State of the Rental Market?

[Steve]

I rented a few of my timeshares for the first time recently. I was really surprised at how quickly they rented. I also found that I could have priced them higher as I had offers above my asking price on one, and I was told by a renter of another that he would have paid hundreds of dollars more.

As a result, I am considering purchasing a few more timeshares to rent. It seems that the purchase prices are still pretty low but the rental market has rebounded nicely from the recession.

To those with established rental portfolios, have you seen rents and demand pick up lately? Am I correct in my thinking?

Thank you,

Steve

 

[simpsontruckdriver]

It goes either way. Like any business, there are 3 main points: LOCATION, LOCATION, LOCATION. For instance, I have heard renting out Disney Vacation Club (DVC) timeshares is easy, everyone wants Disney! Or, renting in Orlando or Hawaii. I have tried to rent out my Wyndham timeshares in Orlando, but was only successful in getting a couple a weekend in Kissimmee (Wyndham Cypress Palms). Others will gladly undercut you. If you can get a week during Nascar Speedweeks in Daytona Beach, or Bike Weeks, you can make some money in those.

So, you MAY be able to rent for a profit, but others you may have to lose some money.

TS

 

[DeniseM]

Orlando has more supply than demand. The best rental areas have more demand than supply.

 

[MOXJO7282]

I rented a few of my timeshares for the first time recently. I was really surprised at how quickly they rented. I also found that I could have priced them higher as I had offers above my asking price on one, and I was told by a renter of another that he would have paid hundreds of dollars more.

As a result, I am considering purchasing a few more timeshares to rent. It seems that the purchase prices are still pretty low but the rental market has rebounded nicely from the recession.

To those with established rental portfolios, have you seen rents and demand pick up lately? Am I correct in my thinking?

Thank you,

Steve

It depends on what you're going to buy. My Marriott properties never stopped renting and I regret not purchasing more when Marriott pricing was way down but now Marriott resale pricing has rebounded so not sure what properties you think are still "pretty low".

I definitely would not recommend trying to rent Orlando week even if they're Marriotts because there is just too much competition.

In my opinion and just based on my Marriott experience the cheapest Marriott property that rents readily and at good price is a Newport Coast Plat. You can secure one for $7-8k and MFs less than $1200. A July weeks rents for $2100+. The issue with that property is you really need 2 weeks to get the right weeks to rent.

 

[ronparise]

I havent noticed that the economy, good or bad has had any effect on my rental activities. I concentrate on special event weekends in a high demand low supply market..What I offer for rent usually gets rented at my price

 

[Julian926]

I havent noticed that the economy, good or bad has had any effect on my rental activities. I concentrate on special event weekends in a high demand low supply market..What I offer for rent usually gets rented at my price

That's awesome that you have a rental business.

I've looked at a lot of timeshares and it seems the ones that actually rent are indeed the low supply market. And, as such, they are the ones that cost a lot of money. Maybe I'm looking at this wrong, but when I see the actual returns (profit), they seem to be less than 6% of investment. Stocks and bonds could give you that much or even more. Am I looking at this incorrectly?

 

[am1]

I've looked at a lot of timeshares and it seems the ones that actually rent are indeed the low supply market. And, as such, they are the ones that cost a lot of money. Maybe I'm looking at this wrong, but when I see the actual returns (profit), they seem to be less than 6% of investment. Stocks and bonds could give you that much or even more. Am I looking at this incorrectly?

It depends. A lot of people lose money on rentals. A few make good money. Even some of those end up working for peanuts per hour.

 

[MOXJO7282]

Maybe I'm looking at this wrong, but when I see the actual returns (profit), they seem to be less than 6% of investment. Stocks and bonds could give you that much or even more. Am I looking at this incorrectly?

I'm not sure how you calculate 6% and I don't go into details too much but what is different is we own wonderful Marriott TSs at some awesome locations so while we're taking these vacations we're also have a return on our investment. And the icing on the cake is God willing one day in the future we'll put together 2 month long vacations every year.

