How long does it take to really know what a TS cost and how it works?

[hammerhammer]

Understand I am a engineer and thus have the mentality that if not every question is answered I do not know how something works.

I have been renting time shares from others and to this day after reading lots of stuff on this site I do not understand how TS really works.

In a nutshell:

• People over pay retail
• Annual fees are way higher than possible (seems they make money on MF's)
• It is hard to sell them
• Even when people sell their TS they have all kinds of questions on how to sell it. I could not buy something if I had no idea how to sell it and what I could get.
• Title work can be hard to understand and get messed up
• If you wanted to go to the same resort ever year the same week you better just buy that week at that place. This is the only way to ever buy a TS and gong there once or twice is not enough to know if you LOVE it.

Then move onto the points system, that is more confusing to me than anything.

Is there a engineering flow chart for how any of this stuff works?

I love this site! Thanks for the owners and members of this site!!!

I am a rookie but want to learn more

John

 

[DeniseM]

I would say that if you work on it - 6 mos.

I suggest that you focus on one resort system, or the region where you want to buy to start with.

 

[Jason245]

It will take as long as necessary (everyone is different) to answer the following questions that I recommend you be able to answer before making a purchase.

As an aside you also need to acknowledge and be prepared for the fact that whatever you pay for the unit (retail or resale), you should generally assume that you will have to give it away for nothing and pay closing costs to give it away (worst case scenario).

When looking at a TS as an individual who is not wealthy (to the point where the spending of this money is irrelivent to the persons annual cash inflow) you need to ask yourself:

1. Can I afford the MF annually and interest and principle payments? (hint: You should be financially stable, be able to fund retirement accounts, have savings to cover several months of unemployment, not be living paycheck to paycheck, not have ANY outstanding personal debt (credit cards etc..))
2. Do I intend to use it for the purpose I am buying it?
3. Is it cost effective? (Annual cost should be less then cost to pay cash for the vacation on an annual basis).
4. What is the payback period of the initial sunk cost outlay and does that timeframe make sense (include interest in this calculation if there is financing involved)?
5. How long do I plan on using this? (compare to payback period)
6. How much will it cost to end the contract and liquidate my ownership (and payoff the loan) and do I have the financial ability to do that if I have to ?
7. Do I really want this vacation benefit given the costs and commitment I will have to make?
8. Wait 48 hours and then ask yourself question number 7 again.
9. Wait 1 week and ask yourself question number 7 again.

There are wiki pages summarizing information for all the main chains (see their individual forums for links). Just make sure you verify nothing has changed since last updates.

 

[DeniseM]

I strongly disagree with Jason - if you have to finance your timeshare - you shouldn't be buying a timeshare.

 

[Jason245]

I strongly disagree with Jason - if you have to finance your timeshare - you shouldn't be buying a timeshare.

I am not recommending financing. I simply created a catchall list of questions that you should ask yourself and made sure to incorporate all factors.

Methods of financing and paying for things are up to individual buyers.

For some people who have access to low interest debt, it is feasible that even when counting interest expense, they are ahead on the deal based on all factors.

In almost all timeshare purchases, third party financing (loan) is a bad idea as the numbers don't add up. Also, if you pay the whole purchase with cash (self finance), you are giving up the interest you would earn on that money. Accordingly that lost income should also be factored in.

 

[DeniseM]

Jason - How long have you been a timeshare owner?

I stand by my post: Timeshares on the resale market cost pennies on the dollar - if you can't pay cash for it, you should not buy it.

 

[ronparise]

Jason - How long have you been a timeshare owner?

I stand by my post: Timeshares on the resale market cost pennies on the dollar - if you can't pay cash for it, you should not buy it.

Denise,

What if I can pay cash, but prefer not to?


Your advise is good advice but it has nothing to do with the ops questions.
Jason says dont buy a timeshare unless you can afford it...you disagree and then say the same thing

 

[DeniseM]

Ron - Jason (who has been an owner for 23 days) is giving advice to a newbie buying their first timeshare.

