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Marriott Vacation Club: Return on Investment in 19 years?

WBP

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I wouldn't say it's a scam, but I would say that you are the WRONG person for the product.

In my opinion, you'd do yourself a huge favor by not buying a Marriott timeshare, and by vacationing however you otherwise see fit. I think you're trying to apply a degree of logic to an illogical (current tense) product. For those of us who have owned Marriott timeshares for 25 or 30 years, we long ago got our money's worth out of the thing, had years of great vacations and vacation memories, own something that has little financial value, today, but some degree of qualitative value, and for us, personally, while I think that our maintenance fees are approaching insanity, we still have great vacations, thanks to Marriott timeshare ownership. And, I'll be the first to say that if it were not for our Marriott timeshare ownership, we would have never, otherwise, had some of the phenomenal vacations that we did, or have stayed in some of the phenomenal places that we did.

I think Marriott stands just about no chance of making you/keeping you (as) a happy customer.


...that assumes 10 resort travel days per year and a 5 year loan term at 19% APR. The best ROI is 7 years, assuming 20 resort travel days per year and a 5-year loan term at 5% APR.

That stinks.

I'm a new member here - my wife and I just returned from the MVC sales pitch at Grande Vista in Orlando.

A penny for your thoughts...

I'm wondering if this MVC is a total scam and/or the sales rep totally flubbed our presentation. (Fair disclosure: I sell $1M+ software packages to hospitals, so maybe I got put off by high-pressure sales tactics and didn't absorb the logic.)

Hoping I missed some critical information here?

Typically, the sales process is 1) establish need, 2) present value, 3) create immediacy to act.

We never actually established my need for this product...the sales rep suggested the typical family wants to do 10-15 vacation days per year "for the kids", then down the road could use the ownership as an "asset". We don't / can't / won't travel that much to a hotel resort. Ever. (I hope!) We showed this to her on paper and it was ignored and she skipped right to "value" of ownership vs 10-15 days per year renting hotel rooms, and then the immediacy of this moment ("act now and you'll secure this great thing").

The pitch raised a lot of red flags, which is why I'm here and doing the math:
  • she skipped an adequate needs assessment (do we even need or want this?)
  • "1:100 people will buy", then "30% will buy" came out later
  • lots of personal stories about how she - and her powerful & successful customers - use their points
  • mixed denominations of various costs (perpetual membership fees presented as monthly, one-time charges mentioned later, purchase price for the points as a lump sum, financing w/o volunteering rate, etc.)
  • points-per-stay varied based on location, season and availability
  • trying to logically connect MCPs (club points) with MRPs (rewards points for hotels, etc.)
  • using the word "asset" repeatedly re: real estate, esp. when it has limited access, variable value, and uncapped membership fees? Seriously?
  • pay for it with a high-interest Marriott credit card to "get the points"?! 19%...what?
  • high-pressure sales tactic of distracting from cost-over-time questions with unrelated premiums, like "2,000 bonus points if you buy now", etc.
During a relentless sales pitch, there was no way to quickly examine all the fees to calculate the Total Cost of Ownership (TCO) over 5, 10, 20 years (that's what's needed to determine ROI). So when the "closer" guy with the Rolex came in to do his work, he had no sense of our value of the product and just puked a bunch of numbers at us, which also revealed more hidden charges and fees.

Closer guy suggested financing the $26K, on a Marriott credit card "for the Marriott Rewards points"...
"Okay," I said, "what's the rate?"
"Depends on your score..."
"Assume an 800; what's the lowest rate?"
"19%"
"Whaaaaa?!?!"
"Well, you can pay it off immediately and still get the points! That's what I just did!"
"Okay, but not many people can do that..."
"But you get a free trip with 200K points, so it pays for itself!!"​

Amazing...I'm horrified to think that people get suckered into these decisions without all the required info! Enough about that bad sales presentation. Let's talk about the real cost of this program.

