# understanding the economics of people buying and selling for a penny?



## quietdesperation (Jul 24, 2022)

as someone new to timeshares who worked on wall st, I'm fascinated by the dynamics of buying and selling for a penny. It seems the seller has decided that the timeshare has or is approaching negative value as most are willing to pay transfer fees and, in some cases, throw in extra points. I'm assuming the ts can't be rented for any meaningful profit over ongoing costs. on the other hand, we have a buyer, who is aware of the negative value of the timeshare yet willing to accept the obligation of ongoing and, to some extent, unknown costs.

I think I get it, the utility of the ts is worth less to the seller, perhaps unwilling to travel as much for various reasons while the purchaser sees value in the timeshare versus alternative services (hotel, airbnb, renting timeshares, etc).  Still, it seems riskier from a purchaser point of view as the seller probably has far more information about the economic viability of the timeshare in terms of rising costs, change in management, maintenance, etc. And perhaps each year costs rise, the timeshare decreases in its already negative value.

I'm sure a lot of this is wrong and I'm missing a lot of the picture, would love to have experienced members pov.

best,


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## TheTimeTraveler (Jul 24, 2022)

Usually an element of Real Estate transactions is "consideration".  

1 cent is such consideration.





.


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## CalGalTraveler (Jul 24, 2022)

Welcome to TUG. People give away their timeshares for many reasons.

a) Sometimes the timeshare is upside down e.g. the maintenance fees are more than renting.

b) However other factors can be at play: death, divorce, health, moving far away.

c) Sometimes they lost their job and cannot afford or do not want the ongoing burden of the maint fee so try to give it away before the next round of maint fees are due.

d)  Sometimes people can afford, the timeshare may have some residual value but don't want the hassle of waiting to unload or renting it, They have owned it for years, believing they have gotten their benefit and want to move on. It's like offloading a depreciated boat or RV.

Whether it is risky for the buyer depends:  If the reason is a) it may be a resort that someone desires, or has sentimental attachment to, and wants to have priority access to the best rooms as an owner.

b) c) and d) are opportunities for the buyer.


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## quietdesperation (Jul 24, 2022)

CalGalTraveler said:


> Welcome to TUG. People give away their timeshares for many reasons.
> 
> a) Sometimes the timeshare is upside down e.g. the maintenance fees are more than renting.
> 
> ...



thanks, makes sense. However, I'd think it would be hard to recognize whether the opportunity is around b,c,d vs a. This is a well-established website, I'm sure this is not a new thought, it seems like one could come up with a rule-of-thumb formulas in a spreadsheet around  evaluating ts opportunities.

anything like that floating around?

ps thanks for the welcome!


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## CalGalTraveler (Jul 24, 2022)

a) is quite simple. Find the annual MF and then compare to rentals on sites like redweek, TUG or Koala. If not a) then could be the other reasons.

One more reason to research is whether there might be an upcoming assessment the current owner is trying to avoid due to unforseen damages. e.g. hurricane, or low reserves (the Maint fee is too low and the buildings will need rehab. via an assessment to the owners.) This is like any real estate. Research before you buy.


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## jabberwocky (Jul 25, 2022)

quietdesperation said:


> as someone new to timeshares who worked on wall st, I'm fascinated by the dynamics of buying and selling for a penny. It seems the seller has decided that the timeshare has or is approaching negative value as most are willing to pay transfer fees and, in some cases, throw in extra points. I'm assuming the ts can't be rented for any meaningful profit over ongoing costs. on the other hand, we have a buyer, who is aware of the negative value of the timeshare yet willing to accept the obligation of ongoing and, to some extent, unknown costs.
> 
> I think I get it, the utility of the ts is worth less to the seller, perhaps unwilling to travel as much for various reasons while the purchaser sees value in the timeshare versus alternative services (hotel, airbnb, renting timeshares, etc).  Still, it seems riskier from a purchaser point of view as the seller probably has far more information about the economic viability of the timeshare in terms of rising costs, change in management, maintenance, etc. And perhaps each year costs rise, the timeshare decreases in its already negative value.
> 
> ...


This isn’t really a classic market for lemons with information asymmetry between buyers and sellers.  Nearly all the information needed is available and current owners really don’t have any “inside info”.

It likely comes down to a cost/benefit and classic supply/demand.


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## bizaro86 (Jul 25, 2022)

quietdesperation said:


> as someone new to timeshares who worked on wall st, I'm fascinated by the dynamics of buying and selling for a penny. It seems the seller has decided that the timeshare has or is approaching negative value as most are willing to pay transfer fees and, in some cases, throw in extra points. I'm assuming the ts can't be rented for any meaningful profit over ongoing costs. on the other hand, we have a buyer, who is aware of the negative value of the timeshare yet willing to accept the obligation of ongoing and, to some extent, unknown costs.
> 
> I think I get it, the utility of the ts is worth less to the seller, perhaps unwilling to travel as much for various reasons while the purchaser sees value in the timeshare versus alternative services (hotel, airbnb, renting timeshares, etc).  Still, it seems riskier from a purchaser point of view as the seller probably has far more information about the economic viability of the timeshare in terms of rising costs, change in management, maintenance, etc. And perhaps each year costs rise, the timeshare decreases in its already negative value.
> 
> ...