This is a completely different scenario than a mega-renter who is leveraging his evil empire.

 

[klpca]

I stand by my post: Timeshares on the resale market cost pennies on the dollar - if you can't pay cash for it, you should not buy it.

Besides not buying from the developer, this is (imho) the most important thing that you will learn from this board. Just don't do it. It is a poor financial decision.

 

[ronparise]

Understand I am a engineer and thus have the mentality that if not every question is answered I do not know how something works.

I have been renting time shares from others and to this day after reading lots of stuff on this site I do not understand how TS really works.

In a nutshell:

• People over pay retail
• Annual fees are way higher than possible (seems they make money on MF's)
• It is hard to sell them
• Even when people sell their TS they have all kinds of questions on how to sell it. I could not buy something if I had no idea how to sell it and what I could get.
• Title work can be hard to understand and get messed up
• If you wanted to go to the same resort ever year the same week you better just buy that week at that place. This is the only way to ever buy a TS and gong there once or twice is not enough to know if you LOVE it.

Then move onto the points system, that is more confusing to me than anything.

Is there a engineering flow chart for how any of this stuff works?

I love this site! Thanks for the owners and members of this site!!!

I am a rookie but want to learn more

John

Understand I am a engineer and thus have the mentality that if not every question is answered I do not know how something works.

But as an engineer, do you have to know how something works before you can accept the fact that it does? I have no idea how computers or the internet works but here I am using a computer and the internet to communicate with you. And I dont have to know the details of sausage making or how to bake bread to have enjoyed the sausage sandwich I had for lunch yesterday

Yes people overpay retail, and some folks by a new Lexus when there is a perfectly good Avalon on the used car lot next door...I dont get that either

Annual Fees are not way higher than possible. They are exactly as high as they need to be to pay the bills and provide reserves for replacement. No one is making any money here. (HOA's are generally organized as non profits.)

It is not hard to sell a timeshare. At the right price there is a buyer for everything. Jason answered this for you...assume that you will get nothing when you sell. You may even have to pay someone to take it from you.

Title work is hard to understand, so is building bridges, Thats why I hire title companies to do my title work and engineers to build my bridges. I dont need to understand the details.

Buying a fixed week is the only way to guarantee you the same week at the same resort every year, but you are wrong to say "this is the only way to ever buy a TS". and you are way off base when you say "going there once or twice is not enough to know if you LOVE it."

Dont make points more complicated than you have to

I used to use something called dollars when i made reservations at hotels. Now instead of dollars I use "points" as my currency to make reservations at resorts

And thats all there is..... points are your currency to make reservations.


Timeshares are much like the game of chess. You can learn the moves and start playing in an afternoon. But it takes a lifetime to become a master...The important thing to remember that you dont have to be a master to enjoy the game.

 

[artringwald]

Annual Fees are not way higher than possible. They are exactly as high as they need to be to pay the bills and provide reserves for replacement. No one is making any money here. (HOA's are generally organized as non profits.)

This isn't true when the management company controls the HOA. The HOA can authorize excessive payments to the management company. Diamond Resorts has used this strategy to get rich. It's definitely a conflict of interest to have management company employees on the HOA board, but I'm sure Diamond Resorts isn't the only one that does it.

 

[DaveNV]

• People over pay retail
• Annual fees are way higher than possible (seems they make money on MF's)
• It is hard to sell them
• Even when people sell their TS they have all kinds of questions on how to sell it. I could not buy something if I had no idea how to sell it and what I could get.
• Title work can be hard to understand and get messed up
• If you wanted to go to the same resort ever year the same week you better just buy that week at that place. This is the only way to ever buy a TS and gong there once or twice is not enough to know if you LOVE it.

