What is your "investment" horizon?

[potchak]

There are some who will figure out every aspect of everything and analyze all the numbers in great detail.
This is supposed to be fun, not work.

Are you picking on me?

I'm a financial analyst, it is what I do. Hard to get away from it. However, I do need to say that hubby is one of those guys who refuses to do something unless you show him the figures...

 

[jerseyfinn]

I'm enjoying this thread because it demonstrates that many paths to MVCI & happiness in life exist.

. . . Yes, we would probably have made more money if we bought a Tahoe cabin over 30 years but we didn't want the headaches . . . One thing it does force us to is go on vacation 3 to 4 times a year. My dh would never go unless he is forced . . . these really have saved us as family and he really looks forward to the vacations . . . - ciscogizmo

Our timeshare is an investment in ourselves; it's not about money . . . (then) It hit me like a ton of bricks. It is about money and if I make the "investment", I will take the vacation. It's that simple . . . this was worth every penny because I'm energized and renewed about everyday life. - Diane

TS ownership has its own aesthetics. This includes MVC as well, but regarding MVC, I think that the individual owners also bring something to your own experience as you meet them at the resort or chat here on TUG. I think that in truth, Marriott sales people give one list of reasons to own, but in reality many of us find our own personal reasons to commit to MVC and stick with it ( with great satisfaction I might add ).

Michelle brings an actuarial approach to TS which also has its place. I would note however, that most of us do not finance with MVC ( we're either dipping into savings to pay cash, or we use home equity lines at significantly lower interest rates ). But still, it is worth looking at the numbers to evaluate total costs associated with TS ownership. One could/should do the same with their car/lease payments, mortgage and credit cards and virtually any expenditures we make in life. I think that the only thing we can say with certitude is that we are all materially-driven folks who spend too much money.

So to me, the explanation of why one should purchase MVC ( or any TS ) remains more of an aesthetic gesture. In our Marriott TS travels, we've encountered lots of folks like Cisco and diane who see TS as an imposed "you will relax and enjoy yourself" discipline. And these are usually folks who have intensive, time-demanding jobs. Others are folks who love travel and who find MVC to be the best vehicle by which to do so. This Marriott TS thing really works for all sorts of people.

We ourselves work as nurse anesthetists in the medical field. We witness the marvels of science as well its shortcomings. Life is inspirinig and humbling. We commit ourselves a long time ago to getting out into this world and experiencing it as best we can. We were inveterate TS skeptics until a MVC couple brings us into the fold. Money of course remains an important consideration. It's not as much about how well you invest your money as much as it is about how well you invest iin life using your money to do so.

In that regard, MVC has much to offer anyone who is willing to work at it. The rewards are both tangible and intangible. But all of we MVC owners are fellow travelers who share something in common. A zeal for travel and the experiences it brings. I can't really put a cost figure on this.

Barry

 

[potchak]

One of the things I forgot to add into the mix was the resale value. This is important in the figures because you will still own value to your resort if you wanted to sell.

However, despite all that, one of the other considerations we put into the mix is since we are not planning on having kids, why are we busting our tails to save all this money? It is not like we are going to have anyone but extended family to leave it to, so why shouldn't we spend a little now and make ourselves happier for the future! Hubby was the one who really thought of this. And he has an excellent point, why should we work our butts off for our extended family to reap the benefits? hell no! I want to enjoy my money now!

 

[camachinist]

A couple of comments...

We consider timeshare to be a cost incurred to retain our sanity

Marriott timeshare financing is a mortgage/deed of trust...

We'll sell when the market resale price recoups our principal, which I expect to happen in about 2 years. So, that would be an event horizon of 5 years, in our case.

I feel timesharing is a pre-paid vacation, as was mentioned. BTW, this phrase first came to us through the lips of the sales rep at NCV.

