Looking for advice on buying a DA-20

Any DA20 related topics

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porteju
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Looking for advice on buying a DA-20

Post by porteju »

I have been looking into buying an airplane for a while now, but did not get serious until I flew in the DA-20/40. Since then I have been trying to engineer a way to make this hobby more affordable. I was looking at diamondshare.com and felt the sense of cheesy sales pitch, but then got to wondering about the validity of their business model. If one person were willing to buy an aircraft with 3 more people agreeing to pay a monthly rate to fly could a group of guys make a "personal flying club" worth it? So I crunched some numbers and here is what I came up with... I wanted some input from actual owners and folks with experience to weigh in on my thoughts... So please poke holes in the idea and we will see if it still floats.

I live in Virginia Beach, Va and fly F/A-18s for the Navy. I have a large pool of talented aviators to invite into this "personal club." Most of us have 500+ hours in tactical aircraft but little time in GA. The DA-20 is the perfect center stick, bubble canopy, low wing, economical airplane that is fun to fly after a week of flying for work. (Also considering RV-4/6 but that is a different conversation)
My thoughts are to buy a used DA-20 in the $60-75K range (assuming I can find one that meets my criteria) put 15% down and finance the rest. I would create an LLC that would actually carry the loan and the aircraft, but have to front the capital for the down payment. This begins to set my fixed costs. For fixed costs I considered: Hangar, Taxes, Insurance and Loan.
1. Hangar – It costs $280-345/mo. at my airport
2. Property Tax - I used the personal property tax website for VA to calculate the amount of tax at a rate of purchase price/100*$.58. QUESTION: 1. Anyone in VA or any other location have a better estimate or additional taxes I need to consider? 2. I am a FL resident; everything I own is registered in FL, any possibility of registering the a/c in FL where there are significant tax/registration advantages?
3. Insurance - This is a huge stab in the dark for me, as there are no quotes without specific pilot total time / time in model etc. So I just used what diamondshare.com quoted for a $416,000 brand new DA-40 with 4 people flying it. QUESTION: 1. Assuming the average pilot in our four man club would have at a minimum 500 hrs total and 30 hours in type what would be a reasonable annual cost for insurance? Some of the guys have 1000+ hrs in GA, but let's go with worst case and make sure this still makes sense. 2. Is it feasible to buy insurance for a club like this? I know you can buy individual or flight school policies, but neither really fit here.
4. Loan - I just used a simple excel formula to calc a monthly payment based on APR and loan amount.

After getting a guess at all of these numbers, I normalized everything for an annual cost. If four guys fly 108 hours a year the fixed costs become $27.41 per hour.

Variable costs - I broke these down into Fuel, Oil, Engine Reserve and Profit.
1. Fuel - You can see I used $7.00 per gallon of 100LL (A little higher than the $5.99 currently but helps cover and sways in cost throughout the year) and a 5.5 GPH estimate for 75% cruise. QUESTIONS: 1. What are "normal" fuel burn rates for a pattern/basic maneuvers/cross country flight?
2. Oil - I read that every 50 hours an oil change is usually $150. So I guessed $3/hr would be about right. QUESTION: Any heartache with these numbers?
3. Reserve - Assuming a 2,000 TBO aircraft that requires 20K in work is about $10/hr. I read they can be done for 12-16K, but overestimated (hopefully) in case there are unknown or unexpected costs. QUESTIONS: 1. Is this an accurate estimate of the costs?
4. Profit - You will see that one of my concerns is amount of work this will take and the "minimal" reward, so I factored this in so I could play with the numbers. I have to balance the obligation to pay for 108 hours of block time with the ability to just rent. (If I get too greedy and the /hr cost is too close to the rental rates no one will be interested)

This brings my total Hourly Costs to $51.50 and the combined hourly rate to $78.40. The going rental rate near here is $125-130, for a potential savings of $50/hr.

Man, I cannot believe you have held on this long! Almost to the end! (lots of rhetorical questions in the rest of the post)

Why this is a good deal:
1. I would charge by tach time and you pad the logbook with HOBB time, so you would get that extra time per month. I have seen this estimated by 15% so you pay 124.2 HOBB hours renting @ $125 for $15,525 a year or pay for 108 hours tach time = 124.2 HOBB hours at $78.40 = $8,467 for the year.
2. It would make you fly more. You have budgeted the $700/mo. wet or $350/mo. dry so going out to fly on Saturday is not a pocketbook consideration, that is taken care of at the beginning of the month. QUESTION: Is $700 a logical amount to expect per month for a year contract?
3. You share an airplane with 3 guys you like. This leads to weekend trips with no minimum hours and only four people wanting to schedule the aircraft, leaving it available when you need it assuming you have a little advanced planning and a fair way to distribute the hours.
4. You get the advantages of a partnership without all the hassle. When you want out you simply do not renew your contract. There is no issue of the club not having enough money to buy you out or deciding what all of the club's net worth is so you can sell your percentage. There are no maintenance, paperwork etc considerations for the members, just the owner.