 

[ronparise]

That's awesome that you have a rental business.

I've looked at a lot of timeshares and it seems the ones that actually rent are indeed the low supply market. And, as such, they are the ones that cost a lot of money. Maybe I'm looking at this wrong, but when I see the actual returns (profit), they seem to be less than 6% of investment. Stocks and bonds could give you that much or even more. Am I looking at this incorrectly?

return on investment is something I dont consider with my timeshare rentals. My investment is so small it becomes a meaningless calculation ....here's an example

purchase price = $100
maintenance fees = $515
rental income = $3200
profit = $2685

return on investment =2600%

Return on investment is meaningless for two reasons... 1) this isnt a passive investment like stocks, is more of a business with expenses and work to be done and 2) the invested money is negligible

Im more interested in cash flow, and all I care about is...is it positive or is it negative...When I buy I look for something that will give me
1.5 to 2 x mf. Sometimes I do better like the example above, (that was Superbowl in New Orleans this year) and sometimes I do worse. but overall Im doing ok

By the way I dont even think about dollars per hour as am1 suggests. I dont think many business owners do

 

[am1]

By the way I dont even think about dollars per hour as am1 suggests. I dont think many business owners do

It possible many do not but the should. A lot of times business owners enjoy their work so it has less importance than when punching a clock.

I consider my investment, hours work, enjoyment, risk and how much money I think I need in the end. The last one may be impossible to know.

 

[ronparise]

It possible many do not but the should. A lot of times business owners enjoy their work so it has less importance than when punching a clock.

I consider my investment, hours work, enjoyment, risk and how much money I think I need in the end. The last one may be impossible to know.

One of my goals is to create a money making enterprise that doesnt require any hours worked, by me. except those required for strategic planning and oversight

But for now, in the building stage, its all me and about 3 hours a day. at about $50 an hour...not great but not a waste of time either...The target is about 2 hours a day (10/wk) at $200 an hour

 

[benyu2010]

But for now, in the building stage, its all me and about 3 hours a day. at about $50 an hour...not great but not a waste of time either...The target is about 2 hours a day (10/wk) at $200 an hour

There is a thread of 'law school rejection' in TUg Lounge. You may share your experience of potential quick reaching $200/hour profession there, with no lengthy study and hefty tuition, and absolutely no rejection for ownership of timeshare.

 

[Julian926]

One of my goals is to create a money making enterprise that doesnt require any hours worked, by me. except those required for strategic planning and oversight

But for now, in the building stage, its all me and about 3 hours a day. at about $50 an hour...not great but not a waste of time either...The target is about 2 hours a day (10/wk) at $200 an hour

May I ask why 3 hours a day? Just curious. Is it that you interface with the renter? Is that through emails or phone calls?

 

[Saintsfanfl]

In my opinion and just based on my Marriott experience the cheapest Marriott property that rents readily and at good price is a Newport Coast Plat. You can secure one for $7-8k and MFs less than $1200. A July weeks rents for $2100+. The issue with that property is you really need 2 weeks to get the right weeks to rent.

I don't think this is a good scenario for purely renting purposes. You are looking at well over 10 years to break even because by the time you hit the 6 to 8 years break-even from a simple numbers stand point, the purchase price for this week will be an equivalent of less than half value. In reality you are likely looking at a 20 year break even from a true value of money perspective. The margins will likely drop in future years. That is too long to be predictable and runs the risk of never hitting break even. There needs to be another need besides just renting to make this viable. This holds true with just about any extremely high demand Marriott. The week is worth more to someone for use than it is to an investor, so it is difficult to buy it low enough.

I have bought timeshares where the rental profit for the first year alone is higher than the purchase price. Not nearly the margin above maintenance fees as the example above, but there is now zero investment to worry about.

