Hangar ownership

[AndreiC]

Hello everyone,

I am in the process of buying a hangar, and I hope to ask here about potential pitfalls since it is a not-insignificant chunk of money.

Longer story. For the first 18 years of living in the Madison, WI area I owned a stolid Cherokee, and I just kept it tied down outside at the local field 15 minutes from my house. Hangars there are basically impossible to come by, and way too expensive for what I could afford, so I never even asked.

Three years ago I moved up to my current M20E, and everyone said it would be important to hangar it, so I looked around and the only place I found a hangar to rent was at a field 35 minutes from my house (20 minutes farther from the old airport). The guy I rented from owned two hangars at the time, he put me in the nicer of the two (insulated and heated, nice bifold door), where I was for the better part of the first year. Then he sold that hangar, and moved me to his second, less nice one, but still quite OK. Then, during the following two years I stayed in that one while the hangar changed ownership twice, first the original guy sold it to someone else who thought he would put a Cirrus in there, but then figured the Cirrus would not fit (too tall for the door), and sold it back to the original guy. Now the current owner asks me if I want to buy it from him (he is nice and gives me first chance at buying it since I am in there already), and since I am tired of all the time living in fear that the hangar will be sold and I'll be kicked out, I am thinking of buying it.

The hangar is quite solid, though the concrete floor has got a few fairly long (but not very deep) cracks, and it is not insulated. The door works fine, but it is rather old, not a bifold. Several of the nearby hangars have the same door system and they seem to be ok. I checked on the land lease, and there is no expiration, the leases are renewed every 5 years and the administrator of the airport (it is a private airport, even though it is public-use) says the owner has no intention of changing that. No one was ever kicked out. In fact the airport just put in a new taxiway for about 20 new, larger and nicer (and much more expensive) hangars that are being built.

Money-wise it looks like I would come slightly ahead if I calculate money at around 5% interest. (I would buy it with money down, but I am thinking in terms of what money could return.) There is another guy who keeps his Cessna in the hangar even though he never flies it, and he would pay me a small amount of rent. (I am happy to let him stay, he bothers nobody.)

Other than real-estate taxes, land-lease, and electricity it seems like there are no other fees to pay. What else should I consider?

Give me your thoughts please on potential pitfalls, things I might not have considered, etc.

For reference, at the two bigger airports in town a T-hangar rents for $750-1000/month, which is way outside my price range. Where I am now (the hangar I am thinking of buying) is much larger than a T-hangar; a Mooney and a Cessna fit with plenty of room to spare, there would probably even be room for a third plane if one were to squeeze them. I am currently paying $250/month. The land-lease fees would be $1300/year, real estate fees $250, the asking price (which probably is non-negotiable) is $65k.

Thanks.

[1980Mooney]

Since you are borrowing money you will need to insure it for loss. And since you are subletting I would think you will need liability on the hangar too. If the roof caves in during a heavy snow and crushes the Cessna, the owner will sue you.  And make sure the Cessna has liability insurance too. 

[Fritz1]

never owned a hangar, would run this by real estate attorney as well as an aviation attorney, if you are an AOPA member you can contact their legal department, think the risk is not in the price and not in the hangar falling apart but in the legalese, funny things happen around airports

[midlifeflyer]

Have you considered having an attorney read the lease, assuming that you have not yourself read it completely and understood everything in it?

[NewMoon]

8 hours ago, AndreiC said:

Hello everyone,

I am in the process of buying a hangar, and I hope to ask here about potential pitfalls since it is a not-insignificant chunk of money.

Longer story. For the first 18 years of living in the Madison, WI area I owned a stolid Cherokee, and I just kept it tied down outside at the local field 15 minutes from my house. Hangars there are basically impossible to come by, and way too expensive for what I could afford, so I never even asked.

Three years ago I moved up to my current M20E, and everyone said it would be important to hangar it, so I looked around and the only place I found a hangar to rent was at a field 35 minutes from my house (20 minutes farther from the old airport). The guy I rented from owned two hangars at the time, he put me in the nicer of the two (insulated and heated, nice bifold door), where I was for the better part of the first year. Then he sold that hangar, and moved me to his second, less nice one, but still quite OK. Then, during the following two years I stayed in that one while the hangar changed ownership twice, first the original guy sold it to someone else who thought he would put a Cirrus in there, but then figured the Cirrus would not fit (too tall for the door), and sold it back to the original guy. Now the current owner asks me if I want to buy it from him (he is nice and gives me first chance at buying it since I am in there already), and since I am tired of all the time living in fear that the hangar will be sold and I'll be kicked out, I am thinking of buying it.

