Plane ownership and ancillary questions

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dwm80

Plane ownership and ancillary questions

Post by dwm80 »

Hi Everyone,

Brace yourselves for a novel-length post (I apologize in advance).

Long-time lurker, first time poster here. I come from a family full of pilots (PPL/IFR/CPL people), and I have finally bitten the bullet and am working in my PPL over at Angel City Flyers (great outfit) in the DA40.

I like the DA40 a lot for the happy-go-lucky docile nature and great visibility, as well as the safety factors. That in mind, having spent an inordinate amount of time in the family T210M (which, although a truck/SUV type of a plane, is pretty fast/capable if one doesn't mind the operating costs), I have a desire to go "beyond" the DA40 after finishing the PPL in terms of acquiring my own plane, or should fortune smile upon me an a 50% ownership in some sort of compatible arrangement were to appear. Goals would be minimum of 160ktas @ 8,000-10,000, 700 mile IFR range at that speed (or greater), 400-500lb full fuel useful load, preferably something FIKI, and something with glass on the dash (G1000 preferable).

About the mission, so let me lay it out:

Wife likes to fly / may even look into getting her license as well (jackpot), so many trips are already being dreamed up. Intention is to start immediately on instrument rating after PPL, most of even the frequent/short range ones wouldn't be attempted without one unless CFII is in the right seat using it as an instrument training trip!

Frequent (fun/holiday) trips - 400-700 mile radius, we currently travel a lot in this range by car and by airline (more by car as we take the family dog with us). Long Beach-> El Paso and Long Beach-> Sonoma County will be quite regular jaunts.

Less Frequent (fun/holiday) trips KLGB->KMGY (family here, probably 3-4 trips a year, also a business office here to help mitigate costs), Seattle/Vancouver, probably a Caribbean trip, some east coast stuff, Wyoming/Montana, explore America etc. That Dayton flight makes me want FIKI (we get a lot of thin low-level light icing layers in Ohio in the winter).

Work trips (more on this later) - We do go all over the USA (and Canada), but I don't currently travel on a regular schedule. Most frequent trips would likely be up to Bay Area. I would say for now assume 20% of trips are work, 80% pleasure (I know, the opposite of what you want to write the thing off!).

So I've been looking at various options, something that will keep me busy for the next 8-10 years (I'm more of a subscriber of "buy your last plane first" as much as is realistic), but something I can realistically get insurance on as a "very low time" guy. When I say "get insurance", I mean if it is more than $1,500 a month to insure it, I would call that "not insurable" given a hull value of say 300-400K.

One which many of you will be familiar is the DA42 (2.0 or NG, I think -VI is way out of budget, although I lust after the -VI badly...)

A few pointed questions:

1. Imagine someone who has, say, 70 hrs of DA40 time and got their MEL on a 42 and is ready to start instrument training, and went to buy a 42. How insurable / how horrific will the bill be if there is going to be a CFII in the other seat for 40+ more hours while I get the instrument? I'd like to get a preferred insurance contact from a 42 owner just to fish this further if possible?

2. While I own a piece of my company, my travel at the moment is not consistent and not frequent enough to comfortably exceed the business use requirements (as I understand them) to stay safe RE: the tax man vs. how much we plan to use the plane for pleasure. If anyone has any suggestions on either the best way to structure this (put the plane in a LLC and rent it back to myself?!?), or if there is even a way to mitigate the financial burden at all as a non-business user the majority of the time, I am all ears. Any tax/accountant people that come recommended for this particular scenario?

The other planes on "the list" at the moment are - Cessna 400, Mooney Ovation or Acclaim/Bravo, Piper Malibu (doubt I am insurable), Cirrus SR22T/TN

I really appreciate everyone who has contributed to the forum over the years, it has been a great source of information and entertainment (particularly Colin's posts/blog, Antoine's adventures and recent EA400 shenanigans, and Jaunty's videos!). Thank you in a advance for any comments, suggestions, therapists you can direct me to, etc. :mrgreen:

-Dave
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shorton
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Re: Plane ownership and ancillary questions

Post by shorton »

Dave, congratulations on getting started on your PPL. Angel City Flyers is indeed a great group of people. My plane, N825US, is part of the rental fleet there.

I may well be interested in a co-ownership situation in a DA42 at some point. I got my MEL in a 42, but have not looked at insurance issues in that plane. No doubt others here are very familiar with current insurance costs.

