Buying a duplex…and an airplane

Submitted by Seinfeld-Lyfe t3_ydlzf5 in personalfinance

This is a big financial moment in time for me.

So basically in the long run, I want a nice house, some land, a couple or a few rental properties, and to be working less and traveling more. Sooner rather than when I’m like 50. I’m 30. But I also want an airplane. So here’s the situation.

I have a 100k job (after taxes), and my commercial pilot’s license. I can get my instructor pilot certificate, and instruct on the weekends for about a year to get to the flight time threshold for aviation insurance to buy close to my dream plane for 150k. It’ll cost me somewhere around 25-30k/year to operate the plane. I could probably get this done within 1-1.5 years. But cash available (not invested in any capacity) is currently around 126k (around 8k of that isn’t invested but sitting in a brokerage account waiting for direction). My emergency fund isn’t supposed to be less than 40k based on my expenses and having a nice cushion. I’m also hoping to buy a duplex soon. So if I manage to buy a duplex for around 300k (I know it’ll be tough but I have prospects), that drops cash available to 26k after I subtract the emergency fund and house down payment. I know it’ll be more than 60k for 20% down with everything but I’m still saving money, so the math is still conservative. Then if I put 15% down on a 150k plane, I’m left with 4k in disposable cash. So after buying all of that, I would have 44k in the bank while having a mortgage (hopefully offset by a renter but not eliminated due to current rates) and an airplane loan of about 128k…

Granted. I won’t be able to buy the plane until I get the hours needed to get insured, so I have another year to year and a half to save more money. But that’s the situation as it stands. But it would kind of hamper my ability to get a second duplex which was kind of what I was thinking about doing next. Yes I’m investing in my 401k to get all the matching and I’m also investing in my brokerage account weekly. That won’t stop. So it seems like I could actually do all of this finally but it’s not going to be a completely risk free shot.

Thoughts?

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GMUcovidta t1_itszv2f wrote

Even if you're flying the plane at least once I week I don't see how it would be considered reasonable to buy one and pay $35k/yr on 100k salary.

(assuming the plane lasts 30 yrs you're looking at 150k+30k*30yrs=$1.05 million, excluding interest)

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Seinfeld-Lyfe OP t1_itt0wb8 wrote

Valid point! Especially if it were just for convenience or to try to travel cheaper.

So that number is based off of flying it about 200 hours a year. It’s not just to get me from point A to point B either. There are other reasons it’s the pick for now. It’s efficient for what it does, allows me to do aerobatics, and can vary another person and some baggage. The end goal jet would cost about 4x as much initially and yearly haha. But I may not be able to reach that ever so this is the one that seems most attainable. Aviation is a major passion of mine and I’ve always intended on buying an airplane so I can enjoy all of the work I’ve put into flying for years. It is for sure not a cheap passion haha

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GMUcovidta t1_itt13pz wrote

If you want to do that you better get a much better job- that's a very expensive hobby and doesn't include maintenance or a place to store the plane just fuel?

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Seinfeld-Lyfe OP t1_itt25ki wrote

Agreed! That’s where my reduction in living expenses and instructing on the side come in. I also do make more than that but knocked it down to that for the a little more cushion too. My after tax income is not much less than that. I am also looking for a higher paying position. Very valid point! I haven’t done any of these things. Just kind of airing out the whole concept.

Yeah! So those operating costs factor in fuel, maintenance, hangar, etc. And those expenses are based on a friend who owns the same aircraft.

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GMUcovidta t1_itt3cp9 wrote

Have you considered just paying the friend to rent his plane? It seems like you income would need to at least double for the purchase to make any sense

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Seinfeld-Lyfe OP t1_itt647z wrote

I definitely would if I could. He lives in a different part of the country and it’s also not legally allowed to rent this particular type of aircraft, unfortunately. Ya think double?

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InteriorAttack t1_itt15fj wrote

that doesn't adress how you are going to afford spring 1/3 your income on the plane alone

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Seinfeld-Lyfe OP t1_itt318f wrote

Well the airplane is the primary expense really. And 30k is on the high end. The duplex with capex, maintenance, would hopefully allow me to at least allow to reduce monthly expenditures on housing to about 900/mnth. Otherwise I’m very tight with the rest of my money. And my take home after taxes is quite close to 100k.

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93195 t1_itt2c88 wrote

$150K plane that costs $30K/yr to operate (it’s always the higher number) plus both sides of a duplex, plus you want to maybe get another duplex too?

Seems like a big ask at $100K/yr. Just operating the place alone is 30% of your pretax income.

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Seinfeld-Lyfe OP t1_itt5x7i wrote

This is true. I realized I should have put “after taxes” in parentheses after that number and have done so now haha. And I know that’s still tight for those numbers. Yeah 25k is already quite conservative and 30k is very conservative. Those are padded numbers from someone I know who operates the same aircraft.

