Renting vs. Owning

I originally posted this in a thread that discussed the changing trade power of weeks deposited into RCI. After thinking about it some more, I wanted to give it a thread of its own, so I could get some feedback from other Tuggers. I was afraid leaving it buried in the other lengthy thread wasn't getting the exposure the topic needs. Your comments are welcome.


After reading about the issues with changing trade power of weeks deposited with RCI, and of deposited weeks that turned up in the rental pool before being made available for exchange, I did some test-checking on RCI for vacation rentals, specifically for the resorts I own. I already have reservations to visit Hawaii for two weeks next year, and will be using the weeks I own at two different resorts. In RCI's rental pool, for the same time frame, I can rent a week at both resorts for virtually the same cost as my maintenance fees. I'm sure the rentals won't be the same exact units (lagoon view vs. ocean view, for example), but it's still at the same resort during the same weeks.

So now the practical side of me is wondering why I should hang on to owning these weeks, and run the risk of assessments and increasing maintenance fees every year, if I can rent when and where I want to for similar costs? It makes more sense to dump the timeshares, and rent from RCI when I want to. Worry-free.

What am I missing here?

Dave

If looking at the parking lot

vs that great ocean view doesn't matter, then maybe you should rent, but I really enjoy the ocean front and ocean view in most of our ownerships, and to me that makes it worth the risk/cost.

Fwiw,
Greg

BMWguynw said:

I originally posted this in a thread that discussed the changing trade power of weeks deposited into RCI. After thinking about it some more, I wanted to give it a thread of its own, so I could get some feedback from other Tuggers. I was afraid leaving it buried in the other lengthy thread wasn't getting the exposure the topic needs. Your comments are welcome.


After reading about the issues with changing trade power of weeks deposited with RCI, and of deposited weeks that turned up in the rental pool before being made available for exchange, I did some test-checking on RCI for vacation rentals, specifically for the resorts I own. I already have reservations to visit Hawaii for two weeks next year, and will be using the weeks I own at two different resorts. In RCI's rental pool, for the same time frame, I can rent a week at both resorts for virtually the same cost as my maintenance fees. I'm sure the rentals won't be the same exact units (lagoon view vs. ocean view, for example), but it's still at the same resort during the same weeks.

So now the practical side of me is wondering why I should hang on to owning these weeks, and run the risk of assessments and increasing maintenance fees every year, if I can rent when and where I want to for similar costs? It makes more sense to dump the timeshares, and rent from RCI when I want to. Worry-free.

What am I missing here?

Dave

Click to expand...

From a financial perspective, you aren't missing a thing. For the last several years renting has looked like a better option for the wallet.

But, there are other factors over which you will have little to no control:

view (already mentioned)
unit size - can you live with studios or do you require 2 or 3 br?
Unit type - different phases can have different attributes and you may not be able to request the section you want
availability - maybe you rent from Joe Bob but he sells or occupies and Wanda only has dumpster view, and only for the week after you want to go
fluctuating cost - supply, demand, owner whim, new resort amenities...
no owner/member bennies (some resorts charge the public more than the owning/exchanging guests for parking, activities, safe, cleanings ...)

Just like with exchanging, the more flexible you can be, the better your chances of renting working for you.

I would always rather rent from the owner than any third party. But ... With RCI getting free inventory, they can be cheaper since the owner has expenses to make (I would expect that if RCI assigns a 'share of overhead' expense to each week, it would be so tiny as to be inconsequential).

It is an issue that never should have arisen.

We put our weeks into the exchange pool expecting to be exchanging them with what other owners have deposited to the exchange pool.

Now RCI alters the T&C and says they can do what they want with deposits i.e. rent them.

Since that has been going on for some years now, the status quo, with little backlash directed at RCI, I'm like you and wonder what to do.

The rational response is to rent, less risk, while conditions are such as they are.

Dave - you and I both own OF at KBV, and for us, that view is worth every penny! I would not be happy looking at the lagoon to save a few hundred bucks!

Looking at these pictures - I sure miss it! When you look at the view, doesn't your heart just melt? Can't you feel the breeze, smell the salt air, and hear the myna birds? Ahhhhhhhhh.....Kauai....





BTW - there is an OF unit for sale on ebay if you need another week!