As for ownership structure, I have lots to say about that. I'm an aviation attorney and CPA. My practice is devoted to aircraft tax issues. The benefits you can achieve with even 20% business use are potentially great provided the ownership and operating structure is set up properly and good records are kept. I'd be happy to discuss this more whenever you would like.

Scott Horton
dwm80

Re: Plane ownership and ancillary questions

Post by dwm80 »

Thanks for the reply Scott!

I would love to talk shop with you (and happy to pay for your professional opinion).

My email address is dmadding atsign gmail dot com (spelled out to try to dodge the spambots as best as possible 8) )

I haven't flown your bird but I will look for it on the ramp tomorrow morning. Thus far I have the most time in N626ST, and some time in N176DS and N385DS.

-Dave
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Re: Plane ownership and ancillary questions

Post by carym »

Dave,
Good luck on your training. You are off to a good start. For 2 people only, the DA42 is a great traveling plane. I had 900 hours in mine and flew it all over the US (including Alaska). You can read my Alaska blog at:
http://mariashflying.tumblr.com

I don't think that insurance will be much of an issue once you have the required number of hours. I had 700 hours of twin time (in my C310) when I got the DA42, and insurance only required 5 hours of dual in the DA42. I suspect that insurance will require a minimum of 50 hours twin (DA42) time to get insured. Expect that insurance costs will be about 1.1% of hull value + about $500/yr liability. The best way to get an answer to the insurance question is to just give AVEMCO a call to get a good idea.

I think you have to be reasonable about the costs. Owning a plane is not cheap, even if you fly >100 hours/year. While Scott may be able to help with the taxes, it will still be expensive. Fixed costs (hangar, insurance, annual) alone will exceed $15,000/yr. Then there are things that seem to break, even on relatively new planes (I had to replace both ECUs, starter motor, gear and clutch every 300-600 hours, etc). If you understand and have realistic expectations of the costs, go for it. You only live once.
Cary
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Alaska adventure: http://mariashflying.tumblr.com
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Re: Plane ownership and ancillary questions

Post by CFIDave »

For insurance, AVEMCO quoted us a ridiculous $17K/year :scream: to insure our DA42-VI. So please don't depend on them to get an idea of what insurance will cost.

Instead, use an independent insurance agent who can shop your policy to multiple underwriters; our premium on a relatively-high hull value DA42 is a fraction of that.
Epic Aircraft E1000 GX
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ATP, CFI, CFI-I, MEI
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Re: Plane ownership and ancillary questions

Post by carym »

CFIDave wrote:For insurance, AVEMCO quoted us a ridiculous $17K/year :scream: to insure our DA42-VI. So please don't depend on them to get an idea of what insurance will cost.

Instead, use an independent insurance agent who can shop your policy to multiple underwriters; our premium on a relatively-high hull value DA42 is a fraction of that.
I agree, AVEMCO quoted me about twice what I eventually paid. I just suggested AVEMCO because you can find out relatively fast whether or not you are insurable, and what requirements they need for insurance. I have always used Eastern Aviation Insurance Specialists for my DA42, and they have been able to get me reasonably good rates for the last 9 years.
Cary
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S35 (1964 V-tail Bonanza)
Alaska adventure: http://mariashflying.tumblr.com
dwm80

Re: Plane ownership and ancillary questions

Post by dwm80 »

Thanks carym and CFIDave for the responses.

I will contact Avemco to get a rough idea, and then take the number with a pinch of salt.

Carym I hear what you are saying RE: ownership costs. We weren't a very religious family until around annual time on that T210 :mrgreen: Turbo rebuild and gear work costs WHAT?!!? :scratch:

I think our interest is mainly access and the ability to stay somewhere for an extended time while not incurring excessive daily charges from the rental company. If ACF have a 42 ready for me to take on long trips on fairly short notice / don't absolutely have to have the plane back by x time on y date, and I'm not getting hit with onerous daily minimums, I agree it may make more sense to rent. I think $40,000 of non-business use is doable in a year, anything beyond that and I'm gonna have some splainin' to do :D

I was just researching and roughly (perhaps optimistically?) figured direct operating costs for a NG would be around $50 (engines) + $70 (fuel) + $25 (props) + $50 (maint+misc) = $195/hr

2.0 look to be about $40 more /hr on top of that but that doesn't account for the recent TBR increase (and neither do the NG numbers as I think TBO went up on the AE300 as well), so maybe it is down into the $2x /hr increase.