The hangar is quite solid, though the concrete floor has got a few fairly long (but not very deep) cracks, and it is not insulated. The door works fine, but it is rather old, not a bifold. Several of the nearby hangars have the same door system and they seem to be ok. I checked on the land lease, and there is no expiration, the leases are renewed every 5 years and the administrator of the airport (it is a private airport, even though it is public-use) says the owner has no intention of changing that. No one was ever kicked out. In fact the airport just put in a new taxiway for about 20 new, larger and nicer (and much more expensive) hangars that are being built.

Money-wise it looks like I would come slightly ahead if I calculate money at around 5% interest. (I would buy it with money down, but I am thinking in terms of what money could return.) There is another guy who keeps his Cessna in the hangar even though he never flies it, and he would pay me a small amount of rent. (I am happy to let him stay, he bothers nobody.)

Other than real-estate taxes, land-lease, and electricity it seems like there are no other fees to pay. What else should I consider?

Give me your thoughts please on potential pitfalls, things I might not have considered, etc.

For reference, at the two bigger airports in town a T-hangar rents for $750-1000/month, which is way outside my price range. Where I am now (the hangar I am thinking of buying) is much larger than a T-hangar; a Mooney and a Cessna fit with plenty of room to spare, there would probably even be room for a third plane if one were to squeeze them. I am currently paying $250/month. The land-lease fees would be $1300/year, real estate fees $250, the asking price (which probably is non-negotiable) is $65k.

Thanks.

Great deal

[Justin Schmidt]

9 hours ago, AndreiC said:

no expiration, the leases are renewed every 5 years and the administrator of the airport (it is a private airport, even though it is public-use) says the owner has no intention of changing that

Until they do...developers and/or municipalities/county/states have a way of breaking people.

5 year land lease is the expiration and in my opinion not even remotely worth that risk. In the hopes that it is renewed.

Amortize the cost and get break even, that's what the minimum land lease should be and what I would want in an agreement.

On another note, planes do not NEED to be hangered as long as they are taken care of and flown. Yes, hull insurance is a little cheaper and much more convenient, especially there in winter, need vs great to have is different.

A wise man once said don't put your balls in a vice just to know what it feels like

[1980Mooney]

1 hour ago, Justin Schmidt said:

Until they do...developers and/or municipalities/county/states have a way of breaking people.

5 year land lease is the expiration and in my opinion not even remotely worth that risk. In the hopes that it is renewed.

Amortize the cost and get break even, that's what the minimum land lease should be and what I would want in an agreement.

On another note, planes do not NEED to be hangered as long as they are taken care of and flown. Yes, hull insurance is a little cheaper and much more convenient, especially there in winter, need vs great to have is different.

A wise man once said don't put your balls in a vice just to know what it feels like

 

11 hours ago, AndreiC said:

 (it is a private airport, even though it is public-use) says the owner has no intention of changing that. 

I missed the point that this is a privately owned airport.  During the past 27 years here in the Houston area I have seen three (3) private airports on the west side of town sold to real estate developers.  I expect that two (2) more will succumb over the next decade.  The problem is that the original owners with a passion for aviation get old or sick.  Their heirs/estate don’t usually share the same passion unanimously. If more than one heir is involved, one heir may want their share of estate monetized now - not willing to settle for the slow drip of lease income vs unexpected repairs. (Especially if there is an unplanned cash call for repairs like a runway).  The only way to settle with the heirs is to sell - generally a developer for alternate use.

That is a risk the you will have to take. - Possibly $65k/5 =$13k/yr.  Maybe you will get lucky and it will be longer. But you said that you were going to finance.  Talk to your lender.  Since the land could possibly be sold in 5 years and the hangar torn down, you may need to secure the loan with your house for instance rather than the hangar.  Same issue with the age/condition of the hangar - you may need to secure the loan with other assets.

[Parker_Woodruff]

Insurance for the structure should be inexpensive in WI, but you'll want general liability coverage added onto that policy since you'd be leasing space to someone.  Budget hangar insurance at $1000 for the structure (will probably be closer to $700) and $400 for general liability.  If you will be moving the other aircraft or otherwise have care, custody, and control of it from time to time, you'll want hangarkeeper's coverage, too.

