Whose is the better HGVC deal?

[Jason245]

I generally use 20 years since I have young kids and plan on using these things for a long, long time. Plus, it's a way to justify spending the money when your calculation says you're only spending 16 cents per point over 20 years. That's nothing! :whoopie:

This simple idea of looking at the TOTAL cost per point over a long period is something that TUG taught me and really is critical if you want to be successful in the timeshare game. Many people see a free or cheap unit and jump on it but then get stuck paying high MF's forever. Or they shy away from a unit because the purchase price is a little steep but don't bother to look at the MF/point ratio and realize that in the long run this unit would be cheaper than the "free" unit they got on E-Bay for $1.

Total cost per point doesn't factor in cost of capital, special assessments and MF increases above inflation.

My calculation is Very different and uses the following factors.

1. Buy in Cost (this is the purchase price and fees for the unit, and should be considered SUNK and lost as soon as the purchase is made and the money leaves your hand).

2. MF (cost/point)

3. True Rental cost for accomodations based on where you plan on going for the next 2 years using your points (map it out)(For example, a 1BR in orland can be rented at a RCI gold grown resort on last call for $250 for a week, while a rental in South Beach will cost $400/Night from a third party/hotel, and a rental in Marco will probably cost about $300/night, Hawaii could range in the $4-600/night depending on location.

4. Liquidation cost (I automatically plug $1,000 in this number).



Step 1. Find the difference between MF (and all other fees) for next two years and the rental value for your planned stays for that same period. If number is Negative, DO NOT BUY. If number is positive, Move to Step 2.

Step 2. Take your total Buy in cost and Add the liquidation cost (this is your worst case scenario total cost of unit).

Step 3. Divide the number in Step 1 by two (this is your estimated annual Rent V own benefit).

Step 4. Divide the number from Step 2 by the number from Step 3, This number is your "break even point" in years. If that number is higher than 5, the deal is terrible, if the number is lower than 1, the deal is probably pretty decent.


My focus is on cash flow savings not this imaginary cost/point number which requires a 10-20 year projection to rationalize the buy in price (in 10-20 years a lot can happen that can limit or change your neads).

For Example, I got a Bay Club Contract for nothing on Ebay 1 BR 4800 points. I had to pay ~300 to enroll and liquidation cost of $1000 means that my cost for this unit is set at about $1300. My MF plus membership is another $1300.

This year I did 3 nights in south beach ($1200 Value), 3 nights in Marco 2BR (~$1050 Value) and am going to be doing a few nights in Disney later this year in a 1BR (lets figure that those nights are only worth $250). My Delta for year 1 is (conservativly) ~$1200 (travel savings) [ 1200+1050+250 - 1300]. This means that my payback period is a little more than a year ($1300/1200) and that is inclusive of liquidation cost.

If I get rid of the unit mid next year at an out of pocket cost of $1k (I really doubt I would have a hard time finding a taker for free or free with me throwing in closing cost) I haven't lost any cash, and if I keep it longer and get rid of it, I can track the true cash savings.

Personally, It doesn't make sense for me to vacation for more then 2 years without being at breakeven.

 

[JSparling]

Total cost per point doesn't factor in cost of capital, special assessments and MF increases above inflation.

My calculation is Very different and uses the following factors.

1. Buy in Cost (this is the purchase price and fees for the unit, and should be considered SUNK and lost as soon as the purchase is made and the money leaves your hand).

2. MF (cost/point)

3. True Rental cost for accomodations based on where you plan on going for the next 2 years using your points (map it out)(For example, a 1BR in orland can be rented at a RCI gold grown resort on last call for $250 for a week, while a rental in South Beach will cost $400/Night from a third party/hotel, and a rental in Marco will probably cost about $300/night, Hawaii could range in the $4-600/night depending on location.

4. Liquidation cost (I automatically plug $1,000 in this number).



Step 1. Find the difference between MF (and all other fees) for next two years and the rental value for your planned stays for that same period. If number is Negative, DO NOT BUY. If number is positive, Move to Step 2.