I have a finance background as well (the MD in my job title doesn't have anything to do with medicine). 

I think you're assuming more market efficiency than exists in the TS markets. The law of one price doesn't apply here, because arbitrage is very difficult, largely due to transaction costs. 

Think about the transaction costs in a retail (full price) TS sale. The developer pays staff to market to potential tour takers, gives those tour takers an incentive, operates a sales centre, pays high pressure sales people commissions, and pays closing costs. 

Even in resale TS the transaction costs are high. Brokers generally need $1000-$1500 to manage a real estate transaction, which exceeds the DCF value of many TS. Self listing can be cheaper, but then the opportunity cost of paying MF while searching for a buyer can become significant.

That opportunity cost is one of the reasons TS sell so cheaply. Sellers are motivated to sell because they are not using it for whatever reason, so cost of ownership to them is often 100% of MF with no offsetting benefits. By contrast buyers might expect to get accommodation worth 1.25x MF, but since there are more sellers than buyers the price is still zero. Many $0 timeshares can be rented for more than MF, but not for enough to cover the cost (==time/risk) of owning them for rental, so the buyer pool is only owner-occupiers. TS where there is a cogent case for rentals (Disney, Marriott/Westin  weeks in Maui/Hilton Head/Scottsdale) trade at prices reflective of a high but plausible cap rate on the expected rental income, and not for $0.

I don't think information asymmetry plays a role. Timeshares in a given resort are often fungible (in the case of floating weeks/points) or at least reasonably substitutable (fixed weeks in different units are mostly similar). The marginal buyer is likely someone who owns at the resort already or at least has done some research. In a couple cases where I've bought subsequent units at a resort I knew much more about it than the sellers, because I was an active/participating owner that read the budgets/rule books and the sellers didn't.


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## easyrider (Jul 25, 2022)

quietdesperation said:


> Still, it seems riskier from a purchaser point of view as the seller probably has far more information about the economic viability of the timeshare in terms of rising costs, change in management, maintenance, etc. And perhaps each year costs rise, the timeshare decreases in its already negative



Learning about what you plan to purchase and the low price of resale timeshares really mitigates much of the risks, imo. The timeshares we own are used mostly for escaping winter. Most are rtu's ( right to use ) with expiration dates that we are comfortable with meaning we won't need to try to get rid of them, they will just expire. 

Bill


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## DaveNV (Jul 25, 2022)

In my experience, timeshare Weeks were purchased gradually, as I learned what I did and didn't want to own.  I wanted to learn how timesharing worked in my world, and the best way to do that was to "learn by owning." None of it was ever junk, and all were decent resorts and systems that were worth owning.  I just happened to get them for a deal.

As I decided I wanted to own this or that timeshare, I bought them on eBay and similar for virtually nothing.  I didn't care why the seller was unloading it so cheap, I just knew I wanted to try owning it, and see if it was a good fit. Over time, as I learned more about the ownership, it became clear that the particular timeshare in question may or may not have fit into the way I wanted to vacation.  In most cases, I either found I wanted to own something different at that resort, or just be done with it.

In every case, I sold my timeshares for a dollar.  I also paid transfer fees, to sweeten the deal. My decision to pay those fees was to move it quickly, so as to NOT have to pay the maintenance fees the next time they were due.  I wanted the timeshare out of my name as quickly as possible.  Paying those transfer fees, which was usually just a few hundred dollars or less, was the difference between either giving up that money to find a buyer, and having to pay much more in maintenance fees, if I didn't sell it.  In each case I had a buyer within a few days, and I never had to pay maintenance fees on that timeshare again.  Eventually I decided Weeks timeshares didn't fit the way I like to vacation, and I sold them all, in the same way. I never looked back.

I then bought a Points system, also on eBay. I paid about $1500 for it, but I still stayed well below retail.  I have every confidence that when the time comes to sell, I can sell it for the same sort of money I paid.  That makes it a wash for me, and I'll walk away with a clear conscience, and no financial obligation.  Meanwhile, my buyer will get a great timeshare system at a good deal price, and we'll both be happy.

So it isn't about having something that isn't worth anything.  Every timeshare I've owned was worth something.  But I'm not a greedy person, and I believe in paying it forward.  Selling as I have achieves my goals, and I'm not out anything.  The costs involved can be amortized into the cost of my vacations.  And everyone know those tend to be pretty priceless.

Dave


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## The Colorado Kid (Jul 25, 2022)

DaveNV said:


> In my experience, timeshare Weeks were purchased gradually, as I learned what I did and didn't want to own.  I wanted to learn how timesharing worked in my world, and the best way to do that was to "learn by owning." None of it was ever junk, and all were decent resorts and systems that were worth owning.  I just happened to get them for a deal.
> 
> As I decided I wanted to own this or that timeshare, I bought them on eBay and similar for virtually nothing.  I didn't care why the seller was unloading it so cheap, I just knew I wanted to try owning it, and see if it was a good fit. Over time, as I learned more about the ownership, it became clear that the particular timeshare in question may or may not have fit into the way I wanted to vacation.  In most cases, I either found I wanted to own something different at that resort, or just be done with it.
> 
> ...


