Why not just rent rather than buy

[ladycody Member Find all posts View Profile Close ladycody]

Let's look at the economics of buying. If I were to spend $20000.00 for a Marriott on Hilton Head compared to investing the $20000.00 would it make sense to buy? At 6% interest I would return $1200.00. Add $800.00 Management fee and I would have $2000.00 available to rent a unit. This is without any obligation to pay yearly fees. I know that rentals will increase yearly but so will Management fees. What would happen of the resort were hit with a severe hurricane . Would that increase the fees? Also I still have the $20000.00 principal. At what point does buying make sense? What discount to purchase price should I look for to make this formula work?

There are people who use their ownerships and get the equivelent of one week of travel per year. The mf's associated with ownership are not worth it to me for one week alone.

I may be a complete financial idiot...and I certainly would bet that there are some investment guru's out there that could do better with their money...but here's my take on ownership (someone who's not an investment guru or ever likely to be one).

Keeping in line with the above example ($20,000 invested with $2000 in returns/savings to spend on accomodations per year): Keep in mind that prices for accomodations will likely continue to inflate at a faster rate than most (non-guru type) investment options....so as time goes by, if that holds true, the return value on investment (number of vacation nights) would diminish over time.

My ownership would have cost about $20,000 when I bought it 3 years ago....so the comparison works.

With my expenses as an owner (mf's, renting, and bonus time travel costs), I've averaged about $950 per year in accomodation expenses for an average of 22 nts per year in 2br condos. I know that (if our kids were older and/or we were retired) we would be able to get ALOT more vacation time (like 4 to 6 more weeks per year) for an additional $1050 cash (which would total to the $2000 referenced in the above example) through the use of last call, getaways, and instant exchanges/trading. Someone who's not an owner would have to work very hard to accomplish the same thing (6-8 weeks of vacation in condos for $2000). JMO

So for me...I guess owning makes sense as long as I'm able to stay in 2br condo's for bargain basement motel prices. Right now I'd guess I average $43 per nite. If I worked it...I might be able to get a good hotel through priceline or in a TS on a last minute rental for that price...but I'd also be spending a good deal more on food as well (and hence less on activities) because we truly do use our kitchens when traveling for most meals.

When I'm able to run amok vacationing ...I expect my cost per night will go down even further. Hotels will go up and priceline's 50% off a hotel room will go up as well. I've actually researched this a bit (can you say obsessive?)..and believe that hotel rates, historically and on an average, double in price about every 10 years. Yes my MF's will go also up...but I'm betting they go up at a slower rate (esp when baby-boomers start retiring~which I expect to increase the rate of inflation in the hospitality industry at some point...just my opinion.) Between that and my eventual ability to take greater advantage of my ownership, I believe my ownership will continue to make sense for us.

I think most owners own without all the analyzing ...but vacationing wasnt something we ever spent money on...and when we decided to become owners and step out...I was hoping I did a good thing. I may be way off base with my thinking...but I'm outrageously happy with my ownership and what it does for us. Really, though....only time will tell....but wow I'm havin' fun.

[docdvm Junior Member Find all posts View Profile Close docdvm]

Ownership

What a great response! I am guessing that since you are spending $20000.00 and receiving 22 nights that you obviously purchased more than 1 week. What was your average cost per week sale? I assume you bought resale so did you purchase most at the same location? Did you buy from a resort that is close to your home? Do you mostly trade?

I am planning to visit 4 resorts traveling to 3 RCI resorts (Orlando, Ft. Lauderdale and Bahamas and then Hilton Head or possibly Myrtle Beach (Marriott) I then need to decide whether to buy or rent. Assuming that resale values are less than $5000.00 I could buy say 3 weeks for $15000.00 and then trade. You mentioned that your MF are less than $1000.00. That would suggest that either you have only 1 week or you rent covering some MF's Is that correct? 3 weeks would cost me over $2000.00. I cold say trade in off seasons for 5 weeks or maybe 6 but would still have $2000.00 MF If I add a loss of investment income for the $15000.00 the the $2000.00 would increase to closer to $3000.00, right?