I think timeshare might be something we'll come back to later in life, perhaps in another way. It's been an interesting and educational experience. Met lots of nice people too

Pat

 

[wsrobinson]

Food for thought

Financially justifying a timeshare purchase is not the best idea. However, you must also consider (when doing so) that if you have a 2 bedroom timeshare and take 6-8 people on vacation, you would need 2 standard hotel rooms to accomodate everyone. If this is included in the equation, the numbers look dramatically different. BTW the interest on the loan is deductible as a second (vacation) home and marriott will send you a 1098 to write it off your taxes (assuming only one loan you are doing this for) so the 13.99 is not quite as bad as it looks. My window (as calculated by my warped mind) is 16.7 years (assuming 3 percent growth for MF and hotel rooms). Just another perspective.

 

[PerryM]

Investment horizon of zero - renting a timeshare

If we had no timeshares and wanted to vacation the way we do today, timeshare rentals would get us to exactly the same resorts and condos that we do today – for cash. I believe there is a glut of timeshares in the market and we are observing this glut with inexpensive timeshares being rented all over the place. Thank RCI for the ability to rent a beautiful 2BR condo for $350 (For 7 days usage) – half the MF. This would be the definition of a glut.

When non-timeshare folks ask me to recommend a timeshare to “invest” in, I tell them to rent first and then see if they want to go thru the huge learning curve needed to become a timeshare aficionado and learn how to vacation much cheaper than renting. In fact, even make a profit at it.

It is so easy to rent timeshares these days that the newbie is best served renting and then if they have the cash and want to spend many months learning how to work the system, buy a timeshare or get into a points club.

To this person there is no investment horizon since their investment is elsewhere – in appreciating real estate or the stock market or whatever they feel comfortable in generating money from their cash.

When you look at the lost opportunity costs of the money needed to purchase a timeshare and then the yearly MFs renting is not only an alternative but a superior way to timeshare today – it will only get more advantageous to rent in the future as thousands of new timeshares hit the market each year (owners that is).


That $35,000 Marriott you paid cash for has a HUGE lost opportunity cost that needs to be reflected upon before buying. (I don’t think this is covered in the 90 minute sales presentation - I could be wrong .

The DOW has averaged 13% per year over 100+ years. We are just reaching all time highs after the 2000 Internet bubble burst. You can assume that the lost 13% for all those year will be made back in the future. Assuming you pay long-term capital gains on the stock and return 3% inflation to the funds each year you can use 5% as a figure to compare to “investing” in a timeshare.

$35,000 * 5% = $1,750 then add in the MF of an average of $850 = $2,600 to be applied towards renting a Marriott instead of buying it. That’s $371 a day in rent – you can rent many a nice Marriott for that amount. For holidays use $65,000 to buy and that equates to $600 a day in rent.

 

[minoter]

Winter home on the Beach

As an early retiree, I purchased 6 platinum weeks at the Beach to spend the months of January-March (10 to 12 weeks, after look off) in Florida in the winter. Our total cost through Marriott $120K. We also received 1.5 million points in the transaction as incentives. We purchased only to use all weeks at Ocean Point during the winter. We only want to spend the winter in Florida, as we enjoy the other seasons in Connecticut.

Considering the alternative rental for 20-25 years, or the purchase of an oceanfront condo in Palm Beach for at least $800K, the $120K, not financed, purchase of a winter home on the Beach in Florida seems to work using most any reasonable financial model, even considering opportunity cost on the $120K.

We consider our deeded purchase as a "fractional share" of a condo which will have a resale value in 2030, likely more than $120K. Our deed is for the same unit for consecutive winter weeks--a legal hedge against any future disolution of the condo association.

 

[jerseyfinn]

Everything in life is an opportunity cost. Make no mistake, finance is important if one wants to make judicious use of their financial resources. But if I have to take out an amortzation table every time I go to spend money, then I might just as well start a bonfire with $100 bills.

TS is interesting because for some folks it is indeed an impulsive decision that they live to regret. But so too is marriage and we know how that turns out sometimes.