I made a spreadsheet for Total Cost of Ownership over 15 years with these assumptions:
  • 2000 MVC points costs $26,500 + $1060 / yr + $700 processing fee
  • (very few people will pay cash for this sort of thing)
  • Marriott financing is 19% APR (sheesh!)
  • Accumulating credit card points has zero (zilch, nada, nothing) to do with spending money on a timeshare...using a Delta Skymiles card or AmEx Saphire is a better product for a lower cost of use
  • an average HELOC (home equity line of credit) right now is ~5%
  • financing is stupidly expensive for terms >5 years, esp. 10+ years, esp. esp. @ 19%
    • some people are actually carrying a balance for this on a high interest credit card!
My spreadsheets showed a pretty lame TCO over 15 years, even with a 5 yr loan term, with low interest financing:
  • 2,000 points / year (pitched as "entry level"): "$26,500"
    • TCO = $57,844 (19% APR, e.g. high-interest credit card or mafia / loan-shark)
      • upfront of $9,450 / year for years 1-5
    • TCO = $46,606 (5%, e.g. HELOC or parents)
      • upfront of $7,200 / yr for years 1-5
  • "1,000 / 2,000 points" (1,500 / yr average): "$13,750"
    • 15 yr TCO = $46,606 (19% APR)
      • upfront of $5,165 / yr for initial 5 years
    • 15 yr TCO = $27,945 (5% APR)
      • upfront of $4,000 / yr for initial 5 years
The "break-even" point is when the accumulated cost of buying into the program becomes equal to the accumulated cost of renting hotel rooms at $250 / night (w/ projected 3% annual rate increase).

For people paying 19% APR for 5 years, plus fees, etc, they needed to pay into the program for 9 years in order to match the accumulated cost of 20 hotel rental days per year. These people would see a 19 year break even point to match the total cost of 10 hotel rental days per year.

At 5% APR, the break even point arrives earlier at 7 years of paying in to match total cost of 20 hotel rental days per year, and 15 years top match 10 hotel rental days per year.

That is pretty horrible return on investment. You'd need to commit to vacationing in a Marriott property >20 days / year to break even in <7 years. That's a lot of vacation time...more than I'd ever use, esp. at a resort property. Also consider the cost of traveling to all those vacation areas...20 days is 5-7 long vacations every year! Who even does that?!

It's tough to stomach the up-front financial hit, get tied into a commitment to deal with the fact that it's an uncertain, complex process to get the desired location, when you want it, for a reasonable price, paid for in "points" that by definition have variable value and fluctuating service fees.

IMO, this is a horrible investment for retired people...they cannot afford the upfront costs (and would use a credit card) or the airfare fees required to travel to a resort that often. My calculations showed ~$33K in *interest alone* for a $26K loan with a 10-year term at 19% APR.

In my experience, working people like me who have that sort of disposable income could keep the costs down with a HELOC, but they we don't have the capability to take a 3-7 day vacation every 8 weeks.

What did I miss here? Is this the most ridiculous scam ever?
 

GregT

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Marriott: Maui Ocean Club Lahaina Villas (3BRx5), Ko Olina, Shadow Ridge II, Willow Ridge, Aruba Ocean Club, DC Points HGVC: Flamingo, Sea World, I-Drive, Starwood Bella (x4), SDO, TradeWinds, Worldmark
Timeshare is one of the worst investments and one of the best purchases we've ever made. We'll never sell for what we've paid. And we've overpaid. But we've bought and paid several times now, each time with eyes wide open. We've taken more family trips, stayed in first class accommodations, learned to work the system (not only the TS, but hotels, rental cars, and airfare as well) than we ever would have planned and paid cash for. We live in Massachusetts. We went "down the Cape" in the summer and skied the north in the winter...weekend trips, stayed with friends, day trips, etc. It is just what is done here. Since purchasing 10 years ago, we've been to the beach in Daytona, Manhattan Beach, Oahu, Maui, Myrtle Beach, Hilton Head, Newport, and Cape Cod. We've skied Breck, A Basin, Vail, Park City, NH, ME. Been to Orlando multiple times, San Francisco, LA, Vegas, Atlantic City, Chicago, NYC and others. Almost all of these trips would not have happened if we didn't "invest" in vacations. My kids have traveled as much in their lives as we have in ours. We just would never have booked hotels for weeks at a time, paid for flights, rented cars, laid out thousands of dollars multiple times per year had we not purchased.

Wow - great post - thanks for the comments, I feel the same way!

