Diamond Share Experience

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tahoemark
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Diamond Share Experience

Post by tahoemark »

Wondering if anyone can give me feedback on their Diamond Share experience. On the surface it seems like a great way to buy a new plane and share the costs. I'm sure there are a bunch of negatives. What are your thoughts?
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Boatguy
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Re: Diamond Share Experience

Post by Boatguy »

I do not have direct experience with Diamond Share as I declined to enter into their agreement. While the concept is sound, I reviewed the Diamond Share agreement after purchasing my plane from Lifestyle Aviation and concluded it was not good value. I have extensive experience negotiating contracts in my professional work and these are the items I found unacceptable. Lifestyle may have changed the agreements since I reviewed them two years ago.

1) Owner agreement may be modified unilaterally at any time by Lifestyle.

2) Owner agrees to give Lifestyle 20hrs of use of their airplane per year at no charge.

3) Owner agrees not to offer to sell their plane directly (i.e., without paying Lifestyle a commission) to any Diamond Share member, past, current, or prospective. Owner agrees to give Lifestyle aviation a 30 day notice and first right of refusal as broker if they ever decide to sell their airplane.

4) Owner agrees to put the Diamond Share logo on their airplane.

5) Owner pays Lifestyle a one time $5,000 fee to use the program. Each "member" must pay Lifestyle a $200 initiation fee and a $700/yr annual fee.

6) The lease rates proposed by Lifestyle were absurdly low from an owner's perspective.

For agreeing to all of the above, Lifestyle will provide a Google calendar for scheduling the airplane and solicit new "members".

Dry lease agreements are not a new concept. Early in my career I worked for an airline and provided pricing for dry lease agreements of various jet aircraft. With that experience. I developed my own agreement and currently dry lease a block of hours annually to another pilot. We use Flight Circle ($10/mo) for scheduling software which is far more comprehensive and tailored to aircraft sharing than a Google calendar. I found potential members (more than I wanted), with a listing on Craigslist and notices posted at my airport and another airport nearby.

Conceptually, a dry lease of your plane to other pilots is a sound concept. There are a number of tax issues which vary from state to state and then of course there are the IRS tax rules for business use of aircraft which will reduce the percentage of the expenses which you can deduct in order to create a tax loss to offset other income. These need to be well understood before you embark on a dry lease program.

You are de facto running a new business in which you are the service provider. Your "members" are not equity partners who will share in the expense and logistics of aircraft ownership. They are customers who have purchased a block of hours and expect the plane to be airworthy. Your plane will accumulate flight hours a lot faster which means more service and you are the one responsible for scheduling and paying for the service. Members need not be abusive to contribute to normal wear and tear which requires additional service. You are responsible for getting the plane to the shop, and back to your home base (unless you are fortunate enough to have a service center on your airport) and more service means more downtime.

So there are two issues to consider. Do you want to be running a dry lease business? If so, is Lifestyle Aviation providing sufficient value to you in running that business to justify the terms of their owner agreement?
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AndrewM
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Re: Diamond Share Experience

Post by AndrewM »

I also looked into this and decided it was not worth it. At the time I do not believe there was the condition to give Lifestyle 20hrs PER YEAR at no charge!!

In any case with my first DA40 I found someone easily to share hours but ultimately did not do that. I am now in a partnership with another DA40 for almost 3 years and it works out just great. We just use google calendar (free), and charge ourselves a wet rate per hour based on HOBBS time. We split out the tasks, I handle maintenance and software updates and my partner manages the accounts. The agreement we use was something that AOPA provided my partner and we modified that slightly to suit our purposes.

If you run with the Diamondshare program, you would also be wise to get professional aviation tax advice (which you should absolutely get anyway prior to buying a plane) depending on your personal circumstances, and if you are going to rent out blocks of time to others.
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Rick
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Re: Diamond Share Experience

Post by Rick »

I had exactly the same experience as Andrew. I bought my first DA40 with a single partner, and we consulted an aviation attorney to get it set up. We split all the costs 50/50 and used Google calendar to schedule the plane. We set it up initially so that we each "owned" alternate weeks (Friday thru Thursday, IIRC), which meant we had first dibs on our own time but could trade as necessary. We were friends and it was never a problem for either of us to fly when we wanted or needed to. He was an accountant and did all the financial and tax work, and I took care of keeping up with all the maintenance because I enjoyed that. We each paid an hourly rate into an account, and then split all the fixed costs. I'm sure we would still be in that arrangement had his job not taken him to the other side of the country!

