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29 Mar 2024, 10:02 [ UTC - 5; DST ]


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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 00:48 
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Username Protected wrote:
Trust me, PPP loans are very much behind behind this buying frenzy.

Jg

Yup. Combined with historically low (and unsustainable) interest rates, a distortion in economic reality created by the federal government has been created and is unfolding before our eyes. Feels good now but will not end well.


The Historically low interests rates have been with us since the emergency response to the housing crisis meltdown of 2008. Nothing has changed since that time in terms of our Nation’s complete Financial Picture. The Wealthy continue to make great gains while the Working and Middle Class are getting crushed and the poor are being wiped off the map altogether. The entire system is built on a house of cards and it will come crashing down.

If the Fed Attempts to Raise Rates, the house of cards will just come down even faster. We have built an entire generation that is light years behind ourselves. Millennial home ownership is a fraction of what my generation was at the same age. They’re forced to take on Credit Card Debt just to make ends meet. The cost of living in comparison to salaries is simply not tenable. I’ve seen discussion on here advising to sell our Aircrafts now because in a few years, there won’t be anyone financially or professionally qualified to purchase them. Sadly, I completely agree with that assessment. I fear for the future of General Aviation as a result.

The rates are so low because they have to be. Absolutely no one in the younger generations would be making major purchases without the low rates and they’re way behind the curve as it is. Take that away and the entire system collapses. It’s inevitable regardless of what we do but we need to address the extreme inequities that are currently built into the system.

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 01:15 
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There is a guy south of Savannah named Swaid Rahn. He's an A&P, IA, and pilot. ...and an outstanding human being. Unfortunately he would not be the type to take your gold bullion. He does what is needed for the aircraft to keep it safe and sound.

Username Protected wrote:
I just bought a Sundowner today. I kicked the tires and drove it around the ramp once and it did just fine. So I paid in cash, with some gold bullion on top for being in such pristine condition.



Does anyone know a good AP in the SE area? :popcorn:


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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 01:18 
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I do but you won't spend much of that gold pressed latinum (not the cryptocurrency) with him. He does what is needed to keep the airplane safe and sound. I will PM you his info. He's just outside Savannah.

Username Protected wrote:
I just bought a Sundowner today. I kicked the tires and drove it around the ramp once and it did just fine. So I paid in cash, with some gold bullion on top for being in such pristine condition.



Does anyone know a good AP in the SE area? :popcorn:


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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 08:59 
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Joined: 11/25/11
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PPP, Paycheck Protection Program, issued over $550 billion during the Trump administration. The rules of need and use were ludicrous; pretty much use it for salaries and payment was forgiven whether the business had suffered loses or not, up to $10,000,000 per recipient. And, by the way, non-taxable.

Half went to large companies that were in absolutely no financial straits. It was like manna from heaven. The other quarter of a billion went to smaller businesses. Still, no need to show losses.

The newest round of "loans" and grants is supposed to require proof of lost business, but it is already announced that audits would be minimal.

As to the "new" airplane buying frenzy, it stupefies me that so few people could see the real impetus of the demand. In the middle of a lock down, with people being quarantined, and flight schools shuttered everybody needs an airplane? All of a sudden this new, revitalized interest in aviation? How many times can I print BS without getting pitched off BT.

Of all the buying frenzies going on as a result of funny money, none will end faster than the demand for general aviation airplanes. "All dressed up and no place to go." is a phrase that applies perfectly.

I'm betting that there are several people hereon, like Sven, whose businesses have benefitted from the funny money buying frenzy. Those buyers don't walk in waving the money and laughing about the government hand outs, oh no, they want to pretend that they have always had it, but now, in the middle of a crisis decide it is time to buy an new $150,000 Range Rover. Sorry Sven for using your market as an example, but, by innuendo, you have already said as much.

The smart money is sitting on the sidelines in lots of venues, just ask Warren Buffet. The funny money rich are singing "Happy Days Are Here Again" and spending like drunken sailors.

Jg

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 09:16 
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Username Protected wrote:
So much for the prebuy and handshakes.


Have you ever backed out of purchasing a car because you changed your mind? I’m betting so, as most of us have. Why it seems to be okay to change ones mind on a purchase, but not okay for a seller to change his mind, remains a mystery.
Absolutely I have changed my mind as buyer.

Always before the handshake, though; never after.

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 10:57 
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Username Protected wrote:

I'm betting that there are several people hereon, like Sven, whose businesses have benefitted from the funny money buying frenzy. Those buyers don't walk in waving the money and laughing about the government hand outs, oh no, they want to pretend that they have always had it, but now, in the middle of a crisis decide it is time to buy an new $150,000 Range Rover. Sorry Sven for using your market as an example, but, by innuendo, you have already said as much.

The smart money is sitting on the sidelines in lots of venues, just ask Warren Buffet. The funny money rich are singing "Happy Days Are Here Again" and spending like drunken sailors.

Jg

Jg - you can cite my business as an example anytime my friend. :peace:

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 11:41 
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Yup.

There is a big difference between saying you are interested in a plane, and agreeing to buy a plane. I expressed significant interest in 4 airplanes before deciding to buy one.