If you rent a 2 bedroom for $850 off season the 6 weeks would come to much more ($5100.00) 3 weeks is $2550.00, about the same cost of owning or a bit less without the obligation to pay fees. Of course some people just head south and rent a house for a month which is even less expensive. Still it is not a fair comparison to staying in a resort.

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[opkansas Senior Member Find all posts View Profile Close opkansas]

Renting may be a better alternative in some cases and RCI's rentals not only hurt exchangers, but also can hurt developers. On my last timeshare presentation, I brought along a copy of RCI's rental page for the resort, which blew the salesperson's mind. I could rent cheaper than the maintenance fee without buying- how can you sell someone a week when that's the case ?

This might be a good ploy for someone going to a presentation- and might put pressure from developers on RCI's rental programs.

Tony, I WILL remember this!

[1950bing Senior Member Find all posts View Profile Close 1950bing]

By far please please rent than own. With renting, you will never encounter the yearly increases in ownership fees that will go up for sure !
After you rent, you go home free of any other costs and are free to go where you want next time. With ownership you are tied in forever with paying fee after fee. At the end there is the task of trying to dump the thing and you must accept no return on your investment. You will sell for much less just to grt rid of it,I know !
Don't forget B&B. I find them to be great and like them over t/s.

[BoardGirl Senior Member Find all posts View Profile Close BoardGirl]

No way I would ever choose a B&B over a timeshare. I don't go on vacation to share my precious time off with a pile of strangers. I want the privacy and to do whatever I want without having to pretend to be sorry to miss out on scheduled activities. and, of course, I want to deal with my own meals.

to each his own. that's why there are numerous choices.

[ladycody Member Find all posts View Profile Close ladycody]

docdvm...I own a point system (WorldMark)...and how I use the credits (unit size and season) will determine how much time I get out of them. My mf's run about $600.

We generally stay close to home...within driving distance we have about 10-20 resorts (ranging from a 3-9 hour drive)...although we are going to Cabo this winter in a PH for our anniversary. The amount of credits I own (12,000) would technically get me the equivalent of a week in a 3 bedroom unit in red season at most of the resorts nearby and would get me at least a 2br in most of the others I care to visit. My credits alone usually get me 10-12 nights because I do take one week a year in red season using them....so even if all I did was use my credits...I'd be averaging about $60 per night for 2br condos.

WorldMark also allows me to access bonus time, in which I pay a small fee to use resorts on spontaneous trips (book within 2 weeks of travel and based on availability). Between my credits and renting occassional distressed credits (from other owners that have credits that are going to expire) comined with bonus time...I do well using just my ownership.

For those that exchange and can travel on shorter notice(45-59 days) for week long trips...the options expand even further...because you can book an exchange in that timeframe for 4000 credits regardless of unit size. So...my 12,000 credits could get me 3 weeks in 2br gold crown resorts for a total expenditure of $1000-$1100 (mf's + echange fees) depending on which exchange company I use.

In addition, as an RCI member, I can access last calls vacations which are short notice and usually at off-season resorts or in areas that have a glut of TS accomodations (like mexico, spain, and florida...and the entire east coast for much of the fall, winter, and spring). The last calls are not a guaranteed commodity...I mean, they could go away or increase in price...but right now they average $179 per week for a 1br and up to $250-ish per week for a 2-3 bedroom.

I know a guy that's able to take advantage last call pretty regularly...his kids are grown and his schedule is relatively free. He and his wife have done studios and 1br condos on last call in Mexico for an average price of $20-25 per day. This past Oct they did 2 consecutive weeks in Mexico for a grand total of $258 spent on their studio accomodations (private jacuzzi too ). They also take bumps on their flights whenever possible and because of that, only had to pay taxes for their flight down ($101). Makes me green with envy....but someday I'll make him look like he stays home all the time. For me...there are usually last calls that are close to home for us during the fall, winter, and early spring, that we could choose to escape to...and at those prices...even if I dont use the whole week...I'm doing well price-wise.

