Owning a gyro with others

Kevin_Richey

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At Chapter 73's web page (www.pra73.net), look under the link further down the page titled "Past Newsletters".

Click on the March 2002 issue, and go to page three. Paul Plack wrote an in depth report about owning a gyroplane with others. It contains details of how that went with Texas PRA Chapter 78 in the past.

I'm not a critic of a jointly-held gyro. In fact, I'm just the opposite. I participated in one in the 1990's, a Vancraft Rotor Lightning. I got to learn how to fly a gyro, and got 75 hours time with it, for a total of $1,000.

While prices are higher for gyros, parts, engines, and rotorblades 15 years later, it was mostly a positive experience, Financially, it was a steal. There were several reasons why it was a success, and there were some problems.

The buy in was $2K (and you could make payments on that amount), and since I was the first to buy in, I didn't have to pay for lessons from the owner, a former Army helicopter pilot and gyroplane owner and pilot.

Another of the co-owners received an inheritance a couple of years later from his parents passing away, and he decided he wanted to own the gyro outright, so he wouldn't have to receive permission to make changes to the machine.

He offered to buy the rest of us out for $1K each, making my total investment in it only the same amount.

The problems were: No one else was interested in paying into a kitty to provide a fund to draw from for repairs, updates, etc. Whomever damaged the gyro had to pay the first $500 of repairs, and the rest of us would divide up the balance when that happened.

I wanted to establish an emergency/savings fund to provide for those items so we didn't have to suddenly come up with the money when the gyro was damaged.

And, with enough savings in that fund, acquire another gyro for two to fly at the same time. If one gyro was damaged, then we would still have the other to fly until the second was repaired. And, then keep the fund growing.

I feel each member should have their own set of rotorblades to fly on. In that situation, if someone scuffed up, dinged, or destroyed their set, then the other owners would still be able to fly the machine, once the repairs were made to any other damage from the rotorblade incident, such as the rotor bearing, rotorhead, possible mast structure being bent, prop or tail damage, etc.

I don't know if others feel the same as I do. I look upon my gyro like I would a motorcycle, either a street bike or dirt bike. If I feel someone has experience riding a motorcycle, either version, and was responsible and careful, then I'd let them ride it.

My gyro was (slightly) used when I acquired it, so the price was much lower than new, about half.

When one considers the investment in a flying machine and tries to analyze the interest that amount of money would have earned otherwise, then it doesn't make sense.
 
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GyroDoug

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Kevin,

It sounds like there is starting to be a lot of interest in using a joint ownership concept to make flying more afordable and to bring more people into our sport. I believe this may be the single most important concept we can pursue and we are actively trying to come up with enough serious participants to put something together.

No doubt owning your own machine and not having to deal with any of the challenges of joint ownership is a superior option (if you can afford it) but so many people act as if it is the only option and since they are not able to pull it off alone, they simply never get started. Joint ownership could really be the key to bringing more new people into our sport. I hope it is.
 

All_In

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Good morning my friends!!!

Kevin I see you brought the discussion from our emails to the forum... Good idea.

I have a great deal of experience with fractional ownership.

In the 70's we became a Piper Dealership. As an accountant at the time I understood finances, and taxes and could recognize when the person trying to buy a plane just could or should not afford a new Piper on their limited income. I soon realizes that somehow I needed to get these folks with the same desire together as none of them had a need to use an aircraft full time.

So I created a holding company called PiperPartners to hold title of an aircraft in the form of stock allowing two or more people to own the aircraft but as stock. This allowed partners to sell or buy in without any registering or paperwork. It also allowed repossession with very little paperwork as it only then depends on the partners keeping their equity accounts equal.

The contract I had written was exceptional at keeping this fair and is the most important part of creating Fractional Ownership today.

Unfortunately I have misplaced/ lost the contract as it's been over 30 years ago.

I'll start creating the outline here for the contract of as much as I can remember so others may copy or adapt the principals that worked so well for us over 30 years ago.


1. Scheduling time in the aircraft is handled by the Club, it would be done online today. Soon we had 21 brand new aircraft on the line all available for leaseback so if one partner was using his aircraft they could just rent another if they had too paying another group of partners to use there aircraft for this one trip. This would be harder for gyro’s as we do not least them back because they are experimental. At least that I know of? I hope to change that for San Diego Rotorcraft Club and have least back aircraft as we already are offering a Cessna 150 and Cherokee 180.
Without leaseback aircraft to rent them, some negotiation as to how many weekends each partner has use of the aircraft will have to be agreed on by the partners and they could trade days etc.

