Selling block time. Anyone done it? Experiences?

[khedrei]

I have an opportunity to sell block time on my 231 to an experienced Mooney Pilot.  He owned several Mooney's in his lifetime.  He bought a 172 on floats recently to get to and from the cottage and I think he is kind of regretting it.  He is also my insurance broker and has helped me out immensely in looking for this plane, as well as getting a decent rate with the insurance company for my first airplane.  I know another Mooney pilot that has done the same thing and he said it worked out well for him and really helped cut down the costs of flying.  Curious what this community's experience is.

Questions I have:

-Has anyone done it and what are your experiences? 

-If so, do you have a copy of a "block time agreement" you could post that I could reference to make sure I don't miss anything should I decide to go ahead with this?  Did you do the agreement wet/dry, hobbs time/air time? 

-What do you think a fair rate would be?  In Canada I think $120/hr dry would be pretty fair.  172R/S models rent for $165 to $170 at this local FBO which is a wet rate.  Also have to add 13% sales tax onto that, so if I did mine including tax then I'm pretty competitive.

Thoughts?

[peevee]

We did on our last 231 to a previous partner.  I wouldn't really do it again.

I think 120 dry is too cheap. The 231 is much more expensive than a 172 to maintain and operate. I wouldn't consider less than about 180/hr

[RobertGary1]

Id be curious how he structures the insurance. When I looked at it the additional insurance for renting out the plane to an individual pretty much ate away anything I'd make. Even though it's just one personal they consider it a bit of a commercial act. 

He cant be covered under the open pilot warrant because it requires the pilot not have regular access to the plane (it's only for occasional use and not for hire)

 

-Robert

Edited June 16, 2017 by RobertGary1

[peevee]

10 minutes ago, RobertGary1 said:

Id be curious how he structures the insurance. When I looked at it the additional insurance for renting out the plane to an individual pretty much ate away anything I'd make. Even though it's just one personal they consider it a bit of a commercial act. 

He cant be covered under the open pilot warrant because it requires the pilot not have regular access to the plane (it's only for occasional use and not for hire)

 

-Robert

Ours was named insured on the policy. Cost us like 400 a year iirc. Another reason 120 isn't enough.

[Oldguy]

If he is your insurance broker, he should know what needs to be done to cover not only the plane when he flies it but also you for anything which may occur when he does. I am not sure how the laws are in Canada, but for financial protection, many of us have our planes in an Limited Liability Corporation (LLC) to protect personal assets. Whether that works as designed or not is a question I hope to never have to answer. He should cover all of those costs up front.

If you have had your plane for more than a year, you should have some idea of hourly operating costs including reserves. I agree the $120 CDN seems a bit low as my J runs about that with a lower engine reserve. If the 172 R/S rents for the price you show in your post, you are WAY under priced. Remove the fuel burn costs from the Cessna and what is the hourly rate? $50/hour for fuel seems a bit high, but I am not aware of the cost of fuel. Even so, that would put your K on a par with a 172. 

Also, if this is a friend/associate, being competitive should not be considered, but if this is just a business deal, everything changes. Likely the insurance will as well.

Just thoughts from someone who once did leasebacks with a local FBO. Never again.

[peevee]

I guess it also depends on your goals.

Why are you doing this? Is it to help a friend out ? then you might break even at 120 and that's ok. Is it to get the plane flying regularly? Then same story, if you break even and the plane doesn't sit it's a win/win. Are you trying to help offset your fixed costs? If that's the case you're probably costing yourself more at 120 than offsetting. We easily ran 120/hr operating costs on our 231. Maybe yours is less of a mx hog.

 

I think most of us owners are more emotionally invested. If it was pure business then we'd leaseback and let the plane pay for itself and get beat to death.

[steingar]

Talk to your insurance agent and be honest about it.  I was once thinking about leasing an aircraft through an FBO.  My insurer had no difficulty talking me out of it.  I can't imagine they'd be all that happy about your arrangement.  Is your aircraft in an LLC or some other liability shielding arrangement?  It had better be, or you get to be on the hook when your pal plows your nice airplane into a school full of kiddies.

Who pays for repairs?  What if he breaks it?  What if he breaks it doing something wrong, or stupid?

I would happily bring someone in as a partner without a buy-in, I've done it before.  But no way would I consider what the OP is discussing.

[FBCK]

I had a guy ferry my airplane a couple of years back, experienced Mooney pilot, fried the engine with 200 SMOH.  I would never let anyone fly my 231 again unless I have absolute trust in them and their ability to fly a 231.  Its just a little more temperamental then most airplanes, with someone who really knows how to run it, its a great plane.

[RobertGary1]

I also considered the increased maintenance cost. With a single pilot I can change a tire etc under preventative maintenance. But if something went wrong when someone else flew the plane it's too much liability. So when I had a partner everything needed to be done by an insured mechanic, even oil changes.

-Robert 

[Mooneymite]

Just sell it to him with a buy back agreement based on months/hours.  It's his until it's yours again.

Seller financing might work.