Speaker 1: 0:00

Tom has put out some great content. I reached out to him and you know what Screw it, let's just bring him in. So, Tom, hey, welcome to the show.

Speaker 2: 0:06

What's up guys? How's it going?

Speaker 1: 0:08

Good man. Well, I think you're in sunny Florida where it's always warm, but today is a beautiful day out. Actually, I wound up canceling my flight lesson to make sure we do this podcast, because that's how excited I am, wow. So I'm trying to get my instrument rating, so, but either way, hey, what you want to introduce yourself and kind of talk about what you do and how you got into the private aviation industry.

Speaker 2: 0:35

Yeah for sure. So my name is Tom Lelio, my agency is Jet Life Arrow and I've been in aviation for a number of years now. It all started when I was in high school and saw the movie Top Gun and wanted to fly myself. I tried to be a private pilot, took three lessons and I quit. But before my life in aviation I was a youth pastor for about 10 years, and now here I am, specializing primarily in light jets, a lot of the citation line and, as of late just because I love consuming content like this a lot more people have been interested in buying private jets and using it as an investment vehicle. So that's what brings me here today.

Speaker 1: 1:15

Nice, nice, yeah, that's awesome.

Speaker 3: 1:20

I don't even know where to start because I want to dive in. I got a bunch of questions for you. Um, let let's just dive in, like like, talk about. Um, let's talk, let's talk about owning a private jet as an investment vehicle. Let's see where that. That's part of the conversation, yeah.

Speaker 2: 1:40

So, so, so, basically what I always tell people, you know, my whole goal with my, my YouTube channel, with all my guides and everything is I want to pull back the curtain on private aviation, because when I was getting into the private aviation world, there was really nothing out there. I mean, I saw the Gulf streams, the celebrities, you know. If you YouTube stuff, there was a lot of listing videos or very technical like this jet can go this far and has this much of a fuel burn and max takeoff weight, and it just didn't mean anything to me. So my goal is to pull back the curtain and just speak plainly. You know into. You got questions. I'm going to help you out.

Speaker 2: 2:13

So when people get into private aviation, a lot of people think, well, I can't afford a jet, I can't fly private. And that's just not the case, as probably a lot of your listeners may have already experienced. You can start off with chartering a private plane. That's only going to cost you a couple thousand dollars to go from point A to point B and then from there you can go into jet cars, you can get into fractional ownerships, you can own your own aircraft if you're flying that much, or you can even take the route of buying a jet and leasing that back to a charter operator and try to generate revenue from there. So it's a wide range of private aviation that I help people get plugged in wherever they're at in their aviation journey, because there's absolutely nothing like flying private, as you would know, ian, just like with your own plane, even if it's a 172, it's just a fantastic experience.

Speaker 1: 3:03

It's a very freeing experience. I will say I have not been in a private jet. Actually, I think, jason, you have been in one. I have. Yes, I have not, but I'll just say go to the airport, just be able to walk out on the tarmac Be able to walk out, just to the plane to go, fire up your own plane and go for a flight.

Speaker 1: 3:23

It's freeing, it's it's freeing. It's different, right, like you're not confined, like the airlines are really just the Greyhound bus to the air. Right Like you got to go. You got to go through this whole thing. Get on a plane, go where you want to go, and they do a good job, they make you feel comfortable. But there's nothing like just walking out to a plane, getting in and just going and being up there and just being free. It is definitely a different experience.

Speaker 2: 3:43

Yeah, 100%.

Speaker 3: 3:45

So I've heard of stories of individuals that own planes and they obviously lease it back to the chartering company I don't know if that's the right word in order to do so. Walk us through kind of how that process would work. What type of plane, what price point would typically be the best? How would it structure it? How would they structure it? Let's just say, hey, I want to buy a plane for a $4 million plane, I don't know, whatever it costs. Like how would I finance it? Would I have to pay cash? You know, would I? Would I create a, an entity that owns the plane? Would I have to hire pilots and things like that. Like, if you could maybe walk us through that, yeah.

Speaker 2: 4:23

So I'd be happy to walk you through that. I'm just kind of thinking, like the questions that you're that you're kind of bringing up, I think it'd be really good to kind of get started from the beginning, so like with my guide. Basically, the way I look at it is I step. Step one is it is it even a good vehicle for investment and what are some of the things you want to look out for? So you know a couple of things that I talk about is you know your acquisition costs. You know, obviously, anywhere from half a million dollars for a private jet, all the way up to 8 million, 10 million, whatever you want to invest in. So you know you're it's, it's a high, it's a high investment threshold. You know it's not just like anyone's just going to go ahead and you know, for a few thousand dollars, buy a jet. I mean you're talking at least a million dollars that you're going to need to be liquid to invest in that. So you got your acquisition costs.

Speaker 2: 5:07

Next, you got to talk about the fact that it's a mobile asset. This thing's flying all around. It's not like a piece of property that you have a lot of control over. I mean, who knows what you're going to do with this mobile asset, what your pilots are going to do, what your operator is going to do where it's going to go. So you want to keep that in mind.