Best,

Greg
 

mjm1

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Timeshare is one of the worst investments and one of the best purchases we've ever made. We'll never sell for what we've paid. And we've overpaid. But we've bought and paid several times now, each time with eyes wide open. We've taken more family trips, stayed in first class accommodations, learned to work the system (not only the TS, but hotels, rental cars, and airfare as well) than we ever would have planned and paid cash for. We live in Massachusetts. We went "down the Cape" in the summer and skied the north in the winter...weekend trips, stayed with friends, day trips, etc. It is just what is done here. Since purchasing 10 years ago, we've been to the beach in Daytona, Manhattan Beach, Oahu, Maui, Myrtle Beach, Hilton Head, Newport, and Cape Cod. We've skied Breck, A Basin, Vail, Park City, NH, ME. Been to Orlando multiple times, San Francisco, LA, Vegas, Atlantic City, Chicago, NYC and others. Almost all of these trips would not have happened if we didn't "invest" in vacations. My kids have traveled as much in their lives as we have in ours. We just would never have booked hotels for weeks at a time, paid for flights, rented cars, laid out thousands of dollars multiple times per year had we not purchased.

We agree with you. We bought into timesharing shortly after getting married 30+ years ago. We've made changes to our portfolio over the years as our family, travel and interests have changed and made a significant investment in our vacations. The experiences have been outstanding and we look forward to many more years of the same.

Best regards.

Mike
 

jme

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ChurchSt/Charleston x2
I'm wondering if this MVC is a total scam and/or the sales rep totally flubbed our presentation.

The "break-even" point is when the accumulated cost of buying into the program becomes equal to the accumulated cost of renting hotel rooms at $250 / night (w/ projected 3% annual rate increase).
  • What did I miss here? Is this the most ridiculous scam ever?

Or,
the "break-even point" could be the first moment it all hits you like a ton of bricks, and you let out a long and satisfying sigh, and realize
that yes, you've had a decade or two of wonderful travel experiences, full of fantastic memories with your spouse and children (who have thanked you many times), and know that your family life would have never been that good without the enjoyment of growing together over time.

That moment came to me earlier on than for some, but it was a definitive moment in time when the rationalization of the large initial purchase price no longer required the rationalization, and instead turned to a simple smile.

The ongoing numerical calculations had been thrown out the window.

Since then it's become even better, and the priceless memories continue.
 
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AlmostRetired

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Bought 2 resale weeks in 1995. Never thought of it as an investment and maybe I was too stupid to think about break even. It was a way to spend time with the family. We vacationed (defined as a week or more) as much outside of the timeshare system as within. We have gone on as many if not more mini vacations (defined as 3 days or less). The kids always went, they stopped going and they started again. As adults, one son enjoys traveling, one kid kind of enjoys it and both love it when I pay.

I think we sometimes give too much credit to timeshares as a means to and end. It is the dynamics of the family that creates the memories. I have a brother with three daughters who only vacationed in Disney when they could afford to go. My nieces all married with kids still enjoy vacationing there. I have offered countless times to get a timeshare but they will only stay on Disney property because that is what they did as a kid. My sister cares for an ill husband and vacations infrequently. Her kids believe they have wonderful memories. I do not have one friend who owns a timeshare. They have as many family pictures and videos to share as I do. There are over 120M families in the US and only 8.5M timeshare intervals. Hard to believe 110M families are deprived of family vacation memories.

Love owning a timeshare, hate it... ROI, sunk cost... you created those invaluable memories and I would bet you donuts to dollars that if you never purchased a timeshare you would still have vacationed/traveled and figured out how to create those invaluable memories.
 

Panina

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I've watched my sister pay thousands for each trip she takes being in hotel rooms. Even though she and her husband have loved experiencing timesharing in the past with me , her husbands mentality has been its not a good investment even when I showed him resale. True, in their eyes, not in mine.

I've been an owner of timesharing since I'm 24, now 57, 33 years of going to wonderful places, in great accommodations, multiple times a year for less then one vacation costs my sister.