[Ragsf15e]

13 hours ago, AndreiC said:

Hello everyone,

I am in the process of buying a hangar, and I hope to ask here about potential pitfalls since it is a not-insignificant chunk of money.

Longer story. For the first 18 years of living in the Madison, WI area I owned a stolid Cherokee, and I just kept it tied down outside at the local field 15 minutes from my house. Hangars there are basically impossible to come by, and way too expensive for what I could afford, so I never even asked.

Three years ago I moved up to my current M20E, and everyone said it would be important to hangar it, so I looked around and the only place I found a hangar to rent was at a field 35 minutes from my house (20 minutes farther from the old airport). The guy I rented from owned two hangars at the time, he put me in the nicer of the two (insulated and heated, nice bifold door), where I was for the better part of the first year. Then he sold that hangar, and moved me to his second, less nice one, but still quite OK. Then, during the following two years I stayed in that one while the hangar changed ownership twice, first the original guy sold it to someone else who thought he would put a Cirrus in there, but then figured the Cirrus would not fit (too tall for the door), and sold it back to the original guy. Now the current owner asks me if I want to buy it from him (he is nice and gives me first chance at buying it since I am in there already), and since I am tired of all the time living in fear that the hangar will be sold and I'll be kicked out, I am thinking of buying it.

The hangar is quite solid, though the concrete floor has got a few fairly long (but not very deep) cracks, and it is not insulated. The door works fine, but it is rather old, not a bifold. Several of the nearby hangars have the same door system and they seem to be ok. I checked on the land lease, and there is no expiration, the leases are renewed every 5 years and the administrator of the airport (it is a private airport, even though it is public-use) says the owner has no intention of changing that. No one was ever kicked out. In fact the airport just put in a new taxiway for about 20 new, larger and nicer (and much more expensive) hangars that are being built.

Money-wise it looks like I would come slightly ahead if I calculate money at around 5% interest. (I would buy it with money down, but I am thinking in terms of what money could return.) There is another guy who keeps his Cessna in the hangar even though he never flies it, and he would pay me a small amount of rent. (I am happy to let him stay, he bothers nobody.)

Other than real-estate taxes, land-lease, and electricity it seems like there are no other fees to pay. What else should I consider?

Give me your thoughts please on potential pitfalls, things I might not have considered, etc.

For reference, at the two bigger airports in town a T-hangar rents for $750-1000/month, which is way outside my price range. Where I am now (the hangar I am thinking of buying) is much larger than a T-hangar; a Mooney and a Cessna fit with plenty of room to spare, there would probably even be room for a third plane if one were to squeeze them. I am currently paying $250/month. The land-lease fees would be $1300/year, real estate fees $250, the asking price (which probably is non-negotiable) is $65k.

Thanks.

I would also be careful with the 5 year ground lease. Owning a hangar is really great, but coming up on the end of the lease is miserable.  You can’t be sure they will renew, and the price can definitely change. I have had mine for 7 years, came into it the same way as you (including a Cirrus not fitting), and now I only have 4.5 years left.  It’s not fun having that uncertainty as the airport board won’t even talk about renewing yet as we “still have 4.5 years”…

If they “guarantee” a 5 year renewal then they should be happy to sign a 20 year renewal with appropriate cost increases along the way.  More consistent for both parties, but more important for you because they could easily change their mind in 5 years and sell to someone else.

[PeterRus]

Sounds great except for the land lease part uncertainty. (:

[AndreiC]

Well, I found out more. First of all, the land lease is for 10 years, not 5, I had misunderstood. It is increasing at 3% per year, but otherwise is not subject to abrupt changes. The clock would start when I buy the hangar, so I would have 10 years without worries.

The company that owns the airport is keeping their jet (a Citation) on the field. So they are vested in the airport. And indeed, the airport has seen significant growth in the past 5 years, they have been constructing new aprons and hangars. There are at least 30-40 people who have plunked more than $120k each to build brand new hangars just last year. So I don't think the airport will be sold to a real estate deal soon. Moreover, apparently the town is also vested -- they help with plowing, crack repairs, etc. All in all it seems like a pretty solid situation from this point of view.

