Not intending to flood the thread, but since I forgot to post this the first time, here goes:
Jason’s Leaseback Advice:
1. Leasebacks are a business, always treat them like one. Never get emotionally attached to a leaseback airplane, it will get abused just like a rental car does, and you don't go seeking those out when you buy a used car, do you? Put leaseback aircraft in corporations, run their books separately, have a separate tax return for the aircraft each year, etc.
2. You can make a lot of money with a leaseback. You can lose a lot of money with a leaseback. Many of the factors of making/losing money are completely outside of your control. If your goal in a leaseback is to have someone else pay for your personal airplane, you probably are not going to be happy with the result.
3. If you leaseback an aircraft to an honest FBO, you have a chance to do well. If you leaseback an aircraft to a crook, you have no chance at all. Get to know with whom you are doing business. Ask around the airport, talk to the other owners, etc.
4. Run the numbers from a realistic viewpoint. Take what you're paid each hour by the FBO and subtract the per hour costs such as fuel and maintenance reserves. That figure is your actual hourly income (the rest does not exist for this calculation) Take the monthly fixed costs and divide them by that "true" per hour income. That is the number of hours the aircraft must fly each month to break even. The monthly fixed costs must include insurance, tie-down, and the "payment", even if there is no payment on the aircraft. The cash you might pay for an aircraft has value, if you don't include it in the monthly fixed costs, you're letting the FBO use your money for free.
5. You're still a renter, you just rent one specific aircraft for a reduced rate, but you're still a renter and must schedule your flights along with everyone else. If you are inclined to "bump" paying customers for your own flying, you're probably a poor leaseback candidate. You'll upset those customers and you'll be hurting your own income stream.
6. The standard leaseback agreement is the basic 80/20 plan. You get 80% of the per hour rental rate, the FBO gets 20%. Out of your 80% you pay fuel, insurance, tie-down, maintenance, and the "payment" for the aircraft (again, this has nothing to do with actually having a bank loan or not).
7. FBOs like leasebacks because it removes all the risk from them. They get 20% of the rental rate, yet do not have to own or maintain a fleet of airplanes. You absorb all that risk.
8. The best leaseback deals are on aircraft that fly a lot of hours each month. A Cessna 172 that flies 80 hours a month will almost always make money. A Piper Arrow that flies 20 hours a month will almost always lose money. The breakeven point on most single engine airplanes is around 50 hours and the leaseback becomes really worth doing from a profit perspective at 65 hours. I know of a case where a Piper Arrow was leased to a flight school and it flew 60 hours over 8 months. The owner lost a lot of money in insurance and maintenance. I also know of a case where a Cessna 172 was leased to a flight school and it flew an average of 87.2 hours a month over a 12 month period, the owner made a lot of money that year.
9. Never buy a leaseback airplane from a flight school. If they already own the airplane, they have no reason to sell it to you and then have you lease it right back to them. Never put a brand new airplane on leaseback, they lose too much value the first few years.
10. Only do a leaseback if you can afford to own the airplane without the leaseback. Used aircraft can be expensive the first few months you own them. Don't expect to take anything home the first three to six months. People who already have money seem to do well with leasebacks. Those who really cannot afford an airplane in the first place seem to do poorly.
11. Buy the right aircraft, the right way. You can do everything else right, but if you buy the wrong aircraft or pay too much, you'll lose every time. This doesn't mean pick a Cessna 172 over a Piper Warrior, this means pick the right Cessna 172 or Piper Warrior. Some airplanes just shouldn't be leased back. You want something reliable with a known history. Avoid the very high time and very low time airplanes. You must sometimes spend money to make money, people want to rent airplanes with nice interiors and good panels. If the per hour rental rate is equal, would you rather fly in a Cessna 172 with ARC radios and no GPS, or a full King Digital panel? The new panel might add 20% to the price of the airplane but double your monthly profit.
12. Think long and hard about why you're doing this. Many people get into leasebacks for all the wrong reasons, make sure you're doing it for the right reasons.
Jason
