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Would anyone be interested in a "real" timeshare?

Fatbaby52

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Sorry if this is the wrong forum for this question and also for the fairly long preamble.

My thinking on timeshares has evolved a little bit over the past 15 years or so. At first, they seemed like an obvious scam/ripoff. My in-laws had a bunch of Wyndham points, and I didn't ever really dig into the numbers, but it sounded like they had tens of thousands of dollars invested and had the obligation to pay a few thousand dollars every year just to have the right to book a couple weeks in a fairly nice, fairly large hotel room. It seemed like I could sometimes do better just using a site like Hotwire and finding a four star hotel wherever I wanted to go.

As I've done more reading here, it seems like that is mostly true- especially for developer sales. It looks like there's some value to be had in resales, but you're still jumping through some significant hoops, and maintenance fees can make any sort of value really thin. For example, I've been looking at the Sheraton Desert Oasis in Scottsdale- it looks like I can pick a large 1BR up for just about free. But then I'm on the hook for ~$700/year, which might increase, and I'm going to have to have my computer fired up at midnight a year before I want to book if I really want to guarantee a room for Spring training. On the other hand, for the past couple years, I've just kept an eye on Ebay and the boards here, and without too much trouble, I can grab the 1BR for ~$1000. This year it was about $800. So there's some value in ownership, but it's thin vs. the commitment, I have no control over maintenance fees, and then I'm left with something that I'll probably have to pay a couple hundred bucks to give away some day.

Finally, if you zoom out a little bit and see what Marriott/Sheraton is doing, that ownership is really expensive. For the 2BR unit, they are collecting $1200/week, or just a little more than $62k. If you assume that an equivalent 2BR condo would have maybe a $300/mo. HOA fee ($3600/year), there's a $58k difference, which is almost exactly the mortgage payment on a million dollar loan. SDO is nice, but those are not million dollar condos. I'll bet that 52 SDO owners, even if they're happy overall with the property, would probably rather have 1/52nd of what that $58k buys every year than what they have now.

Anyway, what I'm thinking is that it would be cool to find a condo or house someplace where there's year round demand (Tahoe?), where there aren't any rules against short term rentals, and buying it to be used as a group-owned vacation rental. I know that this isn't a novel idea, but I haven't seen much discussion here. Is anyone interested in exploring this?

Am I overlooking something obvious that's going to make this tough?
 

1Kflyerguy

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What your talking about is a considered a "fractional". They are reasonably popular, but have some challenges.

My brother in law is a partner in fractional, and i know they had lots challenges with getting agreement on renovations, etc.

The other challenge is that your usage is tied to a single location, unlike a timeshare that allows you to easily visit multiple locations.
 

Ski-Dad

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Am I overlooking something obvious that's going to make this tough?

Your basic 2 bedroom with $3600/yr MF is pretty hard to find these days, but your point remains quite valid.

There is a big difference between the cost of maintaining an owner occupied 12 month condo without pool, fitness facility, etc vs. a unit that has to have front desk staff, units cleaned and turned over 52 weeks/yr, pool maintenance and all the management that goes with that. If the margins were $50K/yr per unit, there would be a lot more management companies undercutting one another.
 
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Fatbaby52

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Your basic 2 bedroom with $3600/yr MF is pretty hard to find these days, but your point remains quite valid.

There is a big difference between a the cost of maintaining an owner occupied 12 month condo without pool, fitness facility, etc vs. a unit that has to have front desk staff, units cleaned and turned over 52 weeks/yr, pool maintenance and all the management that goes with that. If the margins were $50K/yr per unit, there would be a lot more management companies undercutting one another.

Sorry if this is a dumb question- but can you help me understand how the hiring of management companies works for timeshares? I've always assumed that either Marriott or some company related to Marriott handled the management of these properties. I assumed that was why the maintenance fees were so high relative to the amenities.

Doing some back of the napkin math, I found a 3BR condo in Scottsdale with a $350 HOA that has a (smaller) pool, a tennis court, golf course access, and presumably fairly similar grounds. No front desk staff, no snack bar. Assuming the pool is roughly proportionate (might not be), it seems like the majority of the difference in price is cleaning (I'd guess that's a max of $100 per week at 8 man hours of $12.50) and whatever the front desk does.
 

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This might be more apples to apples. I love the Stateline area in Tahoe. There are two Marriott properties right there and then something like "Tahoe Vacation Club". Then on the lake side of the street, there are luxury condos- Zalanta: https://www.zalanta.com/

A 2BR is going for $1.2 million. HOA fees are $1350/mo, which includes grounds that look very similar to what the Timber Lodge across the street has. It looks like a 1BR unit at the Marriott has a $1500/week fee, so I'm guessing that a 2BR lockoff would be $3k, or $12k/mo.

