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Thread: Hangar Ownership?

  1. #1

    Join Date
    Dec 2017
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    Omaha, AR
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    Hangar Ownership?

    A local airport offered me a lease for land to build a hanger. What are the economics of owning a hanger? Do they appreciate? What Terms do other airports offer for hanger ownership? I am considering building a hanger/shop I can build and fly from instead of building a shop next to my house AND renting hangers space to store it.

    Thoughts anyone?

    Brock

  2. #2

    Join Date
    Aug 2011
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    Northern IL
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    How long is the land lease and what restrictions are there on what the hangar can be used for?

  3. #3

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    Oct 2011
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    Terms of the land lease are important. The FAA airports guidance favors 20-25 year terms. They understand that you will want to amortize your investment and that if you have to take out a loan, it will have a term that reflects commercial real estate lending.

    The lease will likely have an inflation clause. That is, the monthly rent will be adjusted periodically based on some government inflation index.

    You want the lease to have an option for renewal at terms that make sense. Ideally, the lease automatically renews at the original terms.

    You do not want a lease that says that after some time the airport owns the building. That means your investment goes down in value every year. Generally hangars increase in value if the lease is renewable. Run, do not walk, away from the type of lease that says you will lose ownership after some period of time.

    Talk to some hangar builders. Some kits are completed down to the last nut and bolt, some are not. And you may have to contract with a second and third contractor for foundation and then floors.

    Will the land lease include some paved ramp space in front? Where you are snow plowing may not be a factor. It is, and who does it, affects my lease.

    How big a hangar? You might want to rent a space to another airplane owner or builder. You do not want your lease to prevent that. And even if your do not opt to do that, you can never have too big a hangar. Ask me how I know (somehow 2400 sq ft got filled with "stuff"?!)

    Utilities are a consideration. Is electric, water, and sewer nearby? Or does the airport plan to extend those in your direction?

    Finally, will the lease speak to insurance? Some leases require that the hangar owner purchase liability insurance and name the airport as an additional insured.

    All factors into deciding whether to invest the time, effort, and $$.

    Best of luck,

    Wes

  4. #4

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    Jul 2011
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    Clarklake, MI
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    It's all in the details. Don't expect the property owner to grant you a lot of bennies in a lease. The lease you negotiate will spell out all the terms and conditions, usage, sublets, etc. The airport may require any building erected to meet all applicable building codes and be erected by a building contractor.

    It's also common for any permanent structure built on airport property to revert to the airport at some point in time because once erected it becomes a "fixture" [legal term] of the property. The building may appreciate in value at some point but the airport will be the one cashing in.

  5. #5

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    At my airport, the body that manages the airport, has a policy of encouraging development. Our land leases are typically for 20 years with an option for renewal for another 20. The stated policy is to continue renewals. The airport authority owns no hangars. The leases say that if the contract is not renewed, the owner of the building must remove it or it becomes abandoned and the airport authority will own it. That clause creates the expectations for how non-renewals of leases are handled. But there has not, and by policy there is no expectation of, not renewing a land lease that has been faithfully paid for.

    We unfortunately live in a time where the number of airplanes tied down on the ramp is shrinking, and hangars sit for sale for some time before a buyer appears. One unit in my hangar condo association was for sale for two years before a buyer appeared. But given the character of the average New England winter, you can rent an empty hangar for at least 3 months a year, which will cover property taxes and some of the condo fees. And of course, if you price the unit reasonably, once you get an airplane owner off the outside tie-downs, they tend not to want to go back outside....

    At this time in our history, the would be builder is as valuable to the airport as the airport is to the would be builder. As evidenced by the statement "A local airport offered...". Every locale is different, but small airports are struggling. Cities and towns do not want to subsidize their airports beyond token $$. A couple of years ago we discovered that some of the local city council did not even know the directions for driving to their local airport. The airport finances benefit from each new tenant who pays land rent, buys fuel (flowage fees), and buys services that support that airport businesses that are also paying tenants. Each new tenant improves the financial ecosystem of the airport.

    So don't undersell yourself as a prospective tenant. And go to every month's airport authority meeting. Be a familiar face. Speak up. That's what works at my airport.

    Best of luck,

    Wes

  6. #6

    Join Date
    Dec 2017
    Location
    Omaha, AR
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    Thanks everyone. Your information jives with what I am hearing from local pilots. I am leaning toward a six plane T hanger that I operate as income property.

  7. #7
    FlyingRon's Avatar
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    Aug 2011
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    NC26 (Catawba, NC)
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    2,627
    I own the ground under my hangar.

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