I never looked at it as an investment and I never looked a my house as an investment either. I Looked at both as having a better quality of life. If I looked at my timesharing as an investment, when I liquidate, you can say a loss as I give them away but looking back each one saved me thousands in traveling expenses. If I did the math, I am ahead.
 

kds4

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Growing up in the 70's/80's, my parents owned a fixed-week at an RCI affiliated resort in Destin, Florida. I have many memories of the family trip each year between Christmas and New Year's. Not sure that is why I chose to become an owner myself with Marriott. However, I'm sure the experiences of my childhood with those timeshare vacations played a role in my decision to accept the 'cold-call' offer to go to Orlando for a 'preview' trip with my own family back in 2008. Have I spent less to vacation this way in the years since than if I had just used cash? I have no idea. I do know the best timeshare ownership related decision I made was to join TUG. The education I have received here has helped me save money in what I have spent making timeshare purchases as well as getting as much 'value' as possible from what I have purchased through leveraging the exchange system. TUG has provided me with measurable financial savings from my timeshare expenditures. For that, I thank all of the more knowledgeable owners who have shared their experiences and insights.
 

CalGalTraveler

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I am not a Marriott Owner (Hilton) but have been reading this thread. Like most, I got smacked initially by purchasing from the developer but now I am going back in to buy another resale timeshare.

Why? Because you cannot get the space and resort amenities that you get with a timeshare. For example we stayed for 14 days at a 2 Bdrm oceanfront timeshare in Hawaii that would rent for $5000 a week for the cost of my maintenance fee. On principle, I would never rent anything for $5000 a week, so if we did not have a timeshare, we would likely end up with my family crammed in a crummy hotel room with a view of the parking lot, spending a fortune on restaurants.

I could rent VRBO/AirBnB but that contains risks too (we've had good and bad experiences). Many costs such as housekeeping, security deposits and fees can double the price for short stays. Many VRBO's don't have the resort amenities that timeshare resorts offer. IHMO...I don't want to waste my vacation in a VRBO that did not live up to the photos, poor housekeeping, doesn't have a pool, bar, restaurants, exercise room, walk to the action location etc. Timeshare systems offer consistency.

Although timeshares have a terrible reputation because of the horrible sales process, the accommodations and staff at the major hotel branded timeshare resorts are top notch.

My timeshare will be worth very little when I sell - but neither will my BMW, boat and designer apparel that I enjoy. However I paid less than $12k resale so what's the risk for 10 - 20 years of nice vacations? If you sweat over the maintenance fees and the cost of resale, you should not be buying a timeshare...in fact you should not be taking vacations. This cost is peanuts compared to the cost of purchasing a vacation property and the costs and headaches of maintenance and property taxes. Save your money for retirement, home etc. until you have sufficient discretionary income. This is not for everyone.
 
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jme

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I am not a Marriott Owner (Hilton) but have been reading this thread. Like most, I got smacked initially by purchasing from the developer but now I am going back in to buy another resale timeshare.

Why? Because you cannot get the space and resort amenities that you get with a timeshare. For example we stayed for 14 days at a 2 Bdrm oceanfront timeshare in Hawaii that would rent for $5000 a week for the cost of my maintenance fee. On principle, I would never rent anything for $5000 a week, so if we did not have a timeshare, we would likely end up with my family crammed in a crummy hotel room with a view of the parking lot, spending a fortune on restaurants.

I could rent VRBO/AirBnB but that contains risks too (we've had good and bad experiences). Many costs such as housekeeping, security deposits and fees can double the price for short stays. Many VRBO's don't have the resort amenities that timeshare resorts offer. IHMO...I don't want to waste my vacation in a VRBO that did not live up to the photos, poor housekeeping, doesn't have a pool, bar, restaurants, exercise room, walk to the action location etc. Timeshare systems offer consistency.

Although timeshares have a terrible reputation because of the horrible sales process, the accommodations and staff at the major hotel branded timeshare resorts are top notch.

My timeshare will be worth very little when I sell - but neither will my BMW, boat and designer apparel that I enjoy. However I paid less than $12k resale so what's the risk for 10 - 20 years of nice vacations? If you sweat over the maintenance fees and the cost of resale, you should not be buying a timeshare...in fact you should not be taking vacations. This cost is peanuts compared to the cost of purchasing a vacation property and the costs and headaches of maintenance and property taxes. Save your money for retirement, home etc. until you have sufficient discretionary income. This is not for everyone.


Ditto on every count. You get it.

Our stories would no doubt be parallel, as both systems are top notch.