@DaveNV Very well-said


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## quietdesperation (Jul 25, 2022)

thank you for thoughtful and thought provoking replies @CalGalTraveler @jabberwocky @DaveNV @easyrider @bizaro86
-  Is a general rule of thumb for purchasing a zero dollar timeshare that rentals for a similar unit are >=  1.25*cost where cost=maint+ future assessment estimates?
- I'm thinking there must be 1000s of "zombie timeshares" where the rental price is < ongoing costs and they are impossible to sell unless the owner ponies up $ or other incentives?
- Has there been recent volatility in pricing due to concern over inflation's potential effect on cost?
- Perhaps zero dollar timeshare sales aren't the sweet spot for savings? are there other price points (for example $1k) where the capital at risk is balanced by increased return? I guess @bizaro86 mentioned "Disney, Marriott/Westin weeks in Maui/Hilton Head/Scottsdale"
- it's been interesting to hear that the seller does not have an information advantage over the buyer that is being monetized.

I do still think there's a place for a spreadsheet which makes buy/hold/sell recommendations by capturing quantitative and qualitative metrics like sales history, cost over time, sales price, rental price, inflation assumptions, management grades, etc. Or maybe I'm overthinking it?

best,


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## Sandy VDH (Jul 25, 2022)

Independent Resorts aside..... Let look at points systems only, which we did a comparison. 

Follow this link








						Timeshare System Points Comparison Chart
					

side by side comparison chart of all the major Timeshare Point systems



					tug2.net
				




It is a couple of years old, but there is a line at the bottom of the comparison that still holds true, and that is Resale Value.


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## quietdesperation (Jul 25, 2022)

Sandy VDH said:


> Independent Resorts aside..... Let look at points systems only, which we did a comparison.
> 
> Follow this link
> 
> ...



thanks, I've been poking around for a week or so and did see that chart. It's an interesting starting point but honestly wasn't sure what to make of it without hard(er) numbers. what does "modest" or "high" mean? how much more upfront is a disney timeshare as opposed to a Marriott? what are their respective rental values? etc. 

I'm not asking for these answers...I understand I have to do the legwork but the spreadsheet I suggested with real data across timeshare properties and point systems would, I think, be valuable.


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## T-Dot-Traveller (Jul 25, 2022)

quietdesperation said:


> as someone new to timeshares who worked on wall st, I'm fascinated by the dynamics of buying and selling for a penny. It seems the seller has decided that the timeshare has or is approaching negative value as most are willing to pay transfer fees and, in some cases, throw in extra points. I'm assuming the ts can't be rented for any meaningful profit over ongoing costs. on the other hand, we have a buyer, who is aware of the negative value of the timeshare yet willing to accept the obligation of ongoing and, to some extent, unknown costs.
> 
> I think I get it, the utility of the ts is worth less to the seller, perhaps unwilling to travel as much for various reasons while the purchaser sees value in the timeshare versus alternative services (hotel, airbnb, renting timeshares, etc).  Still, it seems riskier from a purchaser point of view as the seller probably has far more information about the economic viability of the timeshare in terms of rising costs, change in management, maintenance, etc. And perhaps each year costs rise, the timeshare decreases in its already negative value.
> 
> ...



Welcome to TUG

Since you mentioned your Wall Street background - Arbitrage opportunities.
A classic one was the South African Tiger Traders.

Low cost resale buy in - High TPU to MF ratio

**********
@quietdesperation - I know what I wrote looks like Greek to you. 
Keep reading TUG for a while.
At that point it will make sense why many active TUG members own multiple TS ownerships


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## quietdesperation (Jul 25, 2022)

T-Dot-Traveller said:


> Welcome to TUG
> 
> Since you mentioned your Wall Street background - Arbitrage opportunities.
> A classic one was the South African Tiger Traders.
> ...



lol, I was doing algo and hft. If you read Flash Boys by Michael Lewis, I worked with just about everyone mentioned...I have done wine arbitrage on my own but that's a long, boring story.


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## CalGalTraveler (Jul 25, 2022)

Basically you are arbitraging better vacations. Some units on Maui and Hilton Head hold their resale (not developer) value. Buy a 2 bdrm OF or OV Marriott or Westin. Some lockoff and rent out half to cover Maint fees = free vacation. Some lockoff to get 2 weeks OF/OV for less than an IV hotel room in a cheap resort.

Sell when done to recoup capital. Small is not always best in TS.


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## quietdesperation (Jul 25, 2022)

CalGalTraveler said:


> Basically you are arbitraging better vacations. Some units on Maui and Hilton Head hold their resale (not developer) value. Buy a 2 bdrm OF or OV Marriott or Westin. Some lockoff and rent out half to cover Maint fees = free vacation. Some lockoff to get 2 weeks OF/OV for less than an IV hotel room in a cheap resort.
> 
> Sell when done to recoup capital. Small is not always best in TS.


sorry, trying to keep up, what is OF, OV? oh, wait, ocean view and ocean front!  so you buy a 2br, lock off one br and rent the other. the rental covers maintenance. ok, got that. or you lock off one and take an extra week...I guess the resort platform facilitates that. and then you sell and recoup cost - minus txn fees.  interesting, but there's more capital at risk. I suppose marriott is a safe brand...covid must have been a killer for this stuff, hawaii was was locked down, probably a buying opportunity missed...

same thing with disney? have you done this @CalGalTraveler ?