Step 2. Take your total Buy in cost and Add the liquidation cost (this is your worst case scenario total cost of unit).

Step 3. Divide the number in Step 1 by two (this is your estimated annual Rent V own benefit).

Step 4. Divide the number from Step 2 by the number from Step 3, This number is your "break even point" in years. If that number is higher than 5, the deal is terrible, if the number is lower than 1, the deal is probably pretty decent.


My focus is on cash flow savings not this imaginary cost/point number which requires a 10-20 year projection to rationalize the buy in price (in 10-20 years a lot can happen that can limit or change your neads).

For Example, I got a Bay Club Contract for nothing on Ebay 1 BR 4800 points. I had to pay ~300 to enroll and liquidation cost of $1000 means that my cost for this unit is set at about $1300. My MF plus membership is another $1300.

This year I did 3 nights in south beach ($1200 Value), 3 nights in Marco 2BR (~$1050 Value) and am going to be doing a few nights in Disney later this year in a 1BR (lets figure that those nights are only worth $250). My Delta for year 1 is (conservativly) ~$1200 (travel savings) [ 1200+1050+250 - 1300]. This means that my payback period is a little more than a year ($1300/1200) and that is inclusive of liquidation cost.

If I get rid of the unit mid next year at an out of pocket cost of $1k (I really doubt I would have a hard time finding a taker for free or free with me throwing in closing cost) I haven't lost any cash, and if I keep it longer and get rid of it, I can track the true cash savings.

Personally, It doesn't make sense for me to vacation for more then 2 years without being at breakeven.

This is fantastic and very accurate. However, I don't think it's applicable for the OP question. They just asked about 3 scenarios and said "which one is best". Most of your calculation isn't relevant because you'd plug in identical data for all 3 units. And they weren't asking if they should buy or not or what they'd recover one day when they sold it (which many would say you need to plug in $0, not $1,000, for your "sales price" one day down the road).

Simple question: out of the 3 which made the most economical sense (which I interpreted as which has the best point/cost ratio). I think your calculation is great for the "should I buy a TS or should I just get a hotel room when I travel" question. But when so much of your data/input isn't necessary or unknown (will the MF go up more in Vegas than Orlando over the next 10 years? Who knows.) I think OP can get an idea of the best "bang for your buck" deal based on the simple cost/point calc.

 

[JSparling]

Total cost per point doesn't factor in cost of capital, special assessments and MF increases above inflation.

1. Cost of capital - do you mean what could I do with this $1,000 instead of buy a TS? Such as pay down a 15% credit card balance? Unless you're a finance major working on Wall Street I'm not sure that's relevant for the question of does Property A, B, or C (which are all within a $1,000 or so of each other) give me the best point/cost value?

2. Special Assessments - no way to know this for any given property. Will Orlando get hit with one next week? Will Vegas never see one? No way to know.

3. MF increases above inflation - again, no way to know. You could look at the trend for Property A vs. Property B. If A averages an increase of 6% per year over the past 5 years and B averages 2% per year over the past 5 years chances are B will stay at a lower annual increase. But that's just a guess.

 

[Jason245]

This is fantastic and very accurate. However, I don't think it's applicable for the OP question. They just asked about 3 scenarios and said "which one is best". Most of your calculation isn't relevant because you'd plug in identical data for all 3 units. And they weren't asking if they should buy or not or what they'd recover one day when they sold it (which many would say you need to plug in $0, not $1,000, for your "sales price" one day down the road).

Simple question: out of the 3 which made the most economical sense (which I interpreted as which has the best point/cost ratio). I think your calculation is great for the "should I buy a TS or should I just get a hotel room when I travel" question. But when so much of your data/input isn't necessary or unknown (will the MF go up more in Vegas than Orlando over the next 10 years? Who knows.) I think OP can get an idea of the best "bang for your buck" deal based on the simple cost/point calc.

Economics of a deal is more than purchase price. It is like shopping for a car, if you focus on one line of the deal you could get screwed on two other lines.