Speaker 2: 5:25

On top of that, it's a depreciating asset typically. I mean, the last two years have been kind of crazy, but year over year you got to be anticipating that the asset itself the more you use it, the less valuable it's going to become when you go to sell it. And that's just been different for the last two years. But we're seeing a return to that normalcy where you're investing in an asset that's going to be less valuable than the time that you purchase it.

Speaker 2: 5:49

So is that a good strategy? I mean, you have to kind of weigh it. And then the last thing, kind of to your original question, is when you buy a private jet, it's not like buying a piece of personal property where you can buy it, fix it up and then just throw it up on Airbnb, vrbo. You can buy it, fix it up and then just throw it up on Airbnb, vrbo and off you go. In order to generate revenue from this asset, you need to go through the FAA. You need to have what's called a charter certificate or 135 certificate, and I can tell you exactly different ways that you can do that.

Speaker 1: 6:21

Yeah, anytime the government gets involved, it's automatically more expensive and going to take you a lot more time. I got my license in December and I still don't have it. I'm going on almost three months now without my license. I just have a temporary one. But you know, hey, it is what it is, it's the government. I was a government employee.

Speaker 1: 6:41

I get it Paid days, the same Every other Friday what you going to do, but I think, like something that to clarify and even just as like a private pilot, it comes up is talking about the mission, and I think that's kind of what you were getting at, like what's the mission of your plane? The same way, what's the mission of a piece of real estate? You know you're going to go buy a piece of land. You're not just going to go stick houses on it when it's in a commercial business district, right. The same way, you're not going to go buy a 172, but you want to be able to get across the country in a timely manner. And I think understanding what your mission is helps guide you to what type of plane you potentially want, right.

Speaker 2: 7:20

Yeah, no, absolutely. And the mission is typically what I would tell people. Well, two things. Number one what is your mission? Is this a hobby that you want to private jet for your own use? You just kind of want to offset your costs, or you want somebody else in charge of overseeing the maintenance and managing the aircraft. So you're not really generating revenue but you're just kind of, you know, offsetting costs. Is that the mission? Or is the mission to make money? And the mission is, you know, this is an investment vehicle.

Speaker 2: 7:49

So you're really only going to operators because you know there's three ways to get a charter certificate. You can start your own. That's going to take paperwork, that's going to take about two years to get back from the FAA. Like you said, they move slow. You're going to need to get your own director of maintenance, to get a chief pilot, you know, to get a plane that's going to be 135 ready. So there's a lot involved, a legwork just to get your own certificate. Or you could buy a certificate. One that's already in process costs you anywhere from a million dollars up, depending on what plane comes with it and how broad of a certificate, because there's different levels of certificate.

Speaker 2: 8:36

And then, lastly, what we're kind of going to dive into now is this idea of partnering up with a charter operator. You know someone who already has a certificate, someone who's already established in the market and is in need of more aircraft. Because there's so much demand, they need more aircraft. And so you come across to them and say, hey, I've got capital, I can purchase an aircraft for you, I'll lease it back to you and we'll split the revenue However you want to do that. And so that comes down to what is the mission of the operator, which is going to reflect what jet you're going to get, because some operators like the light jets, some need the real heavy jets, like the Gulfstreams, and a lot of them really use the midsize jets. So now we're into what's the mission of the operators.

Speaker 1: 9:19

Right, so the plane is the same as the piece of property, the part 135 or the charter certificate is the same as a rental license or your license to do business. Your charter company is basically your property manager. And then your pilots or your employees are the same as porters or maintenance guys.

Speaker 1: 9:41

Yeah, you know what I mean Just trying to frame it up for people to understand that, like, when you invest in real estate, you have all these parts. Well, if you're going to invest in private, private air travel, it's the same thing. There's all these parts that you need to operate to be able to do it and make money, and do it the legal way and I'm sure insurance is insanely expensive the same way it is in real estate.

Speaker 2: 10:06

Yes.

Speaker 1: 10:07

But what now? Usually when you're seeing okay, so when you're seeing people invest in private airplanes and to charter them back out, Yep. Financially like. What does this look like? Are they generally paying cash? Is there owner financing deals? Are they levering up from a bank? What does that look like? I guess kind of in the product. I'm trying to frame it up so people see the similarities and the differences all as one, and what it's going to take to do it.

Speaker 2: 10:34

No, a hundred percent. So so we're you're probably going to want a budget between 2 million and $8 million maybe 10, if you're really excited about a Gulfstream and those really big jets but you're going to want a budget between $2 million and $10 million. Now, however you get that money is up to you. Usually it's not owner financed or anything like that. Usually we're either paying cash or we're going to be looking to a bank for lending in that situation, and that's usually, I want to say, about 20% down, um, and the term is usually I have to grab my notes I want to say five to seven years, um, with a balloon at the end, kind of a thing. So there's different, different ways. You can uh, you can skin that cat.

Speaker 1: 11:20

Hmm, interesting. And what's?

Speaker 2: 11:22

the interest rates are probably above par, I would have to assume, on those types of things, but I think yeah, I want to say and and we just had this conversation with with my guy uh, we'll be dropping that on the channel, so you'll know for sure. But I want to say it was like five, five percent, but I you got to double check on my notes and check out that video for sure.