Hi John,

I am by no means an expert, and there are a number of answers to your questions. Here is my experience, for what it's worth:

There is such a wide amount of information, some of it good, and a lot of it based on emotion and frustration, even anger, I decided to teach myself about timesharing through a "learning by owning" approach. I bought several timeshare Weeks over the years, one at a time, and all resale. I have since sold or given away all of them but one. My intent was to find timeshares I was interested in owning, first in resort locations I wanted to visit, and then that would provide me quality trade value if I chose to exchange it away for a vacation somewhere else. In each case it worked just fine.

I bought each one on Ebay for a few dollars, paid reasonable (or no) closing costs, and I enjoyed using them until I decided whether I wanted to keep them. As I decided to get rid of the ones I didn't want, also one at a time, I listed them for sale on Tug and/or Ebay. I offered to pay closing costs on them, using Legal Timeshare Transfers, a reputable closing company and Tug member. They only charge a nominal fee (roughly $150 or less) to process the paperwork. Each timeshare I sold had a buyer within a few days, and each closed escrow quickly. It was all relatively painless and I never felt "stuck" with any of them.

There was no profit in the sale of anything - it's not right to think of timeshare sales in the same way one thinks of real estate. To my way of thinking, timeshare ownership is about buying the vacation experience, regardless of whether you own the resort or exchange in or rent. You're buying or renting the fun, not the physical location. Expecting to sell a timeshare for a profit is rarely a valid thing. Yes, it does happen, but not nearly as often as it used to.

My calculation of ownership costs was to factor the maintenance fee and exchange fee (if applicable) into a daily cost for the vacation. To me, that was the 'real" cost of ownership, since the purchase price was so minimal, it amortized out within a few years. If the daily cost was the same or lower than renting at a comparable place, I figured I was money ahead, or at least I was breaking even. As long as I was able to arrange vacations in places I wanted to go, it was great. If and when I decided I wasn't getting my money's worth, or I didn't want the financial obligation any longer, I passed the timeshare week along to a new owner.

As Denise suggested, I did not finance anything, nor did I pay Developer price for anything. I studied Tug forums and articles, asked smart questions, checked and rechecked resale listing online, and I took my time. I started small, with a tiny studio in Waikiki that traded like CRAZY (it took me via RCI exchange all the way to the Manhattan Club in New York City), and I worked my way up through other places, groups, clubs, and mini systems, to the one that remains - a very satisfying oceanfront EOY timeshare in Kauai I consider my vacation home. Even with the increasing maintenance fees on this resort, I am still satisfied with this ownership.

The big thing for me was exchanging options. As the big exchange companies (RCI and II) have gotten more and more specific and tricky about making exchanges, it became more apparent that exchanging within a mini-system or brand was going to be easier. Points take the edge off that, as long as there is availability. When RCI went to their TPU system for Weeks owners, it changed the exchange picture. Options that were there before, were no longer available. (That Waikiki studio no longer has the trading power to get to the Manhattan Club.)

My advice for you is to do the math, but don't buy anything in a rush, do not get anything that would ever be a burden, and don't buy something based on impulse. Renting is a smart way to gain experience in systems and locations you enjoy, and perhaps to learn which kind of timeshare works for you and your needs. Then, once you've made your decision, wait another six months, watch the market, and learn where the things that interest you are going. It may be Weeks, may be Points, or may be continuing to rent. It could be in a club or mini system, or a brand-name group. Just be sure whatever you decide, that the choice is right for now.

Good luck with whatever you decide. Renting is a great beginning, and a great way to learn without obligation.

Dave

 

[ronparise]

Ron - Jason (who has been an owner for 23 days) is giving advice to a newbie buying their first timeshare.

This is a completely different scenario than a mega-renter who is leveraging his evil empire.

Denise

something I learned a long time ago

doing something for 20 years doesnt give you 20 years of experience, Its just one year repeated 20 times. And most of the time its the new guys in an organization that have the clearest understanding of whats going on

Im at the age now when everyone I look up to or admire or go to for advice is younger and has less experience than I do..(the folks older and more experienced are all dead)....at first it was hard to accept,,,,but I no longer dismiss anyone because they are younger than I am.