Anyway...hope this helps some. There are lots of people able to do LOTS more with their ownerships than I do ...some own WM...some own other TS's. The universal truth is that for those who do get so much from their ownerships...learning their relative systems and how to work them is half the fun. Finding that deal you just CANT believe you got...or even looking at what you COULD get if you just had more vacation time (which just kills me)... is an addiction for half of us. I was thrilled with my ownership when I first got it..but am stunned by just how much I can do with it now that I've learned how to use it.

[ladycody Member Find all posts View Profile Close ladycody]

If I add a loss of investment income for the $15000.00 the the $2000.00 would increase to closer to $3000.00, right?

I dont understand this logic...and have heard it before...so would love to finally get it. We discussed investment...$20,000 in a fund vs $20,000 in ownership. The fund provided return which, added to one's expected mf's could then be used to travel. In both scenarios...financially...one would hope that at the end of one's traveling days...(I'm hoping at least 35 years )...that you have at least what you started with...either $20,000 or an ownership worth $20,000 on the market. Many people believe that provided the industry doesnt go down the toilet...their ownerships might be worth more after they've had years of travel. I, personally, could care less what it's worth on the market when I'm done as long as it holds use value for my children to use it when I'm done.

What I dont understand is the loss of investment income thing. You do get an immediate return on your money through ownership if you're using it properly when you factor in retail dollars not spent (savings)....dont you? I mean...when I factored retail value of the nights I've had so far...I came up with about $12000 and my total costs were under $3000...and I wasnt pricing 2br condos to pad the numbers...I was pricing hotel rooms with a few hotel suites thrown in. So cant I assume that I recieved $9000 in value from that 20,000 initial "deposit"? (at least...cause I likely saved another $3000-4000 on food.) It would have taken cash to stay those nights...which I wouldnt have spent because we cant afford to travel like that...but I still received the value of that cash equivalent...no?

The bottom line is...if you are going...then that money is being spent. The only way you can insure that you wont lose investment income is to stay home and not spend vacation dollars, so that the investment would grow. Not an option for me.

The idea here is to vacation...so no matter how you do it...you will be spending money that could have otherwise been invested and growing. The object, it seems to me, is to minimize the amount necessary to achieve the end result...to get the maximum amount of travel in nice digs for the least amount of money.

I just am not a financial wizard and wish someone could tell me where my logic...for me...falls short. Perry's tried and failed.

[1950bing Senior Member Find all posts View Profile Close 1950bing]

To me a stay at a B&B is much more private. There are usually 3 to 4 couples to get to know and at the end you have made new friends. That seems better than having hundreds of people to deal with. Plus, there is no one constantly wanting me to take a tour for hours at a time and loading up the phone with messages of stuff that I don't care about.. At B&B there are usually no loud kids that are all sticky.
When I'm off the last thing I want to do is to cook. I like trying the local taste and having everything fixed for me.
I don't understand the " pretend to be sorry " part but as you said,
" to each his own."
Give me a good B&B anyday. ( No maint.fee to pay )

[tonyg Goomba & Super Moderator Find all posts View Profile Close tonyg]

I do prefer a private bath, so B&B for me is an after dinner drink.

[docdvm Junior Member Find all posts View Profile Close docdvm]

Investment option

In an attempt to understand the costs of ownership to renting I believe it best to compare apples to apples. So let's say I rent a a 1 bedroom TS in Hilton Head for February and let's say 2 weeks. I believe the Marriott is a nice place and would sell the 2 weeks for over $20000.00 with, I believe MF over $1000.00 if you add in memberships (II) , etc. On the rental market I could likely get the TS for let's say $2500.00 which I believe is reasonable, No?

If I invest the $20000.00 for a 6 % return then I would generate $1200.00 albeit taxable income. I also avoid the management fee of $1000.00. Therefore is it worth tying myself into a contract for the rest of my life for a saving of a couple of 100 $$ at most. I also believe that I could rent the TS for less than $2500 in February so there goes the financial benefit.