I'm just happy to have the chance to use some of the money we earn to do things with. It's as much about opportunities lost as it is opportunity cost. A good thing indeed that there's lots of way for TS to accomodate these needs.

Barry

 

[PerryM]

7/365 = 0.01918 of a year

Barry,

I only advocate considering the lost opportunity to use money before it enters a timeshare or vacation portfolio – after that I never consider it again. Spending $75,000 for 7 days at the new Tower at Marriott’s Maui Ocean Club is such a case where realizing that at 5% you give up $3,750 per year in lost opportunity.

Many of us own many timeshares and they kind of sneak up on you until one day you realize that you have a lot of money in timeshares – as much as a house in many cases. Timeshare ownership makes sense in many cases but in many more it turns out to be something that is very hard to make work in a busy life style that many families now live in.

I don’t do a lost opportunity on a new car or plasma TV – we use them every day of the year. A timeshare is used 7/365 of a year and has a considerable yearly maintenance fee that goes along with it. Most of us here could find ways to live without a timeshare so I put them in a category for very close scrutiny.

Anything that is used as little as a timeshare and costs so much to buy and “own” deserves to be compared to alternatives. Every time I do, timeshares are attractive to us; but we’ve put in many hundreds of hours learning how to make them out perform most investments we own.

 

[tsl]

Our timeshare is an investment in ourselves; it's not about money. Let me explain. Five years ago we visited Orlando and did two timeshare presentations, a full one at Sheraton Vistana and a drop by at the Marriott Grande Vista. I decided I could find accommodations more inexpensively on my own and maybe even higher grade. So we passed. And the next year I found a great deal for the Westin Hotel at St. Johns, USVI for $1000 for a week. Frequent flier miles used for first class travel and it was a great, relatively inexpensive vacation.

Fast forward four more years to this December when we took our 16 and 19 year old girls back to DisneyWorld for the first time in 8 years. AND we stayed at the Marriott Grande Vista and did the timeshare presentation. I realized that my husband and I (we're both consultants and self employed) had not had a vacation since St. John's (college visits got in the way along with life). When I worked for a corporation +20 years ago I took annual vacations. It hit me like a ton of bricks. It is about money and if I make the "investment", I will take the vacation. It's that simple. So without doing much research (this is uncanny as I'm in market research and research everything I buy), we bought MGV. It was an investment in our sanity. (now that I've found Tug I would do things differently). As a parent and a self-employed business owner, I find we keep giving and giving and no one tells you to stop. So I said STOP!

So just last night we returned from our first couple's vacation in four years and I am a better person for it. We were at the Marriott Surf Club in Aruba. We had a great time and we relaxed and enjoyed every minute. I told my husband this was worth every penny because I'm energized and renewed about everyday life.

Going back to the poster's original question; I was sold also on the idea that my children would inherit this timeshare. I don't want them to miss out on taking vacations because their life is too busy to think to schedule one or their finances won't allow it. I believe I'm giving them a gift of a good time, every year. . . now with us, and later on their own.

My 2 cents,

We were EXACTLY the same. We got married in 1990 and took a one week cruise for our honeymoon. The next vacation over 4 days that we had was in 1998 after the birth of our second child. It was a "cheap" promo package to the Marriott Kauai Beach Club and we used FF miles. It was during that presentation that we came to the same realization---we took no time for ourselves. I remember my hubby saying that he didn't think it a great deal but it would force us to take one nice vacation every year b/c we wouldn't let it expire after we paid for it.