And Jasons advice was not really timeshare advice, It was the kind of advice any good financial adviser would give a new client.

I wouldnt worry about the op, hes not buying anything yet...he's an engineer, and engineers are very good at engineering but they wont put their stamp on a plan until they have considered all the possibilities . Im sure his spread sheet for his questions is weighted to consider all the variables. age of respondent, experience of the respondent, sex,

 

[Talent312]

When I bought my first TS, I knew very little about TS's.
But, having been a guest of a relative, I liked the style of vacationing.
... A little home away from home, instead of a small, cramped hotel room.

IOW, for me, there was more than financial-logic involved in the decision.
However, you can use statistics to rationalize just about any decision.
Consider how much you save by not dining out for meals.
Consider how much you save not renting hotel-rooms for family/guests.
Compare the cost per sq.foot of a TS vs. a hotel room.

I bought into a complex hotel-based TS system, and it took me a year
before I had a grip on the particulars, and I'm still learning new things.
Nevertheless, it's provided some very enjoyable travel.

Ultimately, it comes down to this: How do you like to vacation?
.

 

[Jason245]

Jason - How long have you been a timeshare owner?

I stand by my post: Timeshares on the resale market cost pennies on the dollar - if you can't pay cash for it, you should not buy it.

Scenario:

I can buy a resale timeshare for $5,000 that has everything I want (all in). After all research, this is a fair price. I have over $10,000 of excess cash available for the purchase, can get a loan for 1% (Tax effected factoring in all other costs and averaged over life of loan (True APR)) and can invest that money at 2% per year in a secure investement with guaranteed liquidity on demand.

What should I do?

Your advise would have me pay cash now and give up 1% guaranteed profit per year.

My advise would have me make 1% a year and be ready to liquidate on a moments notice to payoff loan and pay closing costs to give away unit.

As for your first question:
Timeshare owner - Not long because until recently, I could not answers all questions to my satisfaction, specifically question number 2 given the fact that I only recently got married and we have started having children.

As for the question you did not ask:
Able to answer question number 1 with an affirmative - well over 10 years.



As an aside, your advise is not bad advise to the general public as it is the safe answer (Pay cash or don't buy) that I would generally recommend. I simply leave myself open to the possibility that the safe answer isn't always the right answer to everyone in every scenario.

 

[gmarine]

You should provide the OP with an example of where to get a loan that provides a rate of 1% after factoring in a tax deduction on the interest.
The OP would also probably like to know where he can invest at a guaranteed rate of 2% with the funds available on demand.

 

[vacationhopeful]

Ah, an engineer .... heh, heh, heh.

I have 3 siblings who all got engineering degrees from TOP TIER universities for engineering majors. I have a 19 yo nephew attending a TOP 5 in USA engineering program. His father also graduated from a TOP TIER university with an engineering degree. Two of them had or have HUNDREDS of engineers working in their command chain under them.

I even have an advanced degree from one of the same top tier engineering university's ... I walked graduation with that sibling.

All of them -- love to hang out in MY TIMESHARE collection. And they show up when I say, "anybody want to come?" Mostly, I don't charge them - but they didn't charge me for my cabin on an Alaskan cruise or my food & tickets for weeks at baseball Spring training or all the dinners & drinks & tickets & rental car on those trips. Those trips have included Kauai, NYC & Chicago (downtown city stays), Ft Lauderdale, Washington, DC, Williamsburg (my sister's evil revenge for me sending my aunt & uncle there without her permission), etc.

And I have worked the numbers - I do have a Math degree with an accounting minor plus an MBA. Buy resale after you figure out where YOU and the family like to vacation, but for the very LONGTERM. (Disney for the next 5 years is NOT long term - long term is for the next 15-25 years).

And yes, I own fixed weeks and several points systems. And like most TUGGERS, I review my ownerships and look at what to sell (and sell them).

My new thing is, must sell 3 for every 1 that I want to buy.

 

[bogey21]

I once had $85,000 tied up in 4 Marriott Weeks then decided to sell and go a different direction. Here were my parameters with the $$$ slightly updated.