$40,000 is 100 hours wet (retail cost) worth of renting a 2.0 from ACF so it does beg some thought, and it also makes a shared situation or equitable leaseback (do these exist or are total unicorns I wonder...) more interesting. I suspect with hangar and financing costs, break-even vs. renting (not factoring in daily minimums on the rental and any scheduling opportunity costs) is probably 100 hours. If one could split fixed costs (financing, hangar/tie-down, insurance, etc), things get more enticing.

I went and took a close look at the 42 in the hangar today at ACF... I really love the look of these guys (not everyone agrees, but there is no accounting for taste I suppose!).

Speaking of seeing things around ACF: Here is Scott's bird getting a bath and a wax this morning: http://i.imgur.com/tYjE18Z.jpg
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Re: Plane ownership and ancillary questions

Post by Colin »

Obviously, faced with a similar question and similar missions (er, I had no desire to go to El Paso, but we did Napa, Vegas and Sedona) I bought the DA40.

Instrument rating will make a BIG difference in your insurance cost. I believe in the DA40 I went from $3,800 a year to $1,800 a year, which paid for my training. Currently I am paying $4,300 a year for the DA42's $350k hull value. I only had 20hrs in it when they let me lose solo, so I think it is an eminently insurable aircraft. (Avemco quoted me $25k, and they really didn't want to do it.) I can send you my insurance information if you want.

I looked pretty carefully at the DA42 options (I have a spreadsheet if you want it). Buying a new -VI made no sense at all to me. So I have a plane I bought for $300k and I will put a couple hundred into it at the end of the summer. It won't be as fast as a -VI, but I have never been about getting those last ten knots of speed, I like being in the sky. And there's the weight increase, but I am down to two people, three sometimes. In the end, I'll have a plane that I've put $500k in and I think I'd be able to sell it for a little more than that because it will be an oddball (lot of recent tech, older airframe). We'll see. As soon as the first used DA62 is on the market I know that I will want to start a spreadsheet for that.

It sounds like you are going to get enough advice about the tax stuff. A decade ago when we bought our DA40 it was *much* easier. I flew 51% out of the state for the first year and didn't have to pay sales tax. I just logged those flights and said I was looking at real estate, since we had made some money flipping some acres near 29 Palms. So we were ostensibly in the real estate investment business and even made a few more investments. When I bought the new plane I looked into it and California (at least) has gotten *really* tough on that stuff. Advocate, which did my tax consulting, had a client that had to get a notarized letter from the client he had flown to see in Phoenix. Uh, that's not going to go over well with *any* of my clients. So the current plane is a hobby expense. We're looking into other options, but it just got really, really tough.

One of the DA40 pilots on the old board (can't remember if he made the hop to the new one), Ralph M., wanted to step up. He wanted a Malibu Meridian but his insurance agent said, "Get a Saratoga, fly that for a year, then we can get you into the Malibu." So he did that. I saw last year that he had gotten rid of the Malibu and I asked what happened. "It was one too many annuals at $25k a pop. I was coming up on the next one and couldn't stomach it."

Ping me if you want to go for a flight. I'm trying to fly every other day and I am often at LGB (cheapest fuel nearby). In fact, I'll be there tomorrow for an FAA Seminar at AirFlite. I have a great insurance broker (tried three), too, if you want to ask her for an estimate.
Colin Summers, PP Multi-Engine IFR, ~3,000hrs
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Re: Plane ownership and ancillary questions

Post by Colin »

I love Cary's Alaska trip. It's the first write up that sparked any interest in me to do a flight up there. (There's a COPA flight where they go to the polar bear area, that looks pretty cool.)

That should be in your signature block, Cary.
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Re: Plane ownership and ancillary questions

Post by carym »

dwm80 wrote: I was just researching and roughly (perhaps optimistically?) figured direct operating costs for a NG would be around $50 (engines) + $70 (fuel) + $25 (props) + $50 (maint+misc) = $195/hr
I think your estimate of direct costs along with my estimate of fixed costs is about right. I tried for about 8 years to get a partner. Problem is there aren't that many pilots who are twin rated, and once they found out how much more it costs to operate a twin compared to a single they lose interest. See if you can manage a used DA42 by yourself and i don't think you will be disappointed.
Cary
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S35 (1964 V-tail Bonanza)
Alaska adventure: http://mariashflying.tumblr.com
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