How viable is it to buy a heli with the intent to lease to a local School/charter?

[WillyPete]

I'm curious regarding those who have bought an aircraft personally, but with the intent of recouping most of the cost of doing so by renting to a local business rather than just letting it sit in a hangar in between their flights.

Does it make sense to buy a popular helicopter that a local school might use frequently (Like an R22/44, G2), or that a charter or tour company might use for busy days (B206 LR, EC130?)?

Or does it make more sense to buy a more specialist aircraft for things like lifting, fire-fighting, filming, etc with the hope of being the only one around who can do this work?

Basically I'd imagine the idea being like a venture capitalist, hoping your ability to provide an asset will enable the company to benefit from it.

[chriswhi]

Don't do it, the income you will receive will be far less than the increased maintenance cost of your aircraft being flown by others who probably will not take as much care of it as you would

[Hughes500]

Willy
If you do then you should ask the men in white coats to come and pick you up at the same time

[B2N2]

with the intent of recouping most of the cost of doing so by renting to a local business

That should read:

with the intent of recouping SOME of the cost of doing so by renting to a local business

After the increased MX you're looking at 10's not 100's of pounds going your way. If that.

[givdrvr]

Just imagine your cherry helicopter being on the receiving end of a significant rotor/engine overspeed..which is not unusual in the flight school training environment. Hope to God they confess and your first indication isn't engine failure. IF it's reported and even IF the school can cover the significant cost of inspection/repairs your still left with that nice sweet black mark in your aircraft logbook.
This can be done but it's a minefield, and IMHO the profits are slim and IRS is in the habit of looking down on losses associated with leasebacks.

[paco]

When it comes to the UK you are looking at a LOT of hours for early writeoffs.

Phil

[WillyPete]

When it comes to the UK you are looking at a LOT of hours for early writeoffs.

Phil

Not sure what you meant there Phil.

[WillyPete]

Thanks guys.
Was just wondering how some people do this.
I didn't think the lease of the aircraft to another company would cover your costs, unless your contract includes them paying maintenance even on a ration of hours used per party.

[paco]

Based on the experience of an owner I know, it normally takes 10 years to write off such an asset. But if you do over 600 hours per year, it can be done within 3 years. In this case it was a 109 which didn't do that many hours and was written off too early. Large tax bill.....

Phil

[206 jock]

It depends how you see the capital value of the a/c. Based on personal experience, leasing out a Bell 206 on say 300 hr/annum, you cover your variable costs (normal maintenance, insurance etc) and a contribution to a component replacement pot but not much more. So really nothing towards depreciation of the asset. And nothing for the SBs, ADs and random s**t like the 8.33 radio requirement.

I note you say 'personally': bear in mind that many of your costs (maintenance etc) will have VAT added, but you can't charge it out unless you put the a/c inside some sort of registered corporate wrapper.

Whatever you do, don't think you're going to make money from doing this. The best you can hope for is a contribution to your costs. True of an R22 in a flying school, and a Bell 206 on charter work

[John R81]

I note you say 'personally': bear in mind that many of your costs (maintenance etc) will have VAT added, but you can't charge it out unless you put the a/c inside some sort of registered corporate wrapper.





Sorry, not true in UK (though not sure where the OP resides).


As a sole owner (not corporate) if the machine is used solely for lease then you can register (UK HMRC might try to argue otherwise, so you do need to know what you are doing and stick to your guns) and recover the purchase VAT and any further VAT charged on maintenance, replacements, etc. You do then charge VAT on the lease to the school. That means either "no personal flying" or that you lease all the hours on the machine to the school, and you use it yourself like any other self-fly hire would do (and you don't get the VAT back on that use - it is a personal, not a business, expense).


As a sole owner, if you intend some partial use yourself (not as above) you will find HMRC trying very hard not to let you register for VAT. However, if you know the law and stick to it you can succeed. Then you have to estimate private use and you will not recover that fraction of the purchase VAT or VAT on other costs (maintenance, etc). You have to monitor the actual private use, and if you use it more than your estimate then HMRC will claw-back more VAT from you.



And don't forget the business taxes, either!



As to whether you can make money - the number of privately-owned small helicopters mean that schools and charter businesses can access aircraft at a price below break-even for the owner. Many people do this for a contribution to cost, and so you can't break that ceiling.


There are (rare) examples of people making money; they have identified a niche market, they have the right helicopter; they have found a way to control the risks (such as the overspeed mentioned above) and they have a lot of hours on the machine; and you do need a lot of hours to cover the fixed costs and move to profit.

[Flying Binghi]

I'm curious regarding those who have bought an aircraft personally, but with the intent of recouping most of the cost of doing so by renting to a local business rather than just letting it sit in a hangar in between their flights.....



Sorta like having a wife that you rent out to recoup some of the costs..:hmm:






.

[WillyPete]

Thanks again, especially John R81. That was the info I was expecting to see.
Didn't think anyone would make a profit from this, but expected to see some contribution to owner costs and the monthly "mortgage".

[Hot and Hi]

... but expected to see some contribution to owner costs and the monthly "mortgage".
No WillyPete, what we are saying is that most likely your additional (incremental) cost per hire & fly or training hour sold, is higher that the hourly rental fee that you can command.

[500e]

If you need to rent it you cant afford it, the unexpected maintenance can remove ALL the gains, & it will.
Trust flying Binghi, there could be an up side there. :=
Hot & Hi has it

[WillyPete]

No WillyPete, what we are saying is that most likely your additional (incremental) cost per hire & fly or training hour sold, is higher that the hourly rental fee that you can command.

Got you.
So how do the schools not continually lose money on the aircraft they rent out?

[ec155mech]

my old instructor always told me if it floats, flies or f**ks... rent it...


I was looking at doing what you are thinking about doing.. and if I didn't touch the heli I would have had a break even of 250ish hours a year and if I flew it myself, well there goes the neighborhood.


and this was based on maint cost and 5% reserve an hour for unforeseen expenses, but of course you can only have so many unforeseen expenses before the 5% have been eaten away.

[Hot and Hi]

Got you.
So how do the schools not continually lose money on the aircraft they rent out?
They rent it at below-cost-recovery rates from suckers like me and you (admittedly, we have all been there ...)

[Rotor Kop]

I disagree with most of you. I own R22 and R44 helicopters and find them to have a positive bank balance at year end. If there was no money to be made then why are there literally thousands of them flying around our skies????

[WillyPete]

my old instructor always told me if it floats, flies or f**ks... rent it...


I was looking at doing what you are thinking about doing.. and if I didn't touch the heli I would have had a break even of 250ish hours a year and if I flew it myself, well there goes the neighborhood.


and this was based on maint cost and 5% reserve an hour for unforeseen expenses, but of course you can only have so many unforeseen expenses before the 5% have been eaten away.

Thanks for that.
Yes, I've changed nsidered that using it for self fly and renting it to the school only on "busy" days then you'd run a loss. But would that loss be more or less than the cost of renting an aircraft anyway? I guess I'd have to do some more calculations. Adding % of maintenance, insurance, etc.

[WillyPete]

I disagree with most of you. I own R22 and R44 helicopters and find them to have a positive bank balance at year end. If there was no money to be made then why are there literally thousands of them flying around our skies????

Quite a few instances that prompted me to ask this have been with the robinsons.
Schools have a handy replacement when their own birds are undergoing maintenance and during a time of "peak load".
The owners I've chatted to appear to have a similar experience to yours, but I think the profit margins will reduce as the help becomes more expensive/complex.

At my local field, someone there recently overhauled a timexed 44 and seems to be doing well renting it to VVB.