How would you calculate the value of timeshares

[boyblue]

We see timeshares that developers sell for 40k, go for a dollar on the resale market. With the glut of resale timeshares it's hard to believe that anyone would ever buy from a developer. We know they're not worth 40k but most are worth more than $1. Even in a case where there is a glut, if your MF is significantly below rent rates, the unit has value, but of course no where near what they generally sell for. Wouldn't it be great if there was like a TUG formula so that folks can plug in the facts and get a reliable valuation? Although I'm not sure how it will work here are a list of factors that I'm plugging into the formula in some form or fashion...

Resort
Maintenance Fee
Additional Fees
Size of Unit
Size of Property
Resort Rent Rate
RCI or Club Affiliation Points
RCI Rating or Club Affiliation Rating
Week Color
Standard Amenities
Additional Amenities

Are there other things that should be considered in terms of the actual unit? If so feel fess to share, or not .

I realize that locale is a factor in TS valuation, so somehow I'll try to have that reflected. The plan is to give Scarcity (are there weeks in the area that go regularly unused), Utility/Proximity (What's the draw to the area and if there is, is the resort proximate?), Relative Exclusivity (How nice is it in comparison to properties in the area?), Economy (Cost of ownership compared to rentals in the area). Are there any major factors that I have not included?

Once I've come up with a formula, I'll run it on some well known resorts to see if you agree on the valuation.

 

[boyblue]

After looking over all of the information needed for my proposed formula, I know most would not go through the hassle of collecting all of that so I'll also try to come up with either a shortcut or a formula that uses less input.

 

[CalGalTraveler]

This has been discussed on several forums and needs to be treated on a system by system basis lest you compare apples to oranges.

For example in HGVC the mini-system points trading value is a key metric - A low maint Fee per point is a good metric in the HGVC world. In fact a low MF/point can often offset the purchase value over time making the purchase price less important. Such units are good arbitrage value.

Also taking into account whether the MF is less than what you can rent it for. Why buy if it is flipped unless it offers superior value?

Ease of exit - is there a resale value attached to the deed or can it easily be given away without additional cost? or can be sold close to what was paid resale.

 

[VanX]

To make it handy for everyone a weighted decision matrix would be best so that each person could assign their own weights of importance to each criteria listed. Has been a very helpful tool for me in the past.

 

[AwayWeGo]

With the glut of resale timeshares it's hard to believe that anyone would ever buy from a developer.

I have no way of knowing, but I can't help believing that people buying timeshares at developer prices, from professional timeshare sellers, do so without having any idea that a secondary market exists (eBay, TUG, RedWeek, etc.) where pretty much the same thing as a full-price timeshare is available close to free if not totally free.

We found out by chance while driving back to our dinky motel after saying No Thanks at a high-pressure timeshare sales presentation. We caught sight of a roadside billboard advertising timeshare resales. The rest is history.

Much later, after thinking about some of the things the timeshare sellers said across those little tables in a timeshare presentation salesroom, I recalled that part of the sales pitch included telling us that owning a timeshare is owning valuable deeded real estate which can be used, rented out, lent to family members, exchanged, bequeathed to heirs, or sold.

Sold ?

Well, If people can sell their own timeshares, that means other people can buy them, right?

Yes -- right.

But other than letting it slip that timeshares are property that can be (re)sold, the timeshare sellers pretty much keep mum about that aspect of the timeshare world. They have to keep it a secret, otherwise it's hard to believe that anyone would ever buy a timeshare from a developer.

-- Alan Cole, McLean (Fairfax County), Virginia, USA.​

 

[TolmiePeak]

Calculating the value of a timeshare is no different than calculating the value of any other asset. The value is simply what a buyer is willing to pay for it.

 

[billymach4]

I don't count timeshare as an asset at all. If anything they are a liability and depreciate faster than a Brand New Cadillac driving out of the the Dealer lot.

If I break even when selling I am a happy man. Even that I don't bank on at all.

People that purchase from the Timeshare Sales table just are not informed. That's what they count on. Hard to believe in this current age of 24 hr news and the Internet. But hey what can I say?

 

[LannyPC]

Even in a case where there is a glut, if your MF is significantly below rent rates, the unit has value,

That's my formula. That might be an oversimplification but it's the basic truth. I calculate it this way. If you can easily rent it out for well above the MFs, then it has positive value. If you're struggling to recover a fraction of the MFs to rent it out (see TUG's Last Minute Rentals section as an example), then it, IMHO, has negative value. Unfortunately, that describes 90+% of the intervals out there. Even more unfortunate is this creates a huge market for the exit scam companies.

 

[LannyPC]

We see timeshares that developers sell for 40k, go for a dollar on the resale market. With the glut of resale timeshares it's hard to believe that anyone would ever buy from a developer. We know they're not worth 40k but most are worth more than $1.

I totally agree. Even if the developers sell a TS to some unsuspecting person for $40K, it's not worth $40,000. It's just that the sales people convinced the buyer to pay $40K for it.