I don't know what sort of % you would need down for a vacation home, but to keep the math easy I'm assuming $520k down, $680k loan, 5%, 30 years and then the standard assumptions that "smartasset.com" gives for taxes and other fees.

The monthly mortgage would be $4.5k. HOA brings it to ~$5.7k. If you had 52 owners, all of whom would get a week, this would get you to $10k down, $1315 each. In my opinion, that would be better than getting the Timber Lodge (which is very nice) completely free. At $1700 less, you'd be at breakeven vs. maintenance fees within 6 years.
 

VacationForever

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$3,000 per year to maintain a 2BR condo? That number isn't even close to average cost to maintain a condo, let alone weekly housekeeping and regular updating of soft and hard goods in the condo and maintenance of the grounds. My home, a 3BR condo, costs $24K a year which includes HOA dues, utilities and insurance. It does not include our housecleaning services and the upkeep of our home - water heater, furniture replacement etc. We don't have pool, gym, tennis etc.

$62K per year to maintain a 2BR weekly rental condo like SDO is very reasonable.
 
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pittle

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We owned a 3 bedroom 3 bath condo at the Lake of the Ozarks from 1995 - 2007. During that time, we had our condo on the Lodge of the Four Seasons rental program from January 1996 until July 2001. We had MF each month that included water, insurance, lawn care, daily trash picikup and cable TV and that was about $250 per month. When the Lodge rented our place, we got 50% of what they did. Not bad since they included housekeeping in their share. Our place rented for $350 per night in the time we rented it. We just set aside the time it was not available to rent so that we could use it at certain times of the year. (We did get some tax deductions for expenses when it was on the rental program.) When I retired in January 2002, we did some renovations and refurnished it. We lived there for 5 years. We sold it when we moved from the Lake to Goodyear, AZ in March 2007.

Because we were affiliated with The Lodge of Four Seasons, our place was also a RCI Gold Crown Resort and the higher level II resort. We never used it for exchanges, but some of the owners did.

Therefore, it is possible to own and rent out for short term rentals. Some of the towns are now making restrictions because of AirBNB and HomeAway/VRBO rentals. The cities are trying to get room taxes for their coffers.
 

CalGalTraveler

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Last year the snow was 15 feet high in the Tahoe area. Snow shovelers were asking $3000 one-time to clear it and people were happy to pay them to clear their roof or deck to prevent cave in. You also have snow plow costs, driveway sealing, painting, deck refinishing and maintenance. The mountains are hard on homes. Trades people are booked solid during summer and charge high rates. Spring and Fall are mud weeks and you cannot bank on money for rentals.

In addition, South Lake Tahoe has attracted attention as one of the most restrictive AirBnB laws in the nation and they are hostile to vacation rentals. When the law first passed one could get a $2000 fine for a parking ticket in your driveway.

 
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geist1223

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We own Points in two different timeshare organizations. We also own a fractional (1/13) so 4 weeks per year, 1 each Quarter. The use is set up on a ten year rotational calendar. So no one gets all the holiday weeks. Every 13th year you lose a week to maintenance work. We mainly trade, let family and friends use, or rent out.
 

klpca

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I have friends who share a resort condo with three others. It was fine until one of the them decided that they want out. They are arguing about value and selling costs with the other owners. They are refusing to follow terms in their original agreement. It's become quite contentious. No thanks, I'll pass.
 

Fatbaby52

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$3,000 per year to maintain a 2BR condo? That number isn't even close to average cost to maintain a condo, let alone weekly housekeeping and regular updating of soft and hard goods in the condo and maintenance of the grounds. My home, a 3BR condo, costs $24K a year which includes HOA dues, utilities and insurance. It does not include our housecleaning services and our upkeep of our home - water heater, furniture replacement etc. We don't have pool, gym, tennis etc.

$62K per year to maintain a 2BR weekly rental condo like SDO is very reasonable.

My $3k was trying to get to the outside HOA number. I know that there are some other maintenance costs involved that will be higher when you have weekly rentals, and I will be the first to admit that I'm dumb, but $62k in maintenance just seems way high to me.

