Jose wrote:

Our club doesn't do equity participation, and that's the reason why I'm
in this club.

It could be optional, in exchange for lower dues. In essence, the extra
dues would cover what it would cost monthly to borrow the equity share.
No matter how it's sliced, the money has to be paid somehow; what I
like about splitting it that way is that the equity share gets returned
on exit. The member actually "owns" a piece of it, should they want to.
It also makes the economics of deciding on another plane simpler.

It seems to me that this equity mechanism - which my club uses too, BTW -
has a disadvantage. What happens when the club wants to "invest" somehow
(better avionics, new plane, whatever)? How does that get funded?

In my club, with a few specific exceptions, it would be an equity increase.
But how far can that go before the equity becomes a significant barrier to
entry (ie. it costs too much for new members to join)?

Invest a little here, invest a little there, and eventually increasing
equity becomes essentially impossible. So does the club cease investing at
that point? Sure, everything is well maintained, but no more aircraft
upgrades (ie. replacing a 1979 182 with a new glass 182)?

A club around here is replacing an older 172 or 182 (I forget which) with a
new glass version. But they're doing it w/o increasing the equity. Those
members that can are loaning the club some money, and the plane gets paid
off out of operating income (ie. some combination tach and montly rates).

So in that case the current members are paying - through their rates - for
an asset that the club will own and from which future members will benefit.
That appears contrary to the idea of equity, and also seems a little unfair
to current members in favor of new members.

However, it also seems to leave more room for investment w/o pricing a club
out of the market.

This is something I've been thinking about for a while, but I've not really
reached any conclusion. Perhaps I'm missing some factor which would
eliminate the "no more investment" issue.

I'd appreciate the thoughts of others on this matter.

- Andrew