Speaker 1: 11:42

So five percent. I'd take five percent. I'd take five percent. Sign me up.

Speaker 3: 11:46

Well, five percent today is good. I mean five percent. Five percent in October 2022 is like, ah, five percent's high, but not anymore, now that everything's changed. So let me ask you about this strategy, this strategy, if it's something that so, it's from my understanding I might be wrong about this, but it's from my understanding that in the year that we, you can depreciate the plane 80% of the plane in one year. Is that right?

Speaker 2: 12:15

That's correct. It was originally a hundred percent for the last three years or so and that's going to be changing every year until it dwindles out to nothing. So you 80% lower 20. So it's going to go to 60 next year.

Speaker 3: 12:30

Got to hurry. So this is our math, this in my, in my master plan, and I don't know if this even makes sense to do, but potentially do some sort of like. Um you know, we uh have a few pieces of real estate that have substantial profits, that might be coming up in the near future, potentially realizing those profits on a piece of real estate. And other folks listening to this might have something similar to this. Where they're, they're selling a property or commercial building and they have an exit that in essence they're going to have a big gain on. And you know time, that right, where they in essence pay taxes on that, they're going to be paying taxes on that big gain and then buy this plane with those with with that money and then depreciate that plane.

Speaker 1: 13:16

I think depreciation is going to come back around. They're going to have to stimulate the economy in some way, shape or form. Too many politicians are involved in real estate. When they see the burden that comes along with it, it'll be back. Maybe it won't. Maybe I'm wrong, it all depends. I should turn this into a politics podcast and be like you know, it all depends who you vote for, but I'll leave that one alone in out of respect for everyone. But in the end, you know, at some point something's going to change and there's always a way to navigate the tax laws.

Speaker 1: 13:45

And you know a private plane is something that's actually interesting to utilize. Utilize. Now, when someone buys a private plane, let's just say we buy a $4 million jet, which seems reasonable relatively speaking. When you try to put this in a frame of reference like Grant Cardone's G whatever the hell he has is 50 million bucks right. So relatively speaking, $4 million is not a lot of money, even though it's a lot of freaking money. On a $4 million jet, what does that look like? Per hour? How could someone even begin to wrap their head around? How am I going to get this thing to make money? How many hours a year is it out and what does something like that even go for an hour.

Speaker 2: 14:24

Yeah.

Speaker 2: 14:25

So let's take a look at a Citation XL or an XLS. It's a midsize cabin. It's going to be three to $4 million. Um, we actually have this proposal uh built into our, uh, our guide, but we can run the numbers real quick. So you're, you're at roughly $4 million, right? Um, we had them. And let me pull up, pull up these numbers so I can, I can speak, you know directly to what, what we're doing, but, uh, the charter rate.

Speaker 2: 14:54

So there's a couple of different things, a couple of different costs that you're going to want to be aware of. Number one is your acquisition costs. Okay, it's $4 million. Number two is what your direct operating costs are going to be. So, your direct operating costs are going to be, you know, anything that it takes to actually fly the plane? Yep, that's exactly it. The Excel XLS, exactly. So what's nice about the Excel XLS is it's a roomy cabin. You can fit six to eight people in the back. It can go up and down the East Coast, no problem, go coast to coast with maybe one stop, maybe two, depending on how much you want to take a stop for. And it's a sweet spot for the charters because the cost to run it is just a little bit more than a light jet, but you can charter it out for a lot more than a light jet. So your direct operating costs, on the Excel, uh, they were estimating, uh, $876,000 for the year. So that was, you know, your fuel and their engine reserves.

Speaker 2: 15:49

Okay, so $876,000 for the direct operating costs, their fixed costs, which is going to be their pilot salaries or management fees, their hangers, their insurance about $450,000 for their fixed costs and those are your two main costs. That charter it out at $5,500 an hour. The other operator was only going to do it, I think, at $3,500 an hour. So this is where partnering with the right operator is important, because obviously that's your margin. What the charter revenue is going to be is how much you can charge for. It is what your margin is going to be. So the breakdown here was they were going to bring in $1.6 million over the year, flying roughly 300 hours. They were going to take 15% commission on that, which is typical. They'll take 15% or it could be a flat rate per hour. Their operating cost was almost 900K. Like I said, the fixed cost almost 450K and the net profit was going to be around $275,000 for the year.

Speaker 1: 17:01

Well, I'm sorry. What was the net again?

Speaker 2: 17:03

The net was 274.

Speaker 3: 17:05

The NOI was 275.

Speaker 1: 17:09

Right, and how many hours is the person? I'm sorry one more time. I was trying to follow up.

Speaker 2: 17:13

No, no, no problem. So this was based on 350 total flight hours, and 50 of those hours were going to be for the individual, the owner, and 300 was going to be for the retail clients.

Speaker 1: 17:28

And 50 of those hours is worth how much to add back into that right?

Speaker 2: 17:33

I think it was so five hours an hour yeah, I think the operating cost was like 30 uh 3 500 right, so that's 200 grand.

