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Rental profit after MF's

ded4025

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What do you consider to be a good profit on a weekly rental after deducting your yearly MF? Please understand that I'm not including purchase price in my thinking. We have owned for enough years that I feel we have gotten great use out of it already.

The reason I ask is we had been considering selling our Disney points. We love staying at DVC but there are cheaper ways to do it (trading within RCI).

Instead of selling, I have decided it is a better deal for us to keep our points and rent or transfer each year. I have rented to people several times in the past with no problem. Now that was a few years ago so I wasn't sure if the demand was still there. I placed a ad on the disboard last month and that same day, I was able to transfer all of our points to another owner. Quick, fast and done!

We don't have a large DVC contract, 160 points. I received $1,760 for transferring my points, so minus out my yearly MF of $759 and I made a $1,001 profit for the year on what is really a 1 bedroom rental.

Would a 1k profit be considered a good deal compared with most Starwood and Marriott 1 bedroom rentals?

Do you agree with my thinking that I'm better off keeping DVC and doing this in the years we don't use it instead of selling it in a really bad resale market?
 

DeniseM

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Would a 1k profit be considered a good deal compared with most Starwood and Marriott 1 bedroom rentals?

Not with "most" rentals, but with rentals at the top resorts - yes.
 
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Ridewithme38

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We don't have a large DVC contract, 160 points. I received $1,760 for transferring my points, so minus out my yearly MF of $759 and I made a $1,001 profit for the year on what is really a 1 bedroom rental.

As someone eventually looking to rent DVC, i'd like to recommend that you rent for $758 and please let me know when you have a unit in Hawaii available for me :D
 

RX8

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I received $1,760 for transferring my points, so minus out my yearly MF of $759 and I made a $1,001 profit

I wish I could easily turn $759 into $1760. That is a nice return on investment
 

rrlongwell

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As someone eventually looking to rent DVC, i'd like to recommend that you rent for $758 and please let me know when you have a unit in Hawaii available for me :D

I just checked. Right now, a VIP Platium Member could rent you a 2 bedroom deluxe at Bonnet Creek for a 7 day stay starting May 11, 2012. That would be 42,000 points with the VIP Discount and upgrade. At $7 per thousand that works out to $294 for the week.

A non-preditory rate for the week, leaving a reasonable profit margin would suggest an offer price of $378. That is using $84,000 points for a week at $7 dollars per night.
 
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Ridewithme38

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I just checked. Right now, a VIP Platium Member could rent you a 2 bedroom deluxe at Bonnet Creek for a 7 day stay starting May 11, 2012. That would be 42,000 points with the VIP Discount. At $7 per thousand that works out to $294 for the week.

A non-preditory rate for the week, leaving a reasonable profit margin would suggest an offer price of $378. That is using $84,000 points for a week at $7 dollars per night.

Bonnet creek in Orlando is definitely my second choice for Disney 2014, if money is still tight i'll be staying there...If i find a money tree that flowers gold bars, i'll be staying in a Savannah View room at Animal Kingdom...

But really, i'm not as cheap as you think...i just try my hardest to set my maximum rate to $100 a night, it doesn't always work like that, i'm paying $566 for 3 nights in Hershey...but my goal is always less them $100 a night
 
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am1

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A non-preditory rate for the week, leaving a reasonable profit margin would suggest an offer price of $378. That is using $84,000 points for a week at $7 dollars per night.

I do not understand what you are trying to say.
 

chapjim

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This makes no sense. What does "$84,000 points" mean? Where does "$7 dollars per night" come in? (I remember renting motel rooms $8/night but that was back in the '60s.) Maybe you mean 84,000 points at $7/thousand?

And please explain what you mean by preditory [sic] pricing. If the buyer willingly pays a price, who decides whether the price is predatory?
 
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MOXJO7282

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What do you consider to be a good profit on a weekly rental after deducting your yearly MF? Please understand that I'm not including purchase price in my thinking. We have owned for enough years that I feel we have gotten great use out of it already.

The reason I ask is we had been considering selling our Disney points. We love staying at DVC but there are cheaper ways to do it (trading within RCI).

Instead of selling, I have decided it is a better deal for us to keep our points and rent or transfer each year. I have rented to people several times in the past with no problem. Now that was a few years ago so I wasn't sure if the demand was still there. I placed a ad on the disboard last month and that same day, I was able to transfer all of our points to another owner. Quick, fast and done!

