Valuing Experimental Amateur-Built (E-AB) Aircraft, Ken Dufour, ASA, MAM, ATP, CFI and Jason Zilberbrand, ASA, CAA, ISA AM, AOA AM, MRAeS
Experimental amateur-built aircraft, often called “homebuilts” because they are typically built in people’s garages and basements, are the fastest-growing new aircraft segment in the United States. Amateur built aircraft are built by individuals and certified by the Federal Aviation Administration (FAA) as “experimental amateur-built” (E-AB).
- You get to build it
Succeeding on a big project gives you a huge sense of accomplishment. You can choose to build an airplane, helicopter, gyroplane, or glider.
- Ultimate freedom
You get to choose the kit, the paint job, the panel. This project can be a reflection of you.
- Latest technology
Cutting-edge glass panels, lightweight composite materials, and high-performance engines are just some of the options you’ll get to choose by building the aircraft yourself.
- All New (if you want to)
Every part and piece of the aircraft can be brand new. Or you can save some serious dollars by scrounging around for used bargains like mid-time engines or first-generation glass panels.
- More performance
If you want a hot rod, homebuilding is where you’ll find the performance you want. The fastest designs available are all kit aircraft. Or, do you want more performance out of the same horsepower by picking a more efficient, modern kit design?
- Lower maintenance costs
The freedom to do your own maintenance and inspections will save you thousands of dollars every year. Plus, you’ll get to source your parts to save more money.
- You have to build it
Of course, not everyone enjoys the challenge of a big project or learning new things.
- No commercial use
The only real limitation on homebuilts is that they cannot be rented or used for any commercial purpose. If you want to rent your aircraft to students, the building isn’t a good fit.
- Foreign travel
You must obtain written permission from another country’s Civil Aviation Authority (CAA) before flying your aircraft in or over that country. For countries other than Canada and the Bahamas, this can present a challenge.
What FAA Rules Must I Follow When Building?
To receive an E-AB airworthiness certificate when the aircraft is complete, you will need to be able to demonstrate that “amateurs” (you and any helpers) built the majority of the aircraft for “education and recreation.” This is often referred to as the “51-percent rule.” You will do this by keeping a “builders log” to show the FAA inspector that you completed most of the tasks.
There is no set format required for a builders log; however, the burden of proof is on you. A simple log documenting the task completed and the date along with some photos will do. The easiest builders log is probably to take lots of photos during the building process, including working on various tasks. Not only will this satisfy the FAA, but you also will find the photos helpful during future maintenance work, and it’s a great memento of the project.
How Do I Know if a Kit Will Meet the 51-Percent Rule?
If requested by a kit manufacturer, the FAA will inspect an aircraft kit to determine that it will meet the “51-percent rule.” This provides potential builders the assurance of knowing that the kit will qualify as amateur-built when completed. The FAA does not evaluate the design, and FAA’s review does not mean that the kit is FAA “certificated” or “approved” in any way. The list of kits that have received “Letters of Eligibility” is available at; ww.faa.gov/aircraft/gen_av/ultralights/amateur_built/kits/nket_list/
How Do I Handle the FAA Paperwork?
EAA’s Amateur-Built Aircraft Certification Kit was created to help you with the FAA paperwork required for building your own aircraft. The kit includes everything you need to register and certificate a new experimental amateur-built aircraft. The 15-page, step-by-step Certification Guide walks you through the entire process—from getting a registration “N number” to the aircraft inspection—and provides samples of how to complete each required form. The certification kit also includes all FAA forms, an “Experimental” sticker (in black), a data plate, and a convenient placard decal sheet. To order, call EAA at 800-843-3612 or visit ShopEAA.org.
AC No: 20-27G Certification and Operation of Amateur-Built Aircraft (Dated 09-30-2019)
a. This advisory circular (AC) provides information about Title 14, Code of
Federal Regulations (14 CFR) part 21, Certification Procedures for Products and Parts,
§ 21.191(g) to operate amateur-built aircraft.
b. This AC provides specific information and guidance to amateur aircraft builders
(1) Certificating and operating your amateur-built aircraft,
(2) What to do and know before building an amateur-built aircraft,
(3) Designing and constructing your amateur-built aircraft,
(4) Fabricating and assembling your amateur-built aircraft,
(5) Registering your amateur-built aircraft,
(6) Identifying and marking your amateur-built aircraft,
(7) Applying for certification of your amateur-built aircraft,
(8) FAA inspection of your amateur-built aircraft,
(9) Issuing an airworthiness certificate for your amateur-built aircraft,
(10) Flight testing your amateur-built aircraft,
(11) Operating your amateur-built aircraft after flight testing,
(12) amateur-built aircraft built outside the United States and purchased by a U.S. citizen,
(13) Becoming a repairman for your amateur-built aircraft, and
(14) General safety recommendations.
c. This AC is not mandatory and does not constitute a regulation. This AC describes an acceptable means, but not the only means, to comply with airworthiness certification and operation requirements of amateur-built aircraft. However, if you use the means described in the AC, you need to follow it in all important aspects.
American Society of Appraisers
Definition of Appraisal and Value: Appraisal is the act or process of developing an opinion of value. Value has been defined as the monetary worth of property, goods, or services. The American Society of Appraisers (ASA) has broadened the definition of an appraisal to include any of the four following operations, independently or in combination:
- Determination of the value of property
- Estimation of the cost of a. production of a new property, b. replacement of an existing property by purchase or production of equivalent property, or c. reproduction of an existing property by purchase or production or identical property.
- Determination of the nonmonetary benefits or characteristics that contribute to value; the rendering of judgments about age, remaining life, condition, quality, or authenticity of physical property.