Username Protected wrote:

Have you ever backed out of purchasing a car because you changed your mind? I’m betting so, as most of us have. Why it seems to be okay to change ones mind on a purchase, but not okay for a seller to change his mind, remains a mystery.
Absolutely I have changed my mind as buyer.

Always before the handshake, though; never after.


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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 02 May 2021, 22:20 
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Username Protected wrote:

What is the motivation? To increase your chances of getting the seller to sell you the airplane?

If the answer to that question is "yes" then you might ask yourself why the seller would prefer to sell the airplane without a prebuy?



To answer the question yes - it is to get a deal done

And why would the seller not want a prebuy? Are you kidding, the seller doesn't have to be devious at all. Yes, by all means take my airplane to some shop I have never used 100 miles away and have them borescope the elevator to find a 20-year-old, 2-owners-ago repair that they deemed unairworthy and therefore kill the sale. (As happened the last time I did a prebuy).

Honest sellers have all sorts of reasons to avoid a prebuy, least of which is getting a deal closed faster.

And in this market ... the way you succeed is to assume risk. Maybe no pre-buy but certainly abbreviated. Bring your mechanic and his borescope to the airplane, take 4 hours and look the plane and logs over and move along.


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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 03 May 2021, 08:37 
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Username Protected wrote:

What is the motivation? To increase your chances of getting the seller to sell you the airplane?

If the answer to that question is "yes" then you might ask yourself why the seller would prefer to sell the airplane without a prebuy?



To answer the question yes - it is to get a deal done

And why would the seller not want a prebuy? Are you kidding, the seller doesn't have to be devious at all. Yes, by all means take my airplane to some shop I have never used 100 miles away and have them borescope the elevator to find a 20-year-old, 2-owners-ago repair that they deemed unairworthy and therefore kill the sale. (As happened the last time I did a prebuy).

Honest sellers have all sorts of reasons to avoid a prebuy, least of which is getting a deal closed faster.

And in this market ... the way you succeed is to assume risk. Maybe no pre-buy but certainly abbreviated. Bring your mechanic and his borescope to the airplane, take 4 hours and look the plane and logs over and move along.


I can see that in the piston world, obviously all of my current experiences are turbine aircraft, in my world people are using the same logic to get deals done on King Airs and Citations where the potential exposure can easily be six figures.
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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 03 May 2021, 08:38 
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For a large chunk of buyers the prebuy is more about leverage to lower the price of the aircraft than anything else. In these times that is not going to work to well.


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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 03 May 2021, 08:48 
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What is happening in the real estate market is much easier to explain than what is happening in the aircraft market.

Real estate is supply and demand with a historically steady demand. The lumber mills were closed for six months, so were many home builders. The lumber mills come back online and the builders start building, folks that didn’t buy during lockdown are out shopping... a lumber shortage, lumber prices skyrocket. New home prices jump... a lot, and they have limited inventory. The new home buyer looks at preowned. Now you have 3-4 buyers for every available home. The feeding frenzy begins. After losing a few times the next offer is above market with few contingencies.

There are going to be a lot of people way upside down when the dust settles.

Thankfully this isn’t happening in turbine aircraft, at least not yet. I do hear some pretty wild stories from my piston friends. Sounds like the 172 / 182 market is nuts.

One huge difference is that airplanes are not typically emotional purchases, I think that helps keep a lid on the craziness.

Right now I advise my clients to be patient and let us find them a deal, if the aviation market gets stupid my advice will be to sit on the sidelines until it corrects.

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 03 May 2021, 08:54 
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Username Protected wrote:
For a large chunk of buyers the prebuy is more about leverage to lower the price of the aircraft than anything else. In these times that is not going to work to well.


You are correct and that has never been a good business practice. We have done a prebuy and received a quote, then done a “quick close” for a negotiated price, but it is always just enough to cover the risk the buyer is taking on and it’s usually because the seller wants to close quickly or the buyer wants to close quickly, usually to start and avionics upgrade while the airplane is still apart.

I’m not a fan of getting an airplane in to prebuy and then using that as leverage. I make it very clear to our clients that we do not do that. We have to maintain a good reputation with sellers or it will effect our ability to buy airplanes in the future.

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 03 May 2021, 09:25 
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Informed consent is key. Don't buy an aircraft without a prebuy or due diligence then get upset/angry/confused if it goes sideways. I have seen people make huge mistakes, on GA and larger aircraft over and over. The common errors are noted well in this thread. Understanding the risk benefit metrics, knowing the true cost of acquisition/operation, understanding the market and making an informed decision are all keys to a happy owner.

Regards, Tom

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 03 May 2021, 09:38 
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Username Protected wrote:
I’m not a fan of getting an airplane in to prebuy and then using that as leverage. I make it very clear to our clients that we do not do that.


Sorry but what other purpose is there? You do a prebuy because the likelihood of finding problems is high. And you find a problem then that means money.

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 Post subject: Re: QUIT buying airplanes without a PREBUY!
PostPosted: 03 May 2021, 09:54 
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Mostly agree.

I think there should be some discussion before a prebuy. If the prebuy indicates that the plane is not in the advertised condition, that seems a valid reason to walk away or ask for a lower price.

Username Protected wrote:
For a large chunk of buyers the prebuy is more about leverage to lower the price of the aircraft than anything else. In these times that is not going to work to well.


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