We don't have a large DVC contract, 160 points. I received $1,760 for transferring my points, so minus out my yearly MF of $759 and I made a $1,001 profit for the year on what is really a 1 bedroom rental.

Would a 1k profit be considered a good deal compared with most Starwood and Marriott 1 bedroom rentals?

Do you agree with my thinking that I'm better off keeping DVC and doing this in the years we don't use it instead of selling it in a really bad resale market?
That is a very nice return and it was easy, so why would you consider selling?

My question is how much does 160 points cost?
 

DeniseM

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I just checked. Right now, a VIP Platium Member could rent you a 2 bedroom deluxe at Bonnet Creek for a 7 day stay starting May 11, 2012.

Kids are in school May 11th and Ride has a little girl. School holidays are more.
 

exyeh

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How much a 160 DVC points cost? What kind of DVC resort can 160 points get? Thanks for the info.
 

presley

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DVC is currently being flooded with people buying low on the resale market with the intention of renting for a profit. DVC also changes their rules fairly regularly in regards to renting out points/reservations.

DVC is only a good purchase if you plan on staying in DVC units. If you already own and think you will use it in the near future, then keeping it and renting points until you do plan on using it is viable.

To those who don't own, but think they should buy to rent out for a profit, I suggest joining mouseowners.com and reading the forums and rent/transfer/trade boards daily, just to give some perspective on all part of the equation. Personally, I think buying with the sole intention of renting is a very dangerous idea. I bought with the intention of use only and have decided to unload my contracts. Sure, I could keep them and rent, but what happens when DVC does another point reallocation or decides that we can't rent out points anymore.
 

ronparise

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I just checked. Right now, a VIP Platium Member could rent you a 2 bedroom deluxe at Bonnet Creek for a 7 day stay starting May 11, 2012. That would be 42,000 points with the VIP Discount and upgrade. At $7 per thousand that works out to $294 for the week.

A non-preditory rate for the week, leaving a reasonable profit margin would suggest an offer price of $378. That is using $84,000 points for a week at $7 dollars per night.

You probably mean 84000 points not dollars

Two considerations here, one is you are quoting the rate for a one bedroom , not a two, and secondly May is the Value Season. most other weeks take more points

Your discounted cost as a VIP Platinum member is closer to $600 for a two bedroom in Prime Time
 
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ronparise

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When i rent I like to get double mf...sometimes I can get more, sometimes less, but thats what I shoot for...But I try to make reservations to rent for event weeks...I think Id have trouble renting in Orlando except Christmas and Easter
 
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MOXJO7282

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When i rent I like to get double mf...sometimes I can get more, sometimes less, but thats what I shoot for...But I try to make reservations to rent for event weeks...I think Id have trouble renting in Orlando excepy Christmas and Easter

I try to get what the market will bear. The nice thing about owning a number of weeks is you don't have to make a killing on every listing so I can take what the market will give me.

I list my weeks slightly higher than the lowest bid as long as there is not a super low listing and I usually find renters pretty quickly that way. I could probably make a few bucks more but I'm more than happy with my margins and would rather just turn things over and than try to hit the home run.
 

Pmuppet

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Simple mathematical calculation

If it is strictly a revenue based decision (you dont plan on using it ever again for personal use), it makes very easy to assess. I recommend a 20% ROI cause timeshares are risky and carry a lot of unknown risks.

The amount of rental revenue above maintenance fees really is immaterial cause if you are only getting 5% ROI on a very risky investment, you should sell. You need to include your cost of capital to ensure you are getting a reasonable return.

Your financial calculation for a perpetuity (never ending cash flows) is: (Rental revenue - (MF+marketing fees+wage))/.2

($1700-($700+$100+$200))/.2=$3,500

So, from an investment perspective, the annual ($700) cash flows brought in from the assumptions below are worth $3500 to you. So in other words, if you can resell your timeshare profit (after fees/taxes) for more tham $3500, you should. Cause you arent making enough return for the risk you are taking by owning it the investment.

However, if your timeshare profit after sale is less than $3500, you should keep the property cause it is giving you more than your required rate of return. And if it meets this criteria, you should tell me the property so i can buy in. ;)

One final way to look at it is you are willing to pay up to $3,500 today for $1,000 a year forever. It might seem crazy that you would only pay $3,500 for an endless stream of annual cash flow payments of $700, but that is the amount you would pay up to get a 20% rate of return. You have to discount these cash flows significantly cause there is a good chance they wont occur. There is a lot of risks that owners face (and where there is risk you must have high ROI to take that risk) and as a result, most timeshares dont turn a solid rate of return to warrant the capital outlay it requires to make a purchase.