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## CalGalTraveler (Jul 25, 2022)

Yep, you got the acronyms right.

I am not familiar with Disney but others can weigh in.

What I described works with Marriott and Vistana. Location, Location, Location, size and season (platinum)

others like Hilton are deeds with points. Lockoffs don't exist in the Hilton Grand system. However many arbitrage and buy certain high point/low Maint Fee resale Vegas deeds then trade them using the points assigned to their deed for Hawaii or other high value location where it is more expensive to rent and to own. I have traded my $960/week deeded Vegas points into Waikiki Ocean Front 2 bdrms and Penthouses for a net cost of around $1100 per week. These units rent for $5000/week.

Others buy certain RCI and II high value traders and get great trades into Marriotts, Hyatts, Disney and HGVC (however you won't get the premium units at these resorts but for still a great value.

This works for your own personal use and for small-time rentals e.g. renting half of your lockoff - some of the systems are cracking down on mega-renters so don't recommend that route because you could be shut down.


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## bizaro86 (Jul 25, 2022)

quietdesperation said:


> -  Is a general rule of thumb for purchasing a zero dollar timeshare that rentals for a similar unit are >=  1.25*cost where cost=maint+ future assessment estimates?
> 
> - I'm thinking there must be 1000s of "zombie timeshares" where the rental price is < ongoing costs and they are impossible to sell unless the owner ponies up $ or other incentives?
> - Has there been recent volatility in pricing due to concern over inflation's potential effect on cost?
> ...



1.25x isn't a rule of thumb, that was just an example. If you get rental value much more than that a $0 purchase isn't very likely imo.

Pricing volatility is hard to determine and even harder to discern the cause. The normal variation in prices is very high due to illiquidity and a large bid/ask spread.

I doubt zero dollar timeshares are the sweet spot specifically. The market is so inefficient that I think the "sweet spot" for value can be anywhere.

I would say that in general the higher dollar TS that I listed tend to have more efficient markets. The pricing is high enough that there are active brokers, and the resorts exercise rofr on these.

A spreadsheet like you propose could be created, but many factors would be at least somewhat qualitative. Take rental value. How do you propose to determine that? There is no listing of sold rentals with prices, and asking prices are things that haven't rented. And for many/most intervals the best weeks available for a floating week are competitive, so you can't guarantee you get them. If you put in a range of $1500-3500 for a rental value you won't get a tradeable result. Garbage in garbage out, as they say.


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## CalGalTraveler (Jul 25, 2022)

bizaro86 said:


> A spreadsheet like you propose could be created, but many factors would be at least somewhat qualitative. Take rental value. How do you propose to determine that? There is no listing of sold rentals with prices, and asking prices are things that haven't rented. And for many/most intervals the best weeks available for a floating week are competitive, so you can't guarantee you get them. If you put in a range of $1500-3500 for a rental value you won't get a tradeable result. Garbage in garbage out, as they say.


This. Maint Fees change every year and the developers can change some rules (but not all) making a master spreadsheet difficult. Some forums have stickies with spreadsheets for that system. Like travel points hackers, Tuggers figure out the latest ways to hack timeshares - its not for everyone  but we enjoy the hunt. If this interests you stick around!


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## quietdesperation (Jul 25, 2022)

bizaro86 said:


> 1.25x isn't a rule of thumb, that was just an example. If you get rental value much more than that a $0 purchase isn't very likely imo.
> 
> Pricing volatility is hard to determine and even harder to discern the cause. The normal variation in prices is very high due to illiquidity and a large bid/ask spread.
> 
> ...



>>The market is so inefficient that I think the "sweet spot" for value can be anywhere.
I suppose that's good and bad news for me,  a steep learning curve with potential payoff.

>>A spreadsheet like you propose could be created, but many factors would be at least somewhat qualitative. Take rental value. How do you propose to determine that?

on the tug rental page it says $21,122,299.00 in completed for rent classifieds". so the rental and sales marketplace is yielding some data. I'd try to figure out which key metrics I want to collect and turn that into structured data on the TUG rental/sales listing form. And I'd try to find a way to incentivize users to enter post-sales data. If successful, I'd aggregate the data and offer a free version to TUG users and a Pro version to everyone. Personally, I'd pay...$99 to shortcut what is probably going to be at least an 80 hour learning curve. Also, done right, one might be able to sell comparative benchmark data to the large time share operators. We did something similar with wall st. banks.

obviously I'm shooting from the hip, I've had a 1000 bad entrepreneurial ideas but have been lucky in picking 3 or 4 good ones. I'd have to give it a couple of weeks of deep think around viability, investment and return and I'm the least qualified person on the site to do the analysis since I'm new to timeshares.

best,


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## paxlin (Jul 26, 2022)

quietdesperation said:


> >>The market is so inefficient that I think the "sweet spot" for value can be anywhere.
> I suppose that's good and bad news for me,  a steep learning curve with potential payoff.
> 
> >>A spreadsheet like you propose could be created, but many factors would be at least somewhat qualitative. Take rental value. How do you propose to determine that?
> ...