 

[ronparise]

May I ask why 3 hours a day? Just curious. Is it that you interface with the renter? Is that through emails or phone calls?

3 hours is an estimate. Im usually done what I need to do by noon. Although I will take phone calls any time. I deal with my renters by email and phone, but the time communicating with renters accounts for only part of my time. Im also still buying so Im watching the various advertising venues, especially ebay, and talking to sellers too. Occasionally I find something for sale, that I dont want, but I think I can sell for a profit, so Im writing ads and working with buyers.

 

[vacationhopeful]

In my case, some days it is 5 minutes; other days, it is 5 hours or more.

Season of the year determines WHAT has to be done. Some tenants require MUCH more hand holding than others before agreeing to rent. And it has nothing to do with the dollar value of the rental. And the times can be from 6am to 2am. Yes, I have been woken out of a dead sleep with a resort NOT having an unit for my Fixed Week inbound.

If I am making reservations, I am up at 6AM for coffee and getting my notes together. Or doing checking emails.

 

[vacationhopeful]

...I have bought timeshares where the rental profit for the first year alone is higher than the purchase price. Not nearly the margin above maintenance fees as the example above, but there is now zero investment to worry about.

I have brought those low priced, "paid back with first rental" timeshares also. Not every purchase is like that.

But niche buying or specializing in one type of area, may cost a bit more than just buying the ones with perfect numbers, but scattered all over the universe "the numbers are RIGHT" units.

If Joe's goal is to retire and winter in Hawaii by staying in his Marriotts ... that is part of his payback in X years. He does not have to pay the IRS for his adjusted basis - because he is doing personal usage. And as they have depreciated so low, he won't have to recapture much of that "GREAT" depreciation he got during his HIGH income years. Joe's plan maybe VERY different from your plan.

 

[Saintsfanfl]

I have brought those low priced, "paid back with first rental" timeshares also. Not every purchase is like that.

But niche buying or specializing in one type of area, may cost a bit more than just buying the ones with perfect numbers, but scattered all over the universe "the numbers are RIGHT" units.

If Joe's goal is to retire and winter in Hawaii by staying in his Marriotts ... that is part of his payback in X years. He does not have to pay the IRS for his adjusted basis - because he is doing personal usage. And as they have depreciated so low, he won't have to recapture much of that "GREAT" depreciation he got during his HIGH income years. Joe's plan maybe VERY different from your plan.

I totally agree. There are many variables beyond pure investment that create value. Using or exchanging occasionally or at some pointe in the future is an important consideration. I actually do not buy from a pure investment stand point. I want other non monetary factors involved like possible personal use.

 

[MOXJO7282]

I don't think this is a good scenario for purely renting purposes. You are looking at well over 10 years to break even because by the time you hit the 6 to 8 years break-even from a simple numbers stand point, the purchase price for this week will be an equivalent of less than half value. In reality you are likely looking at a 20 year break even from a true value of money perspective. The margins will likely drop in future years. That is too long to be predictable and runs the risk of never hitting break even. There needs to be another need besides just renting to make this viable. This holds true with just about any extremely high demand Marriott. The week is worth more to someone for use than it is to an investor, so it is difficult to buy it low enough.

I have bought timeshares where the rental profit for the first year alone is higher than the purchase price. Not nearly the margin above maintenance fees as the example above, but there is now zero investment to worry about.

I'm not going to get into a debate about my ROI but in my estimate my overall ROI before I added some MOW OF units recently was about 17 years and I am about 11-12 years into that. That example I used was actually lower than I accomplished the last 2 years at NVC.

And many of my properties have a much higher ROI. For instance my Aruba Surf Club, bought at $20k with 500k reward points in 2003 still rents for more than double MFs, (early on I got 3x and one time 4x MFs but margins have slimmed naturally) has a higher ROI, as does my resale Maui OFs, as will my MOW OFs that I got cheap and rent for more than 2X MFs.

