Would anyone be interested in a "real" timeshare?

[VacationForever]

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?

I will help you get the number to $62K in maintenance fees. There is a ton of usage of the unit unlike in a home. Higher electricity and water use, more wear and tear and breakdown of things in the units. You also need to add resort amenities into the cost - water, electricity etc.
Cleaning and lots of laundry - $300 per week - $15.6K per year
Handyman - $5K per year
Water and Sewer - $100 per month, Gas/Electricity - $500 per month. More guests more usage and less conservation. - $7.2K per year
Water Heater, not just changing out every 10 years, but also regular maintenance of it. $400 per year
HVAC. Change out every 10 years, twice a year checking and cleaning. $12K to replace, $200 per year to maintain. = $1.4K per year
Soft goods every 3 to 5 years - all furniture and linens. $4K per year
Major refurbishment every 10 years - bathroom, tiles, appliances etc - $150K per unit. $15K a year
General area upkeep plus refurbishment. $4K a year
Internet and cable services: $150 per month, $1.8K per year
Insurance: $1000 per year
Property Tax, say $120 per week : $6240 per year
Total: $61,640

 

[Jan M.]

If you've never owned a vacation home that you rent out you should talk to at least several people who do. Especially if you will need the money from the rentals to help cover the mortgage payments, utilities, upkeep, refurbishment, taxes, and insurance. If you don't live nearby you will need to use a management company. Ask how much they charge to come out to change a light bulb, for the call and the light bulb, when a renter calls to say one is out.

For 10 years we went to the Outer Banks, usually twice a year. Some years we went for a week at either Christmas/New Years or Easter. The two weeks in the summer evolved into a third week at a different house that we picked up cheap at the last minute and my friend and I stayed with the kids from all three families. There were only four houses that we stayed at a second time so over 10 years of all those stays we stayed in a lot of different houses through half a dozen realty/property management companies. I can't tell you how many times we got into a house to find not just one light bulb out but sometimes several. Sometimes there were other obvious maintenance issues too that the cleaners and checkers either didn't catch or didn't report to have maintenance take care of as part of the routine turn over day maintenance work. We wondered if they were told not to or maintenance didn't come out so the management companies get to charge more. Several times we had a refrigerator die and the management companies always replaced them with a bottom of the line GE pos at the cost of what a mid grade Amana or Kitchen Aid one would cost. My husband out of curiosity asked the head of maintenance why they put in junk refrigerators that don't last more than a couple of years. He was told the owners don't want to pay for better ones. Since the appliance store delivery guys had us sign for the delivery we saw the bill and knew how badly the owners were being gouged. If that wasn't bad enough we gathered there was a charge for maintenance to come out and do nothing more than confirm that the new refrigerator had been delivered and was working. They could have done that with a phone call to us.

People in our dinner group built a big house in the Outer Banks that they rented. They usually tried to be there at the same time we were there as their kids looked forward to having the kids from our three families to play with when we got together. From them and other owners we met over the years we learned many of the headaches of owning a vacation rental property and saw the wear and tear and damage you can expect. Owning a vacation rental property may suit some people but for us the timeshares are perfect.

 

[easyrider]

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.

This is so true regarding employee costs. Many people never think about how much it actually cost and they are surprised when it seems like too much.

Bill

 

[turkel]

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.

$500 for a bed? When was the last time you bought a decent bed? Your estimates seem unreasonably low.

 

[Fatbaby52]

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.

Thank you for this answer. I guess I did a poor job of articulating it, but that is what it feels like.

Not to pick on SDO, because it's a nice property in a convenient location (I'm headed there next week for Spring Training), but it just doesn't feel like $60k per year per 2BR unit is realistic. Assuming that there are 150 2BR condos there, that means that the management company is taking in $9 million per year. I know the pool has to be heated, mattresses need to be replaced, and rooms need to be cleaned, but it sure seems like there's a lot of margin there.

 

[Fatbaby52]

$500 for a bed? When was the last time you bought a decent bed? Your estimates seem unreasonably low.

I'm talking about just a mattress and box spring, not the full bed. I don't think the frame needs to be replaced all that often. I've done some consulting for online mattress sellers in the past, and I think that $500 is probably realistic for a company that's buying 300 of them at a time.