Cleaning- how much? I think $100 covers it for average weeks. So $5k/year
Handyman type stuff- $250/mo - $3k/year
Water/Sewer/Gas/Electricity- $4k/year
Water Heater- Let's say $1,000 every four years? $250/year
AC Unit- $5k every 10 years? $500/year
Mattress- 2x$500 every other year? $500/year
Other furniture- $6k every 3 years? $2k/year
Appliances- $3k every 3 years? $1k/year
Pool and landscaping- this is the big one, but SDO has 300 rooms (not sure if it's 150 2BR or 300 2BR), so it's split 300 ways. For comparison, my community has 260 homes. Our pool is maybe 1/2 the size of SDO's, landscaping maybe also 1/4 as involved. Our entire HOA bill is $82/mo., and some of that goes to gate maintenance and administrative costs. So 4x would be $320, or about $4k/year.

I think I'm estimating high for most of this, and I'm at maybe $20k. What am I missing that gets to $60k?
 
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Sorry if this is the wrong forum for this question and also for the fairly long preamble.

My thinking on timeshares has evolved a little bit over the past 15 years or so. At first, they seemed like an obvious scam/ripoff. My in-laws had a bunch of Wyndham points, and I didn't ever really dig into the numbers, but it sounded like they had tens of thousands of dollars invested and had the obligation to pay a few thousand dollars every year just to have the right to book a couple weeks in a fairly nice, fairly large hotel room. It seemed like I could sometimes do better just using a site like Hotwire and finding a four star hotel wherever I wanted to go.

As I've done more reading here, it seems like that is mostly true- especially for developer sales. It looks like there's some value to be had in resales, but you're still jumping through some significant hoops, and maintenance fees can make any sort of value really thin. For example, I've been looking at the Sheraton Desert Oasis in Scottsdale- it looks like I can pick a large 1BR up for just about free. But then I'm on the hook for ~$700/year, which might increase, and I'm going to have to have my computer fired up at midnight a year before I want to book if I really want to guarantee a room for Spring training. On the other hand, for the past couple years, I've just kept an eye on Ebay and the boards here, and without too much trouble, I can grab the 1BR for ~$1000. This year it was about $800. So there's some value in ownership, but it's thin vs. the commitment, I have no control over maintenance fees, and then I'm left with something that I'll probably have to pay a couple hundred bucks to give away some day.

Finally, if you zoom out a little bit and see what Marriott/Sheraton is doing, that ownership is really expensive. For the 2BR unit, they are collecting $1200/week, or just a little more than $62k. If you assume that an equivalent 2BR condo would have maybe a $300/mo. HOA fee ($3600/year), there's a $58k difference, which is almost exactly the mortgage payment on a million dollar loan. SDO is nice, but those are not million dollar condos. I'll bet that 52 SDO owners, even if they're happy overall with the property, would probably rather have 1/52nd of what that $58k buys every year than what they have now.

Anyway, what I'm thinking is that it would be cool to find a condo or house someplace where there's year round demand (Tahoe?), where there aren't any rules against short term rentals, and buying it to be used as a group-owned vacation rental. I know that this isn't a novel idea, but I haven't seen much discussion here. Is anyone interested in exploring this?

Am I overlooking something obvious that's going to make this tough?
If you contact a realtor in Lake Tahoe im sure they can connect you with fractional interest property to purchase. I've seen them listed in real estate magazines when visiting there. Hawaii is another place I've seen them.

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You are missing the cost of actually managing all of this work. Who is hiring the cleaners, repairmen, pool guys, plummer, electrician, etc. etc.? Is somebody managing all this for free?
 

CPNY

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Buy a vacation home or condo where you want to go. Use it as a vacation rental and Hire a maint company who will turn over new guest and block off weeks you want to go.
 

easyrider

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Sorry if this is a dumb question- but can you help me understand how the hiring of management companies works for timeshares? I've always assumed that either Marriott or some company related to Marriott handled the management of these properties. I assumed that was why the maintenance fees were so high relative to the amenities.

Doing some back of the napkin math, I found a 3BR condo in Scottsdale with a $350 HOA that has a (smaller) pool, a tennis court, golf course access, and presumably fairly similar grounds. No front desk staff, no snack bar. Assuming the pool is roughly proportionate (might not be), it seems like the majority of the difference in price is cleaning (I'd guess that's a max of $100 per week at 8 man hours of $12.50) and whatever the front desk does.

Often time a vacation home , especially a condo, has to be cash out depending on the condo association type. Even when there is financing for a condo the terms are often not great. Bigger Pockets has a forum that this type of question is right up their alley. My experience with condos are it was better to refi my house and cash the condo out. My experience with selling condos are many people would be willing to do a private contract with the owner and pay about half down.

I have a friend that moved to Phoenix in 2008 and bought 6+ condos in the the same complexes that Wyndham bought for Worldmark. They do really well with these. They live in the area. They rent these on vrbo and have a clientele that rents months at a time in spring, fall and winter.

