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.

 

[CalifDan]

We flirted briefly with the idea of doing a leaseback on our Duchess when we bought it last year. I suppose it can make some economic sense if you can use the depreciation to offset other income and that depreciation is suffcient to more than cover the cash shortfall that will likely occur with the leaseback.

As i investigated it further I decided that the benefits just did not outweigh the downside.

There are no twins to rent within about an hours drive of my location. I would driveover an hour to rent a twin and had to schedule it sometimes weeks in advance to get an afternoon. The maintenance on it was marginal. The local FBO was very interested in having me put one in leaseback and we did talk about it.

What I relized was that my insurance would be 11,000 annual and I would be locked into 100 hour inspections (essentially complete annuals) and my ability to schedule the aircraft would be limited by their use. On top of that, since it would probably be used for ME training, it would be subjecting the engines to consant shut-downs and shock cooling. It also has become apparent to me that the typical renter pilot just does not take care of an aircraft like it was their own. that is too bad, because over time, the opportunity to fly anything but junk will go away unless you are an owner. With 37 years flying some as owner, some as a renter, I've watched the overall fleet deteriorate unless you are willing to spend in excess of 200 an hour for a newer single.

We passed in the leaseback opportunity and have the aircraft all to ourselves. Our maintenance is impecable and we are gradually turning it into the aircraft we want regarding equipment and looks.

I see posts on here looking for cheap twin time or complaints about the cost of renting. At the same time I see complaints about the lack of proper maintenance and trashed interiors, etc. You all have to decide which way you want it. I can tell you that the real cost of providing a Duchess in excellent mechanical shape at $4 an hour fuel would be in excess of $250 per hour. Anything less and something is being deferred into reduced value or a future maintenance shock.

 

[TrafficInSight]

I've got a couple of nice horror stories too.

One of the guys I went to college with bought a Seneca to build time with and in order to offset the cost put it on leaseback at a flight school. He wasn't looking to make any money, just cover some of the ownership costs. He did alright until student and instructor creamed a runway sign with it at an away airport during a simulated single engine go around. Insurance covered the cost of repair to the damage from that incident but while it sat there out in the open being repaired some corrosion started showing and avionics/instruments went bad and the loss of revenue from it not being on the flight line pretty much bankrupted him.

The twin still sits there, with new skins and repairs... but little else.


This one may or may not be true, I heard it secondhand from one of the flight instructors. It seems really bizzarre but could be true... we did have a 337 online for a while and it did disappear for a while and when it did come back 2 to 3 months later it was not available for rental anymore.

This guy bought a 337 for his personal use and put it online at the club, again just to offset costs. One day a guy rents it for like 2 weeks, takes off, and isn't seen again for at least a month. When he did come back, it was sans airplane. Finally the owner got a call from an FBO in Europe saying the repairs were done a while ago and when would he like to come pick the airplane up and pay his extensive bill. Something like $10,000 for exhaust repairs.

I honestly think that insurance costs are so high that many airplanes are unsafe as a result. I know a couple of airplanes that are almost scary because the owners are just trying to stay afloat.

 

[NuGuy]

Hey Calif,

If that's your bird in your avatar, it looks VERY nice.

I saw a Dutchess up north of TPA that someone had restored lovingly. It was one of the last ones to roll off the line (81 or 82?), and everything about it was cherry.

Nu

 

[CalifDan]

NuGuy,

That's it. The only change since that picture is we replaced the standard clock with a Davtron. We spent most of our effort this past year getting the aircraft mechanically sound. We pretty much did not pass over anything that needed to be done and a did many that could have waited.

We got the aircraft with a single GNS430 and the Garmin Audio Panel along with some other avionics. We took those out and added the 2nd GNS430, the MX20, a Garmin 327 transponder (digital), a GDL69 for XM weather and a Ryan TCAD. The MX20 also has Chartview. While doing the work we re-arranged some of the instrument panel and also added the JPI760. It all makes for a very efficient and complete IFR panel. Those of you with Duchess time will probably notice the substantial changes.

As I said earlier, mechanically, we have really gone through it. It was a training aircraft at some point in the past and while overall it was sound, I doubt if it had a really good annual in at least five years. We found much of it at pre-purchase, but like all things, some gets by. The trips to the shop are getting farther apart all the time. Since purchase we have followed a strict fix-it on suspicion poilicy rather than a fix-it when broke policy.

It is probably over-improved for a Duchess, but it is probably our last airplane and it is nice to have two motors. That was particularly true last night as we flew home from Southern California after dark and mostly over the Pacific Ocean coming up the coast. We could go faster in a Baron, but that would be more initial cost, more maintenace, lower TBO's and more gas. All we need is four seats (90% of the time we only fill 2) and building multi time at my age is kind of rewarding.

This thread has accurately hit the highlights of why leaseback aircraft are pretty much the way they are. I'm sure that most leaseback owners are pretty disappointed people. The dollars are probably not working out the way they prefer and the are constantly coming back to their aircraft after others have flown it for 10-20 hours and finding things broken, scratched, torn, or just plain abused. They pay for maintenance and yet when they want to fly it something is still broke. They reach a point where they tell the FBO to do no more than necessary to keep it flying. They will take the depreciation while they can and hope that the engines make something near TBO without some other major expense before they can get out of the thing.