Buying an airplane & leasing back

[Brokepilot]

I had a conversation with a guy that was talking about purchasing a multi-engine aircraft and putting it on a leaseback at a flight school as a way to build multi time without having to pay too much for it.
What are some of your thoughts on purchasing a plane and putting it on a leaseback at a flight school? Have any of you done this? What are some things to look out for?

Thanks,
Brokepilot

 

[sstearns2]

.....

Basically a lease-back can be a good deal if the airplane doesn't have any major problems. Normally the FBO does the routine maintanance, but the owner pays for anything beyond that. The people I've talked to who have done leasebacks have done well until the airplane needed avionics work and/or engine work and it turned into a money pit. A big thing to remember is that there is a big differnce in the maintanance required on a personal airplane that flies 20 hours a month and a flight school airplane that flies 200 hours a month. It's my understanding the leasebacks were a much better deal 20 years ago because there were big tax advantages that are no longer with us.

The FBOs love leasebacks because they don't have to tie up the money in the airplane and they sell you the gas and do the maintanance and sometimes even sell you the airplane.

Scott

 

[BradG]

I work at an FBO in the Kansas City area, and we have a pretty extensive fleet of rental/flight school airplanes. All but 2 of them are leasbacks. Most of the owners seem to do ok, some have been with us quite a while. In our arangement, the owner pays for EVERYTHING. And i have seen some of the owners get screwed. Rental planes for the most part get the $hit beat out of them, and that can ring up some pretty high bill. One of our owners owes us so much, he is having to sell the plane to pay the bill, mostly cuz it got geared up by a non-qualified renter, and he got stuck with part of the bill. One of the owners has 3 planes, and he supposedly makes money. But then again, they are 3 of the busiest planes we have. Just keep in mind that although some people treat rentals like their own, others treat them like a rental car, and just tear them up. Personally, after seeing how it all works would never put a plane on leaseback, unless it was like a Warrior or 172 that would fly alot, and make me some money. I would also want something else to fly myself, because you can run into scheduling problems. Anyway, just my $.02.

 

[aero99]

Quote:
"as a way to build multi time without having to pay too much for it. "

If this is the reason for doing a lease back, I would advise against it. Your still gonna pay, and pay and pay.....it's an airplane and people you don't know will be flying it.

I do beleive there are still tax brakes if you have a savy cpa.

Just remember, when that renter pulls off the wrong taxiway and bends a blade, your still gonna have to pay the deductible, the monthly payments and the insurance while it is in the shop. Meanwhile, you will be a renter yourself if you want to fly.

I know a guy that has 4 or 5 planes on lease back and actually makes money though. He is simi-retired and used some retirement bucks to pay cash for the planes over the years. Most of them are the piper and cessna trainer types.

If your buddy is looking for the lease back to help pay for the plane, tell him he is looking for trouble. If he can afford to purchase and maintain without a leaseback, then it could be a way to go.

 

[ksu_aviator]

An FBO I worked at in the St. Louis area did lease backs. They required that the owner make all the payments and pay for maint. The company coverd fuel and hanger expenses. But, of the owners "profit" the company set aside money for maint. so that the owner never really had to pay it upfront.

As far as taxes are concerned....You can deduct the deprecition from your taxes. I also think there maybe something about it being a business expense too.

 

[Slim]

I tried to post a response yesterday, but was interupted by my four-year-old.

My father has a Citabria which he has leased to several schools/FBOs over the years. Each time, he has learned some small things which add up to a lot of money in time.

Should you choose to lease any airplane, pay attention to the following:

1. Is there a charge for parking the airplane in (a) a hangar or (b) tie-down spot? Who charges for parking...the FBO or the airport? If the airport does not collect a parking fee, then tell the school/FBO you refuse to pay to park the aircraft while they don't have to pay a parking fee to the airport.

2. Will the school/FBO charge the renter(s) by Hobbs time, then pay the owner based upon tach time? If so, tell them you're not interested. That's skimming off the top...good for them and bad for you.

3. Maintenance costs are always sticky. My father came up with the following method and it worked until the last flight school ran a tractor into the airplane. Previous leases wanted him to pay everything! The first two leases were agreed to that way. What he does now is pays for the annual and the first 100-hour inspection. Then, subsequent inspection costs and all unscheduled maintenance costs are split between him and the school/FBO.

Good luck...Fly safe!

 

[Brokepilot]

Thanks Slim, I wouldn't have thought of the Hobbs vs. Tach or the parking fees. I guess none of the stories of problems with lease backs should surprise me after some of the FBOs and flight schools that I have dealt with already. I am in no position to purchase a plane at this point, but I was just curious. Who knows what the future may hold.

Thanks for all of the info,
Brokepilot