 

[billymach4]

We see timeshares that developers sell for 40k, go for a dollar on the resale market. With the glut of resale timeshares it's hard to believe that anyone would ever buy from a developer. We know they're not worth 40k but most are worth more than $1. Even in a case where there is a glut, if your MF is significantly below rent rates, the unit has value, but of course no where near what they generally sell for. Wouldn't it be great if there was like a TUG formula so that folks can plug in the facts and get a reliable valuation? Although I'm not sure how it will work here are a list of factors that I'm plugging into the formula in some form or fashion...

Resort
Maintenance Fee
Additional Fees
Size of Unit
Size of Property
Resort Rent Rate
RCI or Club Affiliation Points
RCI Rating or Club Affiliation Rating
Week Color
Standard Amenities
Additional Amenities

Are there other things that should be considered in terms of the actual unit? If so feel fess to share, or not .

I realize that locale is a factor in TS valuation, so somehow I'll try to have that reflected. The plan is to give Scarcity (are there weeks in the area that go regularly unused), Utility/Proximity (What's the draw to the area and if there is, is the resort proximate?), Relative Exclusivity (How nice is it in comparison to properties in the area?), Economy (Cost of ownership compared to rentals in the area). Are there any major factors that I have not included?

Once I've come up with a formula, I'll run it on some well known resorts to see if you agree on the valuation.

IMHO the only way you can come up with this metric is to consider weeks that for one reason or another have some relative value based on season and location.

For example Name Branded Locations with Ski in Ski out.
For example Name Branded Locations located on the Beach in the US namely Hawaii, FL, perhaps HH SC.
Name Branded systems that have ROFR. (And by name Brands I mean Marriott, Hilton, Hyatt, Sheraton, Disney). No BS brand like unmentionables (Wastegate).
Oh and the Super Bonus weeks like Pres Week, Christmas - New Years.

That narrows you down to less than 5% of all TS weeks. And at 5% I am being overly optimistic.
In reality I bet the % is less than 1%.

 

[dioxide45]

Wouldn't you value it in the same way a home is valued? By looking at recent comparable completed sales? None of that other stuff you list matters except why trying to find equivalent comps.

 

[billymach4]

Wouldn't you value it in the same way a home is valued? By looking at recent comparable completed sales? None of that other stuff you list matters except why trying to find equivalent comps.

Problem with that is there is no easy way to source comps. Yes I know ROFR.NET but? That data is not verifiable?

 

[easyrider]

To make it handy for everyone a weighted decision matrix would be best so that each person could assign their own weights of importance to each criteria listed. Has been a very helpful tool for me in the past.

How would that work ? It actually sounds like a good idea if it's a way to rate or score without being too subjective. Pretty much numbers only with the subjectivity being desirability.

Bill

 

[dioxide45]

Problem with that is there is no easy way to source comps. Yes I know ROFR.NET but? That data is not verifiable?

It depends on the property. There is Ebay, Redweek and a few other sites. You can also go by county records, but that takes some extra work and also sometimes extra math.

My main point is that most items on the list in the original post don't matter. You can have a great property that fits almost all of those things and it is still worth $0.

 

[rickandcindy23]

Exchange value is a fair assessment for some timeshares.

 

[Eric B]

The value of an ownership depends greatly on the reason for having it and will vary greatly from person to person. A formula based on capitalized rents less costs makes a great deal of sense if you’re renting for profit. For using it, a formula based on differences between MFs and rental rates might make sense. For selling one, the market rules and most have little value. I don’t think it’s worth trying to set up a universal value formula - the right answer will always be “it depends.”

 

[iftravel]

The”market” value of a timeshare depends on its exit strategy, which is zero or negative for many. There is a new type of co-ownership growing which has a clear exit strategy (the developer will sell the property in 10 years and distribute the money which I find interesting.) I hope the major brands also do that.

 

[dioxide45]

The”market” value of a timeshare depends on its exit strategy, which is zero or negative for many. There is a new type of co-ownership growing which has a clear exit strategy (the developer will sell the property in 10 years and distribute the money which I find interesting.) I hope the major brands also do that.

Which property or developer has this system?

10 years really isn't enough time to gain anything from this, both for the individual owners and the developer. Unwinding a timeshare development is very expensive. When we have seen this happen in the past, most owners get a few thousand dollars in the end. 10 years of ownership is simply too short of a time to make any real sense. If you have a specific example of a property that is doing this, please name it as I would like to look more into it.

 

[Eric B]

Sounds more like co-ownership of a vacation home or collection of them. Not a terrible concept but dependent on a rising real estate market. I’ve seen a few companies running those sorts of things. Not resorts, though.

 

[iftravel]

Which property or developer has this system?