Assumptions:
.2 is the 20 percent rate of return
Marketing fees are cost of advertisements $100
Wage is the salary you pay yourself for your time (you MUST include this). So if you spend eight hours posting ads to market the property, responding to people about the property, selling people on the unit, etc. Assuming a $25/hour wage, you salary is $200

MF= $700
Rental Revenue= $1700 (realistic average rental rate you can expect)
Inflation: ignore inflation because while rental rates will climb, these revenue gains will be offset by maintenance fee growth from inflation.
 
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vckempson

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This makes no sense. What does "$84,000 points" mean? Where does "$7 dollars per night" come in? (I remember renting motel rooms $8/night but that was back in the '60s.) Maybe you mean 84,000 points at $7/thousand?

And please explain what you mean by preditory [sic] pricing. If the buyer willingly pays a price, who decides whether the price is predatory?

It's the "RRLongwell" language. Without a RRLongwell to English dictionary it's tough to figure out what he's saying most of the time.

To the OP, +1 for Joe. He's got the right idea. Price it to what the market will bear.
 
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ronparise

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If it is strictly a revenue based decision (you dont plan on using it ever again for personal use), it makes very easy to assess. I recommend a 20% ROI cause timeshares are risky and carry a lot of unknown risks.

The amount of rental revenue above maintenance fees really is immaterial cause if you are only getting 5% ROI on a very risky investment, you should sell. You need to include your cost of capital to ensure you are getting a reasonable return.

Your financial calculation for a perpetuity (never ending cash flows) is: (Rental revenue - (MF+marketing fees+wage))/.2

($1700-($700+$100+$200))/.2=$3,500

So, from an investment perspective, the annual ($700) cash flows brought in from the assumptions below are worth $3500 to you. So in other words, if you can resell your timeshare profit (after fees/taxes) for more tham $3500, you should. Cause you arent making enough return for the risk you are taking by owning it the investment.

However, if your timeshare profit after sale is less than $3500, you should keep the property cause it is giving you more than your required rate of return. And if it meets this criteria, you should tell me the property so i can buy in. ;)

One final way to look at it is you are willing to pay up to $3,500 today for $1,000 a year forever. It might seem crazy that you would only pay $3,500 for an endless stream of annual cash flow payments of $700, but that is the amount you would pay up to get a 20% rate of return. You have to discount these cash flows significantly cause there is a good chance they wont occur. There is a lot of risks that owners face (and where there is risk you must have high ROI to take that risk) and as a result, most timeshares dont turn a solid rate of return to warrant the capital outlay it requires to make a purchase.

Assumptions:
.2 is the 20 percent rate of return
Marketing fees are cost of advertisements $100
Wage is the salary you pay yourself for your time (you MUST include this). So if you spend eight hours posting ads to market the property, responding to people about the property, selling people on the unit, etc. Assuming a $25/hour wage, you salary is $200

MF= $700
Rental Revenue= $1700 (realistic average rental rate you can expect)
Inflation: ignore inflation because while rental rates will climb, these revenue gains will be offset by maintenance fee growth from inflation.

Way too complex....all you need to know is what's someone willing to pay...and to know that, just put it out there...If you are asking too much the phone doesnt ring...you better drop your price. If you are asking too little the phone rings off the hook, Ask more next time

Your mf is of no consequence to the guy that wants to rent something
 
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Pmuppet

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Got to agree to disagree there Ron. I hear you about it being semi complex. I agree with you if you if the owner is just looking to rent out a year in which they aren't going to make it to the unit that you just want to get what you can get for it.

But if they are using the timeshare rental for strictly investing purposes (and rarely, if ever, plan on going to the complex), this calculation is a must.

Otherwise, you may be investing your hard earned $$$ in something that is too risky. On the flip side, you might have a gem that you are investing in, and your really don't know it. In that case (that it is getting greater than 20% ROI), you should look at getting more properties.

But you don't know that without doing the basic math calculation.
 

vckempson

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Got to agree to disagree there Ron. I hear you about it being semi complex. I agree with you if you if the owner is just looking to rent out a year in which they aren't going to make it to the unit that you just want to get what you can get for it.