For rental history the best data point would probably be redweek.com
They have rough history of timeshare weeks rental / resale for major timeshares.





						What's my timeshare worth? | RedWeek
					

If you are considering selling or renting your timeshare, you need to find out what it is worth. Our free tool makes it easy to see what other owners are asking for their units at your resort.




					www.redweek.com
				




TUG's market place is probably not as efficient as redweek or other rental sites such vacationcandy.com or go-koala.com
Also quite a few rentals are done on facebook groups or maybe even ebay.
And DVC is completely separate with David's vacation rental and DVC rental store being the 2 largest brokers.

In general timeshare rental is just very fragmented depending on the system.
So it's really hard to make an apple to apple comparison or datapoints to keep track of.


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## quietdesperation (Jul 27, 2022)

CalGalTraveler said:


> This. Maint Fees change every year and the developers can change some rules (but not all) making a master spreadsheet difficult. Some forums have stickies with spreadsheets for that system. Like travel points hackers, Tuggers figure out the latest ways to hack timeshares - its not for everyone  but we enjoy the hunt. If this interests you stick around!



thnaks, there are a lot of subforums, any suggestions on where to get started to come up the "hacking" learning curve?


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## CalGalTraveler (Jul 27, 2022)

Look at the stickies for the major hotel players. Specifically MF/point spreadsheet on HGVC and ROFR on all.

ROFR.net also helpful for actual resale prices.

Also think about the quality of accommodations basic to luxury and desired travel location.

You may want to fill out the following questions to get help on where to get started on the right system. Once you know the targeted system(s) then you can ask questions about best arbitrage opportunities. If you don't know, suggest that you rent from owners first via TUG or Redweek to get a feel for the quality and locations of each system.









						"What to Buy" Questions for New Timeshare Owners
					

Here are some questions you can answer to focus your timeshare wants/needs.   Suggestion - copy the questions below, and start a new thread entitled "My Survey" or "What should I buy?," or something similar, and answer the questions in a NEW thread.  1) Is there a vacation destination you wish...




					tugbbs.com


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## bnoble (Jul 27, 2022)

quietdesperation said:


> any suggestions on where to get started to come up the "hacking" learning curve?



Advice Worth Every Penny You Paid:

There are arbitrage opportunities in timesharing. However, it is probably better to approach it as a hobby* rather than a finance hack. I understand quite a bit of the landscape, and have made some fantastic deals. But if I add up the hours (and hours and hours) I've spent learning the ins and outs, viewed as ROI on time, it is easily among the dumbest things I've done. (Full disclosure: the list of dumb things is not short).

I suspect that's because there isn't any such thing as "timeshares in general" because each system---and each ownership option in that system---is essentially a different value proposition. Yes, you can use costs/rental value, but figuring out rental value requires fairly intimate understanding of that particular resort and its location: its seasonal variations, the competition, and how fast that competition is going to change. That is not effort that generalizes across locations, for the most part.

Worse, backward-looking rental data isn't necessarily trustworthy as individual resorts are typically managed separately, and things can change unexpectedly turning the value proposition upside down. The resort that has low fees might be in that position because the owners are not interested in refurbishing the place frequently. They like it how it is, it is comfortable and they don't need the newest stuff. That means it falls behind the alternatives in terms of the rental rates in can attract. This thread is a good example. The exceptions to this are the resorts that are tightly controlled by their branded management companies which hold them to a specific standard (e.g Marriott) but those are well-known and understood in the resale market, so there's not as much leverage available. And even Marriott has "de-flagged" timeshare resorts that don't keep up.

That's not to say this isn't fun, or you can't do it. I do it, and it is fun. The thrill of the hunt is a hoot. But, if you are looking for a business to start based on your analytic skills, I'm guessing there are lots of better places to spend your time. On the other hand, if what you are really looking for is a way to hack your vacations and you don't mind treating it as a hobby, then you've definitely come to the right place and you sound like you have the right sort of attitude.

------------------------
I don't know if Ambrose Bierce ever put it this way, but my definition of a hobby is: An activity into which you can pour unbounded amounts of time and money.


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## dioxide45 (Jul 27, 2022)

Some may also take on a unit with free usage and pay only a penny and then strip the free usage and turn around and give it away without free usage. So they get a week of timeshare somewhere for free.


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## CalGalTraveler (Jul 27, 2022)

@bnoble has this right. It is a hobby. The rewards are incredible vacations at a fraction of the cost vs. renting.  We've stayed in two story 3 bdrm Penthouses in Waikiki with views of Diamond Head, 2 bdrm Oceanfront Maui. premium 50th floors 2 bdrm grand at the Elara in Las Vegas and NYC premium units with views of Central Park and lounge, Tuscany Italy for $1200 or less for the WEEK

If hacking travel is not your intent, you will be sorely disappointed. Stick with "easier" cash arbitraging opportunities.