I have just become a bit concerned about the asking price, which almost everyone says is kind of high. Another hangar on the field sold 1.5 years ago for $55k, and that one is a steel structure (mine would be wood) and has a bifold door (mine has a rickety contraption that works but is not very solid it seems, though many people in nearby hangars seem to have the same system). The reason the guy selling me the hangar justified the high price was that "construction costs have gone through the roof lately, it would be well over $120k to put together a similar hangar now." But I am not sure that argument is fully justified, he bought the hangar for $50k a year ago.

Any other thoughts?

[Ragsf15e]

I live in a medium cost area and that price is likely reasonable here, but it all depends on the lease.  A beautiful hanger (mine) with 3 years left is worth much less than a semi-rickety hanger with 10. If it makes you feel better, get a construction contractor to look at the door and quote upgrades/repairs so you can budget.  If you’re planning to fly for the next 10 years, Id definitely buy a hanger and not look back.

[AndreiC]

5 hours ago, Parker_Woodruff said:

Insurance for the structure should be inexpensive in WI, but you'll want general liability coverage added onto that policy since you'd be leasing space to someone.  Budget hangar insurance at $1000 for the structure (will probably be closer to $700) and $400 for general liability.  If you will be moving the other aircraft or otherwise have care, custody, and control of it from time to time, you'll want hangarkeeper's coverage, too.

Hi Parker, who would be quoting these insurances? I tried asking my Allstate agent (through which I have my house and car insurance), and they said that in 22 years they never dealt with this kind of thing. 

[Jetdriver]

I just bought a hangar at my home base in Utah and just went through a lot of this. Same 10 year lease but the airport is expanding and there is demand for hangar space so I wasn't overly concerned about renewing the lease. Land lease also increases 3% a year but it was still less than $500 this year. It helps that I got a really good deal on the hangar and was able to pay cash. Having never owned a heated hangar before I have to say its awesome and makes winter flying so much better. My hangar insurance and liability was about $1000 for the year.


 

Edited February 26 by Jetdriver

[Hank]

24 minutes ago, AndreiC said:

Hi Parker, who would be quoting these insurances? I tried asking my Allstate agent (through which I have my house and car insurance), and they said that in 22 years they never dealt with this kind of thing. 

@Parker_Woodruff?

If I had to guess @AndreiC, I would guess either Parker or your current airplane insurance agent would also insure the hangar. 

[201Mooniac]

This thread is making me think, I've never had any insurance on my hangar.  I guess I need to unerstand what I would be insuring as it is just my airplane in the hangar.  I guess I need to understand if we had a big storm that damaged the hangar such that it fell on my airplane would my airplane insurance cover it?  Anything else I should consider insuring for?

[1980Mooney]

@Adrian C

 Cash out per year: $1,500/yr for casualty, liability and hangar- keepers' insurance.  If you are in it for 10 years, you are going to have maintenance costs. - planned and unplanned.  Add $500/yr for Roof, paint, door, floor cracks/foundation, maint etc.  With 3% escalation the Lease is about and average $1,420/yr over 10 yr.  You mention real-estate taxes and "real estate fee = $250".  Is that the annual property tax?  If the current owner is paying $250/yr based on his $50k purchase price, then your taxes may go to $325. And you have electricity - let's say $55/month.

You said in the first post you plan to pay with "money down".  I misunderstood before that you are paying cash.

So you might have annual cash out of about $3,800/year = $317/month.

You are paying $250/month now so I assume the idle Cessna owner will pay you the same. Your ave.. out of pocket cost per month might only be $70. 

You mention maybe a third plane could squeeze in - who is responsible for pulling the planes in and out? (do you have to pay someone to move planes?)  If you have a third plane squeezed in then you basically have no out of pocket expense - maybe some income.

If the cost of money is 5%, then you lose $3,250/yr interest income on your $65,000 cash that was previously earning income. (that is before tax).  So lost income is about $271/month (before tax).    But if interest rates decline (as some hope) then your "lost income" is less.

If the hangar retains value and you get your principal back after 10 years then your "cost" per month is about $340 assuming the idle Cessna pays you $250/month.  If your "tenant" moves out then your monthly cost is $590/month.

Pros

• Either monthly cost ($340 w/ Cessna tenant vs $590 w/o tenant) number seems pretty reasonable.
• If you squeeze a third plane in, it could almost be almost cost free for you.
• If the hangar appreciates $15,000 over 10 years then your hangar monthly cost is $100 less in any tenant case.