 

[Jason245]

1. Cost of capital - do you mean what could I do with this $1,000 instead of buy a TS? Such as pay down a 15% credit card balance? Unless you're a finance major working on Wall Street I'm not sure that's relevant for the question of does Property A, B, or C (which are all within a $1,000 or so of each other) give me the best point/cost value?

2. Special Assessments - no way to know this for any given property. Will Orlando get hit with one next week? Will Vegas never see one? No way to know.

3. MF increases above inflation - again, no way to know. You could look at the trend for Property A vs. Property B. If A averages an increase of 6% per year over the past 5 years and B averages 2% per year over the past 5 years chances are B will stay at a lower annual increase. But that's just a guess.

And because of the unknowns, the time to break even becomes more and more important.

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[Jodi0415]

Thank you!

It isn't hard to book other locations unless you want a high demand time in Oahu or at a ski resort. Since that likely isn't the case, you can get by with a small annual contract to travel every other year. Banking and borrowing is easy to do in HGVC, but you have to pay a fee to bank. Borrowing is free. You are correct that owning just one EOY isn't as flexible as owning a smaller annual.

 

[PamMo]

Jodi, when you are using HGVC points to trade, whether in HGVC or RCI, points are points. It doesn't matter what HGVC resort you own, or if you own silver, gold, or platinum weeks. The difference is in cost. You can use points to book any club week that is available. Since owners get first dibs on reservations at their home resort, prime weeks at popular resorts may be limited by the time club booking opens up. You need to keep an eye on the calendar and make your reservation as soon as the booking window opens up nine months out.

Since you are wanting to bank and trade points, I want to make sure you're aware of these additional costs over MF's:

Mandatory annual HGVC Club dues (including RCI membership) - $140
Club Reservation Online/Phone - $$52/99
Depositing Points Online/Phone - $76/99
Rescuing Points Online/Phone - $76/99
Borrowing points from the next year is free.
RCI weekly reservation Online/Phone - $209/219​

You are smart to be researching this now. A lot of people start looking into how much timesharing is really costing them long after they bought a very expensive week from the developer.

Also, I see you own a week at Hacienda del Mar - a beautiful resort outside of Cabo San Lucas. If this is a new purchase, a friendly suggestion is that you might want to slow down on buying a second timeshare. Buying bargain timeshares at nice resorts is like eating potato chips - it's very hard to stop at one! Just read through some of these threads - http://tugbbs.com/forums/showthread.php?t=208977&highlight=timeshare+addiction and http://tugbbs.com/forums/showthread.php?t=232406&highlight=timeshare+addiction and http://tugbbs.com/forums/showthread.php?t=198969&highlight=timeshare+addiction

 

[Jodi0415]

Thank you very much!

I did something similar but just for one year. I used cost per point and MF per point. I'll use you formula as well!

You asked about "economic sense" - it's simple math. Add up all costs for 10 years and all points for 10 years. Then divide total costs by total points and see what your lowest cost per point is. That's your answer. This will assume no increase in MF's over the next 10 years which won't happen - but asusming all resorts increase MF's at a similar rate your "which unit has the lowest cost" calculation will still be pretty close. Here's the math:

One-time costs: purchase price, closing costs, transfer fee, activation fee
Annual MF's x 10 years
Annual HGVC Club Dues x 10 years
= Total costs for 10 years

Points per year x 10 years = total points for 10 years

Total costs/total points = cost per point

The reason I use a 10 year calculation is to make sure over time you're getting the best deal and blend in purchase price (one time) over MF's (annual). You may get a steal on a unit as far as the purchase price but if the MF's are crazy high or you're buying a silver unit you'll be worse off in the long run than paying more up front for the purchase for a platinum unit and then having lower MF's per point.

 

[Jodi0415]

Thank you Pam!

I have the HGVC manual in iBooks on my phone. So I'm very aware of all the fees. I have read it twice so far, and referred to it numerous times. It's not my goal to trade HGVC in RCI but you never know. I'm sure I'll primarily borrow.