But if they are using the timeshare rental for strictly investing purposes (and rarely, if ever, plan on going to the complex), this calculation is a must.

Otherwise, you may be investing your hard earned $$$ in something that is too risky. On the flip side, you might have a gem that you are investing in, and your really don't know it. In that case (that it is getting greater than 20% ROI), you should look at getting more properties.

But you don't know that without doing the basic math calculation.

She already made the investment. That horse is already out of the barn. A desired ROI is absolutely irrelevent to what your are able to rent the unit for. Your calculation would be useful to assess if a TS were worth buying, based on purchase price and market rental rates. It does not, however, have any place in properly pricing your unit to both maximize profit and assure renting it out.

edit: I do see that you were using the calculation to assess if it's better to sell or rent. I might agree with you except that the potential to buy time by renting while the market maybe firms up a bit is probably more important than your calculation.
 
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rrlongwell

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This makes no sense. What does "$84,000 points" mean? Where does "$7 dollars per night" come in? (I remember renting motel rooms $8/night but that was back in the '60s.) Maybe you mean 84,000 points at $7/thousand?

And please explain what you mean by preditory [sic] pricing. If the buyer willingly pays a price, who decides whether the price is predatory?

Sorry, I messed this up. it should have been 84,000 points not dollars and I used a rate of $7 per thousand points. I set the $7 per thousand points at $1 under the $8 per thousand to "rent" points from Wyndham. Making this pricing formula just under the Wyndham rate available to me. What I quoted in using points for the room are what the Wyndham reservation system would have given me. Specifically, the points needed would be with a VIP Platium discount that was upgraded to a 2 bedroom.

By using the term Preditory, I was just having fun at Ride's expense based on something he had posted. He apparently got the point in one of his more recent posts here.

Preditory, the way I use it, (probably not in accordance with the dictionary) is a rate that is extracted from a distressed seller because of the economic postion that person is in and well below market rate.

I am a firm believer that a good agreement is one where both parties to the agreement receive benifits from the agreement that are in their own self interests.
 

Pmuppet

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She already made the investment. That horse is already out of the barn. A desired ROI is absolutely irrelevent to what your are able to rent the unit for. Your calculation would be useful to assess if a TS were worth buying, based on purchase price and market rental rates. It does not, however, have any place in properly pricing your unit to both maximize profit and assure renting it out.

edit: I do see that you were using the calculation to assess if it's better to sell or rent. I might agree with you except that the potential to buy time by renting while the market maybe firms up a bit is probably more important than your calculation.

I would agree with you if they weren't intending to keep the timeshare as an investment tool. Since it is strictly an investment property (the only travel the OP plans was in the past), then you need to evaluate it based on present value vs proceeds from selling (after fees, taxes, other costs... ie check you will receive from selling the property
 

ronparise

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Got to agree to disagree there Ron. I hear you about it being semi complex. I agree with you if you if the owner is just looking to rent out a year in which they aren't going to make it to the unit that you just want to get what you can get for it.

But if they are using the timeshare rental for strictly investing purposes (and rarely, if ever, plan on going to the complex), this calculation is a must.

Otherwise, you may be investing your hard earned $$$ in something that is too risky. On the flip side, you might have a gem that you are investing in, and your really don't know it. In that case (that it is getting greater than 20% ROI), you should look at getting more properties.

But you don't know that without doing the basic math calculation.

ROI assumes an investment. I own 18 weeks and my investment (purchase price, closing costs and transfer fees was less than $1800. One of those weeks was a guaranteed Mardi Gras Week in New Orleans which I rented for (wait for it......) $1800, so I would argue my investment was zero...You cant calculate a ROI when I =0

Im not looking for a return on investment anyway..Im looking at income. If I add a more expensive property to the mix. Ill amortize the purchase price over 5 years or so and call it an operating expense. as long as my income covers the total (amortized purchase price plus mf) and still leaves me the income I want, Im happy

I know my winners and losers without running a bunch of numbers..Ill add more of the winners and drop the losers

The guy that plays golf as a serious hobby, and maybe makes a few dollars with side bets each week, doesnt calculate a ROI based on the cost of his club membership and the purchase price of his golf cart. He just comes home and takes his wife out to dinner with his winnings.

I know that there are some professional timeshare players here on TUG but for most of us its just a game...for some of us a serious game, that we want to win, but its still just a game. When (if) I make the jump to the pros, Ill look up your post and use it, but for now Ill just use my gut
 
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