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## DaveNV (Jul 30, 2022)

The great unknown variable to timeshare ins and outs vs. hotel stays is the economy.  Recently, hotel stays have become wildly more expensive than they were a few years ago.  Some of that is surge demand since Covid lockdowns ended.  Other pieces of it are opportunistic greed.  But if a person wants to leverage staying at a timeshare vs. a hotel in a high demand area, then buying or exchanging into the timeshare makes better financial sense (in theory.)  If the goal is to get the best bang for the buck, it's a moving target, and there is no hard floor to the costs, short of receiving it absolutely free.  And that is a rare situation that can't be guaranteed. Timeshare sales and ownership costs fluctuate so much, it'd be hard to guarantee a buy-in that stays at that rate. Other than quantifying which systems tend to provide the best ROI, the rest of it is simply how to make the most of your vacationing dollars, learning loopholes, and how to spot a rare opportunity when it pops up.

I tend to agree with the above posters - making the most of timeshare travel is a hobby, at best.  Much like owning a pleasurecraft boat:  A hole in the water you pour money into.  

Dave


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## TravelTime (Jul 30, 2022)

To me, the purpose of a vacation is to have fun. I like getting the “best” deal on a place I like going or a point system to go many different places. There are many posts about the benefits of timeshares compared to other options, which you might have already considered. 

At some point, if I overanalyze the cost or focus on things like spreadsheets, arbitrage, obsessively searching for the absolute lowest cost down to the penny or dollar, the enjoyment of a vacation goes away for me. 

I think you should definitely learn as much as possible, then find a place (buy a week) or places (buy a point system) that you would enjoy vacationing at. Also timeshares are not investments or even real estate.

Many Tuggers do not think like I do so read TUG and rely on the best options for you.


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## sdhakala7 (Jul 30, 2022)

I once wrote an article on TUG about appraising timeshare units and did some valuation analyses of timeshare units in the late 1990s.  It was partly in response to a timeshare scam where a group would offer to purchase your timeshare based on appraised value.  They would get a "garbage" boilerplate appraisal (not real and not compliant with the Uniform Standards of Professional Appraisal Practice aka USPAP) and charge like $300 or $400 for the appraisal and then the company would buy only a few units (to make it look like they actually were serious) and only at big discounts off the appraisal.  They eventually got investigated and prosecuted in Florida after a few years of reports and complaints.

I do not subscribe much to the rental theory.  In part because it is not how I use timeshares and, also, rentals are kind of inefficient and often last minute dumping of unused inventory prices.  If you purchase a condo on a beach or something like a fractional share unit and rent out to cover annual fees and expenses, then that approach sort of makes more sense.  Back in the 1990s, (my children were young and the TS location was on a large lake for boating and near an amusement park and a variety of other things to do in Branson), we used our premium summer week unit probably 2/3's of the time and often used a cheap trader (sometimes used effectively two banked weeks to get one but the maintenance fees were really cheap) to get a second unit nearby for family and friends (which enhanced the value in use).  We also got bonus time offseason and "owner's updates-which of course meant a 2 hour beating with a person trying to sell us in return for 2 to 3 nights of use), so we probably used an average of 9 to 10 days for a fee of $640 per for our base unit to use.  I figured the value of use was $150 to $200 per night, so we realized about $1500 to $2000 of use value per year and a net value of $900 to $1300 per year.  We paid only $2750 all-in and the unit was an older, 1980s standard unit, but we did not care since it had a good amount of space, slept 6, and was a great location with enough amenities (mini golf, pool, limited snack bar and activities center as well as a lake with boat docks for our boat).  So, we basically broke even before three years of ownership and had a good 10+ years of use total before it got stale and the children grew out of it.  Still, I figure over the last twelve years we often barely broke even most years on "net use value (value of use minus cost of use including all maintenance and exchange fees) as the maintenance fees went up a lot faster than inflation (after the system was sold and despite promises in the 1990s that they would not go up) and as we used the unit more for trading (and the trading power or points and availability of weeks became increasingly less due to points systems becoming more common) but probably got a few days every other year extra to make it worth owning.

I look more at annual "practical use" value minus the annual costs of ownership (maintenance and exchange fees) for ownership.  You get a larger unit (more like a condo rental) and some amenities, so price it accordingly but often that value is no more than $100, $150, to $200 per night relative to some suites one can stay at or condos at most for some of the lower end, older standard 2 bedroom units we have exchanged into (which is fine for those cheap RCI 4 to 8 point weeks trades that use a fraction of your annual points from a week) and up to $300 to more than $500 per night for high season and newer and nicer units or hard to get locations (we paid $350 to as much as $500 per night on peak weekend nights for beach condos of equivalent amenities at times before converting to and buying more points).  You should also assume that sometimes you will not use all of the days in a weeks exchanges (I've used as few as 3 to 4 days on a really cheap exchange or rental).  But you do have to book or search for exchanges in advance and are committed, so there is some discount or penalty to that.  I then look at a discounted net "cash" flow over a say 20 year period with some minimal residual value if points and no value if weeks and discount at 7% to over 10% discount rate.