Especially like your analogy (which I've used in several old posts) about vehicle depreciation. Funny how very few people complain about that or equate it to owning a timeshare. A vehicle's accelerator is nothing more than a device that takes the value more and more to zero. At the end of the road, both entities have little inherent value (although some timeshares have MORE).
 

Tokapeba

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We have stayed at many great places. Most we would never have thought we could afford. We purchased a Worldmark after loosing a Marriott Mountainside to Marriott with right of first refusal. If you are considering a purchase I would recommend you do something similar. Worldmark has many great places to stay mostly in the west, but it trades amazingly with II.

We have used it to go to Yellowstone, SF Union Square X3, Sonoma X3, Anaheim, Las Vegas, Lake Tahoe X10, skiing and in summer one time for the 4th, a couple places in Arizona. Bonus time is amazing. We have also traded it with II. Trading we have stayed Marriott Ko olina, The Grand Lodge at Breckenridge, The Grand Lodge at Peak 7 at Breckenridge X3,

We just bought 2 Marriott Mountainside resale because we like skiing. I think they will keep their value and having a 2 bedroom on the slope in Park City for less than $200 a night is amazing!!!

Andy
 
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CalGalTraveler

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Especially like your analogy (which I've used in several old posts) about vehicle depreciation. Funny how very few people complain about that or equate it to owning a timeshare. A vehicle's accelerator is nothing more than a device that takes the value more and more to zero. At the end of the road, both entities have little inherent value (although some timeshares have MORE).

Thanks. We are considering Marriott and that's why I am trying to learn as much as possible. Tug is an amazing resource...

A few more thoughts:

1) For the ROI calculation, I believe the OP used $250 a night hotel room as a comparison. When is the last time you stayed in a 2 bedroom hotel room or VRBO and paid only $250 per night including resort fee, cleaning, AirBnB fees and taxes? $250 perhaps would work in some locations such as Orlando or Vegas, but certainly not Hawaii or other expensive locales during prime season. YMMV.

2) Instead of a car perhaps a better analogy would be the purchase of a boat or RV. They are vacation items purchased with disposable income, but how many people run an ROI calculation before buying a boat?
 

Saintsfanfl

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They are vacation items purchased with disposable income, but how many people run an ROI calculation before buying a boat?

Maybe not ROI but people certainly should do other types of analysis and consideration. A boat purchase is not unlike a timeshare purchase except it is easier to unload. It is one of the very top regretful purchases out there.
 

MOXJO7282

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I won't get into how easy it is to turn a few quality Marriott TSs into a solid investment like I did because most don't have the inclination to do what I do but a quality Marriott TS bought resale CAN provide an excellent ROI even if you don't own and rent multiple weeks for profit.

In my opinion for those vacationers that want/need a 2BDRM annual view unit platinum high demand beach front Marriott there are a number of resorts that provide an excellent ROI, just none that are bought from Marriott.

My quick example is if you purchase a Maui Ocean Club original OF 2 BDRM you would pay approx $20k for an annual unit on the resale market. To rent this unit or any comparably sized or quality prime time week you'd be paying a min $4k if not more. That is currently $1800 above maintenance so you have an ROI of 11 years or so. At the end of those 10 years I'm fairly confident that unit will still be worth $14-$18k so to me that is an excellent ROI. You could do the same for similar units in Aruba, Kauai, Myrtle Beach, the big 3 on HHI, and Newport Coast. I know this because I've done so for many of these resorts for 16+ years

From my experience this only works for Marriott as their brand and quality create units in high demand that rent for well above MFs and that maintain their resale value pretty well, far more than other brands and certainly more than any independent resort.

So bottom line IMHO you can have a prime Marriott 2BDRM resale TS be a good investment that provides a solid ROI, but nothing that is bought through Marriott will or some of the lesser demand or higher supply Marriotts even if bought in the resale market
 

CalGalTraveler

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Maybe not ROI but people certainly should do other types of analysis and consideration. A boat purchase is not unlike a timeshare purchase except it is easier to unload. It is one of the very top regretful purchases out there.

Perhaps people don't realize the cost of boating upfront because purchasing the dock space and maintenance (or storage for that matter) are separate transactions, whereas with a timeshare purchase costs are disclosed by the management company upfront and the fees are mandatory. People can opt to defer maintenance on their boat. Used yachts are not easy to sell because many people with the means to buy a yacht want the latest and greatest and boating is not for everyone.
 
