual inspections cost for a well maintained aircraft of your type. Interior, paint and avionics are up to your judgement. But if you let your airplane turn into a piece of crap, no one will rent it and its value will decline.

The typical engine in a trainer should go to TBO if well cared for. A rental has the advantage of flying often and corrosion probably kills more GA engines than wear and tear. Remember if you have a mid time engine, your reserve for the first overhaul can be higher than normal. If you buy a 150 with 1000 hour on its engine, you have 1400 to go, not 2400.

If you are going to get an aircraft for leaseback, I would not care if the airframe was hightime. As long as it is in good shape your renters will not know the difference. For a 150/152 the only thing that matters is overall condition. Also make sure you know what you are getting when they tell you how many hours since overhaul. Was the engine given an overhaul to new limits or service limits, who did the overhaul and what was their reputation? It may be worth buying a nice aircraft with a runout engine for a cheap price and and getting a rebuild yourself.

I would say that if you look at all this and decide to go for it, make sure that you can cover the cost of the aircraft on your own and things should work out ok. With a 150, this should not be much of a problem.
 

montanapilot

Well-Known Member
I m still considering doing this leaseback with a 152. and have gotten some of the numbers ironed out with the FBO. My question is: What is an appropriate management fee for the FBO to charge to market my airplane? (for a 152). 10% 20% 30%????? any advice would be greatly appreciated.
 

pilot602

If specified, this will replace the title that
Well ... I'd look at how much marketing they do. Ask to see tearsheets or copies of all the advertising they do. Anyone who advertisies will generally get some kind of tearsheet or copy of the ad they are running. I''d also ask for a list of publications, radio stations etc. that they advertise with and then call these places and confrim.

Chances are if they do anything beyond the yellowpages it would be a surprise. And with that in mind I'd go for the lowest "management" fee you can find. Or in otherwords they do very little to no marketing at all.

Most schools leave finding students up to the instructors ... kind of a crock considering many schools take a large (70%) ofthe fee they charge the student for the instructor.
 
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