Speaker 1: 17:43

So you're talking about a half million bucks, essentially on a four million dollar investment.

Speaker 1: 17:47

I mean that's a pretty good yeah, it's a pretty decent return and you would hope, with you know some other things, that it gets a little bit better with, like leverage and debt, you know. So that's um, it's actually really interesting that you know a plane can produce that type of income. Now, as planes get bigger, does the income get bigger? Or like the days on, days on the road, days in the air, get better with the bigger planes? Or like, what do you, what do most people using private air travel for? Like what do you see most of the people that want to charter them and, let's say, you want to buy it as an investment? Are we going with this Gulfstream? Are we going something bigger? Are we going something smaller? Like what makes sense?

Speaker 2: 18:29

Well, this is why I like the midsize, because it's kind of a sweet spot. You have the biggest pool of demand or of buyers that you can possibly have, because it can do what a light jet can do in terms of the operating costs. It's more efficient than your huge jets and it can go further than the light jets and carry more people than the light jets. So basically, the way I look at it is, I usually avoid the light jets unless somebody is really excited about them because they want to fly it themselves. So if you're a pilot operator and you're just like I just want a Honda jet or a vision jet or a CJ, a citation jet because I'm going to fly it when the charter company is not using it, I want to fly it Great. Well, this thing's going to have to be traveling a lot. It's going to have to do twice as many trips because the trips are only going to be an hour, two hours, whereas your midsize can serve a market where the trips are two to five hours. So there's less trips that the midsize has to do. So it's a lot more economical to invest in that.

Speaker 2: 19:28

If it's a business With the Gulf Streams it's kind of similar.

Speaker 2: 19:32

You know the missions are going to be a lot longer, the commissions are going to be a lot higher as well, because it's going further and spending more time in the air. But you're also going to be, it's going to be a beast of a maintenance. I mean an example of Falcon 900, you know, with a sea check, you know a couple of landing gear overhaul um and a couple of um service bulletins. You know I've got one that that's going to need all that maintenance in two years. That's a million dollar bill right there, like, so, the, the, the. There's a point of diminishing returns, obviously, because while you can charge more, you also need more money to operate the jet. So I'm not as experienced with the heavy jets. It's more been the midsize jets that have been the sweet spot for a lot of operators, not to mention, like, all the overhead you need to to, to, to to work on these, these huge jets. You know, only certain operators at a certain level are going to be able to do that.

Speaker 1: 20:29

Well, go ahead. No, I was going to say, like you're talking about maintenance. This isn't like just pulling your car into the mechanic and saying, yo bro, I need an oil change. Like you're talking a month or two months of downtime. Like there's legit downtime in these things, because parts take forever to get, things are expensive, they take time. I don't really want my guy rushing through and I can't pull over. I promise you you can't pull over to the side of the road because you have to practice this.

Speaker 1: 20:58

You can't just be like, yeah, I got to pick, or my car has got a flat tire, you got to navigate your risk here.

Speaker 2: 21:04

And that's what a lot of people don't realize. They think like, oh, I've got 12 months a year, 365 days a year. It's like no, you don't you really, like you said, you've got 10, 10 and a half, usually 11 months of uptime and the rest is going to be down for maintenance.

Speaker 3: 21:20

Yeah, Good.

Speaker 1: 21:21

Jay, I see his head, I see the wheels turning. I'm just trying to get him in the idea that we need a jet.

Speaker 3: 21:27

Is there any investors? When I say investors, somebody who wants to buy a jet, uh, that that you work with that. Buy this purely on cash flow and investment use. They don't care about. You know, they don't care about the jet for their own leisure or their own preference.

Speaker 3: 21:44

It's like hey, you tell me what jet to buy, I don't care if it's two million bucks or ten million bucks yeah I'll put up all the money and maybe they'll finance it behind the scenes you don don't even know or care or I'll pay cash with it, and what's going to give me the biggest return on my buck?

Speaker 2: 22:01

Yeah, no, there's definitely people like that. I've got three acquisition clients right now we're looking at. One's got a Lear 60 that he wants to get, one's got a Hocker 800 and one's a Citation XL. So, yes, there's absolutely, and I've been getting more and more of those people, which has kind of driven me to look more closely at it and to find a couple of operators around the country that can not only explain it well but deliver on these promises, because they're grand promises. And it's funny because pre-COVID the best an operator could do is to say hopefully we can offset your costs. But because of the demand that has risen due to COVID, we're seeing that this has been a wave that's still growing.

Speaker 2: 22:46

As far as charter goes, as far as aviation goes Now, similar to real estate, the acquisition of private jets has slowed down because there's only a small pool of people that can actually afford to buy a whole, entire jet. But the pool of people that can afford a charter has increased because of COVID, because of the demand for private aviation. So there's certainly, jay, to your point, more and more people are coming to me and saying how do I do this? Just find me the right chat, and I love that because it allows us to work with the operators to maximize the operator's performance. We're not being hamstrung by a guy that's like, oh well, my buddy has a Gulfstream, so I'm only going to buy Gulfstreams because I got to keep up with the Joneses.