What that can mean is that even a really good two bedroom high demand points (week) with a $1,500 maintenance fees and an average of say $150 per year of costs for exchange or other fees (assuming an average of 6 days of actual use in practice, inhouse use half the time) can be worth $5,000+ in "fair use" value still from a purchase and use standpoint over 20 years even with no residual value after 20 years.

The market is so inefficient and so many people are desperate to sell ("liquidate") their timeshares that the resale prices are now really substantially depressed to "liquidation value" and are set well below the "fair use" value of a good timeshare unit for a good week in a good system and location or for points values.  By contrast, in the 1995 to 1998 period, timeshare weeks in decent systems still had "red week" resale prices of $2,500 to $10,000 per week (more for premium weeks and resorts) and were legitimately worthwhile at those prices.  Back in the mid 1990s, a rule of thumb for a good red week was 20% to 35% of the price you would pay to the developer for a really good timeshare week at a really good location.  It could be as much as 50% in rare cases and often was much lower than that for less in demand or oversold locations and times of the year.  Points in some of the better points systems sold on resale from 30% of original cost (with some loss of perks) to 50% to 70% of original cost depending on the system and year.  If you think about it, the developer spent (and still spends) about 50% on marketing and general and administrative expenses and profit are about 20% to 30% of what you pay the developer when you buy from the developer.  The underlying cost of the unit (inclusive of reserves for replacement and upkeep) was close to 20% to 25% of the sales price on a good price from a developer in the 1990s.  So, what you were paying in the "resale" (secondary market) was equivalent to the actual adjusted replacement cost of the unit allocated to your week.

But if you get bonus time and discounts for premium membership levels and really use your points wisely and fully, then you can get that net use per year value up a lot more.  Say I get an average of 10 days of use at $300 per day for $3,000 in use value per year and pay fees (typically some fees for bonus time) of $1,750 per year for 20 years.  Then, I "earn" $1,250 in net use value in year one and the value (at a net annual discount rate of 7%) is about $13,700 over 20 years of use even if I simply walk away (which our system now allows, often called a "quit claim" deed forfeiture").  I suspect that the points I own will still have some "residual use value" or resale value for my children though or in resale.  Now, the developer will still try to sell the equivalent points for about $30,000 inclusive of fees and taxes, so buying from the developer is not a great deal unless you really know how to work the system or they just happen to be desperate to get some sales (in which case it might cost $25,000 but they will throw in points for an extra year and some other stuff worth maybe another $3000 to $5000).  [In my case, during Covid, I flipped my old primary weeks unit (worth minimal net use value of me) because they wanted that week for points exchanges.  That conversion resulted in a net gain in use value of about $8,000 to $10,000, plus got free points for one unit week for one year, and the points value of a second premium unit as well.  I a discounted cost for one premium week's worth of points, and, also, gained benefits from discounts for status in the system.  As a result, the purchase of a second week of points just barely made sense at a stretch for my family.]

An old weeks unit at a location your really want and plan to use typically has much lower maintenance fees than a point weeks and you will also incur fewer fees for exchanges by using that week.  Thus, there are times when the "net use value" of a weeks unit can actually be a lot more than the equivalent points (which was true in my case for about 13 years until the kids got too old) simply because of the lower maintenance fees.  But fixed week units lock you into 7-day fixed or floating week, force planning accordingly, and you cannot count on any resale value anymore (unlike in the 1990s).

BTW I really overthink this stuff as a nerd who has a Ph.D. in Econ (taught Econ in a Ph.D.-granting University) but have been a full-time economic, financial, and valuation consultant who does a lot of business (and some real property and machinery & equipment) appraisals) for the last 30 years now and has actually valued some timeshare developers and receivables (which is how I learned about timeshares and resales in the 1990s).


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## curbysplace (Jul 30, 2022)

My 2 cents: 
1-don’t look at buying a timeshare just so you can rent it out. Buy it to use it
2-don’t look at buying a timeshare as an investment. Buy it to use it. 
I hope you catch my theme here.


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## LannyPC (Jul 30, 2022)

sdhakala7 said:


> I do not subscribe much to the rental theory.



I'm more or less the opposite.  The rental theory is what sets the value for me.  It's twofold for me:

1) Why buy/own when I can rent for less than the MFs?  The last trip we did, we booked on Travelocity/Expedia at a resort.  We got the exact nights we wanted for less, on a per-night basis, than what the owners there are paying in MFs.  So why should I own there?  Or, as an example, take a look at TUG's Last Minute Rental forum.  How many of those weeks being offered have MFs below $800/week?

2) One of the ideas behind owning is that it costs less to use it than if you rented from an owner (or the resort) and owning a TS is supposed to help you save money and make vacations more affordable and hence, more attractive and desirable.

Of course, this is a classic example of YMMV.