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frank808

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From my experience this only works for Marriott as their brand and quality create units in high demand that rent for well above MFs and that maintain their resale value pretty well, far more than other brands and certainly more than any independent resorts.

There is another system that has similar if not better returns than marriott rentals. If you bought resale 6 years ago you are looking at about 40% profit if you were to sell now. Plus if you were to rent it out these past 6 years you would have made about 10-12% roi easily.

Think the happiest place on earth.


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CalGalTraveler

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There is another system that has similar if not better returns than marriott rentals. If you bought resale 6 years ago you are looking at about 40% profit if you were to sell now. Plus if you were to rent it out these past 6 years you would have made about 10-12% roi easily.

Think the happiest place on earth.
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It seems like renting is not the lowest hanging fruit especially when the stock market and home rentals are faring so well. In addition, if the economy falters, vacation rentals are the first place where people cut expenses. However if renting offsets the cost of your vacations, and you enjoy the effort of renting out timeshares, then all the power to you for maximizing your money.
 

frank808

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Disney Vacation Club (Aulani,SSR,VGC,VGF) Hilton Grand Vacation Club(Bay Club, Kohala Suites, The District) Marriott Vacation Club (Aruba Surf Club, Grand Residence, Grand Chateau, Grand Vista,Harbour Lake, KoOlina,Willow Ridge & DC points)
It seems like renting is not the lowest hanging fruit especially when the stock market and home rentals are faring so well. In addition, if the economy falters, vacation rentals are the first place where people cut expenses. However if renting offsets the cost of your vacations, and you enjoy the effort of renting out timeshares, then all the power to you for maximizing your money.
By all means i am not saying to buy timeshares to rent as an investment. I am just saying that there has been a timeshare system that has returned decently these past few years.

Totally agree that in a bad economy luxury items like timeshares are the first to go.

A wise man told me once that there are 3 things in life you need. Food, clothing and shelter anything else is a luxury. I don't like working in the sun so no farming, my hands are to big for sewing and so home rentals it is. Being a landlord is great residual income as people have to have a roof over their head.

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CalGalTraveler

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Being a landlord is great residual income as people have to have a roof over their head.

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Completely agree. We own a property in a resort area and found that we can make more money (at least during good economic times) as a VRBO/AirBnB. It is not very profitable compared to other investment alternatives, however it is nice to get money in our sleep and pay for the property maintenance expenses and taxes. It has doubled in value since we purchased it. And we can use it when we want. (IMHO, We are tired of the property location, and I enjoy exploring new timeshare locations and not having to maintain them.)

Can you write-off maintenance and associated rental expenses with a timeshare when you rent it out?
 
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frank808

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Completely agree. We own a property in a resort area and found that we can make more money (at least during good economic times) as a VRBO/AirBnB. It is not very profitable compared to other investment alternatives, however it is nice to get money in our sleep and pay for the property maintenance expenses and taxes. It has doubled in value since we purchased it. And we can use it when we want. (IMHO, We are tired of the property location, and I enjoy exploring new timeshare locations and not having to maintain them.)

Can you write-off maintenance and associated rental expenses with a timeshare when you rent it out?
That is the beauty of timeshares. The ability to go to different places and not worrying about the yard, roof, appliances etc. You do pay for that privilege and convenience.

Consult with your tax pro in regards to deducting your maintenance fee and expenses. Don't forget the depreciation of the property as that also lowers your profit. As such you should consult your tax professional as I am not one.
 
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TXTortoise

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Yes you can write off your maintenance fee and expenses. Don't forget the depreciation of the property as that also lowers your profit. As such you should consult your tax professional as I am not one.

Might want to check that. Some good explanations here on TUG and on the net about the very limited circumstances allowing you to write off some expenses.
 

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Might want to check that. Some good explanations here on TUG and on the net about the very limited circumstances allowing you to write off some expenses.
No problem. I am not a tax professional and don't play one. Like i said in my post consult a tax professional. If i rent my timeshares i will consult my cpa. Ill edit my post.

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By all means i am not saying to buy timeshares to rent as an investment. I am just saying that there has been a timeshare system that has returned decently these past few years.