For comparison, the "Heavenly" is what Westin would call the mattresses used in the W hotels (at least in the past, I'm not up on this). On sale, these would get to consumers at about $850 shipped with the box springs. Other mattress sellers would have rough equivalents (directly from Serta or Seally or whoever made them for Westin) with the same features and coil counts that would go for just under $700 for a King set on sale. If we're assuming that Sheraton uses a step down and there are cost savings in picking up 300 at a time, or especially in ordering tens of thousands per year to be split across a bunch of hotels and whatnot, I think that $500 each is at least in realm of possibility. Maybe $600, but not enough to blow the whole model up.

 

[ski_sierra]

OP, there is a reason why many TS are sold for a dollar. MFs are too high.

It is easy to spend other people's money. Management companies have perverse incentives. Their fee goes up as the total operating budget goes up. I'm sure there is a lot of waste and inefficiency. MFs keep going up by more than inflation at a large number of places. Owners put up with it so they keep going up. Why should the management company focus on efficiency?

SDO weeks are often sold for $1 because the MFs are too high. I still bought at SDO as it is a cost-effective trader and what I get in return is more than my MF. Some people also stay at SDO and they find staying in 2 BR for a week for ~$1200 is good value.

It would be nice if there was an efficient management company. But I think the search for one might be like the search for an honest politician.

 

[VacationForever]

Thank you for this answer. I guess I did a poor job of articulating it, but that is what it feels like.

Not to pick on SDO, because it's a nice property in a convenient location (I'm headed there next week for Spring Training), but it just doesn't feel like $60k per year per 2BR unit is realistic. Assuming that there are 150 2BR condos there, that means that the management company is taking in $9 million per year. I know the pool has to be heated, mattresses need to be replaced, and rooms need to be cleaned, but it sure seems like there's a lot of margin there.

Vistana, now Marriott, takes 10% fee over actual operating cost, so technically the true cost is 90% of 62K - $55.8K, with $6.2K per unit per year, total of $930K per year for SDO. I am merely using your numbers to come up with how much it goes to Vistana/MVC which in turn covers their management expenses plus money back to the shareholders.

 

[CalGalTraveler]

Insurance skyrocketed in the Tahoe area after the Camp Fire. Some cannot even buy insurance and must rely on a state fair plan which is not good coverage and will only insure up to $1.5m. Calif property taxes are high too. It would not be uncommon to have $15k - $20k a year of maint expenses on a small cabin without amenities. If a condo has amenities, you can add onto that bill. On top of that if you are having to refurbish, reserves can significantly add up as trades are very expensive in the area.

Lastly, if we are headed into a recession where people opt to stay home, you still need to pay the maint fee bill regardless. If your goal is to have a week or two in Tahoe, just rent or get a timeshare and pay the MF premium (which is minimal compared to owning and having to shell out $15 - $20k+ even if you have no renters.)

 

[LannyPC]

OP, there is a reason why many TS are sold for a dollar. MFs are too high. SDO weeks are often sold for $1 because the MFs are too high.

It's also supply and demand. Sadly for the TS industry, there is not much of a demand for something that an owner must pay MFs for and when the amount of the MFs exceed what could easily be fetched for a rental. So using the SDO that the OP is mentioning as an example with $1200 MFs, if I can rent from an owner for $900 who can't use it and is desperately trying to rent it out just to recover some of the MFs, would it make sense for me to own there?

Conversely, if I own there, am paying $1200 in MFs, but for some reason can't use it one year, I would probably be doing jumping jacks if I found someone who would pay me $900 to use/rent it that week. Again, under such circumstances, would it make sense for me to own there?

 

[ski_sierra]

It's also supply and demand. Sadly for the TS industry, there is not much of a demand for something that an owner must pay MFs for and when the amount of the MFs exceed what could easily be fetched for a rental. So using the SDO that the OP is mentioning as an example with $1200 MFs, if I can rent from an owner for $900 who can't use it and is desperately trying to rent it out just to recover some of the MFs, would it make sense for me to own there?

Conversely, if I own there, am paying $1200 in MFs, but for some reason can't use it one year, I would probably be doing jumping jacks if I found someone who would pay me $900 to use/rent it that week. Again, under such circumstances, would it make sense for me to own there?

Supply and demand are related to high MF. To me the root cause of all these issues is the high MF. Many people wouldn't be selling if the MF was lower. If the MFs were lower, like let's say $500 for a 2 BR, then people would be willing to eat the MF for an occasional year.

The demand side elasticity with MF is probably not has high but I'm sure more people would considering owning if the MF was low enough.