From what we read on TS sales absolutely everyone suggests that the cardinal rule is to buy resale. Why? Because owners are taking a beating on resale letting their TS go so 20-50% off developer's prices. Why do you think that your resale will be worth more? Do you feel that 35 year old resorts will command higher prices? Do you think the special assessments when the resorts need refurbishing won't drive prices down? Add the fact that you will have no choice but to pay as that is your obligation.

So why should I buy instead of rent? Is it worth it?

[1950bing Senior Member Find all posts View Profile Close 1950bing]

I beleive you have answered your own ?

[BoardGirl Senior Member Find all posts View Profile Close BoardGirl]

To me a stay at a B&B is much more private. There are usually 3 to 4 couples to get to know and at the end you have made new friends. That seems better than having hundreds of people to deal with. Plus, there is no one constantly wanting me to take a tour for hours at a time and loading up the phone with messages of stuff that I don't care about.. At B&B there are usually no loud kids that are all sticky.
When I'm off the last thing I want to do is to cook. I like trying the local taste and having everything fixed for me.
I don't understand the " pretend to be sorry " part but as you said,
" to each his own."
Give me a good B&B anyday. ( No maint.fee to pay )

The pretend to be sorry part? That I don't want to get to know anybody!

I'm selfish with my vacation time and generally want to do what I want to do and not have to spend time with those 3 or 4 couples or the hosts, or be pressured to join the activities they have planned.

I don't end up dealing with hundreds of people at a timeshare, and in fact enjoy being anonymous.

I'm ok with maint fee for private accomodations and sleeping late, even if that means missing community breakfast. I like cooking and vacation is when I have the time to do it right.

We all like what we like! Luckily, everyone can find a vacation that suits them.


ps: I'm not a fan of loud sticky kids, either.

[BoardGirl Senior Member Find all posts View Profile Close BoardGirl]

So why should I buy instead of rent? Is it worth it?

If you look at only the financials, probably not, especially if the only resorts in consideration are the high-end, pricey, Marriotts.

For me, vacation quality, locations, amenities, having a plan over a year in advance, etc., make it worth it. Has it been worth it financially? Well, no, because we probably would not have taken vacations, and certainly not in such fine accomodations or exotic locations. We'd be camping, most likely, or bunking on couches of relatives. More likely, staying home to paint the house or clean out the garage. Is that better? No. Would that save money? Yes.

If I could go back in time would I undo our first purchase? NO WAY. I'm a healthier, happier person now that I've recovered from workaholism.

[wackymother Senior Member Find all posts View Profile Close wackymother]

In an attempt to understand the costs of ownership to renting I believe it best to compare apples to apples. So let's say I rent a a 1 bedroom TS in Hilton Head for February and let's say 2 weeks. I believe the Marriott is a nice place and would sell the 2 weeks for over $20000.00 with, I believe MF over $1000.00 if you add in memberships (II) , etc. On the rental market I could likely get the TS for let's say $2500.00 which I believe is reasonable, No?

If I invest the $20000.00 for a 6 % return then I would generate $1200.00 albeit taxable income. I also avoid the management fee of $1000.00. Therefore is it worth tying myself into a contract for the rest of my life for a saving of a couple of 100 $$ at most. I also believe that I could rent the TS for less than $2500 in February so there goes the financial benefit.

From what we read on TS sales absolutely everyone suggests that the cardinal rule is to buy resale. Why? Because owners are taking a beating on resale letting their TS go so 20-50% off developer's prices. Why do you think that your resale will be worth more? Do you feel that 35 year old resorts will command higher prices? Do you think the special assessments when the resorts need refurbishing won't drive prices down? Add the fact that you will have no choice but to pay as that is your obligation.

So why should I buy instead of rent? Is it worth it?

NO! I honestly don't think timesharing makes a lot of sense for you. For me, with a big family and limited vacation time, yes, it does make sense. But for you, no, I'm not seeing it.

[docdvm Junior Member Find all posts View Profile Close docdvm]

Link to similar discussion

I guess I am not alone in considering renting over buying. Another similar discussion:

Buying timeshares (even resale) - Buying, Renting, and Selling Timeshares Discussion Forum - RedWeek.com