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KnotKrazy

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FINALLY....I've got some time to move forward on my project. House, kid, work, etc., are all 'on autopilot' and I can move ahead with the build. (This has been a long time coming, btw). Looking at all the components, I'm estimating 100K - 120K to finish a -7.

Buying the kit is no big deal; the spousal-unit didn't have any gripes with a 20K check...but she's coming unglued about taking 100K+ out of hard-earned savings. I have to agree with her; cash is king in this economy, so we've decided to borrow the majority of the money. I though about using HELOC money, as it's a bit cheaper and tax deductible ;-) but we both dislike borrowing against the house. I'm shopping aircraft finance companies and they all seem to have similar terms. So I'm turning to the experts. If you financed any part of your project, who did you use, and would you recommend them? I realize it's a personal subject so if you're not inclined to respond, completely understand.

If it matters, I have strong credit, good income, very low debt-to-income ratio, and solid savings. (Yes, we've been VERY fortunate and blessed). Thanks in advance for any info.

Martin Tricycle Motor Works
 
Where are you at on the kit? I wouldn't go on a 100K + shopping spree just to get all the stuff. You never know were you will be by the time your done. Buy or finance just what you need to keep going now.
 
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We used a HELOC for the big purchase, and found a way to work the rest of the items into the monthly budget.
 
I used Bob at First Pryority Bank of Pryor Oklahoma for my -8. I can't say enough good about them! Great folks!!!
 
You may want to rethink your position....

I don't know where you are going to get the money and I don't know what expected return you might get on an investment, but here are some things to think about.

Let's assume you are going to spend 120K. You will need 20% down (24K) and you get a loan for the remainder (96K) Let's further assume that you COULD get a 6% loan. Most kit loans are for terms of no longer than 20 years.

So for a 20 year, 6% loan on 96K, your monthly payment for 20 years would be $687. You will have paid $69,065 in interest and 96K in principal for a total cost of $165,065. That's a pretty steep premium on the value of the airplane.

Let's assume you invest the money in a MM/CD. It would throw off 1% at best or $960/year. That would give you about a month (after taxes) in payments/year and lower the effective rate to about 5.5%. Lowering the cost to $158,489. Still pretty steep.

Let's further assume that you decide to invest in a little more risky investment such as a ST bond fund. Current yields are about 2%. You would still be paying an effective, after tax rate of about 5%, or total cost of $152,053.

If you are willing to only pay for the kit (no additional interest), you would likely need a portfolio that is going to return close to 9% to break even (after tax). Again this is assuming you can get the money at 6%.

Would seem a better investment to pay as you go and use cash.

What would the wife say if you told her it was actually going to cost $160K?
 
pay as you go, use cash, finance engine/prop/avionics if you have to, or buy a flying plane, paid in full, then borrow the amount you need to finish against that plane's title- do not borrow against your house, as a rule you shouldn't finance toys
 
panhandler1956 said:
I used Bob at First Pryority Bank of Pryor Oklahoma for my -8. I can't say enough good about them! Great folks!!!
Click to expand...

I concur with Brent's statements. First Pryority will set you up like a construction loan on a house. They will issue checks to Vans, Stein, Aerotronics, Aerosport, etc as you need purchases, so you don't have to order all at once. Typically it's an interest only loan until you get your pink slip, then converts to a traditional loan.

Bob and April have been great to work with. If you ask them for something that doesn't make financial sense, they will share their opinion and educate you why it may not make sense.

bob
 
left out a few details...

One of the things I love about this forum (besides the great people!) is the speed at which one can get an answer. To ANYTHING!

Many thanks for the thoughts and info. I should have mentioned: I'm cutting way back on work hours, which will allow me to effectively work full-time on the kit. I wasn't planning on buying any big-ticket items until it they were needed; I was hoping (dreaming) of being able to build in two years or less.

Regarding the financing; my idea was to leverage the larger items ONLY as a short-term solution. We're able to pay back several thousand dollars a month on the principal, which lowers the effective rate substantially. And we're able to pay cash for quite a bit more than just the kit. Our goal in the initial question was to find the best overall way to pay for the project. We plan on having the entire project paid for in 3-4 years, max. I agree, it makes sense to just pay cash as we go, but that depletes a savings account and slows us down by a couple years, versus repaying a short-term loan with income along the way over several years. That way, we keep the cash that we already own. I'm not an accountant (obviously), but it seemed to make sense and (more importantly) kept the wife happy. Well, that AND a new car.

Thanks again to all; I'll be on the phone first thing in the morning with Pryority.
 
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pay day

In 2 years the kit will be about the same as now but in 2 years avionics will change a lot with nex gen
 
If you're thinking it's going to cost you $120k to finish a -7 :eek: why don't you just pay cash for a used one? There are some nice 6's and 7's for sale a lot less money. Then you can upgrade avionics and such and help cover cost selling off the old stuff.

$120k to finish a 7 is paying top dollar for all new stuff. You can do way better than that if you try.
 
Personal banker

I'm surprised that none of you guys suggested using your personal bank or banker. Mine has been financing my airplanes for many years and during lousy spraying years, allowed interest-only payments when the money was tight.

Best,
 
Glad you are able to start your project Marty. A two year build would be full time I?d think, less than average I?d bet (might be a VAF Poll on Build Time ?).

So paying cash as you go spread over a longer time frame might be more manageable ? Just can?t get much return on cash now days, won?t surprise me when the Banks start charging us to keep our money safe !! Cash is King or Cash is Trash :)?

If you are needing talking points for the Spousal Unit, tell her there will be a 9-9-9 National Sales Tax enacted soon and if you don?t spend your cash now you will end up being taxed again when you spend your (already taxed) savings.

pk
 
With all due respect, IMHO I believe it is a really really bad idea to take a 90+k loan out right now on a toy. I was able to build my 8 on a pay as I went program, and if I could do it anyone you is a hard worker and disciplined can do it.
 
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