Is Aircraft lease-back to a flight school a good investment?

[squale]

I was just looking at options of owning my own plane one day and I couldn't do it without somehow recouping some of the money. So I could either get a few partners together to buy the plane and just keep it as a personal plane or I could buy the plane myself and do a lease-back to a flight school.

Specifically, I was looking into the AMD Alarus IFR certified plane ($129,000 IFR certified). This plane looks very appealing and in my opinion is a better choice than a Cessna 172 or Piper (which is around $175K+ with the same avoinics). It is cheaper, has the latest in avionics and from the reviews I read about it, it might just be the training aircraft of choice in the next 5 years as more flight schools get them. It seems they will make an excellent training aircraft as well as a personal aircraft.

So with that being said, I was checking out the leaseback program here: http://www.newplane.com/amd/lease_back.html
If you buy the aircraft in 2005 you can get use of the "American Jobs Creation Act of 2004" and some other deductions such as the annual Section 179 amount where the expense limit was hike to $100,000

I was just wondering from people who have actually purchased new aircraft to be used in a leaseback agreement, how it worked out and whether you lose a lot of money or actually make money doing it. And also how much personal use of the airplane do you get yourself (ie. for your own training, flying pleasure, taking it on vacations, etc.)

Thanks

 

[troy]

Four of our five aircraft at the flight school are leasebacks, three from the same person. I don't know the specifics of the contract, but it must be ok for both parties.

 

[soarby007]

It's a good way to loose your butt. Years ago I looked into buying a plane and leasing it back and the owner of the school, a friend, figured it would cost me, barring no unforeseen mechanical problems, about $5.00 an hour for someone to fly it. Also, no one will take of the aircraft the way you want it. A renter or flight school will use it as a tool and treat it as such. Don't expect tender care and respect.

That's why all these planes float in and out of management companies on charter. The owners of the planes keep hoping against hope that they can get the plane paid for and make money at the same time. Too many middlemen.

 

[414Flyer]

It can work out good for you, or you can loose your ass too. I think with a new plane, or even recent but still expensive model, would be really putting yourself in a financially precarious position.

If it is a busy flight school, but that does things right and with good maintainance too and will not try and rip you off, it can work out. I think an busy Aero Club would be a good place to do it personally, compared some outfits.

 

[TrafficInSight]

http://forums.flightinfo.com/showthread.php?t=50555&page=1&pp=15

We covered leasebacks in that thread from a while back. Check it out.

 

[yasir1212]

Almost all the planes at the flight school I used to instruct at where leasebacks. It all depended on the plane, how much it flew per month/year, and how much maintenance it needed, and how long it was down or grounded for. During the busy times of the summer and specially pre 9/11, the owner was actually making money on the plane. It's a different ball game now, but it all depends on many many factors, the biggest one being the type of contract you negotiate with the flight school. You're looking at a new model of aircraft to purchase. Keep in mind that it's speculation that this plane will be the aircraft of choice in the future, etc. Basically every flight school has either a Cessna or Piper or both, it's like a common fleet. If you get a Cessna, you have a much larger market share plus you'll have a much larger choice of schools to lease it back to.

The best thing I would say is stay with a Cessna or Piper, talk to your accountant, talk to the flight schools, talk to the insurance companies, get info. from AOPA, and more importantly talk to people who own aircraft that lease them back to flight schools.

 

[NTXPilot]

Kinda curious as well...looked over the last thread on leasebacks couldn't find this info. What kind of terms and conditions are usually in a leaseback? I'm sure it depends on a lot of factors, but what's the "norm". Are the payments usually a fixed amount or a percentage of revenue generated from the aircraft? Who is responsible for maintenance, hanger fees, inspections, ect? Who is liable if the aircraft is damaged? Again, I'm sure these contracts are on a case-by-case basis with flight schools, just wondering what the "norm" lease agreement might be like.

Thanks

 

[Vespa]

Wouldn't buy an Alarus. You can't pay people to buy them used. There was one at my flight school where I worked a few years ago that just sat there. No one like to train in it and no one liked to rent it. I flew like a slow brick! It was maxed out with the top of the line avionics. Then the owner tried to sell it, and he never got an offer. He ended up finding some flight school who only flys CH2000's to take the thing. I don't think that he is breaking even.

A good story:

I know a guy who makes okay money off leasing back an older C172. After maintenence, insurence and tie downs, he still walks away with about 1000 a month. The flight school is super busy, they have about 22 planes and 15 are leasebacks. He has a C172N I believe.

If you want to make money, I would suggest finding a flight school that has a mix of students and airplanes and is really busy and buying an older airplane with good avionics and a good GPS.

 

[No Delay]

It is just like owning a rental house. Some people luck up and come out on top. Most soon realize that it is so much of a headache that it is just not worth the trouble.


And just like a rental house...it will be a dump when you get it back. The mechanics, flight school owner, nor the students will love the airplane like you do.

I bought a C172 and did freelance instructing (instrument ratings only - no student solos) can came out very well. Made good money and sold the plane for more that I bought it for. I was always in the plane so I could make sure it was being taken care of.

Good luck in whatever you decide.