Jodi, when you are using HGVC points to trade, whether in HGVC or RCI, points are points. It doesn't matter what HGVC resort you own, or if you own silver, gold, or platinum weeks. The difference is in cost. You can use points to book any club week that is available. Since owners get first dibs on reservations at their home resort, prime weeks at popular resorts may be limited by the time club booking opens up. You need to keep an eye on the calendar and make your reservation as soon as the booking window opens up nine months out.

Since you are wanting to bank and trade points, I want to make sure you're aware of these additional costs over MF's:

Mandatory annual HGVC Club dues (including RCI membership) - $140
Club Reservation Online/Phone - $$52/99
Depositing Points Online/Phone - $76/99
Rescuing Points Online/Phone - $76/99
Borrowing points from the next year is free.
RCI weekly reservation Online/Phone - $209/219​

You are smart to be researching this now. A lot of people start looking into how much timesharing is really costing them long after they bought a very expensive week from the developer.

Also, I see you own a week at Hacienda del Mar - a beautiful resort outside of Cabo San Lucas. If this is a new purchase, a friendly suggestion is that you might want to slow down on buying a second timeshare. Buying bargain timeshares at nice resorts is like eating potato chips - it's very hard to stop at one! Just read through some of these threads - http://tugbbs.com/forums/showthread.php?t=208977&highlight=timeshare+addiction and http://tugbbs.com/forums/showthread.php?t=232406&highlight=timeshare+addiction and http://tugbbs.com/forums/showthread.php?t=198969&highlight=timeshare+addiction

 

[Jodi0415]

Thank you so much for your response!! This is very helpful!!

I generally use 20 years since I have young kids and plan on using these things for a long, long time. Plus, it's a way to justify spending the money when your calculation says you're only spending 16 cents per point over 20 years. That's nothing! :whoopie:

This simple idea of looking at the TOTAL cost per point over a long period is something that TUG taught me and really is critical if you want to be successful in the timeshare game. Many people see a free or cheap unit and jump on it but then get stuck paying high MF's forever. Or they shy away from a unit because the purchase price is a little steep but don't bother to look at the MF/point ratio and realize that in the long run this unit would be cheaper than the "free" unit they got on E-Bay for $1.

 

[1Kflyerguy]

I generally use 20 years since I have young kids and plan on using these things for a long, long time. Plus, it's a way to justify spending the money when your calculation says you're only spending 16 cents per point over 20 years. That's nothing! :whoopie:

I think i will using our for 20 years or more, but then again life is unpredictable at times.. so i settled on 10 years..

I think the important thing with all these formulas and evaluations is to preform some sort of consensus evaluation, and use the same method when comparing the options..

And of course realize there may be situations where you have an emotional attachment to certain resort or location and you decide to buy there even if its not the best from a dollars and cents perspective..

 

[Helios]

I generally use 20 years since I have young kids and plan on using these things for a long, long time. Plus, it's a way to justify spending the money when your calculation says you're only spending 16 cents per point over 20 years. That's nothing! :whoopie:

This simple idea of looking at the TOTAL cost per point over a long period is something that TUG taught me and really is critical if you want to be successful in the timeshare game. Many people see a free or cheap unit and jump on it but then get stuck paying high MF's forever. Or they shy away from a unit because the purchase price is a little steep but don't bother to look at the MF/point ratio and realize that in the long run this unit would be cheaper than the "free" unit they got on E-Bay for $1.

Using your 10 year analysis, what would you say is an exceptional cost per point value, a good value, an OK value, and what is the cost where you would say the bad value starts? Assuming that how the points are used is irrelevant, just look at it from the pure cost per point stand point.

 

[Jason245]

Using your 10 year analysis, what would you say is an exceptional cost per point value, a good value, an OK value, and what is the cost where you would say the bad value starts? Assuming that how the points are used is irrelevant, just look at it from the pure cost per point stand point.

I think the point is to get as low as possible within your price range especially when trying to justify purchases.

It isnt a terrible strategy or goal.. but since you can play with the amortization number it gets real wishy washy (which is why I use my method. If you can get at least 100 percent match on your mf dollars in value , you are doing good in my opinion assuming breakeven is short )



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