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Financing

Ok.  So you want to build an RV.  How are you going to pay for it?

This is a question I am sure that every RV builder has ever faced.  Cash or finance are the most obvious choices.  I wish I had a really rich friend I could blackmail, but unfortunately I don’t.  Paying cash, by my way of thinking, is the way to go.  The only bills are the ones that you incur from having fun, you don’t have to worry about paying for your plane forever.  Unfortunately, I’ve looked in all my couch cushions and can’t find enough so I may have to finance.

To best arrive at a decision I have broken my project into two logical parts.  The airframe will consist of all pre-finish items that are permanently installed parts of the aircraft located aft of the firewall.  The firewall forward will consist of…well everything forward of the firewall and the avionics.  The reason for breaking them down into groups is mainly because there is going to be a large gap in time between when I start my tail section and when I hang my motor.  Another reason is that the cost of the firewall forward is going to far exceed the amount for the airframe.  For the sake of brevity, I’m going to keep this to the airframe only for now.  I will be financing the motor and avionics, but that event is so far off I cant even think about it today.

For the sake of my calculations I am going to say that in 2010 the total airframe cost is $15208.00 +/-$800.  Of course the cost of the individual components are broken down by Van’s as empanage, wings and the fuselage.

The cost of my empanage with accesories is going to be $1945.00.  Which on the surface sounds totally doable.  Except, like most RV builders, I dont have a garage full of building tools.  If I get everything on my tool wish list at once the total is going to come up to about $3000.00.  Yikes!  Do the math and suddenly its about $5000, with all the little doo-dads I’m not accounting for.   Thats approaching wing money, there.  I started looking at the tools and came to the conclusion that it is the expensive things that I need the most.  😦

I’m resigned to have to jump in for about $5k.  After this, the wing kit is ~$6700 and the fuselage is ~$6800.  I’m using 2010 pricing here, so likely the price will have gone up by the time I’m ready to get wings and a fuselage.  I might be able to get on the wing list before the price goes up (they do price changes in February).  Either way, I’m not really worried.  I can probably sock away the money before I need them.

Where can I get the cash, of course is a logical question.  I have several options here.  I can pay as I go, I can liquidate some stocks or I can dip into other savings.  I’ve looked in to the stocks and saving idea.  The capital gains hit is just going to be too much on the stocks.  The other savings are mostly in an IRA which I can dip into, again with a 10% hit against it.  I just cant justify taking those hits for this project, right now.  If you have a 401k at work you might be able to borrow against it.  The nice part is that you are paying yourself back, including the interest.  If I had a 401k I might do that, but Ive always worked for small companies and startups.  My 401k’s are now in my IRA.  Before you jump on this, though, make sure you talk with the plan administrators.  There are some major “gotchas” if you aren’t careful.

I’m in a job where I make a commission for sales.  Sales have been ok (they could always be better) and for the past few months we’ve been putting away all my commissions in a savings account.  I’ve built up a bit of a war chest, but not the 5k I need to pull the trigger.  I am very impatient.  When I’ve made the decision to go, I want to go!

Why not borrow the money.  I could very easily.  My credit is very good and I’m sure someone would lend it to me.  I just cant seem to come up with a loan plan that makes me feel good.  If I borrow money for the entire airframe, using a regular personal loan from my bank at about 12%, I’m going to be paying interest on a fuselage that is made of aluminum that probably is still holding beer.  A credit card is just out of the question.

I have heard of an RV friendly bank in Prior Oklahoma that supposedly will basically give you a construction loan that you can take “draws” from for the build.  At the end of the build the loan converts to 20-yr loan.  I haven’t researched it since I am not going to go this route.  One of the things that doesn’t work for me here is that, if this is right, I will have to start making interest payments against my “draw” starting on day one.  The longer the process takes, the more interest you have to pay.  If I wanted to pay someone to build for me, then this would be a good way to go.  I’m just going to be plugging away at it, bit by bit, so this isn’t realistic either.

So the decision is this…since I dont seem to have really written a very coherent page of commentary.  Pay as I go on the airframe, collect cash and raise a war chest for the parts I need.  At the time of this writing I’ll probably be financing the motor and avionics.

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