Airplanes As An Investment
It is virtually impossible to take a $100,000 airplane and recover the cost of a $15K paint job, or a $9K window replacement, or a $15K interior let alone an engine overhaul or avionics install... keep that in mind when you are negotiating the purchase of your next airplane.
I recently was looking at an airplane listed for sale... a beautiful airplane that will certainly sell quickly. Someone raised the question about buying an airplane as an investment and the majority of people quickly responded that "aircraft are no investment." I wanted to take a moment to talk about this to those considering the purchase of a used aircraft.
Prior to 2008, I would advise my clients NOT to depreciate their aircraft because they invariably increased in value. Of the 60 plus aircraft I had owned at that time, all except 2 sold for more money that I had in them when they sold. If you needed an airplane for your business, they were assets that did not lose money and, more often than not, rose in value assuming you bought an airplane that was 12 years old or older. You could easily see from the data that after 12 years, most airplanes increased in value. But you had to buy an airplane that had an "exit strategy" over a 5 year period, and 1031 exchanges also helped defer tax issues as they do today.
After 2008 everything changed. Aircraft prices fell by 50% or more, fuel nearly doubled in price, pilot training dropped off, and used aircraft inventory levels grew. Today, I spend most of my time helping clients analyzing and acquiring aircraft that will hold their value and helping them manage the value of aircraft they already own or recently purchased. If there ever was a time to buy an airplane or upgrade to a different airplane, that time is NOW, but it is absolutely the worst time to get out of aviation, especially if you bought an airplane in the late 90's or up to 2006 when the market was at its peak.
Based on the results of a survey we conducted among ABS members in 2009 when I sat on the board (an opportunity I was honored to have had by the way), there will be an large turnover of aircraft starting in 2017 which I believe could drive used aircraft prices in the Bonanza market down even further or at a minimum, keep them depressed. If interest rates climb, prices may degrade even further. When I tell a prospective seller what I believe their aircraft is worth today, I often hear "Well I will just wait until the market changes." Think about that statement... the average Bonanza owner is 66 years old, fuel is over $5.00 a gallon, the number of certificated pilots are declining and we have an aging aircraft fleet.
Furthermore, the relative costs associated with upgrading an aircraft in today's market environment are prohibitive and virtually unrecoverable. Beautiful paint and interior, and upgraded avionics will certainly increase the salability of your airplane but will have minimal impact on its value. For this reason, you need to find an airplane that either already has these attributes in place or find one at a price that allows you to complete the upgrade. It is virtually impossible to take a $100,000 airplane and recover the cost of a $15K paint job, or a $9K window replacement, or a $15K interior let alone an engine overhaul or avionics install.
In summary, I do not believe one should purchase an airplane with the idea of making money from the purchase but I do feel that it is possible to preserve the value of your investment. The last two aircraft acquisitions I did for clients under contract netted a beautiful and loaded 1976 V35B for $54K and a similar 1984 B36TC for $125K. Both airplanes were actively flown with mid-time engines and equipped with good autopilots, weather avoidance, fuel flow, engine management systems and WAAS GPS systems. Whether or not these are "investment grade" used aircraft is hard to say but I bought them for my clients well below market value with literally all the popular equipment options in place today.
A good investment ALWAYS starts with the BUY... keep that in mind when you are negotiating the purchase of your next airplane.