Overall Items of Concern:
1. I am taking on a significant risk and administrative nightmare, is the risk worth the reward? What is the reward? The owner gets to fly cheap (as do the members), the principle is being paid off, you have the benefits of owning your own plane and possibly tax rewards (anyone care to venture to provide an estimate of the tax implications?) Risk is lots of unknowns: what will break next, opportunity cost of money in the a/c, defaulting members, unable to get more members, LOTS of work to do with an airplane
2. Month one a XXX (name the part) fails and it costs big $$$ to fix it, where does that come from?
3. I buy an a/c with 1,000 TBO, my rate of $10/hr for 2,000 hours = $20K for an overhaul works for that timeframe, but will be short $ if the TBO is less.
4. Annuals are expensive, how am I going pay for them?
5. I have thought about a $1,000 initial buy in to help cover the costs of the annual and random things that break throughout the year. Would this be a deal killer?
6. Year one sounds great, what happens if no one renews. Is there enough interest to keep this thing going without draining personal finances? What about as maintenance costs grow with an aging airframe?
7. There is no requirement for 108 hours per year, it was just my initial starting point. Is if feasible for a VFR only airplane to fly 36 hours a month for twelve months so everyone can get their time? Should I just have everyone pay $250/mo flat rate with no hours required and charge $50/hr that you fly. (3.3 hr/mo would be the breakeven point vs. renting)

Big Picture Contract Issues:
1. Fuel surcharge - if fuel goes over a certain amount per gallon a per hour assessment will have to be made
2. End Contract due to deployment/PCS -
3. How to divide up the scheduling
4. Min and Max flight times - min as required by FAR, but cannot fly ahead of the hours you have paid for
5. Out of town Maintenance
6. Required CFI checkout

DA-20 Myself 1 Member 2 Members 3 Members Purchase Price $60,000.00
Fixed Costs Financed Price $51,000.00
Hangar $3,600.00 APR 5.10%
Property Tax $348.00 Term 240
Insurance $3,600.00 $/Gal $7.00
Loan $4,072.81 GPH 5.5
Hourly Costs Hangar/mo $300.00
Fuel $38.50 Down Payment $9,000.00
Oil $3.00 Hours / Year 432 Reserve $10.00 Hours / Month 9 Profit $0.00 $0.00 $0.00 $0.00
Hourly Cost per member $159.10 $105.30 $87.37 $78.40
Cost for 108 Hours $17,182.81 $11,372.41 $9,435.60 $8,467.20
Monthly Cost $1,431.90 $947.70 $786.30 $705.60
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Aircraft Ownership Rates.xlsx
You can change numbers
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porteju
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Re: Looking for advice on buying a DA-20

Post by porteju »

I am new to the fourm and appreciate the community helping a perspective owner with some advice. I attached the excel spreadsheet that I used to calc the costs so you can play with the numbers if you are interested. The formatting was lost when I posted, and all of the numbers at the bottom do not make sense anymore.

Hopefully I can take your knowledge and convince the boss (my wife) this airplane thing is a good idea :D
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Re: Looking for advice on buying a DA-20

Post by Steve »

Justin:

Welcome to the Forum. I cannot comment on the specific financial aspects of your business plan, but as a retired Naval FS, wondered about the practicality of an active duty (deployable) aviator signing up for a fixed length contract. Hard to fly hamburger runs on the weekend when you're floating around the IO.

Being a great believer in Murphy's Law (and all its sub laws), unless you buy a new aircraft (with a warranty), you have to anticipate unanticipated maintenance issues. Having partners reduces the hit, but it would be prudent to plan for it and have a reserve fund budgeted.

My expenses actually came out significantly lower than I had projected, due to my doing owner-assisted annual inspections for the past 11 years. I also was able to pay off the aircraft loan early, and save on that interest expense.

Good luck with your plan,

Steve
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Re: Looking for advice on buying a DA-20

Post by CFIDave »

Wow, that's one heck of a long post, but clearly you've been thinking a lot about this!

Just a couple of points:

1. 108 hours/year sounds really low for 3 people, particularly if you start thinking like an owner -- "Let's see, I've already covered the fixed costs to have an aircraft available to fly; I'm going to fly as many hours: as I can afford the gas/are available in my schedule/are VFR weather/etc." I'd plan on at least 200 hours/year for 3 people.

2. Hopefully none of you military pilots are "overweight" and/or plan on carrying overweight passengers in a DA20. As you know, the DA20 has a limited useful load for passengers and bags, or space for bags. (That's what the DA40 is for. :) ).

