Paying for your kit

[RV7Factory]

I do not understand how people can justify financing an airplane. Loans are for things that you absolutely need, like a house, a car, an education. Financing something that is just for fun seems weird to me. Especially financing a plane that needs to be built. That is just too risky for me.

It's simple... if you can earn more with your money than you would pay in interest, why would you part with the cash? Matt hit the nail on the head here, loans are not bad by themselves, it is how people use them that causes problems. As he mentioned, they can be a very useful and effective tool when utilized as part of an overall financial strategy. The problem is, most people don't have a overall financial strategy.

 

[Tom Maxwell]

Investment

I personally don't have the cahoonas (SP) to finance an airplane. But then I have never financed a car in my lifetime either and don't plan to do so in the future.

Theoretically speaking, yes, if you can earn more with the cash than it cost you to finance then leverage it to the max. But there is an element of risk in every leveraged transaction. There seems to be a lot of assumptions made that the value of an RV will appreciate or at least break even. I am not sure what these assumptions are based upon but an airplane is a luxury item and subject to a lot of market forces. If the price of fuel goes up to equal the price our friends across the pond pay, or if the general economy goes in the dumpers, then airplanes and yachts will surely suffer. Not to mention that the used RV market is starting to expand quite a bit. There seems to be a few RV kits sitting for a while and decreasing in price. One thing is for sure, the more RVs that hit the market the slower they will sell and the less value they will retain.

Everyone needs to make their own decisions based on their gut factor. I am just not comfortable going into debt for mine. My only advice is to be careful and don't put your kid's edcuation money into an RV thinking you will always be able to get it back out.

 

[cjensen]

I may be the loaner in the crowd here (more than likely not, but...), but I DO have other debt in the form of student loans, and consolidation debt loan (from my stupidity as a teenager/early 20's...I'm 28), cars, etc...I have not borrowed money yet to get to the wings, however, I may need to borrow sooner than I plan to if my job (sales) doesn't pick up...I plan to borrow for the engine only, but I will borrow to finish the kit if I need to. This is my dream, and I'll get it done. Whether that means working three jobs or not, I'll do what it takes. I DO NOT have the cash in the bank to back up much of anything, but I am a budgeter, and I plan for the future as much as I can. The nice thing about my plan, is that the cars, wife's student loan, and the consolidation loan will all be paid off around the same time (within a few months of each other), and that's right about the time I plan to be ready for an engine.

Also, we bought our second home last year, and in that year, we have dumped about $18k in to it, but it all came back with the rise in property values within that first year. As long as this continues, we'll have the equity to draw on if we need it.

So, I guess I'm pay as you go as well, but if I need to, I'll borrow smartly and I don't have a problem with that. Just me...???

 

[mdredmond]

Everyone needs to make their own decisions based on their gut factor. I am just not comfortable going into debt for mine. My only advice is to be careful and don't put your kid's edcuation money into an RV thinking you will always be able to get it back out.

There's never anything wrong with not going into debt.

But if you think of the plane as sort of a really expensive car, then a short loan (i.e., < 5 years) to buy the engine and/or gadgets probably won't hurt - provided of course that you can afford the loan. If a guy is counting on getting all or a substantial portion of his money back out of the plane (especially within some specific timeframe), then he probably has too big a chunk of his net worth tied up in it.

Just my .02

 

[TShort]

I may be the loaner in the crowd here

HA HA
No pun intended, right? LOL

Thomas
-8 wings

 

[Chappyd]

Borrowing

This is a great thread, touching on a topic you don't hear much about. I originally was planning on borrowing for the big items, but I think I'm going to try and keep it to the engine only. Life is a lot more fun not owing people money. I've owned 2 planes, a Cherokee 140 and a Mooney M20C, and borrowed for both. Pretty reasonable payments, but when added up to the rest of the costs of certified aviation(Maintenance/labor) I have felt like an indentured slave at times.
I wanted the glass cockpit for my RV, but I think I may end up with a semi standard panel layout at first. I have lots of time to think about it What's a couple more years flying behind what I'm used too? LOL

 

[Paul Tuttle]

You shouldn't have to worry about money with all that motorcycle/Discovery Channel money.

I checked to see if he was a relative. No luck besides I was upside down on a motercycle once and thought I'd enjoy it more in the RV 8 .

 

[N62XS]

No partnerships!

I'm on the pay-as-you-go plan. It's taken 6 years, but I've been able to buy all four kits. I'll have to get a loan for the engine and panel--or maybe find a partner.

Mark

I have seen too many good friendships end as the result of an airplane partnership. I've only seen one that works. Way to go Pierre!

 

[N62XS]

Life is Short!

I pay all of the bills. My wife blows her salary. After fulfilling my monthly savings plans, I spend the extra on real estate, fast cars, trucks, electronic toys and AIRPLANES!

Get an MBA and people will pay you three times as much for doing the same thing you could do before going back to school. The two years working on my third degree paid off better than a roulette table at the Mirage. Sorry Ralph!