To do leaseback with experimental aircraft I beleive is a No, No. So everyone would have to be an owner! In other words your chapter/club would have to be the owner of the aircraft and then anyone in the club could legally pay the expenses just like it was a leaseback aircraft. To rent it to the general public they would only have to join the club and pay the going rate.

2. Stock and not aircraft are actually owned. All ownership is really a share of stock in a holding Co or the Club as a holding Co. This makes it very easy to buy or sell a partners share.

3. Pay for what you use. Each owner pays an hourly rate (at cost) to the ‘Club/holding co’ (= themselves) when they rent their own aircraft! This assures that if I fly 100hrs per month and you fly only 10 hrs that I'm paying for my fair share of the maintenance and engine / replacement - or rebuild fund and the money is always available to have the aircraft maintained. The way this worked in real life was Boarder Aeronautics would least all of the aircraft back generating revenue for the partners when they were using the aircraft and charging the same rate to the partners when they flew it. We did everything for them from scheduling to maintenance and would usually send them a check after we deducted the amount they owed for flying it themselves. Remember if it a leaseback aircraft them it become a business and deductible on your taxes at least for three years even if you have a loss every year until the IRS officially declares it a hobby and not a business. This never happen with any of our owners as the owners paid to use there own aircraft so the IRS could not really call it a hobby and would just go away.

4. Insurance, the owners must have insurance that covers any damage that another partner or renter might cause. Some owners had higher limits but then required all of the owners to deposit say $2k to $5k in a saving account that had our name on it too so that at least one partner and Boarder Aeronautics had to sign in order to get the money out and pay for the damage done to the aircraft by one of the partners. This made the deductible higher and the insurance payments lower. The insurance cost is also paid as you fly for the one flying the most will pay for the insurance they are actually using. All costs are prorated in this way and added to the cost of the rental for your own aircraft but at your cost.

5. The buyout clause = Assuring expenses are paid by all partners, the equality clause was one of my best creations. It was implemented with something like this. To remain a partner in good standing all partners equity account must be equal or the other partners have the right to sell or buy your share out at the fixed purchase price of your remaining equality in the partnership/Aircraft regardless of the actual value of said aircraft at the time. A time limit is agreed on in advance by the partners to audit the equity accounts and a partner has a set time limit from this date to pay is equity account in full or we buy/sell his or her share of stock. The audit period was usually 6 months but some partners had 90 days or a year as the cut off date and 30 days to pay your equity up from the time you received the letter that you were in default.

There was much more but these are the main points I remember that really made this a fair deal and allowed me to sell hundreds of aircraft using this method.
 
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farmer jim

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Hi folks -
greeeeenhorn (newbie) here, wondering if I and my neighbor/friend, BOTH FARMERS, bought a bird together, but only I flew it to do farm work on both our farms, how the FAA regs would affect us ??? Any thots ??

farmer jim
 

WHY

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Hi Jim

Obviously the reason for owning a aircraft with some one else is to reduce the cost of flying and there by getting into the air quicker. While FAA regulations are for sure a factor,--- the MOST critical factor is getting GOOD training and enough of it. All the Regulations are of no significance if you are not well trained and "that will cost you money and you cannot go cheap on this or spread it out over a long period of time and still get profficient".

Tony
 

PW_Plack

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...wondering if I and my neighbor/friend, BOTH FARMERS, bought a bird together, but only I flew it to do farm work on both our farms, how the FAA regs would affect us ...
Jim, you didn't say, but if you're talking about an aircraft registered experimental, the regs would prohibit getting paid to carry persons or property for hire. If you fly it for checking fences or getting back and forth from farm equipment on your own farm, you might be OK. If you're working a neighbor's farm, you might have to prove you're doing it out of the goodness of your heart, and not for profit.
 

farmer jim

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THANK YOU for your constructive input, I need all the expertise out there !!
I have my PPL, -albeit it I'm rusty, and WILL CERTAINLY get proper instruction !

have NO INTENTION of doing anything for hire, just would like to be re-imbursed for my expenses, I guess. (fuel, etc) Somethings can be done better & cheaper (& more TIMELY) from the air, something like checking cows @ calving !!

enjoying one's 'work' is a not-so-bad thing as well, I reckon.
 

