Leaseback Agreement

[Fly45]

I'm looking to speak to anyone who might have experience with a leaseback/marketing agreement situation with their Diamond to a local flight school. Considering putting my Diamond on the flight line at a local school, but would love to speak with anyone who has some previous experience/guidance. Thanks in advance for your responses.

[chili4way]

Why are you considering this?
How much do you fly your plane per year?
What year was your plane built? Lycoming or Austro?
Who performs your maintenance?

[Fly45]

I know most people aren't huge fans of leasebacks, but my friend and I who own the plane together are currently working on our own ratings (both PPL for now) and thought this might be a good way to offset some of our own costs. More of a means to an end situation...
We plan to put a couple hundred hours on the airplane between the two of us on our own - our flight school would obviously add much more if it rents well. It's a 2008 with a Lycoming IO-360. The maintenance is all performed by the mechanics at our flight school.
Like I said, it's a consideration and we're looking for someone who has experience to help weigh the pros and cons, but we welcome any/all feedback. Thanks.

[chili4way]

Are there other similarly configured DA40-XLS airplanes at the school? This can affect scheduling and availability for your training.

Once your plane goes on the flight line, it will require the equivalent of an annual inspection every 100 hours, something not required for personal use and training. You'll also need to accrue for an engine overhaul faster. Consider developing a multi-year budget that includes items beyond the "50-hour oil changes" that are listed in the aircraft maintenance manual (AMM). It would be wise understand the income tax (and possibly property tax) implications of the arrangement, possibly with professional assistance.

A common concern in leasebacks is how well the plane (particularly its engine, tires, brakes, and interior) will be treated by students and their instructors. Who pays for the hangar, Garmin subscription, cleaning supplies, may be important details.

Take care there are no misunderstandings and no surprises on the legal, insurance, financial and operational/scheduling aspects of the leaseback.

[TimS]

I doubt it will pencil out. I did it before with an SR20, the break even for the additional costs (insurance, MX...) was around 100 hours a year; and I managed to lease it out only 150 hours a year. So it did reduce my costs some.
Downside, I was flying 150 hours a year, if there are two of you now, I doubt the plane will be available enough to make the math work.

Tim

[Rich]

Many of us (yes, I include myself) will give you all kinds of downsides. We're what was once called "nattering nabobs of negativity" on the subject. I hope you can find someone who feels it worked for them and get their specific input, which is what you asked for. Don't limit your search to just Diamond owners.

[tjmoody]

Steve - Apologies in advance that I am going to add to the negative arguments. In a previous life I had a Mooney M20J on lease back at a flight school. The flight school really did a good job on getting the rental hours ... 400-450 for a couple of years. BUT even with that and a lot of analysis in advance convincing myself it was a reasonable economic decision, it did not make sense. In fact once I took it out of the lease back (I gave it 2+ years), it was less out of pocket to just own it and fly it outright. The key issue was maintenance. Every time something broke that couldn't be deferred, there was pressure to get it fixed so it would be flying again and generating revenue asap. Despite a lot of effort and evaluating every maintenance decision, I couldn't control the costs such that it was profitable. Other costs like insurance are also much more expensive but I knew that going in.

I accept that a Mooney is arguably a more complex plane with more systems to fail than a DA40. So your experience may be different but I came to the conclusion if owning a flight school plane was a reliably positive investment, the flight schools would do it themselves.

[Fly45]

Regardless of the perspective commentary (pro and con) I appreciate the feedback that you all have lended to the discussion. We've floated this in other forums as well (thanks for the suggestion, Rich) and have heard similar mixed perspectives. We're well-prepared to own/fly the plane privately between the two of us, but we wanted to gauge the experience of others who may have weighed a similar situation at some point in the past. Thank you all.

[DiamondMike]

Having observed flight school leaseback operations for years, I can assure you that you will not make money or even break even doing it. In the 1980’s with favorable tax provisions, it was possible to make money, but no more.

At best, a leaseback allows you to own an airplane that you could not otherwise afford by yourself.

With the current supply chain parts availability problems, your airplane could sit unused for months with no revenue.