DeniseM said:

Dave - you and I both own OF at KBV, and for us, that view is worth every penny! I would not be happy looking at the lagoon to save a few hundred bucks!

Looking at these pictures - I sure miss it! When you look at the view, doesn't your heart just melt? Can't you feel the breeze and smell the salt air? Ahhhhhhhhh.....Kauai....

BTW - there is an OF unit for sale on ebay if you need another week!

Click to expand...

Denise, you crack me up. I'll be seeing that view again next May. You and I also know as long as I can afford the airfare, I'm going to keep KBV, because it is SO worth every penny. I was mostly thinking of selling the other stuff I own, and renting to go along with my KBV week. That fantastic KBV ocean view is the last one I'd sell.

Ebay, huh? I don't need another week, but I'll bet someone here does. Those pictures you posted of that fantastic view makes it all worthwhile. I wonder how many people also realize those are real everyday pictures taken from the lanai of one of KBV's ocean view units?

I think I need to tell my practical side to be quiet.

Dave

Either side has risk. Owning has assessment risk. Renting has market-rate risk. In other words---as the economy recovers, it is possible (and in some cases, likely) that rental rates will rise faster than maintenance costs. This is especially going to be true with RCI---as they work to expand their market, it will be possible for them to command higher rates.

Both also have other risks. If you decide that KBV is no longer for you, as a renter, that's an easy decision to make. As an owner, there is more friction. On the other hand, it is possible that inventory won't be available for rent, or not as easily---renting often takes more work than owning. My original timeshare purchase was a Wyndham points deed for visiting Orlando. Financially, it was pretty close to a break-even deal. But, it's much easier to just book a Wyndham week than it was to scour VRBO every year looking for a property that fit my needs.

At the end of the day, timeshare isn't necessarily about lowest possible cost each given year. For me, the hook is that it provides a combination of acceptably low cost, plus a bit of price stability, plus the assurance that vacation lodging is going to be there in places I want to go.

I think it depends on where you wish to go.

When you rent a timeshare from an owner you are entilted to the same view as the owner. Rent is higher for an oceanfront or oceanview unit just as when you buy a timeshare. The resort is obligated to give the renter the view the owner is entitled to. This has never been a problem for me. I have rented a few timeshare units and always had great views, because I pay for the view I want. I always let the resort know what I expect and why. Also, I have the view specified in the rental agreement.

Bee

Thanks, everyone. Those are excellent points. I've only been doing this for a few years, so I'm still pretty new to all this. I'm still wading through the muck of how it all works.

I hadn't noticed RCI's rental rates changing much, so things seemed to be fairly stable. I hadn't considered they might raise those rental rates if/when the economy improves. But as I think of it, this IS RCI after all, isn't it. Of course they'll raise the rates. Duh!

As for being stuck with what I own, there isn't much chance. I bought everything on Ebay for no more than a few hundred dollars, so even after staying in the resorts a few times, I could still give things away for free and pretty much break even.

My goal with this is to try and figure out the balance of timesharing cost vs. the best way to vacation. I'm always amazed that there are so many ways to do all of this. Those of you who own dozens of weeks or hundreds of thousands of points really blow me away. How the heck do you manage it all?

Dave

The limiting factor for RCI's rental rates, IMO, is the size of their market. When they are renting only to timeshare owners, the demand curve is shallower than if they can expand to the general public.

And, RCI has been working very hard to expand in that way.

That said, I believe in bird-in-the-hand. So, the answer is different for "should I buy" and "should I dispose".

If I were trying to decide whether or not to bid on something on ebay, I'd first do the comparison of rental rates from owners/other outlets vs. ownership costs. I do not want to own something unless there is a healthy spread between the two. In most cases, this sort of automatically also keeps you from buying things with poor trade power, etc. I wouldn't buy expecting rental rates to make it pay off down the road---I'd wait until that situation came to be.

If I were trying to decide whether or not to get rid of something, on the other hand, the standard is lower. It would all boil down to whether or not that ownership was delivering value in some way. If I'm more or less breaking even vs. renting, then there's no reason to get rid of it. Even if you're a little under water, there are other non-tangible benefits---you know what you have, you don't have to do anything to secure it each year, etc.

I did a search for rentals at the Manhattan Club in New York City. I found several that ran from $1,000-1200 /week for studios and 1BR 2BA units. A lot of them were floating weeks. I read where the M/F at MC run $1800 /year and the purchase price is several thousand. In this case renting would be a much wiser option.