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## T_R_Oglodyte (Jul 30, 2022)

quietdesperation said:


> Still, it seems riskier from a purchaser point of view as the seller probably has far more information about the economic viability of the timeshare in terms of rising costs, change in management, maintenance, etc. And perhaps each year costs rise, the timeshare decreases in its already negative value.


As suggested above, I think this part of your analysis is off.  People who are buying timeshare are usually doing so with deliberate intent.  They know what they are looking for and what it's potential value is, both in personal use as well as economically. 

It's the sellers who are often less savvy; they have something they want to unload and they don't know how. So it's the savvy buyer who is plucking the bargains.

Some time past, when I was more actively involved in buying and selling, I came across a person who had a timeshare that I decided I wasn't interested in.  But she was quite desperate to sell; she gave me a personal story of her circumstances that I had no reason to doubt. 

I told her that her unit could be sold for significantly more than she was asking, if a person knew how to market it and how to find motivated buyers.  But she didn't have that information, nor was she in a position to spend two to three years generating the experience to do that. So she asked me to take it off her hands and I was welcome to flip it for that profiit.

Which I did, in a win-win situation.  She got out of her timeshare with a bit of money, and I netted an easy $2500 when I resold it four months later.


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## WManning (Jul 30, 2022)

dioxide45 said:


> Some may also take on a unit with free usage and pay only a penny and then strip the free usage and turn around and give it away without free usage. So they get a week of timeshare somewhere for free.


Great suggestion @dioxide45 . I would suggest another option vs giving away. Find someone that will pay above your costs of holding including all maintenance fees paid.


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## WManning (Jul 30, 2022)

T_R_Oglodyte said:


> As suggested above, I think this part of your analysis is off.  People who are buying timeshare are usually doing so with deliberate intent.  They know what they are looking for and what it's potential value is, both in personal use as well as economically.
> 
> It's the sellers who are often less savvy; they have something they want to unload and they don't know how. So it's the savvy buyer who is plucking the bargains.
> 
> ...


@quietdesperation It was very easy to strip and flip ownership before timeshare developers started taking back inventory from owners looking to exit. Its still possible but you really need to find the exit companies that are giving the inventory away for free. Not only do you want free or low cost inventory it must be a lower maintenance fee ownership that is highly desirable. Low cost maintenance fee ownerships sell at a premium even if current use year points have been used.


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## WManning (Jul 30, 2022)

LannyPC said:


> I'm more or less the opposite.  The rental theory is what sets the value for me.  It's twofold for me:
> 
> 1) Why buy/own when I can rent for less than the MFs?  The last trip we did, we booked on Travelocity/Expedia at a resort.  We got the exact nights we wanted for less, on a per-night basis, than what the owners there are paying in MFs.  So why should I own there?  Or, as an example, take a look at TUG's Last Minute Rental forum.  How many of those weeks being offered have MFs below $800/week?
> 
> ...


I find using what it costs in maintenance fees per night to stay in a one bedroom condo compared to a hotel room. A few years back it averaged about $100 per night for a one bedroom at the Wyndham Sedona. This was owning 154,000 points at Wyndham Grand Desert with monthly maintenance fees of $65.


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## Intrepid93 (Aug 9, 2022)

I have never worked in finance but I am smarter than you reading this right now so listen up...there is NO economic issue involved here because economics and marketplaces and buying/selling, supply/demand necessitates chattel or a goods or service that has a value.  There is no value to a "contract in perpetuity" which is what everyone duped into a timeshare contract signed.  The only real reason folks sell them for a dollar is they want to rid themselves of a legally-bound contract that lives on even after their death.


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## CalGalTraveler (Aug 9, 2022)

Baloney. Contract does not live on after death.  You cannot force an heir to accept items in an inheritance.


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## macmanrider (Aug 21, 2022)

quietdesperation said:


> as someone new to timeshares who worked on wall st, I'm fascinated by the dynamics of buying and selling for a penny. It seems the seller has decided that the timeshare has or is approaching negative value as most are willing to pay transfer fees and, in some cases, throw in extra points. I'm assuming the ts can't be rented for any meaningful profit over ongoing costs. on the other hand, we have a buyer, who is aware of the negative value of the timeshare yet willing to accept the obligation of ongoing and, to some extent, unknown costs.
> 
> I think I get it, the utility of the ts is worth less to the seller, perhaps unwilling to travel as much for various reasons while the purchaser sees value in the timeshare versus alternative services (hotel, airbnb, renting timeshares, etc).  Still, it seems riskier from a purchaser point of view as the seller probably has far more information about the economic viability of the timeshare in terms of rising costs, change in management, maintenance, etc. And perhaps each year costs rise, the timeshare decreases in its already negative value.
> 
> ...


Well buy close so you can use the day use. Buy fixed week if you can if you buy a deed in Mexico you can only own for 30 yrs but you can buy for another 30 yrs. Or sell it or let it go. Yes there is no money in TS you can trade but you have to buy into to the yearly fee.  And don't buy to many deeds but for us it's still cheaper that than trying to find a deal. And fixed week the same people show up every year which makes it more fun. Enjoy


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## CO skier (Aug 21, 2022)

quietdesperation said:


> Or maybe I'm overthinking it?


Yes.  No question.


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