The incentives of different players in this market make it a near certainty that MF will always be multiple times of what it takes to maintain a comparable whole ownership unit. You would think there would be economies of scale helping a large TS resort but it just doesn't seem to be the case.

I think that's why @Fredflintstone likes investing in TS development and management companies.

 

[Beachclubmum]

We have a secondary condo in a vacation area. One thing that seems to be missing is that you're mainly looking at current ongoing costs. A large portion of our monthly fees go to the Reserve Fund for big projects like new roof, painting the entire complex, updating dated landscaping, repaving the parking lots. This is to avoid (hopefully, never again) unexpected large homeowner bills such as the $20,000 assessment everyone received one year when the stucco all needed to be redone.

 

[Fatbaby52]

OP, there is a reason why many TS are sold for a dollar. MFs are too high.

It is easy to spend other people's money. Management companies have perverse incentives. Their fee goes up as the total operating budget goes up. I'm sure there is a lot of waste and inefficiency. MFs keep going up by more than inflation at a large number of places. Owners put up with it so they keep going up. Why should the management company focus on efficiency?

SDO weeks are often sold for $1 because the MFs are too high. I still bought at SDO as it is a cost-effective trader and what I get in return is more than my MF. Some people also stay at SDO and they find staying in 2 BR for a week for ~$1200 is good value.

It would be nice if there was an efficient management company. But I think the search for one might be like the search for an honest politician.

Sorry again for my naivete, but is there any way to break out of this?

Sticking with the SDO, even if the costs are inflated, it seems like ownership can be thinly positive if you're able to grab Spring Training, Christmas, and maybe a handful of other prime times (or trade, but again that's probably going to turn into a premium week unless the trading company is dumb). I'm guessing that what's happening is that a bunch of owners who aren't quick to reserve and end up with summer weeks are subsidizing the ones who book well.

But if half (or 2/3rds, or 1/3rd) of people are constantly getting the short end of the stick, what happens next? If there's no way to remove Vistana, and everyone is basically on contract until the heat death of the universe, it seems like the only thing stopping MF from getting ridiculous is the expected default rate. As long as people are "only" losing a couple hundred bucks per year, that's better than going down the default and credit report and whatever else route, right?

 

[VacationForever]

Sorry again for my naivete, but is there any way to break out of this?

Sticking with the SDO, even if the costs are inflated, it seems like ownership can be thinly positive if you're able to grab Spring Training, Christmas, and maybe a handful of other prime times (or trade, but again that's probably going to turn into a premium week unless the trading company is dumb). I'm guessing that what's happening is that a bunch of owners who aren't quick to reserve and end up with summer weeks are subsidizing the ones who book well.

But if half (or 2/3rds, or 1/3rd) of people are constantly getting the short end of the stick, what happens next? If there's no way to remove Vistana, and everyone is basically on contract until the heat death of the universe, it seems like the only thing stopping MF from getting ridiculous is the expected default rate. As long as people are "only" losing a couple hundred bucks per year, that's better than going down the default and credit report and whatever else route, right?

SDO is one of the lowest MF, if not the lowest, in the whole Vistana system. Default rate is very low at SDO.

If there are 150 units, there are only 150 units available in a particular week. Hence the introduction of the new point system - Sheraton Flex. All unwanted, defaulted weeks get rolled into it. One requires fewer points to book into summer weeks and more points for peak season. Vistana no longer sells weeks, only points.

 

[Fredflintstone]

It's also supply and demand. Sadly for the TS industry, there is not much of a demand for something that an owner must pay MFs for and when the amount of the MFs exceed what could easily be fetched for a rental. So using the SDO that the OP is mentioning as an example with $1200 MFs, if I can rent from an owner for $900 who can't use it and is desperately trying to rent it out just to recover some of the MFs, would it make sense for me to own there?

Conversely, if I own there, am paying $1200 in MFs, but for some reason can't use it one year, I would probably be doing jumping jacks if I found someone who would pay me $900 to use/rent it that week. Again, under such circumstances, would it make sense for me to own there?

That situation happens often. I am amazed how many times I get approached by my owner friends if I am interested in a certain week at a great 800 price point when they paid 2 k plus in MF. This is because they can’t go or points are about to sink if not used, etc.

That’s why I personally hate locked in contracts. Let’s face it...life happens and maybe you cannot vacation like you used to yet the MF is due now.




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[VacationForever]

There is certainly attractions with not owning anything. We cancelled our Hawaii trip due to not wanting to get on an airplane and now we are sitting on a whole lot of timeshare weeks and points that will expire next year.