Thinking about buying a cheap
I've had several people call or email me lately with a "fresh" approach to buying a used aircraft. Because the good ones are getting harder to find why not take an old dog and refurbish it into a young-looking, pristine aircraft? To those who have this "idea" it is just that. They have yet to look into the actual costs of overhauling the engine, upgrading the avionics, painting it, and refurbishing the interior.
The cons greatly outweigh the pros in this scenario. That's because every time you spend money upgrading or refurbishing a system only 50 to 60 percent of what is spent is added to the value of the aircraft. Does that mean that you should not invest in a new paint job or interior if your present aircraft needs it? Of course not. But when you plan a complete aircraft makeover it is likely you will spend so much on the refurbishment that there is no way you will recover it should you be faced with selling the aircraft in less than ten years or so.
Don't Go Overboard
Time and time again I have seen aircraft come up for sale where the owner has sunk so much money into it that the asking price was ridiculous. After several months, the price starts down and eventually the airplane sells for something close to realistic, but the owner has lost a good deal of the "investment" he or she made. This happens often to those who don't do their homework before equipping an aircraft the way they want it. Then, shortly after the refurbishment is complete, they decide they want to move up into a more complex airplane, so they buy the new aircraft then put the old one on the market. Because used aircraft appreciate in value, they figure their old bird is worth every penny they invested in it. It takes a while before their confidence in the value of the old airplane is shaken. When the phone calls don't come or a few people tell them "you've got to be kidding!" or words to that effect, they begin to get the message. But now it is too late because they already bought the second aircraft.
Don't believe it? I know of several airplanes that remained on the market for a long, long time because of this same scenario. One, a Piper Arrow, was overloaded with all-new digital equipment including an HSI, an autopilot, an approach-certified GPS, a custom instrument panel, gorgeous paint and interior, and a recently-installed factory remanufactured engine. Another, a Cessna 182, was replaced with a Cessna 210 after undergoing more or less the same treatment.
Another fellow bought a Cessna 210, immediately spent $14,000 on avionics, then put the airplane back up for sale at a price that was close to $20,000 over the market value. When it didn't sell, he changed the autopilot, refurbished the interior, and raised the price again.
Buying On The Cheap (?)
Some folks are in a position where they can do most of the work themselves. That's a big help, especially when you consider that shop rates are often between $60 and $70 an hour for installation work. Still, the investment in the equipment itself has to be dealt with. That can be tempered by buying direct at discount through vendors who advertise in Trade-A-Plane or online.
But most people don't want to get that involved with their aircraft. They don't have the time to invest, or the technical expertise. They just want to fly their aircraft, and they want them equipped with the latest and greatest of the available gadgets. But they gag when they look at the price of new aircraft, so they take what they figure is the second best route.
While major avionics installations and cosmetics will never give you a dollar-for-dollar increase in the value of your aircraft, engine overhauls can come pretty close because the engine time is reflected directly in the market value. But it depends on the type of overhaul that is done and who does it. If you do a cheap "dip and ship" overhaul, fly the aircraft a couple of hundred hours, then have to "top" the engine because the cylinder work wasn't done right the first time, potential buyers are going to be skeptical of the rest of the engine work (and rightly so). If one buyer is turned off by that, others will be also. That means that you may have to reduce the price of the aircraft to make the engine attractive to other buyers.
If you have a good overhaul done by a well-known, competent engine shop, the value of the aircraft will increase dollar-for-dollar with the cost of the basic engine. If you spend several thousand dollars more on new hoses and other under-the-cowling accessories, you won't get much for that in increased market value. But you will always recover a higher percentage of an engine overhaul in increased aircraft value than you will with upgraded avionics and cosmetics.
How Long Will You Keep It?
If you are going to spend serious money upgrading your aircraft, you must plan on keeping it 10 years or more to make it work financially. And that is assuming that the value of aircraft will continue to appreciate in the future as it has in the past. There is no guarantee that will happen, though there is nothing on the horizon that gives the appearance that the market is about to change either.
Long-term ownership is the key to success as an aircraft owner. There are few investments out there that you can buy, use on a daily basis, then sell several years later for more than you paid for it. Is the investment as good as leaving it in a money market fund? Perhaps not. But most of us get a great deal out of our aircraft in a real personal or business sense, and that is worth something.
Some Buying Advice
So, how do you buy an aircraft that you do not have to spend a great deal of money on for upgrades? Most people are in too much of a rush to make their purchase. Instead of waiting for the right aircraft to come along, they buy whatever is convenient. Then, they wind up taking the aircraft they bought in for refurbishment to make it meet their original needs. Financially, that can be a disaster.
When you buy, take your time. Find an aircraft that comes as close to meeting your needs as possible. I like to see 90 percent of the equipment required in the aircraft at the time of purchase. It's one thing to add a GPS to an instrument panel, but to strip out the entire avionics stack and start over with all-new gear is not a good way to go. That's especially true now, since we will all be changing over to WAAS-capable GPS/comms in the relatively near future. Any new nav/comms that are installed now are likely to become obsolete and unsaleable when the government finally gets its act together and gets the GPS system working as it was intended.
Avoid buying an aircraft that needs too much refurbishment. The price might be attractive, but by the time you get done with the upgrades, you won't be too happy with the bottom line. It is one thing to put new paint and interior in an aircraft that you buy. But to overhaul the engine, redo the cosmetics, and upgrade the avionics should be out of the question (unless you can do the work yourself and can buy everything at wholesale).
Be certain you have a thorough prepurchase inspection completed before paying for an aircraft. That is your one line of defense against major problems that will cost a great deal of money to repair. I have seen engine compressions recorded as normal on an annual inspection that was done for a sale, only to find that they are below the required minimum at the next oil change. And don't buy an aircraft whose owners did a top overhaul instead of a complete major when the engine reached TBO. I see that happen all the time, and the new owners can't understand why they lose so much after paying the price for the aircraft that includes the cost of the top, which adds nothing to the value of the aircraft.
Anticipate The Future
When you are trying to determine what aircraft you want to buy be sure to consider future needs. You want to buy an aircraft that you will be happy with for a minimum of five to ten years. While that is the ideal, it doesn't always work. Many pilots don't have the experience they need to get into the high-performance aircraft they want to buy. They have to start out with a low-performance aircraft and move up as they gather ratings and flying hours. It is imperative that they buy that first aircraft right if they are to sell it and move on to the next one within a few years. Any mistakes in the purchase process can prove very costly when they decide the time is right to move up.
Don't Forget Insurance
Recently, I went looking for insurance quotes for a low-time client who wanted to buy a high-performance aircraft. The major insurance carriers declined to quote on his proposal. Only one company would touch him, and the premium was very high. Remember, the insurance companies have a lot to say about who will fly what aircraft. That should be one of your first inquiries after deciding what type of airplane you want to buy, no matter what your experience level. If you are moving from a low-performance airplane into a high-performance one, or single to multi, insurance may be a problem until you get a minimum amount of time in that type of aircraft. Recently, I heard the story of a 14,000-hour Alaskan bush pilot who had trouble insuring his newly-acquired Beech Bonanza because the insurance company said he lacked sufficient retractable time.
Find out if you can get insured at a reasonable rate before going too far in the purchase process. To buy an airplane and then find that no one will insure you in it would be a costly error, but one that has often been made in the past.