Leaseback/instruction questions

[Zekeflyer]

Ladies/Gents,
Alas, I have a question...

I am thinking of buying a C-152 or a Cherokee 140 with which I will either leaseback or give instruction from.

I am trying to estimate operating costs as well as maintenance and insurance on these two birds.

Fuel in my area goes for about $3.50 to $4.05 per gallon. I figure a fuel burn of 5gal/hr for the C-152 and 7gph for the Cherokee 140. Any suggestions (corrections)?

If anyone can throw down a dollar figure on hourly operating costs, please feel free to do so. (I don't think the magical 3x the fuel burn will work for these simple airplanes...too conservative an estimate in my mind).
I know hourly operating costs vary based on usage. The higher the number of hours the plane is operated, the "cheaper" it is on an hourly basis.

Any info on how much maintenance usually runs? For a preliminary estimate, I'm assuming that it will run me about $2,000/yr. I've budgeted an additional $100/mo for "pop-ups" here and there.

I've been so busy with work that I haven't been able to call an insurance company and get a quote. I have tried to get a quote online but once I check that these airplanes will be used commercially, no website will complete the quote. If I get some breathing room in the next week or so, I will get some insurance $ to put in my spreadsheet. In the meantime, I was wondering if I could be enlightened by anyone who has participated in a leaseback agreement or given flight instruction from their own airplane.

Any help I can get in putting the numbers together will be greatly appreciated.

Regards,

 

[crazynut52]

Commercial insurance on a 150 for a starting out CFI is about 6 to 7 grand per year. For a 152 you would want to figure anywhere from 6-7 gallons/hour. Especially if you are training you would probably be somewhere around 7 per hour with touch and go's etc. From what I have seen the cherokee 140 at our flight school burns more along the lines of 8-9 gph.

 

[Lazy8]

AOPA has a nice aircraft operating cost calculater.

https://www.aopa.org/apps/iforms/opcosts/OpCostsInstructions.cfm

g

 

[Zekeflyer]

6 to 7 grand for commercial insurance? That's way higher than I'd anticipated...I was figuring like $4K/year.
So I guess this depends on which insurance company you go with.
What would you estimate the true cost per hour would be for a C-150?

 

[Smash312]

Without Pi*sing on your bonfire, I can tell you first hand that this is more headache than it's worth. Trust me - I'm currently doing it. Bought a C-152 nice IFR trainer for around the $25k mark. Gave it on leaseback, and believe me the school were flying it about 110 hours a month. Out of the 3 months I had the a/c with them, I saw a check of around $200 first month, -$40 second month, and around $400 the third month. Trust me my friend, it's just not worth the time, the effort. The place I gave it to on leaseback are as busy as hell - and ONLY they made money on my plane. I was paying around $300 a month for insurance under their policy. Paying $3.35 a gallon. They took their profit GROSS, then took all the expenses out and paid me net. After all the fuel expenses, insurance, ramp fees and the maintainance and all the other bulls*it that goes with it - it just wasn't worth the time or money. I'm now trying to sell the plane. It's Central Florida based if you're interested. Unless you're going to get your own students and fly it aroud 3 hours a day minimum and charge a decent rate on your instruction price, I'm afraid it's a great way to lose cash and time. Hour on hour, you may make better returns at McDonalds. I, unfortunatly am finding out the hard way. As some wise guy once said, best way to make a million in this business is to have a billion to start with. (Though I never set off to make a million or a billion doing this venture!!)

I'm sure this has and does work for a few wise individuals out there - but unless you don't the the maintainance on it yourself (100hr, annual etc) your margins are exactly that....marginal.

 

[Zekeflyer]

Thanks,
But doesn't it also depend on the leaseack agreement?
Do you mind telling me what the rental rate was?
Were you present for the maintance on the plane (Owner assisted)?
Did you instruct out of there?

The above are things I plan on doing to help "monitor" the costs of the airplane.
I'm a bit surprised tough...Is it possible that the flight school was chargeing you unreasonable maintenance costs?
I read somewhere that you can make money if the airplane flies about 50+ hours a month.
Could you perhaps give me a breakdown of your flight costs?

 

[NuGuy]

Hi Zeke,

The days of the profitable leaseback are over.