Cons

• Possible unexpected maintenance costs.
• Risk of Loss of tenant(s)
• Risk of Loss of hangar value 
  • If it loses $15,000 that "costs" you about an additional equivalent $100/mo. for 10 years.
• Risk of Loss of complete principal after 10 years.

Bottom line:

• Sounds pretty good with multiple upsides
• Even worst case if the hangar loses all value that is equivalent to about an additional $420/mo. cost on top of your $340/month (with tenant).
  • That is still less than the cost at the bigger nearby airports and an unlikely outcome.

Edited February 26 by 1980Mooney

[Hank]

1 minute ago, 201Mooniac said:

This thread is making me think, I've never had any insurance on my hangar.  I guess I need to unerstand what I would be insuring as it is just my airplane in the hangar.  I guess I need to understand if we had a big storm that damaged the hangar such that it fell on my airplane would my airplane insurance cover it?  Anything else I should consider insuring for?

What else is in your hangar? Golf cart, sofa, TV, refrigerator, motorcycle, boat, tools, spare parts . . . .

[1980Mooney]

12 minutes ago, 201Mooniac said:

This thread is making me think, I've never had any insurance on my hangar.  I guess I need to unerstand what I would be insuring as it is just my airplane in the hangar.  I guess I need to understand if we had a big storm that damaged the hangar such that it fell on my airplane would my airplane insurance cover it?  Anything else I should consider insuring for?

Is your hangar attached to other hangars or buildings?

I think if your hangar collapsed on your plane, your aircraft insurance would pay for your plane - but not your hangar.

[Schllc]

2 hours ago, AndreiC said:

Any other thoughts?

Slam dunk in my opinion. 

I would buy a hangar in a heartbeat for that price.  A 60x60 where I am is $2,000,000

The land lease is a 25 year, but is 200k+ and has to be paid in full at renewal, and the condo fees are $3,000 a quarter. I can paint my plane every three years for less than the hangar would cost me.

Even if you paid the 65 k and lost the hangar in 10 years you will have spent less than what you would on rent. Plush you can rent space to two people which would likely pay your mortgage.  If I was worried about being sued, I wouldn’t be able to do anything. 
Buy the hangar, and end the anxiety. 
65k is cheap, you could not build it today for that price. 
With regard to the one that sold a year and a half ago for 55k, what isn’t 30% more expensive than it was 1.5 years ago?

 

[201Mooniac]

21 minutes ago, Hank said:

What else is in your hangar? Golf cart, sofa, TV, refrigerator, motorcycle, boat, tools, spare parts . . . .

As the owned hangar is at my weekend home, not much other than the plane is in the hangar.  When I'm not there, the airport car I use is in the hangar.

[201Mooniac]

19 minutes ago, 1980Mooney said:

Is your hangar attached to other hangars or buildings?

I think if your hangar collapsed on your plane, your aircraft insurance would pay for your plane - but not your hangar.

Free standing port-o-port hangar.  I'm not really worried about it collapsing as we don't really get hurricanes, tornadoes, or much in the way of snow loads in that part of California.  I think I'll check with my airplane insurance agent.

[1980Mooney]

28 minutes ago, 201Mooniac said:

Free standing port-o-port hangar.  I'm not really worried about it collapsing as we don't really get hurricanes, tornadoes, or much in the way of snow loads in that part of California.  I think I'll check with my airplane insurance agent.

Does it have electricity?  Here is another way to look at it.  If it does collapse for any reason (winds, corrosion..) or catch on fire (like an unattended battery charger or just wiring failure) your aircraft insurance will cover your plane.  But it is possible that your aircraft insurance company would turn around and sue the owner of the hangar to recover damages.....

[MikeOH]

12 minutes ago, 1980Mooney said:

But it is possible that your aircraft insurance company would turn around and sue the owner of the hangar to recover damages.....

Now, THAT would be some kind of wicked irony!

[LANCECASPER]

41 minutes ago, 1980Mooney said:

Does it have electricity?  Here is another way to look at it.  If it does collapse for any reason (winds, corrosion..) or catch on fire (like an unattended battery charger or just wiring failure) your aircraft insurance will cover your plane.  But it is possible that your aircraft insurance company would turn around and sue the owner of the hangar to recover damages.....

Huh? So if your house and car is damaged in a tornado,  your car insurance company will sue your homeowner's insurance company for your house damaging your car?

I don't think so. They are both covering different things. The car insurance company will cover the car damage and the house insurance company will cover the house damage.