It would be cool to move on to the second duplex after a couple years of owning the property and the plane but a second property could definitely wait. The flying is definitely higher on my list than the additional property.

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BouncyEgg t1_itszxz8 wrote

If you're planning on having a family/children, make sure to buy a Term Life insurance policy (not Permanent/Whole/Universal/Variable/etc) before you start flying...

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avalpert t1_itt1nmb wrote

Too late for that - they'd have to give up flying for at least a year before and after applying and probably take an aviation exclusion for it not to be considered in underwriting.

But there are still good priced policies out there, you just need to work with an agent familiar with which ones to apply to and which ones not to.

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Seinfeld-Lyfe OP t1_itt834r wrote

My job is that if a pilot in a different capacity than an instructor and it comes with it’s own life insurance that is well aware of my occupation as I have been doing it for a bit haha

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avalpert t1_itt8fud wrote

Group plans are also different from individual plans - when you need life insurance (because you have dependents relying on your income) it is prudent to have a policy independent from your employment.

That said, it is still possible to be insured as a pilot.

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Seinfeld-Lyfe OP t1_itt97t9 wrote

Haha I feel the life insurance concerns can be laid to rest. I am very aware of my policy and know a significant number of people in my job (which is flying airplanes) who fly separately from the job and we all had to go through specific channels to get approval for flying outside of the job before we started doing it. Trust me. The life insurance is no issue. I appreciate the concerns!

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avalpert t1_itt9iz7 wrote

It's not about the policy - it's about the risk you get hit by a bus on your way home from being fired... Or the any number of other circumstances where you die while no longer employed (which is not always a timeline you control).

It's one of those situations where even if the risk is low, the impact if it happens can be so significant that paying to insure it is just prudent.

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Seinfeld-Lyfe OP t1_itta1zq wrote

Ok. I’m not going to go and list how my life insurance works or why I don’t have to worry about it as it relates to my employer, but I am covered completely. It is a unique situation and I am lucky to have it. I’m covered from the bus, I’m cover from the airplane getting swallowed by a giant bird, I’m covered.

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Seinfeld-Lyfe OP t1_itt12q0 wrote

Hahaha very valid point. I’m currently a pilot and do have life insurance in the event a flock of geese causes my demise.

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alllovertheplace t1_itt1j1e wrote

100k after taxes isn't that much, especially if you want to max out your retirement plans and plan to be paying a mortgage, plus all of the extra expenses that come with homeownership, which add up faster than you'd think.

Maybe if you plan to be very frugal in every other area of life, used car, not dining out or traveling much until you get a substantial raise, or buy a cheap home in an area with no property taxes.

Anything is doable if you're passionate enough and willing ti compromise in other areas, but to me it sounds pretty tight and like you'll have to make a lot of sacrifices to make it happen.

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Seinfeld-Lyfe OP t1_itt536j wrote

For sure! Yeah so my after taxes take home is pretty close to 100k. I felt like it would be easier to post that number and I’m now realizing that I need to go in there and put in “after taxes” in parentheses haha.

I agree! I’ve tried to be conservative in how much I would set aside monthly for repairs, capex, vacancy, etc and it would hopefully put my monthly housing expenditures down to around 900/month. Not free like you used to be able to do but it at least allows me to build equity while doing it. Luckily my car has been paid off since the 11th month after I bought it a few years ago too. I love cooking and cook at home almost entirely. I’m pretty frugal in those areas. I would be hoping that I could continue to instruct on the weekends or evenings after work on occasion just to offset the expense and build flight time.

All very good points! Thanks!

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Jet_Jockey_ t1_itt1mcl wrote

An old Chinese proverb:

"If it FLIES, FLOATS or F#CKS...: RENT IT !

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Seinfeld-Lyfe OP t1_itt5f9k wrote

Hahaha if I could rent this, I would. Unfortunately, I can’t haha.

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Amerikaner83 t1_itsziek wrote

You're in a pretty good position, go for it! You've planned it out pretty well and seem to be aware of the risks. Have fun!

And may your number of takeoffs always equal your number of landings

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Don_T_Blink t1_itt59st wrote

He's absolutely not!

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Seinfeld-Lyfe OP t1_itt7t3b wrote

Hahahaha I do realize it’s very tight and it’s not happening right now and the aircraft may not even be available immediately after a year or a year and a half. This is just airing it out haha. I appreciate the input but I haven’t done anything yet. I am currently in my same normal existence saving money and not risking the money haha

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Seinfeld-Lyfe OP t1_itt008z wrote

Thanks! Seems a bit too good to be true, so I felt the need to put the thought out there for people who likely spend a good amount of time considering their financial position.

So far those two columns are equal and I intend on keeping it that way haha.

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