Sure rental margins and resale levels have come down, but I believe both will be relatively stable and in some cases may be on the upswing in price for the high end properties I own. If you've studied NCV for the last few years you know that to be the case where golds and plats were going for 2k+ and 6k+ are now going for $4-5k and $7-8k.

Hey you may disagree and that OK, but all I know is its the best thing I did for my family, financially and most importantly from a family bonding and quality of time experience by far.

 

[MOXJO7282]

I totally agree. There are many variables beyond pure investment that create value. Using or exchanging occasionally or at some pointe in the future is an important consideration. I actually do not buy from a pure investment stand point. I want other non monetary factors involved like possible personal use.

And this is the other half of my ROI. As a family we've taken 6 trips to Maui, all 1st class air thanks to MR. Not to mention 1st class to Aruba and San Diego. So up top of my financial ROI there is the free trip value that is tremendous. No way all those trips happen without my Marriott investment. Doubt we would've flown 1st class once without the millions of points received in the past and now from paying 20k in MFs which gives me a 250k point travel award every 2 years or so.

 

[BocaBum99]

I totally agree. There are many variables beyond pure investment that create value. Using or exchanging occasionally or at some pointe in the future is an important consideration. I actually do not buy from a pure investment stand point. I want other non monetary factors involved like possible personal use.

It is truly sad that most people do not know how to do a true apples to apples comparison between purchase or non-purchase options which includes opportunity costs. I would say that less than 10% of people on TUG can do it properly. It's one of the main reasons why people get suckered into making a purchase in the sales presentation.

 

[ronparise]

It is truly sad that most people do not know how to do a true apples to apples comparison between purchase or non-purchase options which includes opportunity costs. I would say that less than 10% of people on TUG can do it properly. It's one of the main reasons why people get suckered into making a purchase in the sales presentation.

Not just that they dont consider all the factors... I think it goes deeper...Most of us dont even know why we buy what we do. My recent purchase of 2 penthouse fixed weeks at Riverside Suites in San Antonio is a good example...Its not a great rental week, mf is high and I dont think Ill ever go to San Antonio and if I do I certainly dont need two 2 bedroom units for the same week...But I had recently seen the mayor of SanAntonio interviewed. [political - deleted] I really liked the pictures of the unit and the resort...and each usit has its own private balcony overlooking the Riverwalk...so I bid and I got it...

 

[JudyS]

Getting back to the original poster's question, I have only a few rentals, but they do seem to be renting more easily this year.

Also, DVC rental prices have definitely increased.

That's awesome that you have a rental business.

I've looked at a lot of timeshares and it seems the ones that actually rent are indeed the low supply market. And, as such, they are the ones that cost a lot of money. Maybe I'm looking at this wrong, but when I see the actual returns (profit), they seem to be less than 6% of investment. Stocks and bonds could give you that much or even more. Am I looking at this incorrectly?

There have been thousands of people who have posted on TUG, but only Ron and a very few others have done really well with renting. (And some of those others took losses eventually.)

Generally, if a timeshare rents for more than the MF, it will cost some real money to buy. Ron has found inexpensive timeshares that can be rented for more than the MFs, and so have a few other Tuggers, but it takes real skill and lots of time to ferret out these deals. Also, the people who have made money this way tend to buy large ownerships in one particular system. This sometimes gives better deals (in some systems, MFs are lower if you own many points, or you can book last-minute weeks at a discount, that sort of thing) but it means more risk if that system changes its rules.

 

[JudyS]

3 hours is an estimate. ...

Just curious -- Ron, do you count reading/posting on TUG as part of the three hours, or not?

 

[lprstn]

I'm a casual renter of my timeshares and I must say, I'd never purchase a timeshare just to rent it. Doesn't seem cost effective source of consistent income for me and a heck of a lot of work.

* Purchase where and times that appeal to you
* Research it's viability for rentals
* Then and only then purchase if you like - rent when you can't or won't use.