Totally agree that in a bad economy luxury items like timeshares are the first to go.
That is the thing about the Marriott brand, it will always have high demand even when the economy is bad. I've been owning and renting since 2002 and when the economy tanked I thought well there goes my rentals and the fact is nothing changed and I was still renting at a premium and have ever since. The people that rent Maui units in the winter are typically not the ones that suffer in a down economy and that certainly proved true. And I'm not talking about being able to rent 1 unit every year through the recession but my 6 - 8 units rented just as they always have. My returns were much more than 10-12%, on an annual cost basis without getting into specifics.

As for writing off your expenses, if you are renting for a profit like I am you can in fact write off your expenses but there are strict rules that cover this that quite honestly my accountant knows better than I.
 

frank808

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That is the thing about the Marriott brand, it will always have high demand even when the economy is bad. I've been owning and renting since 2002 and when the economy tanked I thought well there goes my rentals and the fact is nothing changed and I was still renting at a premium and have ever since. The people that rent Maui units in the winter are typically not the ones that suffer in a down economy and that certainly proved true. And I'm not talking about being able to rent 1 unit every year through the recession but my 6 - 8 units rented just as they always have. My returns were much more than 10-12%, on an annual cost basis without getting into specifics.

As for writing off your expenses, if you are renting for a profit like I am you can in fact write off your expenses but there are strict rules that cover this that quite honestly my accountant knows better than I.
Glad that you were able to rent during the recession and not experience a downturn. Since you are getting better than 10-12%, it is better than disney. I take it the people that are doing spec rentals are getting more but I don't follow spec rentals at all. I just go by what the brokers are paying owners for their points.

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The argument that Marriott timeshares are a bad investment is true today, but that has not always been the case.

Believe it or not, it was actually not a bad investment until about 10-12 years ago, when maintenance fees started to go through the roof and the Great Recession hit and decimated real estate values, with timeshares especially hard hit. We bought several weeks from the developer (Marriott), starting in 1987 and ending a year or two before the Great Recession hit. We sold two of our weeks for a PROFIT over the developer cost, three at approximately break-even, and our last sale (2 years ago) at a 30% loss. This could never be done with developer weeks purchased today, largely due to the size of the maintenance fees which substantially holds down sales prices, but it might still be possible with well selected resale weeks.

We now own only three weeks and are very satisfied with our portfolio, especially with all of our weeks enrolled in the DC program.
 
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valenta

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...that assumes 10 resort travel days per year and a 5 year loan term at 19% APR. The best ROI is 7 years, assuming 20 resort travel days per year and a 5-year loan term at 5% APR.

That stinks.

I'm a new member here - my wife and I just returned from the MVC sales pitch at Grande Vista in Orlando.

A penny for your thoughts...

I'm wondering if this MVC is a total scam and/or the sales rep totally flubbed our presentation. (Fair disclosure: I sell $1M+ software packages to hospitals, so maybe I got put off by high-pressure sales tactics and didn't absorb the logic.)

Hoping I missed some critical information here?

Typically, the sales process is 1) establish need, 2) present value, 3) create immediacy to act.

We never actually established my need for this product...the sales rep suggested the typical family wants to do 10-15 vacation days per year "for the kids", then down the road could use the ownership as an "asset". We don't / can't / won't travel that much to a hotel resort. Ever. (I hope!) We showed this to her on paper and it was ignored and she skipped right to "value" of ownership vs 10-15 days per year renting hotel rooms, and then the immediacy of this moment ("act now and you'll secure this great thing").

The pitch raised a lot of red flags, which is why I'm here and doing the math:
  • she skipped an adequate needs assessment (do we even need or want this?)
  • "1:100 people will buy", then "30% will buy" came out later
  • lots of personal stories about how she - and her powerful & successful customers - use their points
  • mixed denominations of various costs (perpetual membership fees presented as monthly, one-time charges mentioned later, purchase price for the points as a lump sum, financing w/o volunteering rate, etc.)
  • points-per-stay varied based on location, season and availability
  • trying to logically connect MCPs (club points) with MRPs (rewards points for hotels, etc.)
  • using the word "asset" repeatedly re: real estate, esp. when it has limited access, variable value, and uncapped membership fees? Seriously?
  • pay for it with a high-interest Marriott credit card to "get the points"?! 19%...what?
  • high-pressure sales tactic of distracting from cost-over-time questions with unrelated premiums, like "2,000 bonus points if you buy now", etc.
During a relentless sales pitch, there was no way to quickly examine all the fees to calculate the Total Cost of Ownership (TCO) over 5, 10, 20 years (that's what's needed to determine ROI). So when the "closer" guy with the Rolex came in to do his work, he had no sense of our value of the product and just puked a bunch of numbers at us, which also revealed more hidden charges and fees.