Speaker 2: 23:34

It's better to come into this if you're treating it like a business. It's better to come into this and just say like, yeah, tell me what the right, what the right plane to buy is. And it's also going to depend on, uh, market availability. Um, you know, citations are amazing. They're hard to find. Hawkers are are really hard to find, so more and more people are getting into learjets now. So it also depends on the market too.

Speaker 1: 23:56

Yeah, Go ahead, Shoot. What was I going to say? Sorry, dude, we're very passionate about it. It's like the dream. We're both very passionate about it. So it's like, all right, let's get off. Let's get off as an investment vehicle. I mean, if we wanted to fly private, we as an investment vehicle.

Speaker 3: 24:11

I mean, if we wanted to fly private, we would fly private. It's more of hey, how can we make this? You know?

Speaker 2: 24:19

Well, let me speak to that Like. One thing about this as an investment vehicle is, aviation is notoriously inefficient. You talked about the FAA and how the FAA is very slow. You know we've got parts. You know holdups We've got parts holdups. We've got availability holdups.

Speaker 2: 24:41

Even when you're chartering, there's two types of charter models that you have.

Speaker 2: 24:43

You've got your hub and spoke where you want the plane to be located nearby you.

Speaker 2: 24:48

So you pick the charter operator that's at the airport and they just fly away from the airport and back away from back, and once in a while, maybe they'll string when they go away, maybe they'll find someone that needs to come back and so they'll bring them back on that plane and that's maximum efficiency, right, the plane is going, someone's paying for it, the plane is coming back, someone's paying for it.

Speaker 2: 25:07

This is an incredibly inefficient market, and I'm not trying to say you shouldn't do it. What I am just trying to say is I'm trying to point out all the obstacles that you have to navigate so that you can do it successfully. And so that's why working with a broker, working with an operator that can show you on paper hey, here's our market, here's what we've done the last two years. We know this plane, we know these routes, we know these markets. We can with pretty good certainty say it's reasonable that we should get 300 hours a year and that will net you $200,000, whatever it is, and not just pick out of a hat and try to do it by yourself because you don't know what you don't know.

Speaker 1: 25:51

Yeah, and I think the operator is the key to this whole thing. I don't think a lot of people discuss that. Enough of like having the right operator on hand is what's going to make or break you, because you could have the plane but you're not selling seats, you're not selling flights, like what's. What's the point of it then? Yeah, unless you're going to personally use it all the time exactly and there there's a good bit of cost that goes into it.

Speaker 1: 26:12

You know a lot of people think that Like, oh, whatever, Go get fuel. When it was getting real high it was $9, $10 a gallon when I was doing my flight lessons and we're talking about Thousands of gallons On some of these planes. We're talking about a lot of fuel to go across the country To do what you need to do.

Speaker 2: 26:33

You're holding costs without you even flying the plane You're going to need at yeah, so if it's not flying, can you eat that?

Speaker 1: 26:40

Yeah, and that's where you need to have the right operator to try to get your plane in the air all the time. Then you then you got the uh, then you got the old uh conundrum of, well, my plane's in the air all the time, so shit's breaking. Well, then now you're back out of the air, right? So it's like doing a good job talking about a few other guys are talking about it, uh, and doing a pretty good job with it, talking about what it takes to actually operate a plane and and make it go. Have you done any comparison between? And those that don't know, this is kind of my dream plane, just like personally, because it would do everything I needed to do. I just can't afford it.

Speaker 1: 27:20

Um, is like a pc12, like a turboprop, versus, uh, a jet. And for those that don't know, here's like turboprops props. It's a jet engine where the prop is out versus a jet where the prop is not exposed. Essentially, is really the difference have you talked much about, or, from a financial decision to charter a plane, the difference between turbocrops and jets as an investment vehicle?

Speaker 2: 27:48

Well, a lot of charter operators love the PC-12 platform. It's a phenomenal platform, you know it can be. It's got great room, great cabin space. It's really awesome in terms of the maintenance costs. So it's it's. It's a good platform for chartering.

Speaker 2: 28:06

But you can't get the rates that you're going to get out of a jet and it limits your marketing and what you can do.

Speaker 2: 28:13

So, for example, you know, if a, if a, if a citation old legacy citation jet can get $3,000 an hour. You know the PC 12 can't get more than $3,000 an hour. Like, because, especially depending on the mission, because the further you go in the PC 12, the more you see the benefit of having a jet right, the more you see the jet can move faster, the more you see the jet can get over the weather. So you know, in this situation where you're going to have delays, the jet can help you out there. And so, yes, it's a platform that people can invest in. That's more, in my opinion, a plane that somebody would buy it as a hobby, because you're an owner who wants to fly it himself but you want to offset your costs by giving it to a charter company. As far as a business decision, I think there are better aircraft to purchase in order to try to generate revenue, and it wouldn't be a PC-12.