The idea of just dumping your unit on eBay when you want to dispose of it is not necessarily an easy thing to do. There are many timeshare owners that can't even give their timeshares away so you can get stuck with the maintenance fees.

John Cummings said:

The idea of just dumping your unit on eBay when you want to dispose of it is not necessarily an easy thing to do. There are many timeshare owners that can't even give their timeshares away so you can get stuck with the maintenance fees.

Click to expand...

I agree, John. Perhaps "dumping" wasn't the right word for me to use. But passing along what I no longer want to a new owner at little to no cost is more likely to work than trying to recoup thousands spent purchasing something.

That has always been the great disparity in timeshare ownership for me. Those folks who bought from the developer are much more likely to feel trapped than I am. Thanks to TUG and the Internet, I discovered resale before I ever bought my first timeshare.

Dave

BMWguynw said:

I agree, John. Perhaps "dumping" wasn't the right word for me to use. But passing along what I no longer want to a new owner at little to no cost is more likely to work than trying to recoup thousands spent purchasing something.

That has always been the great disparity in timeshare ownership for me. Those folks who bought from the developer are much more likely to feel trapped than I am. Thanks to TUG and the Internet, I discovered resale before I ever bought my first timeshare.

Dave

Click to expand...

This isn't about resale vs developer. There are tons of threads on that. It is about trying to get rid of a timeshare. Even if you got it for free, you are still stuck with the annual maintenance fees. The problem is that many owners have found out that they are flat stuck with their timeshare because nobody wants it even if it is free.

I think rent vs own varies by location, week and quality of unit.

We have ski weeks in Vail that we can rent out for much more than maintenance fees. If we plan to use the units, we know when the fixed weeks will be, and we can make a reservation for the floating weeks long before most other owners are ready to make plans. For the floating weeks, Spring Break and President's week are the two most difficult weeks to secure, and the least likely we'd want to ski. Maintenance is much lower than rental for any ski week.

We have off weeks in St Maarten at the Pelican Resort, which has tons of cheap rentals, but our units are beachfront 2 bedroom penthouses. We pay about $300/week more in maintenance fees than we could rent a random 1 bedroom unit, which will probably be up on the hill. We already have our flights for next June. Before posting I checked to see if there were any rentals available, and I found nothing. That makes using miles for flights much more difficult if you don't have a place to stay yet.

You can only go on Trade Winds one time for less than ownership costs, unless you can take advantage of their 1 in 4 year exchange rule, which might cost more than owning once you include your maintenance fee and the RCI exchange fee. You can hope for an RCI last call weeks, but you are not guaranteed that any of those weeks will be available if you have specific dates, and you may have to pay much more for flights if you use the last minute option.

Many resorts have bonus nights or weeks for owners, which are much cheaper than rentals for any accommodations in the area. We own three units that we will keep forever just for the bonus nights.

John Cummings said:

It is about trying to get rid of a timeshare. Even if you got it for free, you are still stuck with the annual maintenance fees. The problem is that many owners have found out that they are flat stuck with their timeshare because nobody wants it even if it is free.

Click to expand...

No doubt there are TS weeks that can't be given away - but due to the wide variance in the quality of the various TS properties that exist, there are also weeks that will have a line a mile long if you were giving it away. IE: a Ted Kaczynski cabin vs a Four Seasons.

Similair to the variance in disposing of a week, there will be a variance in renting vs owning. Since there is not a single TS that is the ideal or perfect week/unit for every person, there is not a single correct answer for renting vs owning. Since different people buy different TS for different reasons, I'm sure that a case can be made to support either side of the debate (and neither side would wind up with an overwhelming majority). The perfect example of that is in this thread.

BMWguynw said:

You and I also know as long as I can afford the airfare, I'm going to keep KBV, because it is SO worth every penny. I was mostly thinking of selling the other stuff I own, and renting to go along with my KBV week. That fantastic KBV ocean view is the last one I'd sell.

Click to expand...

To add one last variable to the equation, the answer to the initial question will vary for a single individual over time. IE: what makes sense for a young couple with a family will change as they become an older couple traveling on their own. The initial question is a great question, but IMO, it does not have a single answer.