Closer guy suggested financing the $26K, on a Marriott credit card "for the Marriott Rewards points"...
"Okay," I said, "what's the rate?"
"Depends on your score..."
"Assume an 800; what's the lowest rate?"
"19%"
"Whaaaaa?!?!"
"Well, you can pay it off immediately and still get the points! That's what I just did!"
"Okay, but not many people can do that..."
"But you get a free trip with 200K points, so it pays for itself!!"​

Amazing...I'm horrified to think that people get suckered into these decisions without all the required info! Enough about that bad sales presentation. Let's talk about the real cost of this program.

I made a spreadsheet for Total Cost of Ownership over 15 years with these assumptions:
  • 2000 MVC points costs $26,500 + $1060 / yr + $700 processing fee
  • (very few people will pay cash for this sort of thing)
  • Marriott financing is 19% APR (sheesh!)
  • Accumulating credit card points has zero (zilch, nada, nothing) to do with spending money on a timeshare...using a Delta Skymiles card or AmEx Saphire is a better product for a lower cost of use
  • an average HELOC (home equity line of credit) right now is ~5%
  • financing is stupidly expensive for terms >5 years, esp. 10+ years, esp. esp. @ 19%
    • some people are actually carrying a balance for this on a high interest credit card!
My spreadsheets showed a pretty lame TCO over 15 years, even with a 5 yr loan term, with low interest financing:
  • 2,000 points / year (pitched as "entry level"): "$26,500"
    • TCO = $57,844 (19% APR, e.g. high-interest credit card or mafia / loan-shark)
      • upfront of $9,450 / year for years 1-5
    • TCO = $46,606 (5%, e.g. HELOC or parents)
      • upfront of $7,200 / yr for years 1-5
  • "1,000 / 2,000 points" (1,500 / yr average): "$13,750"
    • 15 yr TCO = $46,606 (19% APR)
      • upfront of $5,165 / yr for initial 5 years
    • 15 yr TCO = $27,945 (5% APR)
      • upfront of $4,000 / yr for initial 5 years
The "break-even" point is when the accumulated cost of buying into the program becomes equal to the accumulated cost of renting hotel rooms at $250 / night (w/ projected 3% annual rate increase).

For people paying 19% APR for 5 years, plus fees, etc, they needed to pay into the program for 9 years in order to match the accumulated cost of 20 hotel rental days per year. These people would see a 19 year break even point to match the total cost of 10 hotel rental days per year.

At 5% APR, the break even point arrives earlier at 7 years of paying in to match total cost of 20 hotel rental days per year, and 15 years top match 10 hotel rental days per year.

That is pretty horrible return on investment. You'd need to commit to vacationing in a Marriott property >20 days / year to break even in <7 years. That's a lot of vacation time...more than I'd ever use, esp. at a resort property. Also consider the cost of traveling to all those vacation areas...20 days is 5-7 long vacations every year! Who even does that?!

It's tough to stomach the up-front financial hit, get tied into a commitment to deal with the fact that it's an uncertain, complex process to get the desired location, when you want it, for a reasonable price, paid for in "points" that by definition have variable value and fluctuating service fees.

IMO, this is a horrible investment for retired people...they cannot afford the upfront costs (and would use a credit card) or the airfare fees required to travel to a resort that often. My calculations showed ~$33K in *interest alone* for a $26K loan with a 10-year term at 19% APR.

In my experience, working people like me who have that sort of disposable income could keep the costs down with a HELOC, but they we don't have the capability to take a 3-7 day vacation every 8 weeks.

What did I miss here? Is this the most ridiculous scam ever?

When we were thinking of buying our first timeshare we called our financial advisor. He said 1 this is not an investment, 2 think of it as purchase of future hotel rooms 3 I own three of them. We now own two MVC properties for over 10 years and are very happy with the purchase.
 
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