Sport Pilot Talk

zdc · Guest

Thinking about buying a Gobosh 700 and leasing back to a flight school, anyone with any experience at this?

Daidalos · Guest Joined: 12 Feb 2009 Posts: 132 Location: KHWV

The answer is not that simple. If you are an AOPA member check out this very good thread on the topic http://forums.aopa.org/showthread.php?t=55355&highlight=leaseback

I’ve rented, been a member of clubs, had a partnership in an aircraft and owned one outright. Each one of those options have pro’s and con’s.

I have never owned a plane for leaseback although I considered it. It has mostly con’s for the owner..

It is very hard to make money or break even on a leaseback. Most people consider them to offset their cost of ownership. If this is your goal I strongly suggest you forget it. Find a good partner instead.

The most critical issue is the leaseback arrangement. Usually they are structured so that the leaseback owner has all the risk and school/FBO all the advantages.

Typically you pay for tiedown, insurance (which be high on a rental A/C), maintenance and of course your loan if you will have one. Those are all fixed costs except for maintenance which will vary and probably high on a rental.

The school/FBO on the other hand gets a small share but they have no risk. Most leasebacks are 80/20 with 20% going to the FBO. That is of course after they take out for fuel. Get a sample of the proposed agreement and have a good aviation lawyer look at it.

Those are the financial considerations. We haven’t talked about the emotional considerations. Are you expecting the joy of ownership, forget it! Renters and students will beat the crap out of it. Do you remember your first few landings? The interior will get beat and they don’t care about babying the engine. Oh did I forget to mention you need to schedule it like everyone else. Make sure you look into scheduling in the agreement. I bet the school is pushing this idea. Are they also selling you the A/C? I'd love to know what gave you this idea?

Bottom line is examine your goals and expectations carefully then match then against the agreement. Realistically try and determine how often it will be rented and is it worth it?

Daidalos · Guest Joined: 12 Feb 2009 Posts: 132 Location: KHWV

A few more thoughts and details came to mind on this.

A rental will require 100 hour inspections as opposed to just an annual.

Even though you will have insurance it’s best to set up an LLC or other type of corporation to protect other assets (like your home) in case of law suit. You can loan the entity the money and then it pays you back.

Of course if you do that it complicates your taxes. If it never makes a profit you can pop up on the IRS radar. Corporations that are setup to limit liability and never make a profit could be forced to dissolve. Again look at the leaseback as a business.

We need a lawyer and account to chime in on this.

zdc · Guest

Thanks for the info and advise.

lsabecky · Guest Joined: 17 Jun 2009 Posts: 2 Location: 21d

I fly a leased back gobosh. The owner had to talk the FBO owner into it - the FBO owner didn't think it would be used that much. I can ask around about the arrangements. The owner seems to be happy. The FBO didn't sell the plane.

FLA-CFI · Guest Joined: 27 Oct 2008 Posts: 45

If you are interested in knowing more about lease backs send me a PM and I'll share some numbers with you that our school and lessors are seeing. So far our lessors are very please with their returns...

You need to see about 40-50 hours per month to break even but any decent Sport Pilot school should see that easily. (The key is going with a Sport Pilot school, don't just stick an LSA on any flight school line. The regular PVT pilot flight schools don't know much about Sport Pilot and would rather promote the more expensive PVT Pilot license instead.)

Adam

zdc · Guest

Thanks to everyone, I'm new to this forum but I can see that there is a wealth of information available. I've concluded that leaseback is a loser for the owner in most circumstances. Expecting anything over 30 hours per month with the wx in my part country is unrealistic. I've discovered that my local flight schools policy is to not own any airplanes. I can only conclude that they calculated that there is insufficent return of capital for the cost of an airplane.

AZPilot · Guest Joined: 25 Jun 2009 Posts: 156

There can be several reasons what an FBO/Flight School doesn't own it's own airplanes. Not all are necessarily bad.

One thing to contemplate is that the largest share of "profit" from a leaseback, typically comes from the tax deductibility since you are operating a leasing business.

Factually, if you are paying large sums of money to the IRS at the end of the year, a leaseback could make sense.

The "operation" of the aircraft will not typically pay for itself, although you may see a substantial reduction in ownership costs over just owning and flying yourself.

jeffbennett13 · Guest Joined: 10 Jun 2009 Posts: 9

Don't know if you have decided on a leaseback yet, but since nobody else hit on this, here it is. If you own an airplane and use it for more than 51% business use, it is tax deductible on a 5 year accelerated scale and new planes are also eligible for a bonus deduction the first year. Now, the thing to know is, do you (or your company if self employed) make enough gross income to make that deduction worthwhile? If you make 70K a year, the deduction won't mean much to you. If you place the plane in leaseback service, you also get a deduction on operational expenses and you can expect to recover about half of the money you spend on an 80/20 split with you paying all airplane related expenses including fuel. If you are getting both of these deductions and you make enough gross income for the deduction to mean something you can do OK on this. But don't ever expect that you will fly for free, or that you will turn a cash profit on a plane. If that were the case everybody's plane would be in leaseback. A Gobosh run on auto gas gives you an operating cost after all expenses including insurance of about $48 per hour. About $59 on avgas with more frequent oil changes. If you charge $120 per hour to rent it you get a pretty good margin, better than a Skyhawk with a higher rental price. But you wont make your plane payment with it. Rotax 100 hours are not expensive, but you MUST have a rotax educated guy doing it. You can bugger up a Rotax real quick if your guy has not been to Rotax school. As to the part about flight schools being rough on the equipment, yes the plane is going to get flown. Students are going to do some hard landings with it. You don't want to put something in service with tender landing gear or springs, and it won't be as pretty with the wheel pants off, but you should do this too. You get no more rights to scheduling the plane than any other renter. Our leaseback owners have an owners section in the scheduling software but they can't rent last minute for the weekend if the plane is booked. If you fly mostly early mornings or late evenings you can usually fly all you want as this is not prime time for rentals. Flight schools need good leaseback airplanes, and they can keep them busy if they market them. If your flight school doesn't keep an active web site, and if they don't market themselves then don't do this. It will take a few months to get renters checked out on it and get if flying regularly. You can expect to comp some time to get the instructors dialed in on it too. Forming an LLC holding company to own the plane is an absolute must. You are going to be using the flight schools commercial insurance policy so make sure they have no losses and they are getting the best rate possible, and that their insurer understands LSAs. Finally, leasing back may be a good way to get hangar space if the school or the airport mechanics keep a large hangar and you can utilize a corner of it.

stardust · Posted: Thu Aug 13, 2009 10:42 am Post subject:

We have several schools around the country which want to enter into a leaseback agreement using an Evektor SportStar.
Write to me at jim@evektor-aircraft.com for more info.

tadel001 · Guest Joined: 12 Mar 2007 Posts: 251

30 hours a month in your area? I am out of Bay Bridge Airport. Our planes average over 60hours per month throughout the entire year. We own and have several leasebacks. I wouldn't worry about adding an LSA to a regular flight school but I would encourage the flight school to become educated on the product. Leesburg had a CT that did horribly there. However, I rountinely get asked to open up a satellite location there.

The one thing I would recommend (and this sounds like a plug) is that you get a plane that can appeal to a large market. Make sure you have a good useful load, good product/parts support, and good cockpit size. If you are limited by weight or cockpit height, you will loose a lot of renters.