StanFoster

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Jim- I farmed years ago and flew my Quicksilver MX ultralight over the family farms , then a Bensen. I no longer farm, but am still flying over the acreage looking for tile holes, wet spots, you name it for just the fullfillment doing gives me. I see no problem flying over your farm and using the gyro to help your operation. Stan
 

BEN S

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Jim et al...

Jim et al...

please start a new thread, I was very interested in the information going back and forth on fractional ownership as it applies to everyone rather then checking on cows.
John, I hope you are able to find the contract, but if not would they still have a copy at the FBO where you were working out of?
How did you get past the fact that although you pay for the amount used, it still doesn't work out fair?
For instance, 3 guys buy a gyro, Mr.A and Mr.B are avid pilots who fly every weekend and are paying their share of the costs for ownership/fuel and insurance, Mr. C is a low time pilot who is only using the rig once every 6 months....who is more likely to have a rollover taxing?....Soooo Mr. C rolls the gyro and Mr A and B are now out a machine they were both using? Since Mr C only flew once every 6 months he couldn't possibly have built up enough money in insurance to pay for the damages his lack of skill caused?
maybe I'm just not cut out for this sort of thing, but I sure wouldn't be too friendly about loosing my ship AND having to pay to repair it.
Maybe I miss understood your post about how it works.
Ben S
 

GyroDoug

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Ben,

I think to make a joint ownership program work, there would have to be a minimum number of hours agreed upon that everyone had to pay for each month (whether they actually took advantage of flying that time or not). That way you could budget how much money was coming in each month to cover fixed expenses. Then if Pilots A & B fly additional hrs they could pay for those additional hour and there would just be more than the minimum amount of money building up to cover expenses. In the beginning there would need to be insurance coverage to protect the other owners but the goal would be to move towards building a big enough reserve that the group could be self insured. This could be worked out in a way that everyone payed their fair (Basic minimum) share and those that want to use it more would pay for the additional extra costs.
 

JEFF TIPTON

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The different owners could each an equal share each month to cover the fixed expenses, plus a rental fee for the actual hours flown.
 

Sir Real

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I am part of an owner's group of a Cherokee, and our group runs basically along the rules John listed. The plane is owned by a corporation and we each own a share in the corporation. We do have one insurance policy that covers all stockholders. We each pay a monthly maintainence fee which covers hangar rent, insurance, and the basic oil, tires, cleaning, lights and other standard owner-allowed maintainence. We pay an hourly fee to fly the plane (about half of what it would cost at an FBO), which covers fuel, and also generates a bit extra, which goes into an "Annual & Engine" fund which pays for the annuals and builds up for engine TBO, or any other "catastrophic" maintainence issues. We tried computer scheduling, but we kept finding that a lot of us decided we wanted to fly on the spur of the moment when we were away from a computer, so we set uo a voicemail box on one of the members' phone, where we listen for who has it sheduled and when, and then leave a message with our own need.

I've been a member for over two years, and I've only had two times when I wanted the plane at a time when somebody else had it scheduled.
 

All_In

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@Ben
No contract at the old FBO we owned and sold.

We started this dealership because I started a flying club and it grew so fast that the other FBO's kciked us off the field because I only rented a small office/room and 4 tie downs but we were flying more hours than all the rest of them. (I rented my aircraft at cost +10%)

So I made it into a family business and we bought a Piper Dealership and an FBO at Brown Field and moved. When the Fed's stopped funding the VA pilots training we sold it but did not sell PiperPartners as the new owners could not understand the value of it and did not wish to pay anything extra for that holding company. Sadly they went broke and are no longer in business.

1) Doug and Jeff got it right the goal is always have each partner pay for what they use.
Should one partner wreck and not pay the deductible that partner's equity account would be charged and if he or she did not pay it by the next audit period the other partners could buy that partner's share out.
Therefore the partner that didn't pay for the repairs looses everything or receives very little of their equity back and the partners can then resell that owner share to recoup your money. You only then need insurance with a high deductible in the event they total the aircraft. (That's the beauty of my equity clause it forces all partners to pay their fair share in a timely fashion one way or another.)

2) The FBO and mainly OUR instructors are responsible for assuring new pilots are actually ready to fly without having accidents. Our current cowboy environment would have to change for all fractional ownership chapters. If not your fears will be played out.
We had an excellent tract record with very few accidents compared to other FBO's so it works = training and no-one fly's before their time. Even if you are a high time pilot to fly with us you are going to have to fly with one of our instructors and have a check-out ride, sorry the only exception are gyroplane CFI's!