Back in the day you could work a deal to get a tax break for depreciation, and FBOs weren't nearly as anal about screwing every last penny out of an owner. Even in the heyday of cheap gas and reasonable insurance, the best I ever saw anyone do is break even on cash flow while building a bit of equity in the plane by making the note payment.

Today, forget it. Fuel is spendy and insurance went into orbit after 9/11. FBOs WILL nickle and dime you to death, and your plane will get trashed by the renters as a bonus. I can guarentee you that MX will be considerably more than $100 a month, and don't forget 100 hour inspections AND 50 hour oil changes.

I agree with the others...rather than leaseback, I'd go with the premium CFI + plane idea.

If this is the kind of deal where you have to squint at the numbers to make the math work (well, if it flys 100 hours a month....) you are setting yourself up for a financial disaster.

IMO....good luck.

Nu

 

[Zekeflyer]

NuGuy,
Thanks for your input. Wow! Not one positive feedback.
I like the idea of instructing in the airplane but I guess I need a solid student base before going that route.
I wonder why it such a loosing proposition?
Even with $4.00/gal fuel, and $400/mo insurance, I still calculate about $62/hr airplane cost on a C-152.
Are people loosing money because they are being screwed on maintenance?
I wish someone would respond and give me more details rather than "dont do it"

 

[NuGuy]

Heyas Zeke,

Let's rough out the numbers.

The true cost for commercial insurance IS aroung $7000 a year. At 50 hours a month thats about $12/hr.

Engine overhaul reserve on a O-235 will run you about $15000, plus installation, plus carb o/h, prop dressing, mounts and hoses will run you aroung $17,000 total, assuming you have a good core. $7 and hour and change. This figure will go MUCH higher if you don't have a 0 time engine, because there is less time to spread out the cost.

100 hour inspections will run $300, so thats $3 an hour. 50 hour oil changes around $50, if you do it yourself, so thats $1/hr.

Real world fuel burn on 152 in training is closer to 7-8 GPS, because students don't lean. $32/hr

Assuming you don't put anything down, and get a 10 year loan for a 25k airplane (which these days, doesn't get you much). $300/mo, so $6/hr.

So now we're at $61/hr. What haven't I included? Tie-down/hanarage, cost of added oil between changes, avionics reserve (radios/gyros/vacuum pump) tires (and there will be LOTS of tires), landing lights (there will be LOTS of bulbs).

The big unknown is MX. Do some of it yourself? Sure, but if you are going to get anything over 50 hours a month, you best be available 24/7 to work on it. Don't forget an A&P to sign off your work, if you can find one, AND he's available, AND he's willing to sign off owner performed work for an aircraft in commerical operation. For every day MX grounds your bird because you're working your day job and can't go out and tinker costs you BIG money OR you can pay the A&P or FBO to do it, and that's $$$$.

The biggest mistake I've seen people make in this gig is A) underestimating the maintentence and B) overestimating the time the plane will fly every month. If you got a FBO or flight school talking you into a deal, sure, they'll sweet talk you into believing it will fly 24/7, because it DOES NOT COST THEM A DIME. They get a cut of the MX, the fuel, the tiedown and a slice off the rental fee.

Like I said, even in the best of times, the BEST I ever saw anyone do was break even on the cashflow while building a bit of equity. NO ONE ever got a check at the end of the month that wasn't already earmarked for something...radio repair, new beacon, nosewheel shimmy, busted altitude encoder...SOMETHING.

Look, if you've got 30k burning a hole in your pocket, then, heck, it's your money, go for it. But if you are trying to finance this whole thing with some pencil work on the back of an envelope, you can get really, really hammered.

If you are looking to do this to subsisize your own flying/timebuilding, remember, each hour your plane isn't available for rent, your costs go UP.

I suggest going over to the AOPA forum and asking around there. You will be surprised at the answers you get.

I know it's a bummer, and some of the things I've talked about are a direct cause of the crappy rental fleets our there. I remember when the SMALL places had 8-10 aircraft, and the big FBO/Flying clubs in a metro area had 20+ aircraft, and the only thing that rented in the triple digits was a twin.

Anyway, best of luck...

Nu

 

[doug_or]

NuGuy,
Thanks for your input. Wow! Not one positive feedback.

I'm not a GA hangar bum, but I've certainlky never met anyone who did a leaseback and didn't feel like the FBO should have at least bought them dinner first.