- Forecast of the earning power of property.
The appraisal of machinery, equipment, and certain other business assets encompasses all four of these meanings.
Standards Rule 1-4, Approaches to Value
In developing a real property appraisal, an appraiser must collect, verify, and analyze all information necessary for credible assignment results.
(a) When a sales comparison approach is necessary for credible assignment results, an appraiser must analyze such comparable sales data to indicate a value conclusion.
(b) When a cost approach is necessary for credible assignment results, an appraiser must:
(i) develop an opinion of site value by an appropriate appraisal method or technique;
(ii) analyze such comparable cost data as are available to estimate the cost new of the improvements (if any); and
(iii) analyze such comparable data as are available to estimate the difference between the cost new and the present worth of the improvements (accrued depreciation).
Using the Cost Approach, a qualified aircraft appraiser starts with the current replacement cost of the property being appraised and then deducts for the loss in value caused by physical deterioration, functional obsolescence, and economic obsolescence. The logic behind the cost approach is the principle of substitution: a prudent buyer will not pay more for a property than the cost of acquiring a substitute property of an equivalent utility.
Replacement Cost New is defined as the cost to replace a property with an equivalent or substitute, which is new, using materials, techniques, and standards which satisfy the description or use of the replaced property; the present cost of replacing the property with on having the same quality and utility.
Sales/Market Comparison Approach
Most production aircraft/helicopters are valued, utilizing the Sales/Market Comparison Approach.
Experimental amateur-built aircraft are manufactured/assembled by different individuals/artisans. There is a high variance in build quality and assembly technique/ability. Unlike traditional aircraft manufacturers, i.e., Cessna, Piper, Mooney, and others, which have a Type Certificate they must comply with for manufacturing each aircraft.
This wide variance in amateur-built aircraft assembly and quality makes it difficult to utilize the Market Comparison Approach to value.
Although there may be numerous amateur-built aircraft for sale, it isn't easy to make a value comparison of each of these amateur-built aircraft.
This small boutique marketplace complicates the resale market, affirming the cost approach's use even more valid.
An analysis of the cost to build the amateur-built aircraft is a valid process to determine value. Therefore, valuing the cost of parts, labor, and any other tangible expenses is the most appropriate valuation methodology to be used for an amateur-built aircraft.
As an additional point, VREF (Aircraft Value Reference) and the Aircraft Bluebook omit the Lancair (any models) in their publications. This boutique homebuilt market is impossible to track mostly due to the unique nature and small production number.
In this appraisal, we valued a Lancair IV-P. The Lancair IV and IV-P series of aircraft kits are out of production. Lancair continues to support these aircraft with parts and technical assistance. The Lancair IV and IV-P, a family of four-seat low-wing retractable gear composite aircraft designed around the Continental TSIO-550, a twin-turbocharged engine capable of developing 350 horsepower at sea level and capable of operating altitudes as high as 29,000 feet.
The Lancair goal in 1990; to design and produce a 345 mph, four-seats, pressurized aircraft that could be easily built in one’s home workshop. The Lancair IV proved to be incredibly fast, efficient, and comfortable. Over the years, Lancair pioneered many “industry firsts” with this aircraft. To begin, it was one of a few single-engine piston aircraft in the history of aviation to achieve a pressurized cabin. It helped make the “IV-P” one of the world’s best personal cross-country aircraft.
By the end of 2011, 110 Lancair IVs and 250 IV-Ps had been completed and was flying; production of the aircraft kit was ended in 2012.
In 2014, Bill Harrelson piloted a Lancair IV setting a world speed record for solo flight between the earth’s poles for an aircraft under 3,000 kilograms (6,600 lb.) in a 175 hour long series of flights. The flight also broke a record from Fairbanks, Alaska, to Kinston, North Carolina. The aircraft was modified to hold 361 U.S. gallons (1,370 L; 301 imp gal) of fuel.
Lancair IV: Unpressurized four-seat kit-plane, powered by a 350 HP Continental TSIO-550 engine.
Lancair IV-P: Pressurized four-seat kit-plane, powered by a 350HP Continental TSIO-550 engine.
Lancair Propjet: Pressurized four-seat kit-planes, powered by either a Walter or a PT6 Pratt & Whitney turboprop that can achieve cruise speeds above 300 knots altitudes up to 30,000 feet.
General Specs (Lancair IV-P): – 4 Passengers, Wingspan 35 ft. 6 in, Gross Weight 3,550 lbs., Fuel Capacity 90 US Gal, 110 US Gal with extended tanks.
Performance Specs: – Cruise 253 mph at 24,000 ft., Range 1,347 nm, Endurance 6.0 hrs., Rate of Climb 1500 ft./min.
Sources for additional reading and reference;
VREF Aircraft Value Reference: Current Volume 2020/Volume 3 or www.vref.com
For additional information or questions or if we can assist you with valuing your aircraft, contact:
Ken Dufour, ASA, MAM, ATP, CFI
email@example.com or 815-391-3153
Jason@vref.com or 844-303-VREF ext. 700
The above article is intended to explain and augment pilot, technicians, bankers/asset manager’s language, and topics to introduce aircraft owners and operators with supplemental information for our VREF subscribers. It is intended as a guide. Contact your nearest FAA Flight Standards District Office (FSDO) or FAA.gov for additional information. The data/information is obtained from numerous FAA and other industry sources.
It is edited and believed to be accurate. VREF does not warrant the accuracy of the source material and assumes no responsibility to any person connected with the use of this VREF article. Permission to reprint this article is granted, so far as the context of the information remains intact and appropriate credit is given to VREF.