Leaseback experiences?

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Seth274
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Leaseback experiences?

Post by Seth274 »

I am based out of KPTW in PA. Been looking for a partner to buy a DA42 for a couple years now and haven't even had much of a nibble. An opportunity has come up for me where i could leaseback the plane to a nearby flight school for twin training. About 375 hrs/year. Only for training - no rentals outside of that.

Working through financials of the whole thing - opps to write-off a bunch it seems to offset other gains i have, and of course i get to move up from my DA40. Its not my first choice though - bit nervous about all that use but at least there will be CFI's in it.

What have people's experiences been? Any best practices and/or gotcha's i should be aware of?
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Rich
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Re: Leaseback experiences?

Post by Rich »

I'll only add a couple of caveats:

When we first acquired our 40 in '02, we had an agreement with the salesman through whom we bought it to use it as a demonstrator, for an hourly fee. This was because the dealer (Galvin at BFI) didn't otherwise have one available. There was a minimum number of total hours in the contract and a calendar limit on how long this would continue. Insurance for this use was to be on the dealer's insurance.

At the time we used Flight Schedule Pro for scheduling time amongst us. The sales guy more than once decided he didn't need to return the plane to PAE, where we were based, and felt empowered to not reflect this on the schedule or call one of us. This resulted in one of us showing up to the airport to go flying only to find the plane wasn't there.

In addition, somewhere along the line the propeller got dinged. It looked minor, but the shop decided it needed to get sent off for repair because the sheath cracked. We couldn't absolutely prove it happened while the sales guy had it, so our insurance wound up covering the repair and we had to ante up the deductible.
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Re: Leaseback experiences?

Post by TimS »

I had a Cirrus SR20 on leaseback for a couple of years. It was with a school that specialized in Cirrus, they averaged about 150 hours a year. It was worth it, since they also "managed" the plane, oversaw the MX, and used a shop they had negotiated discounted rates for all the MX (they had about twenty planes to take there).

Overall, it did a good job of reducing my costs. Did I make money, nope. Would I do it again? Depends on the economics of it.

I would think the hourly costs including depreciation for a DA-42 would make 375 hours a year prohibitive.

Tim
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Re: Leaseback experiences?

Post by Colin »

I will just toss out there that so far my DA42 has been less expensive to operate than my DA40 was. I have to see after the last big shop invoice (replaced gearboxes) how the three years average out, but the two years was definitely less-per-hour than the single-engine.
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Re: Leaseback experiences?

Post by jb642DA »

Seth274 wrote:I am based out of KPTW in PA. Been looking for a partner to buy a DA42 for a couple years now and haven't even had much of a nibble. An opportunity has come up for me where i could leaseback the plane to a nearby flight school for twin training. About 375 hrs/year. Only for training - no rentals outside of that.

Working through financials of the whole thing - opps to write-off a bunch it seems to offset other gains i have, and of course i get to move up from my DA40. Its not my first choice though - bit nervous about all that use but at least there will be CFI's in it.

What have people's experiences been? Any best practices and/or gotcha's i should be aware of?
Our DA42TDi was on leasebasck for ME training. What "kind" of 42 would you be leasing back? What rate would you charge for the leaseback? Would you charge based on Hobbs hours or "Garmin system time"?
Send me a PM if you would like specifics.

John
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Re: Leaseback experiences?

Post by AndrewM »

Colin wrote:I will just toss out there that so far my DA42 has been less expensive to operate than my DA40 was. I have to see after the last big shop invoice (replaced gearboxes) how the three years average out, but the two years was definitely less-per-hour than the single-engine.
Colin, did you have some big / unusual expenses in your DA40 for this result to occur?
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Re: Leaseback experiences?

Post by Colin »

Well, I replaced the canopy and upgraded to WAAS. Neither was cheap. Both felt necessary. I replaced a few pitch servos on the KAP140. I hated that thing by the end. But other than that, nothing I can think of that was unusual. I babied the engine (some people say that was wrong to do, that a hard run engine fares better in the long run) and probably burnt a little more fuel than I had to for a lot of the 1,600 hours I flew the plane.
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Re: Leaseback experiences?

Post by YCCA »

I have a multi trainer in my flightschool. It’s a Beechcraft Duchess but in general I can tell you that 375 hrs/year will make you some descent coin. My plane gets $360-375/hr. Even if you only got $350 that’s $131,250. Your looking at 4 total inspections, 3-100hrs and an annual. Even at $5000 a pop you are still looking good. I’m guessing you will personally put 100hrs or less? Will you be responsible for the MX? I’m assuming the insurance on a 400k airplane but for instruction I’m guessing around 10-12K. So the numbers definitely work for you but you gotta ask if you can accept that your baby is now a working girl.. dings, dents, scratches and wear and tear is what to expect.. It’s hard on the props and engines but airplanes are meant to be flown.. just my 2 cents.. best of luck!
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Seth274
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Re: Leaseback experiences?

Post by Seth274 »

Thanks all. I haven't done any negotiating with the school yet. They quoted a 399 wet rate but they have it down for a 75/25 split on the revenue. That part seems a little strange so i have to do more research on whether that is standard - it doesnt seem like it is to offset any management fees or other costs. I am unclear on why they should be taking any revenue if they arent making any of the investment for the plane and i am covering costs. Looks like the first part of negotiations.
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Re: Leaseback experiences?

Post by jb642DA »

The 75/25 "split" sounds like a money maker - for the flight school (especially if you are providing the fuel- ie "wet rate")l! Biggest question is - what plane will you be using? Older TDi (if you can find one) or a "newer" DA42? Big difference in your "depeciation" considerations.

Our TDi was burning, on average, 8-9 gal per hour of ME instruction based on "hobbs time". ($4x9=$36/hour)

Taking the "wet rate" of $399, "their take" is $99.75/hr. Fuel "guess" $36/hr.
Leaving you with $399-99.75-36= $263.25/hour gross.

As far as student training, we didn't allow "touch and goes" with students along with NO "configuration changes" until stopped and clear of the active after landing (both good rules to "protect" YOUR plane!)
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