We were still VERY nervous about the purchase so we started researching it during the recission period and found TUG. We asked questions but utimately stuck with it. I am now a TUG addict and you guys are family. I have a grid on my computer that tracks our units, our deposits and our vacations through 2010 (although I am working on the 2008 ones). We have purchased and sold several timeshares in the last 8 years. Now we are a little out of control vacationing 3 to 4 weeks a year. One (or two) w/ me and hubby(no kids) and two with our kids now 9 and 12. Our kids have had some amazing experiences through our timeshare ownership that they would never have had. Our recent trip was to Hawaii where we hiked in Volcano National Park and saw the lava running into the ocean. There were amazing snorkeling trips where we swam with turtles. They ski in the winter, have lounged at Atlantis, swam with the stingrays in the Caymans etc. By using our FF miles and eating most of our meals in our condo, our vacations are not expensive for the experience we have.

I think our kids will fight for our TS. They love them. If we ever stay in a hotel---no matter how nice---they look disappointed and ask where the rest fo the condo is. Ironically, we have outgrown our 1 BD Kauai Beach Club unit and rarely ever use it. Some day I will get around to selling it but it has some sentimental value since it was our first. The Marbella unit gave us a foothold into Europe which we will share w/ the kids in a few years. Our Park Plaza unit gives us skiing every year and our Harborside purchase gives us a place the kids want to return most years. I have sent my family (parents/siblings) on vacations they could have never afforded with my bonus weeks and my South African week. I book vacations with our bonus weeks and donate them to the school auction every year making us VERY popular parents and raising money for the school.

Did we spend too much on a couple of these properties? Yes. Do I regret it? No. My return on investment is set forth above (which knocks the socks off what my 401K did the last 8 years)

 

[Whirl]

Now that's a sensible investment!

As an early retiree, I purchased 6 platinum weeks at the Beach to spend the months of January-March (10 to 12 weeks, after look off) in Florida in the winter. Our total cost through Marriott $120K. We also received 1.5 million points in the transaction as incentives. We purchased only to use all weeks at Ocean Point during the winter. We only want to spend the winter in Florida, as we enjoy the other seasons in Connecticut.

.

Minoter,

I have to say that you have one of the soundest plans of most of us, in my opinion. You know exactly where you want to go and when you want to go and purchased exactly that...no more, no less, no trading or exchanging and no maintenance and upkeep to worry about in the other 9 months out of the year. I would certainly say that in your case, I can very much see the justification for a very long time horizon, given a strong management company, like Marriott should be.


More Generally....

For those, like me, that trade, even occasionally ( thus adding the exchange co factors, on top of all the other longer-term unknowns to the mix), I still have trouble thinking a time horizon past 15 years or so is prudent.

It is not that I don't think that I MAY use one for longer than that, but when deciding where to "invest/spend" my dollars on various good and services, I must think about utility and how far out I can reasonably rely on known information to be valid in making future assumptions about utility and value, I think that thirty years is just too long. Too many factors could change, too many out of my control. In even the almost ten years that I have been timesharing I have bought and then sold 9 timeshares because my personal needs changed, or something changed about my timeshare ( exchange value declined, wanted nicer accommodations) or just didn't meet my evolving travel needs. In recent years, I find myself completely uninterested in searching for great exchanges, which used to be all part of the fun!

Now, I just want to go where I want to go when I want to go and I find myself renting mine out and then renting someone else's where I want to go....usually alot easier than waiting and hoping and praying for an exchange; additionally I don't have to plan as far in advance as an good exchange may require.

With one child and more on the way, I often travel with grandparents and trying to get two units together is too hard with so many schedules to coordinate. For most of us, life changes, so I think you have to build in flexibility into your assumptions in order to not get caught with a timeshare that is financially burdensome, rather than bringing the joyous vacation memories that you thought you were "investing" in.


Anyway, this has been very interesting to me to see all the rationales that folks have when buying their timeshares. While I generally still feel that a shorter time horizon is most prudent, I understand the longer views. In reality, I HOPE to get more time than 10-15 years out of my better timeshare purchases, like Marriott...I just don't count on it.