# Buy only at a HOA Controlled Independent at a place you will most likely visit most years.
# Visit the Resort before you buy.
# Buy only Fixed Weeks
# Pay no more than $1,000
# Have a mindset that you will give away the Week when you are done with it.
# MF should be no more than $500 - $700

There is a lot more flexibility here than meets the eye. You can trade through RCI or one of the other Exchange Companies. In addition my experience at most of the HOA Controlled Independents where I owned is that most of them will swap Weeks for you internally at no cost.

George

 

[b2bailey]

Well said

Timeshares are much like the game of chess. You can learn the moves and start playing in an afternoon. But it takes a lifetime to become a master...The important thing to remember that you dont have to be a master to enjoy the game.

And maybe a bit like a poker game. Some people are playing at tables with very high stakes and others are using matchsticks. As long as you stick with what you can afford to lose and keep having fun.

I also want to give kudos to Jason for the thought and effort that went into his reply. in hindsight, I agree with most of what he wrote.

Our Timber Lodge developer purchase from Marriott was made after we were told they were building a convention center in town -- and that planes would soon land at the Tahoe airport, so we would ALWAYS be able to rent our unit to cover our M.F. (A pre TUG membership purchase.)

 

[mpizza]

Hi John - welcome to TUG! You have come to the right site to learn how timeshares work. The majority on the site have leaned how to best utilize their portfolio.

Although I am a 22-year owner and know how my ownerships work, I am not an expert! I use what I own and have discarded those that didn't work for me. I use one location in lieu of a whole-ownership summer home (6+ weeks) so we don't have the responsibility of maintenance, insurance, etc. on an asset that we would occupy 6 weeks a year). I own Hapimag because I love to travel in Europe in spring/fall. So you can see the options are endless!

I would make a wish list of how you want to spend your vacations and then research whether owning vs. renting is the right path!

Good luck and have fun!

Maria

 

[Jason245]

You should provide the OP with an example of where to get a loan that provides a rate of 1% after factoring in a tax deduction on the interest.
The OP would also probably like to know where he can invest at a guaranteed rate of 2% with the funds available on demand.

That is very specific to individual financial circumstances. If you look at history of lending and interest rates, you can see that for creative people there have been many times when the interest rate spread has existed in the favor of borrowers redeploying the borrowed cash in ways that generate more income then expense in relatively safe ways.

Look at Fatwallet for examples.

 

[DeniseM]

Jason - Please give me some specifics - tell me one place where I can finance a timeshare for 1% - just one specific example.

And then, what are the steps in using that funding to buy a timeshare on ebay - specifically.

In your scenario of a $5,000 timeshare, how much will I net per year, by financing instead of paying cash?

 

[DeniseM]

hammerhammer - Have you browsed the free timeshares up for adoption on TUG?

http://www.tugbbs.com/forums/forumdisplay.php?f=55

 

[gmarine]

That is very specific to individual financial circumstances. If you look at history of lending and interest rates, you can see that for creative people there have been many times when the interest rate spread has existed in the favor of borrowers redeploying the borrowed cash in ways that generate more income then expense in relatively safe ways.

Look at Fatwallet for examples.

I didnt realize you meant that it has been done in the past. I thought you were talking about the OP buying a timeshare now with a loan rate of 1% and a guarantee of a 2% rate in a liquid investment. I see now that you mean it cant be done at the present time.

 

[klpca]

Bottom line for me is why would you need to buy a timeshare and finance it when you can go pretty much anywhere you want to with a free one? Unless you want a ski week or Hawaii in the summer you can easily exchange in with a good trader. Sure you can leverage a bit, but 1% on $5,000 doesn't even enter into my decision making process. Everyone is different so do your own thing but paying cash for a timeshare is sound financial advice for a lot of people.

Btw,I would expect that most people who are considering financing a timeshare purchase are facing interest rates far in excess of 1%. Financing at that cost (8% and up) is just silly.