10 years really isn't enough time to gain anything from this, both for the individual owners and the developer. Unwinding a timeshare development is very expensive. When we have seen this happen in the past, most owners get a few thousand dollars in the end. 10 years of ownership is simply too short of a time to make any real sense. If you have a specific example of a property that is doing this, please name it as I would like to look more into it.

Equity Residences, Equity Estates and Lifestyle Assets, to name a few. They are all structured as LLC, and has a clear exit strategy, typically in 10 years. Yes you will likely hit the real estate downturn, but again you could roll into a new fund for cheap and upside you will take a profit. The clear benefit is you know you will likely get some value out in a predefined timeframe.

 

[TheHolleys87]

My initial thought is that you'll have trouble rating DVC as a single entity. There are thousands of posts on DISboards debating the relative values of the DVC resorts, especially the ones at WDW, including recent discussions about VGF vs. Poly vs. BLT which are located so close together! And the different end dates for the individual condo associations (2042 vs. later) are a complicating factor.

 

[jp10558]

It depends on the property. There is Ebay, Redweek and a few other sites. You can also go by county records, but that takes some extra work and also sometimes extra math.

My main point is that most items on the list in the original post don't matter. You can have a great property that fits almost all of those things and it is still worth $0.

This is a complicated thing not specific to timeshares. Many ... (not assets but ...) property? things? have near 0 or below 0 sales value, but certainly have a utility value and some have sentimental value.

But lets look at utility - I have a 99% working Singer Quantum Stylist 9600 sewing machine. If it was stolen, it'd cost me something to replace. Alternatives like paying a tailor or seamstress or friend to do basic sewing would also cost me. Doing without and just more frequently buying new clothes has a cost. IDK what an insurance company would rate that loss as, but that might be a useful starting point.

Similarily, I have an old, somewhat broken down but still functional Bosch 800 series dishwasher. Any replacement is going to be a few hundreds of dollars, another Bosch 800 is going to be over $2,000 last I checked. I doubt anyone would buy it off me, but I still use it at least once a day...

Again, I kind of feel like insurance has the closest generic "loss" calculations, but they're not public.

So, there's a value based on what someone would pay you for a thing, there's a value based on alternate solutions, and there's value based on if you can do without entirely. For instance, very few people get any instrumental value from stocks. It doesn't let them run the company, it doesn't get them anything. So the only value is what they can sell it on for. But trying to apply that sort of valuation to other things doesn't work so well IMO - even a second house has a bunch of what I'm calling instrumental value to people - a place to store things, a back up if something happens to your current house, a place you can rent out, etc. Only if you're running a business flipping houses does it make sense to consider like a stock.

So much of this thought process to TS is IMHO a mismatch of analysis. I don't think any vacation is ever generically a revenue generating event for the vacation goer. [Technically if you're making money as a reviewer, influencer, youtuber whatever - then it's no longer a vacation, but a work trip in a sense.]

I'm currently in Vacation Village Weston - what is the value of 75 degree weather for 2 more weeks vs snow and sleet and 20s in upstate NY? Obviously pretty high for me... I'd guess plenty of people would pay *something* to get out of the snow for a while, and that's what all the resorts bank on and are actually selling in some sense.

Various ramblings aside - most people I've talked to (on this forum, but also IRL who aren't into TSs) consider valuing TS as what similar accommodations in a similar location at a similar time of year would cost. I.e. Myrtle Beach area, so Surfside is "close enough", same number of bed rooms, same month of the year. More generically, I guess roughly a 30 mile radius. The other aspect is the exchange membership for the cash stays - Many many people are sold per the forum, but plenty of people IRL are also impressed with the 2nd tier but still nice for quite cheap locations in RCI Extra Vacations / Last Calls. You could pick up a Triennial that has yearly MFs around $250 just to get access to multiple units at Massanutten or Smuggs, or in Florida etc at $600ish a week in a 2BR. The actual unit is never used or thought about, or you do actually plan it every 3 years, but you certainly aren't valuing it highly. IDK what a standalone RCI membership is, but I tend to subtract ~$100 a year from the various costs for HGVC for the included RCI membership.

I don't know how you generalize anything much more specific though - I know nothing about weighted matrixes etc. I think the what should I buy forum threads basically tell you how to value for a specific person, and that's about as good as it gets. It's like valuing a college degree - it depends on you and your goals.

 

[billymach4]

Interesting point @jp10558 regarding insurance value on a TS? This point has never been discussed to my knowledge.

Probably due to the fact that no such insurance product exists for timeshare.

This is yet a good new angle for a scam scheme.

 

[jp10558]

Interesting point @jp10558 regarding insurance value on a TS? This point has never been discussed to my knowledge.

Probably due to the fact that no such insurance product exists for timeshare.

This is yet a good new angle for a scam scheme.

Well, there's presumably the insurance costs the TS pays that you could divide by the weeks and units, though IDK if you could really map it do an individual interval. I don't know what sort of insurance there could be for an owner - against special assessments?

 

[daverunfast]

((rental value * occupancy rate) - maintenance fee) * 2.5