Speaker 1: 29:10

Yeah, that definitely makes sense and I think, something that I'm starting to realize out of here and Jason, I was hot and heavy on this. We talked about it a lot of like yo can we get a jet to do what it needs to do and we can make money with it? We talked about it a lot of like yo. Can we get a jet to do what it needs to do and we can make money with it? I don't even know if people are syndicating private air travel like private planes to do this, and if they are like, I'm still confused to how they make money and actually justify it, and I think having deeper conversations with the operators is really where we need to go. But more importantly with that is like. I still think a jet is like it's like it's like a vacation home, almost Like you might generate some income with it, but in the end, you're really buying it because it's something that you want for your family. I think it's a good way to potentially look at this.

Speaker 2: 29:54

Yeah, unless you're going to be really, really strategic and ruthless in terms of treating it like a business, like you're not going to use it that much, it's really just going to be there and you partner with the right operator and this is a. This is like a six to nine month process of getting educated in the market, then what you know find, getting to the point where you're ready to have that conversation with an operator asking the right questions, and they should be taking you through a journey of you know, two to three months to make sure you're comfortable with their, their, their operation, their proposal, how they're going to be doing it, and so like it's a lengthy process where you know it's not like just let's pull the trigger.

Speaker 1: 30:36

Like people aren't thinking about from the standpoint of owning a jet, or even in the buying process, like pre-inspections what's something like that cost? Or like what are the things that people should think about that they might not be? Besides the sexy part of owning a jet, like, what are we missing here?

Speaker 2: 30:55

Yeah, I mean, if you're looking at it from an investment perspective, what are some things that you need to be aware of? Well, like I said in the beginning, it's a mobile asset, it's a depreciating asset and in order to start generating revenue, you're going to go through the FAA. Whether you skip the FAA by partnering with an operator or you get it on your own, you're gonna have to deal with the FAA at some point in time. So I would say that to the offset, at the very beginning. Beyond that, you know, when you decide, okay, well, I still want to look at it, I still think this might work out for me. Well, when you get into actually selecting the jets I mean, it's just such a wide world of jets. So I always ask how far are you going, how many people taking with you, how big is your cabin and what's your realistic budget range? Obviously, we're going to have a little bit of leeway, but what your budget is going to determine is how new of an aircraft you're going to be looking at, and so there's a lot that goes into when you first get started. Like, have you talked to a bank yet? Are they going to lend on the aircraft? Because banks are going to want 20 years or younger airplanes. Banks are going to want it to be on what's called engine programs and airframe programs. They're going to want to make sure that if it is a charter company, some banks prefer charter companies, some banks don't want anything to do with a charter company. So working with your lender at the very beginning is important and I don't just mean, oh yeah, I borrow from the bank all the time They'll let me have whatever I want. Typically, that doesn't work. I I've been through it, like if they tell me that I'm like, please go show them this ad from controller and say will you lend on this? Because nine times out of 10 is like oh, it's too old or doesn't have programs or something, something that they won't lend on. So do that.

Speaker 2: 32:35

You know work with insurance, especially if you want to fly the plane yourself. You know what, what kind of expectations they're going to need in terms of insurance. So your insurance, your lender, I mean you got to find out pilots. Where are you going to get these pilots from? How available are pilots? There's a lot to consider. And then, like you said, every plane is going to be different. Every plane has been maintained differently, similar to houses when you get into your negotiations. You're going to have a pre-buy and you're going to do an inspection, you're going to take a test flight. So what are the things that you need to be looking for? You know, are you going to borescope the engines logbook review, which is like the records of the aircraft, visual inspections? You know, are you going to do a full, you know, two week inspection on the aircraft. So everyone's going to be different. And then, you know, finally taking delivery of the aircraft. So there's there's a lot to that goes into doing your due diligence when it comes to acquiring a jet.

Speaker 3: 33:28

For sure, I mean it's just like anything else, any other asset that you're that you're investing in. I mean it sounds like a lot of stuff, cause I think a lot of folks probably aren't familiar with her and ever thought about that, but you know it's pretty overwhelming. If somebody buys their first house or their first commercial building as well, it's similar. You don't know what you don't know. I just think the whole thing that's very appealing, especially short-term, is the depreciation side of it, that you can depreciate the whole thing, 80% of it in the first year, which is, I mean you can have an accelerated appreciation schedule on other assets and other real estate and stuff like that, but not the 80% mark. So it's one of those things that you know if you have, if you have the cash, if you have a large capital gain or you have a large gain from something and you're looking to invest in some sort of asset, I don't know.

Speaker 3: 34:25

To me it seems like, hey, the numbers work and also based on and I'm not saying the numbers that you mentioned earlier, but the 275 net on that particular example, we talked about 275 net plus another 50 hours that are set aside for the owner. Let's say they're not using that that's another $200,000 plus. In essence, if you equate that to real estate, that's $500,000. Noi net operating income on an asset that only costs you $4 million. Call it $5 million. I mean that's a 10 cap.

Speaker 2: 34:58

Yeah.

Speaker 3: 34:58

Plus you can depreciate it 80% the first year. Yeah, Plus you can depreciate it 80% the first year. So and again. I'm just using that as a model of like sounds pretty good.