3) There is one more solution that we have discussed before on the forum and suggested to the PRA.
Boarder Aeronautics had an (in house) $10.00 per month insurance plan. Each member could elect to pay us $10.00 per month to our insurance pool assuring the pilot pays nothing in the event they have an accident.
With over 100 to 250 members this added up to $1,000.00 to $2,500.00 per month. Anyone paying the monthly ins had no deductible to pay as Boarder Aeronautics would just pay the deductible out of this pool so it cost those members nothing.

It's been suggested to PRA to do the same thing ...
 
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BEN S

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Johnny me boy...

Johnny me boy...

I think I start to see the way it works, but in example 3 if you only have 3 guys owning the machine it's not the same as 100 members footing the small bill.
But your saying that they only need to save up for the deductible on the insurance, That I get.
Ben S
 

Mike484

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It would be nice to be able to co-own as long as you can get past the liabilities and details. This has been discussed quite a bit at Chapter 62, primarily on a way to co-own a two place. We have several gyros in our club but as far as a two place where a newbie could get an introductory ride it is basically non-existant at this time.
 

All_In

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I think I start to see the way it works, but in example 3 if you only have 3 guys owning the machine it's not the same as 100 members footing the small bill.
But your saying that they only need to save up for the deductible on the insurance, That I get.
Ben S
Yes the goal is to save the high deductible in a savings account. Then you do not have to make that portion of the insurance payment anymore until you have an accident, solely collect interest on the savings.


And yes your are correct our very small market precludes us from having individual Chapters have a viable Insurance Pool.

It would have to be a national effort either sponsored by the PRA, Aropa, EEA, or a single chapter that took on the responsibility of auditing claims.

A single Chapter could offer all gyroplane owners an insurance pool.
1) They would have to work with the other individual PRA chapters to make this work, as they would be the auditors!
2) They would have to advertise it.
3) Set a maximum payment/ claim amount like $5,000.00 per claim. As this would only be co-insurance and pay the deductible or a maximum of $3 to $5K.
4) Create rules to assure that the gyroplane being insured is actually airworthy and not wrecked already. This could be done by taking it to be inspected at the nearest PRA Chapter and the officers signing off that it was inspected by them and found to be airworthy.

This would be much harder to catch fraud than it was when our FBO had possession of the aircraft and made the repairs. However it could be done with very little effort.
 
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All_In

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It would be nice to be able to co-own as long as you can get past the liabilities and details. This has been discussed quite a bit at Chapter 62, primarily on a way to co-own a two place. We have several gyros in our club but as far as a two place where a newbie could get an introductory ride it is basically non-existant at this time.
Yaw Mon, I agree and would like to see you to continue so I'm posting what I hope will help all of us.
My feeling is: If they have money they should pay to protect themselves not the group or co-owners. So they buy more insurance than the rest of the owners.

Now reality and questions:
How many of you have actually been sued?
As anyone on the forum actually been sued, that wasn't a manufacture and being sued by other designers or partners?

Liability is one of those things we all worry about but rarely happen in real life, I have seen the law suites as I've been in aviation since 1974.

Each person has to evaluate what do I have to lose and what are the actual chances of being sued.

The amount of liability insurance each person needs is different and unique to that individual and what they earn or own.
So if you got big bucks you need to pay for more liability insurance to protect you (not the group). If you only own a house, cars, and a toolbox in California you are almost (collection proof) not sue proof as anyone can sue anyone. But these trip and fall lawyers only take on cases on contingency and pay for the expenses to litigate when they can collect from DEEP pockets.

Most of us don't fall in this category so the likely hood of being sued is very remote in my opinion.

If you got wealth then they have taken steps to protect it by setting up an irrevocable trust, sue me (now) and I only own a few cars and a motor-home everything else is not in their name and the children who name it is in has 3 generations to pay the death taxes that are normally paid on death.
 
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All_In

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Dad told me NEVER enter into a partnership and if I did make sure I owned 51%
That is certifiably the truth!!! I will attest to that!
However it really ring true when PROFIT is involved!!!
Example = All miners get along before you discover the gold vain that will make them rich. Then the fighting, lying, stealing, and law suites start.

Do have 51% control when it's about profit or you will lose something when it become profitable.

However, I would rather own 1% of a 10 million dollars boat or aircraft that I GET use 5% of the time....

Think about that for a minuet and also it already worked in real life for us once with very little of the problems you suggest because the contract is/was fair and you pay for what you use or break!
 
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