3. State of Virginia taxes are (one time) 2% of the initial purchase price, and then annually whatever personal property taxes are assessed in the county where you plan on basing the plane. In Loudon County, VA where our DA40 is based, the Board of Supervisors threatened to hit aircraft with the same tax rate as they use for automobiles (about 5% of the true assessed value every year!), until a group of us pilots testified at a public hearing that we'd all move our aircraft elsewhere to avoid the tax, vacating the local airport. The result is I think I pay a paltry $30/year in personal property taxes on our DA40. But you need to check on your local personal property taxes.

A flying club organized around a DA20 sounds like a very inexpensive way to have fun. 5 years ago my wife and I both learned to fly in DA20s and had a great time.

Also, AOPA has recently started putting out lots of helpful information on organizing and operating flying clubs: http://www.aopa.org/members/pic/ac/flyingclubs/
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Re: Looking for advice on buying a DA-20

Post by Cschobel »

I have doing this same model myself 7 years with a DA40. This works for me very well and the other members.They have all renewed every year.
You ask a lot of good questions.
Call mean I can go over how it works for me
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porteju wrote:I have been looking into buying an airplane for a while now, but did not get serious until I flew in the DA-20/40. Since then ...
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Steven
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Re: Looking for advice on buying a DA-20

Post by Steven »

I don't see where maintenance comes into your model. Unless one of your buddies is an IA, you'll spend a fair bit on maintenance. In my experience, $2000-$5000 per year depending how your annual goes. If you have the free time you can assist in the annual which will help a bit.

You can easily buy a good DA20 for$60-70k. And splitting the costs among 3 or 4 people will make it even more of a good deal. But in my opinion you'll never spend less than renting, unless you fly an awful lot (200 hrs or so per year).
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Re: Looking for advice on buying a DA-20

Post by Joey »

Welcome to the forum. I'm also a retired ex Tomcat NFO and spent many hours at NAS Oceana. The mini flight club is a great way to split fixed costs. You can expect more than what you plan in maintenance no matter what you buy but as several folks mentioned, doing owner assisted annuals and maintenance can help some. The property taxes are generally based on where the airplane is kept, but there may be exceptions for active duty military.

I'm in the Jamestown-Williamsburg Airport and our hangar costs are significantly more, 541/month. Last year for a 2008 DA40 XLS we paid James City County VA personal property taxes of 2200. Chesapeake may be less, but call the tax assessors office for final word. Chesapeake is a good place to fly out of and there are a lot of Diamond aircraft there. You may want to look into a leaseback with EPIX aviation as they are looking for DA20/40 leaseback opportunities.

My personal opinion is that if you are going to fly a lot, ownership makes good sense. If your flight time is realistically going to be 50 hrs or less, renting makes better sense as long as they have a fleet of aircraft so that if one is down for maintenance or already rented, others can be used. It's might nice to be able to just give the keys back and ask for the gripe to be fixed and not worry about it.

If you are in cruise mode, it's really going to be difficult to rack up hours in GA. The same if you are stashed in the RAG.

The DA40 (and I'm assuming the 20 but I haven't flown one) are great to fly with the bubble canopy, stick and 20mm push to talk switch. Good luck in the hunt.
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Re: Looking for advice on buying a DA-20

Post by Tim H »

Somthing to consider is that the DA20 is NOT IFR certified. That may be a turn off to some.

Just wondering aloud here, after a couple of months flying the DA20, would you wish you would have bought the DA40 with it's IFR capability, additional speed and payload? The additional capabilities may make the deal attractive to more pilots.
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Re: Looking for advice on buying a DA-20

Post by porteju »

Steve wrote:Justin:

Welcome to the Forum. I cannot comment on the specific financial aspects of your business plan, but as a retired Naval FS, wondered about the practicality of an active duty (deployable) aviator signing up for a fixed length contract...
Steve,

Thanks for the quick reply. That is a good point about not wanting all military in the club because of our schedule. I was hoping I could find a local guy to give the club some continuity if we ever had short dets etc for a month or so.

I am also a believer in Murphy's Law and would absolutely set up a reserve/"what if" fund, just not sure if I want it to be the initial buy in type or a per hour type.

Thanks,
Justin
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Re: Looking for advice on buying a DA-20

Post by porteju »

CFIDave wrote:Wow, that's one heck of a long post, but clearly you've been thinking a lot about this!

Just a couple of points:

1. 108 hours/year sounds really low for 3 people, particularly if you start thinking like an owner --

CFIDave,

That is a great point about the number of hours, I need as many as possible to make the deal more attractive, but not so many that my airplane gets overworked, or I am not able to give the guys their guaranteed time.

I would agree that a DA-40 would be the way to go with a G1000, payload, IFR etc but the extra initial purchase costs and maintance are a little intimidating for a first time purchase...

The tax info and AOPA website were very informative.

Thanks,
Justin
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