A RV is initially a break even return on investment, parts only. You can usually get your money back. Guys that build part of a kit and expect to get their labor costs upon sale crack me up. We build for the therapeutic value, for satisfaction, and for FUN! A well built, completed RV will appreciate to a point, but how many of us expect to retire on the capital gains from the sale of our RV.

One last thought. You guys that think the major expense is over at first flight should not forget insurance, hangar rent, fuel, maintenance and those **** taxes. Owning a RV is like owning three boats or having a mother, wife and a mistress.

IMHO and FWIW

 

[AWOL Arn]

Thanks for the Advice

I'm a newbie to this site and found this discussion greatly enlightening. Thank-you all for the info. I have been looking at building a LancAir, but after a friend started an RV-7a, I reconsidered. My timeline is to set myself up financially this year and take over my land-lady's garage storage room and then start ordering next year. I'll be taking rides this summer up at the factory. Until then, I'm a computer screen researcher.

Cheers y'all!
Arn

 

[txaviator]

Hard Knox.....

Just completed the MBA (with a 4.0 GPA) but have yet to have people beating down my door wanting to pay me "three times" what I used to make

What's your secret?

 

[osxuser]

Do something that everyone needs... garbage man for instance... also funerals. All good reliable sources of income. Don't know if it's enough to build and airplane with, but hey...

Looks like I'll be playing the credit cards to get this stuff built, might have to sell some of my other junk too, but I want it bad enough, so i'll manage. I plan to have the tail and tools all paid up before I buy the wing kit. I don't know if that will be on credit or not.

 

[mdredmond]

Do something that everyone needs... garbage man for instance... also funerals. All good reliable sources of income. Don't know if it's enough to build and airplane with, but hey...

A coworker of mine (he's a database administrator and former Dallas Cowboy) owns a few funeral homes in east Texas. Apparently a very good business to be in.

 

[jonbakerok]

Airplane investments

Little known fact: many PRODUCTION airplanes appreciate better than houses.

When I got the flying bug, I refinanced my house and cashed out $20K to buy a mid-time '73 Cherokee 140 to learn to fly in. My house payment actually went DOWN. Three years later, I sold the Cherokee for $10K more than I paid for it, and started my RV project. Along the way, I picked up my PPL, got hooked in with the airport crowd, and learned a heck of a lot about aircraft ownership.

Side benefit -- with 300 hours in a Cherokee under my belt, RV transition training took about two hours. Many low-timers spend about 10 hours learning to fly an RV (at more than $100/hour). Hershey-bar Cherokees land much like an RV. The V-speeds are about the same and they also have a relatively high sink rate.

 

[chaskuss]

I can't really afford a plane (who can?) but I'm doing it anyway. I bought my empennage with cash. I purchased the wing kit by obtaining one of those 0% introductory credit card deals. I paided off the balance within the 0% period. Did the same thing with the fuselage kit, but due to investment loses elsewhere, I went over the 0% time limit and got hammered with interest fees.
I purchased my primer, interior paint, electrical supplies, cowl, canopy, magneto, Electronic Ignition, starter, alternator, prop governor, instruments, main wheels and brakes with cash by shopping around (EBay is helpful, as are the classifieds on all the RV lists)
Rather than buy the finish kit, I intend to simply purchase the items I need from it, as I need them. I plan to buy my motor mount/nose gear sub kit within the week. I'll put that on the 0% credit card. The canopy frame, fairings and related parts will be purchased later (either from Vans or from another builder) when I'm ready for them.
Rather than spend $10,000 to $18,000 on an engine now (it will simply sit there on the motor mount for at least 18 months) I've cobbled together a "mock up" engine from red tagged parts. This mock up will allow me to do all the FWF systems work and fit the cowl now. I'll purchase an ECI Titan 361 "kit" engine a few months from when I'm ready to fly. I'll assemble it and swap it out with the mock up unit.
That way, I delay the biggest investment, prevent possible rust damage from prolonged non use, and will still have a warranty on the engine when I'm ready to use it. Contact me off list with a phone number and I'll be happy to talk to you in more detail about this.
Charlie Kuss
RV-8A

 

[LifeofReiley]

Cash & KIS

Pay Cash and keep it simple. You can enjoy flying the $40,000 RV just as much as the $125,000 RV. CASH is KING...

 

[pwhaley6347]

Who did you use for your loan?

Thanks

 

[Jekyll]

Call NAFCO 800-999-3712. RVs get the best rates and terms. They said RV's have the highest completion rates.

Jekyll

 

[Yukon]

Cash and Carry

Cash.

John

 

[rv12iS-builder]

Red tag parts

I've cobbled together a "mock up" engine from red tagged parts. This mock up will allow me to do all the FWF systems work and fit the cowl now.

Charlie,

Can you tell us more about your engine mock up? Where do you get red tagged parts? How much do they cost? What are the minimum parts you need to fit the cowl?


Thanks for the info,

Mark