Renting your private vacation home or condo can be a good little money maker but occasionally you get screwed. You have to factor in the screwed over which isn't on the below list of hidden things.

Bill

https://www.biggerpockets.com/blog/2015-03-02-top-8-hidden-costs-owning-vacation-home
 

slip

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I didn’t have any issue with financing my condo. The rates and criteria were the same as a stand alone home. My daughter had the same experience in Wisconsin and Denver. All the same criteria as a stand alone home.

I did have to have 25% down since it wasn’t going to be my primary residence but again that would have been the same with a stand alone home.

It may be a regional thing or special circumstances at certain complexes though.
 

VacationForever

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@Fatbaby52 Where do you live? You numbers are way off and I suspect that you may be living in a much lower cost of living city/state. The number on each line that you have listed is WAAAY below market at Scottsdale AZ area.
 

easyrider

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I didn’t have any issue with financing my condo. The rates and criteria were the same as a stand alone home. My daughter had the same experience in Wisconsin and Denver. All the same criteria as a stand alone home.

I did have to have 25% down since it wasn’t going to be my primary residence but again that would have been the same with a stand alone home.

It may be a regional thing or special circumstances at certain complexes though.

Condo financing is dependent on the association type and if any of the units are non-compliant for financing. I think its all or nothing with condo buildings. Co-op association type condos have no financing available. This was true a while back. Its been a while since our last condo.

I think it might be easier now to fiance a condo because FHA or HUD has recently started doing condo loans again. The building would need to be approved.

I was wondering if your condo bylaws allow you to use your condo as a vacation rental ?

Bill
 

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I have some specific replies below and I apologize if this is getting argumentative, but I'm genuinely curious. At a property like SDO, isn't it Marriott (or Vistana or whatever) doing the management? If "Scottsdale Premium Property Management" approached the owners and promised to get it all done for $30k per unit per year, would the homeowners have the ability to accept that offer? What do the owners own vs. what Marriott owns?


You are missing the cost of actually managing all of this work. Who is hiring the cleaners, repairmen, pool guys, plummer, electrician, etc. etc.? Is somebody managing all this for free?

That's a fair point, and it's what I'm trying to get to. If SDO fees are $60k per year, how much of that is pure management and how much is replacement refrigerators, heating the pool, and housekeeping?

I have a 100% owned 3 bedroom beach house that we rent by the week. Can you give me the # of your $100 cleaning service?

Maybe I'm way off there, but I'm again using what I've observed at SDO. I'm guessing the cleaners make $12.50/hour and the units are cleaned once per week. I don't think it takes two people more than four hours (8 man hours) total to change the sheets, vacuum and mop the floors, etc.

Where is property tax and insurance accounted for?

It's not, admittedly.

@Fatbaby52 Where do you live? You numbers are way off and I suspect that you may be living in a much lower cost of living city/state. The number on each line that you have listed is WAAAY below market at Scottsdale AZ area.

I'm in Las Vegas, which is probably cheaper than Scottsdale. Maybe I'm a bit low with the labor, but I think that I was overestimating the cost and replacement rate for things like furniture, appliances, and the water heater.
 

slip

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Condo financing is dependent on the association type and if any of the units are non-compliant for financing. I think its all or nothing with condo buildings. Co-op association type condos have no financing available. This was true a while back. Its been a while since our last condo.

I think it might be easier now to fiance a condo because FHA or HUD has recently started doing condo loans again. The building would need to be approved.

I was wondering if your condo bylaws allow you to use your condo as a vacation rental ?

Bill

Yes, I agree this could depend on the association and things probably have changed some over the years.

Yes, my association does allow both long and short term rentals.
 

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Regarding cleaning for 8 hours @12.50 per hour, this sounds about right. However, on top of the 12.50, you need to consider the worker's training, leave, health and retirement benefits, taxes, supervisor salaries, etc. So the real cost would be about double.

Now if you use illegals and pay cash, then your costs will be lower.
 

SmithOp

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I suppose it depends which state the ts is located and if staff is paid minimum wage. There will also be profit for the management company, got to satisfy the shareholders and pay those fatcat exec bonuses.


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theo

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Sorry if this is a dumb question- but can you help me understand how the hiring of management companies works for timeshares?

The answer varies. Independent properties, where the original developer is long gone and completely out of the picture and the HOA is now owner-controlled with a owner-elected BOD, can (and do) select and hire any management company with which they choose to contract.

”Chain” properties control the management company (typically, comprising their very own “peeps”). Needless to say, establishment, control and increases of maintenance fees are very different in these very different arrangements.
 
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