If you can make your own arrangement like that with someone you can get along with, I don't see what value the DiamondShare program brings to the table. If you just need help finding a partner, it seems like there are better ways to make that happen. Either way, as others have said, you should get some professional advice to know exactly what you are getting into and make sure you have covered all your bases, no matter which way to decide to go.
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Re: Diamond Share Experience

Post by tahoemark »

Russ, Andrew and Rick great information and feedback, sounds like if I want to go this route a DIY solution is better. Russ, I'm also in California. I would be interested to know your thoughts on the tax aspects of doing a dry lease situation. Russ, I'm also stumped figuring out what boat you are sailing?
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Boatguy
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Re: Diamond Share Experience

Post by Boatguy »

tahoemark wrote: Sat Oct 03, 2020 7:26 pm Russ, Andrew and Rick great information and feedback, sounds like if I want to go this route a DIY solution is better. Russ, I'm also in California. I would be interested to know your thoughts on the tax aspects of doing a dry lease situation. Russ, I'm also stumped figuring out what boat you are sailing?
I replied via PM.
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AndrewM
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Re: Diamond Share Experience

Post by AndrewM »

Russ you can't reveal the yacht type by PM... I continuously wonder that as well!
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Mdm0515
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Re: Diamond Share Experience

Post by Mdm0515 »

Hi
Recently terminated a DiamondShare agreement on my owned airplane and am happy to offer perspectives and experiences as useful. Best done individually and through PM
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Mdm0515
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Re: Diamond Share Experience

Post by Mdm0515 »

Boatguy wrote: Sat Oct 03, 2020 3:54 am I do not have direct experience with Diamond Share as I declined to enter into their agreement. While the concept is sound, I reviewed the Diamond Share agreement after purchasing my plane from Lifestyle Aviation and concluded it was not good value. I have extensive experience negotiating contracts in my professional work and these are the items I found unacceptable. Lifestyle may have changed the agreements since I reviewed them two years ago.

1) Owner agreement may be modified unilaterally at any time by Lifestyle. Not my experience

2) Owner agrees to give Lifestyle 20hrs of use of their airplane per year at no charge. Not in effect for me

3) Owner agrees not to offer to sell their plane directly (i.e., without paying Lifestyle a commission) to any Diamond Share member, past, current, or prospective. Owner agrees to give Lifestyle aviation a 30 day notice and first right of refusal as broker if they ever decide to sell their airplane. Not my experience

4) Owner agrees to put the Diamond Share logo on their airplane. Yes

5) Owner pays Lifestyle a one time $5,000 fee to use the program. Each "member" must pay Lifestyle a $200 initiation fee and a $700/yr annual fee. No annual fee in my experience

6) The lease rates proposed by Lifestyle were absurdly low from an owner's perspective.

For agreeing to all of the above, Lifestyle will provide a Google calendar for scheduling the airplane and solicit new "members".

Dry lease agreements are not a new concept. Early in my career I worked for an airline and provided pricing for dry lease agreements of various jet aircraft. With that experience. I developed my own agreement and currently dry lease a block of hours annually to another pilot. We use Flight Circle ($10/mo) for scheduling software which is far more comprehensive and tailored to aircraft sharing than a Google calendar. I found potential members (more than I wanted), with a listing on Craigslist and notices posted at my airport and another airport nearby.

Conceptually, a dry lease of your plane to other pilots is a sound concept. There are a number of tax issues which vary from state to state and then of course there are the IRS tax rules for business use of aircraft which will reduce the percentage of the expenses which you can deduct in order to create a tax loss to offset other income. These need to be well understood before you embark on a dry lease program.

You are de facto running a new business in which you are the service provider. Your "members" are not equity partners who will share in the expense and logistics of aircraft ownership. They are customers who have purchased a block of hours and expect the plane to be airworthy. Your plane will accumulate flight hours a lot faster which means more service and you are the one responsible for scheduling and paying for the service. Members need not be abusive to contribute to normal wear and tear which requires additional service. You are responsible for getting the plane to the shop, and back to your home base (unless you are fortunate enough to have a service center on your airport) and more service means more downtime.

So there are two issues to consider. Do you want to be running a dry lease business? If so, is Lifestyle Aviation providing sufficient value to you in running that business to justify the terms of their owner agreement?

I’m now rolling off a full year of DS experience which I’m not renewing and am happy to answer any specific questions if useful
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Re: Diamond Share Experience

Post by CFIDave »

Just to provide some additional information for prospective DiamondShare Owners:

1. Rather than being "absurdly low," the lease rates for Members are set so that with 2 Members income is sufficient to cover the Owner's cost of the note on their brand new Diamond aircraft. With 3 Members the income covers almost everything so that the Owner only ends up paying for the cost of his/her own fuel use. Rates tend to be set higher at airports with high hangar rental rates (assuming a hangar is available in which to store the plane). DiamondShare is one way to get other pilots to help pay for your airplane, but unlike leaseback to most flight schools, DiamondShare Members generate sufficient income for you to purchase a new plane (and experience has shown that Members actually take good care of the plane).

2. LifeStyle will recruit the Members (subject to owner approval). If you already have 3 qualified pilots at your airport who are ready to sign one-year dry leases that you've created, and you've figured out how to fairly share and insure your plane with such an arrangement, then sure -- go ahead and try the DIY route. Otherwise LifeStyle provides all of the program administration, insurance, and Member recruiting/annual renewals.

3. The 20 hours/year for LifeStyle to fly your plane are seldom used -- and are mostly demo flights for prospective Members to encourage them to sign up and become DiamondShare Members for your aircraft.

The DiamondShare program has existed for many years, with a very high renewal rate for both Members and Owners. Most people leave the program only when they move due to changes in their job or life circumstances.
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