Speaker 2: 35:08

Well, let's just say on paper and the model it sounds pretty good and it does work, but, like I said, because of the aviation industry in general, inefficiencies, that's where it's out of a lot of people's control.

Speaker 1: 35:21

Well, and the disposition is similar to real estate. It's. It's illiquid, right, like it's going to take time to find the right buyer to dump the asset. It's not like a car where you can just go trade it in or get cash for keys. You know, there's, there's a lot of things that that go into that. Yeah, I don't know, man it's. I think it's more, it's more obtainable than people put it on a pedestal yes if you want it yes, yeah, yeah, 100 so don't some planes appreciate?

Speaker 2: 35:52

well, the last few years, yeah, I mean, I saw, uh, when I first got started it was like a 1990 citation 5, roughly, you know, 560 um, that was a million dollar plane, down to $800,000, depending on what you came at and last January I sold one close to $2 million, like, literally, from like one year to the next, like it appreciated by a million dollars. I couldn't believe it and it was just the frenzy that we saw in private aviation. And what happened was you know the choice pickings. You know they got gobbled up first, you know the newer ones, and then it got into the older ones and then people started paying stupid prices because they just wanted access to these jets. So the million dollar jet shot up to almost $2 million in the course of two years. That's one of the few times in aviation history that we've seen appreciation.

Speaker 2: 36:45

The only other time you might see appreciation is if you are buying a brand new jet. You know like a $75 million global, you know 8,000 and you spend 80 million, and then it's oh, yeah, we were not going to deliver it to 2025. Well, you wait your two years, it's you, yeah, we were not going to deliver it to 2025. Well, you wait your two years. It's coming up on 2025. And you're like you know what? I don't really need it. So you'll go sell it, to sell the paper to somebody else and you can sell it to them for more than you paid for it. So that would be another way to appreciate an asset. If you wanted to buy the paper for the brand new jet in hopes you're speculating, in hopes that someone's going to come along that's going to want it right away when it gets delivered, because you have that spot in line, because someone had to wait for two years. So that's, I mean, that's another play if you got $75 million to hold on to for-.

Speaker 1: 37:40

It's like a covered land play at that point. I mean, do people buy? I guess it's kind of like wholesaling or covered land play or more of like a development play. Getting it entitled and ready to go Seems risky, but I guess there's money in that, there's money in everything People buying. I don't think a lot of people realize, just kind of to wrap it up here, the age of a lot of people realize you know, just kind of to wrap it up here, the age of a lot of these planes that you fly in, even commercially, are a lot older than you even want to know and you probably wouldn't get on the plane if you did. With that being said, knowing that, do people buy old planes and like renovate them and try to fix and flip them, like is that a real thing?

Speaker 2: 38:18

A lot of fix and flipping last year and even previous. So there is, there is. There are fix and flip opportunities, you know, and and basically I don't usually recommend people do it unless you've got, you know, just some kind of aviation background, because in order for it to make sense, you need mechanics that are going to play ball in terms of pricing, you need to have parts available, you need to have, like there's just all these pieces and there's shops that will do it. There's companies and individuals that I know within the industry that if I'm buying a plane from them, chances are it was a fix and flip. So, yes, there's money to be made in there, but usually there's already established players. So I don't recommend. If I get a call on somebody and someone was like, hey, is this a good fix and flip, I'm like, eh, not really. So I don't recommend. If I get a call on somebody and someone's like, hey, is this a good, you know, fix the flip, I'm like, yeah, not really yeah, no, it makes sense.

Speaker 1: 39:08

It's the same thing as like flipping cars when people buy cars, you need to have the mechanic in your back pocket, right, um, and know what you're doing. Now I just want to bring this up here. I know I was kind of flipping through a bunch of pictures. Jay, this, this would be the dream, in my opinion, to be able to own something like this and not even have to lease it out, just have it. This is probably realistic one day. I mean it's still. I mean these things are $2 million, right, like, is it realistic? I like to think it is. One day, yeah, I could fly this thing. I don't know if Jason will get in a plane with me. Get in the plane with you, I'll get in that crappy plane.

Speaker 3: 39:40

That's what they all say. Tom, I'll get into that crappy plane that you put on video earlier.

Speaker 1: 39:48

The good news is this one has a parachute.

Speaker 2: 39:50

Yes, and the newer ones even have self-landing. If you have a heart attack or something, Jason can just put a button.

Speaker 3: 39:57

Yeah, dude. No, I'm not scared of heights. Those crappy planes that you took your license in that look smaller than your car. I'll go in that thing with you.

Speaker 2: 40:07

I'll go in that right now.

Speaker 3: 40:09

It's an experience. Are you even allowed to go fly with anybody right now?

Speaker 1: 40:14

Yeah, as a private pilot. Yes, you can come with me. I just can't charge you any money for you to come along with me. We can split all the costs Even better.

Speaker 2: 40:29

Yeah, I should have said that, charge you any money for you to come along with me. We can split all the even better. Yeah, I should know you can pay half, you can pay half anything. So I mean, that's, that's. That's again that's a good point, like for people who are getting interested in chartering or trying aviation. If you go to a charter company, maybe it's five thousand dollars an hour, but then you you find a buddy down the road and like, yeah, like yeah, I'll only charge you 2000. That's an illegal charter, like the risk, so don't do that. Um, people try to get away with it. They buy a plane and they just kind of let you know they, they charge someone else to fly in it, and it's like that's no bueno.