Cheryl

 

[littlestar]

We plan on keeping our DVC points that we currently own until they expire in 2042. Heck, I figure if Disney can keep the Contemporary hotel looking as good as it does (built in '71 I think) we'll still enjoy staying at our home resort DVCs up until it expires. Our girls are grown and our son-in-laws love DVC as much as our daughters do, so we all plan on using it to the max. It's an escape from reality. We looked at the purchase of the points as a cost saver for staying in a Disney deluxe resort property.

We bought our Marriott week resale (at a very good price) - bought it to be able to join II and have access to the Getaway weeks (extra vacations for the kids and us), to use occasionally as it's a resort we can drive to, and to use it to trade back into Orlando to stay at Horizons or Cypress Harbour. I felt comfortable buying the Marriott because of their reputation and the great price we got.

We're extremely happy with what we own and have no plans to sell. Another thing, our daughters and son-in-laws wouldn't be able to take the great vacations they do without our timeshares. They are young marrieds just starting out. We view our timeshare purchases as a great "investment" in our family life. It's hard to put a price on that.

 

[jancurious]

Our motivations are a lot like Littlestar. We owned a part interest in a condo in Kauai that entitled us to two weeks every year. However, we found that there were many years that our kids (in their twenties) couldn’t join us because the time frame was set in stone (rotated back one month every year). We bought Waiohai….then shortly afterwards two weeks at Newport Beach – all 2 bedroom non-lockoffs. Now we schedule the weeks around when most of the family can probably make it and have open invitations to our children to join us. They love it & couldn’t afford these types of vacations yet in their lives. We see many wonderful years on these beaches with our future grandchildren, too!

When you are building family memories, I don’t think you can justify these purchases in dollars and cents. I’m a CPA/MBA and have never even run an analysis like so many people here on TUG have done. To me I just know our purchases have been very prudent investments in our family and our quality of life.

Man….when you read through this thread……we could all be timeshare salespersons!!!

Jan

 

[JoeMO]

How long to recoup your principal?

I am trying to figure out how long it will take an average Marriott week to be worth what it was when it was originally purchased. If I buy a Branson Platinum week for $17,000 from Marriott, how long until I could sell it for $17,000.

I am making the assumptions that it will depreciate 50% when I walk out of the door and slowly appreciate back up to its original price. At 5% a year it would take 10 years for me to recoup my principal. I have heard that some Marriotts in HI have sold for more than their purchase price a few years after they were initially purchased. I am sure that is not normal. Do Marriotts appreciate more than an average TS? What would be a good figure, 5% a year, 10% a year?

This was the best thread I could find that attempted to answer this question. I am interested in opinions but I am hoping someone knows of some data or inside information that can give me a good estimate. If a week looses 50% or more after the resort sale, how long does it take to recoup the purchase price? If you buy and use for 10 years can you sell it and get your principle back. I know that inflation, loan interest and closing costs effect this but I am mostly looking for a simple formula for Marriotts.

Thanks

 

[PerryM]

5 to 8 years

New Marriott resorts, where you can buy on day one of sales, recoup the 40% Marriott commission to resell it in 5 years or less.

Mature Marriott resorts, where sales are half over or more, seem to increase 5% a year or about 8 years to recoup your “investment”.

This assumes that Marriott will keep their commission at 40%. It wasn’t too long ago when they only charged 25%. I suspect that within 5 years or so they will charge 50% or more – why should you, the owner, get that money?

 

[camachinist]

I agree with Perry and our experience so far bears that out. We're only a bit ahead of the curve because our resort has a 10 year build-out and we bought about 1/3 of the way into that. I'm still seeing 5 years as the capital break-even point, perhaps longer if easy money (low interest rates) disappears/lessens.

Pat

 

[Dean]

I view a timeshare exactly as I view a car – they last 10 years and its time to get another one. 10 years is our “Investment horizon” and thus the complete Buy – Use – Sell cycle must be accounted for.