Speaker 1: 40:56

Yeah, no, it's definitely all things that we need to consider. Um, you know, and a lot of people don't think about those little things that are out there. It's not like Uber and you can just go, uber your airplane, right.

Speaker 2: 41:07

Yep Exactly, exactly.

Speaker 1: 41:09

No, man, we appreciate it. I think it's good to bring it into like realistically, even like me picking up the phone and talking to you and having the phone conversation and talking about it, it makes it real. Am I going to do it? I don't know. But speaking it into existence, learning about it, understanding it, makes it a better buying opportunity at a later date. And you're in the job of sales, so you're going to talk to presumably a lot of people either way. So we appreciate your information. But again, you might have a deal. You're like yo listen, like I know you guys are talking about this. Here's an opportunity. Are you ready to go? Well, it's the first time we're talking. I'm not ready to get right. Yeah, I'll be ready to go on the fifth time we talk, but at least we're talking yeah, so yeah, I mean, listen, it's just like anything else.

Speaker 3: 41:52

It's like a discounted house or potentially a discounted rolex, where all of a sudden your dealer calls you because you talk to him is like I can't believe I actually have a plane at this price. But I do and I can unload it to you quickly.

Speaker 2: 42:05

Yeah, exactly.

Speaker 3: 42:06

Front of the Rolodex Ian, there you go.

Speaker 1: 42:09

Yeah, what if I make an all cash offer closing 30 days or less?

Speaker 3: 42:13

Let's go, I'm sure 30 days or less in the plane industry is probably phenomenal.

Speaker 2: 42:18

Yeah, most of those sales are a lot longer. Yeah, yeah, exactly, and that's one piece of leverage that you know, I was fortunate to deal with a couple of uh, really good, uh buyers that would, that would, and so I have my rolodex of guys like that so that when I find a plane where the owner is like open to um, you know, a lower price point, okay, here's the lower price point and we can move, we can move quickly.

Speaker 1: 42:39

So okay, we're getting, we're getting in the. We're getting getting in the Rolodex babe.

Speaker 2: 42:42

You're in the. You're in the Rolodex.

Speaker 1: 42:43

Hey Tom. Well, no, dude, we really appreciate it. What's um? You know, we like to ask everybody like, what's a like a book or podcast that you're listening to now, or a book or podcast that's like changed your life, that you would like for people to know about?

Speaker 2: 42:57

Um, for me, the biggest game changer has been a lot of Grant Cardone's content, gary Vee, any of their content is what I'm listening to on a daily basis. I know the personalities are not always there, but what it's done for me is just undeniable. The confidence that it's given me, the drive that it's given me, like you said, that $2 million plane, like it's achievable, like it is and and I have no reason to to not think that, you know thanks to to the content that I consume on a daily basis yeah, everybody, dude, everybody has their own thing that they listen to.

Speaker 1: 43:35

I mean I, I listen to andy for sale. A lot of people go. He's too over the top. He says the same thing every day. I'm like I don't know. It resonates with me. I'll listen to it. Right. Right, who gives a shit? So, um, but no, dude, they got great content and they do a really good job with it. And if you resonate with it, take it for what it's worth and go kill the world, man.

Speaker 1: 43:53

So yeah, yeah, for sure what's the best place people can find you on the internet? I know you do a lot of stuff on instagram and facebook where. Where can people find you, or what's the best way to get ahold of you?

Speaker 2: 44:01

So for this audience I put together a guide. It's only seven pages but it's an ultimate guide to investing in private jets. So you go to theultimatejetguidecom forward slash jet invest. Theultimatejetguidecom forward slash jet invest. That'll get you your guide so you can invest in all my social media stuff there at Tom Lelio, on TikTok, on Instagram, linkedin and then, of course, my YouTube channel, Jet Life with Tom.

Speaker 1: 44:29

Yeah, no, dude, you say it's only seven pages, but you never know, man, that seven pages might change someone's life, someone's-.

Speaker 2: 44:34

Well, exactly, yeah.

Speaker 1: 44:36

Anything it might motivate them to go do more, to go get that private jet. So those might be the best seven pages someone reads, and I looked at it and it was very informative and it makes you think about a lot of things of like what do you want your life to be? Like vision, you know. Like you start thinking about, man, what would a jet do for me or not do for me? You know, sometimes, like you know what, this isn't the right move. I can tell you this, though I hate driving across the country and flying is way easier, I just hate waiting in the lines. Even with TSA pre-check, it's still annoying to me. But yeah, man, you never know. So we appreciate you coming on, look forward to it, and maybe one day we will have a YouTube video or a live podcast from our jet one day. What do you think, jason? I'm in.

Speaker 2: 45:22

Thank you for having me, guys. I appreciate it.

Speaker 1: 45:24

Yeah, hell yeah. Thanks Tom.