The loveable timeshare salesreps always talk about “Passing it on to your heirs”, well that sounds great but who the heck wants a 1980 Yugo as a surprise gift from a distant relative who just passed away? Foisting a “gift” that costs $850 per year for the rest of their lives is not my idea of a compassionate gift. Better to instruct the executers of your will to liquidate the timeshare portfolio and turn over cash to the heirs of your will. Let them run their lives.

Once selling is brought into the mix things change considerably. This is where the loss of 40% and more rears its ugly head. This is where you can calculate the REAL cost of ownership and compare it to renting the same, exact, timeshare. This is where that 14.99% interest rates for 10 years doubles the cost of the timeshare and renting is a bargain basement cost.

Every timeshare purchase should be viewed as selling it in 10 years and getting something more in tune with your families timeshare needs then. That Disney timeshare salesrep spinning the wonderful thoughts of “A lifetime of memories” may not be true – the kids are in college and visiting Mickey for the 11th time in a row may cause you to pause.

I'm getting in a little late I guess but I agree with Perry here and it's one of the reasons that the RTU issue makes me laugh. I do feel one should look at various aspects and to a degree consider the short term, mid term and long term implications. Almost all of the value ($$$ wise) from timesharing comes from 2 aspects, these are purchase price and knowledge of the product in question. One should look at the dollars as a qualifying event. If you can't afford it, nothing else should matter. After that, it's a combination of dollars, personal preferences and perceived value. The more educated you are in all aspects, the better choices you will make and the better value you will receive over time. It's funny that my most expensive timeshare purchases have been, and likely will continue to be, my best values. But had I paid the $32.5K retail for my Grande Ocean OF, it would be have been the same value as the half that I actually paid.

One's personal situation also dictates the value and that is likely to change over time as Perry also points out. I know with 2 adult children, our situations have changed and I am changing my portfolio accordingly. For example, I generally only need a 1 BR and can travel off season. So I'll tend to trade into DVC off season and will likely sell many (but not all) of my points there after a large trip coming up in Dec.

 

[pwrshift]

This is a crap shoot in most cases. But if you do get in real early and if Marriott is hungry enough to provide a ton of points for a good (?) buying price you might recover your investment depending on how your look at it. Some resort resales are up to and over their purchase price for original pre-construction buyers (ie. HH Grand Ocean) and other may never get there. The variable could be the points program, because as you age so do your kids and you have less need for a 2 bdrm suite and may want to see the world you've put off until retirement.

Instance: Manor Club Sequel cost me $18000 and came with just over half a million points in 2001 ... so 5 years later I doubt if I could get anywhere near that cost. BUT...I had a wonderful trip of a lifetime for 2 weeks in two Cat 7 hotesl (London & Paris) as well as very expensive business class air for two people - a trip that would have cost thousands of dollars if paying cash.

Same thing happened with Canyon Villas a year later - paid about the same $19000 and got over a half million points with non-use years, etc. Another memorable, well planned trip to Italy on business class air would have offset a lot of that price because I always wanted to do it and would have had to pay cash otherwise. For some reason CV is commanding a higher resale price on the resale market than Manor Club and I could get quite close to what I paid for it (perhaps). It's still a crap shoot - but you have to put some value on the points and how you use them in figuring out what the timeshare actually cost you.

So it depends on how you look at it. If you waste your MR points by taking air or hotel separately or for short stays, you won't realize the cost value savings - but the air&hotel packages changes the equation greatly. Unfortunately, Marriott has raised prices and lower points incentives so much the value of the points program has diminshed for new buyers IMO, even though the number of points to stay at their hotels has not increased nearly as much as their rack rates have for their hotels. As long as people are still lining up to buy direct with few points (if any) Marriott won't go back to the 'old days' of half-million points with purchase.

Brian

I am trying to figure out how long it will take an average Marriott week to be worth what it was when it was originally purchased. If I buy a Branson Platinum week for $17,000 from Marriott, how long until I could sell it for $17,000.

.

Thanks