Rent or Buy

Greetings Lisa.....With the recent promotion of rentals at Redweek.com can you give us the facts on how one decides to rent for a week versa buy a time share? Do you simply look at a weeks' rental versa the cost of buying plus the fees every year? What else should we consider...... At first glance rentals seem the path to take? Many thanks Joe

I'm not Lisa, but in this day and time, I wouldn't buy any timeshare as the vast majority can't even be given away AND when buying you're stuck with ever increasing maintenance fees and possible special assessments .... there are so many rental outlets now such as Redweek and that's the route I would take if I were you.

The only reason to buy is if you want a certain timeframe in a certain area at a certain resort and you want to go there every year (re: oceanfront, etc.). Be aware that it's much harder to sell a timeshare than to buy a timeshares, especially in this weak economy.

It's my opinion that the timeshare market will never return to what it was pre 2007 .... too many people have been burned and there's too many scams relating to timeshares that people are reading about ... people will not be using their disposable income for such luxuries as timeshares .... this weak and crashing housing/timeshare/recession market will not be forgotten any time soon.

This is a great time to buy. Period. Exccept maybe if you already own too many timeshares.

Mark my words. Timeshares are a bit like bonds, and a bit like cars. We all know how they are like cars, the moment you buy one direct it loses 30-80% of its value. But do you understand how timeshares are like bonds?

The purchase price of a bond is, among other things, affected by current interest rates relative to the rate the bond offers, and economic conditions of both the economy and the specific condition of the entity which offered the bond. - When general interest rates rise the price of the bond must fall so the effective interest rate paid to the owner is similar to current interest rates. Opposite when general interest rates fall. - When the economy becomes worse or better, this will also affect the price of the bond. US Treasuries for example are considered a safe haven and thus the price will rise in times of uncertanty whereas many corporate bonds can fall due to the same reasons since investors worry the corporation might not be able to meet its obligations. - The health of the specific entity which sold the bonds will likewise affect the bond price.

So how are timeshares like bonds? - The annual maintenance you pay (and special assessments) affects the value of a timeshare sort of like interest rate changes. What is your annual maintenance compared to though? I feel it's comparable to hotel and resort rates, but it is also comparable to the price owners receive for renting their units. Currently maintenance has been rising while hotel rates and owner rental rates have been falling. Thus, timeshares are worth less. In the next three years we will see lodging rates rise again and thus the value of our timeshares will increase (but see the other two factors). - We've all seen the condition of the economy, and I'm pretty certain we can agree buyers of resale timeshares are hammering for lower bargains now more than ever. And it's unfortunate that owners feed the reduction of timeshare value by helping others find bargains on auction sites and other super discount opportunities. But that is the nature of the beast. As the economy imporves, less owners will feel the need to sell and more people will want to buy more resale timeshares. Generally speaking this will cause many timeshares to rise in value (but see the next factor). - Finally we come to a very important factor. The specific condition and desirability of a unit, and how you are allowed to use the unit, and the condition of the resort or management. Even if annual maintenance fell and rental rates increased two or four fold, this last factor can still render a timeshare basically worthless. I feel the higher quality resorts will see value increases in the years to come and on a case by case basis many other resorts with desirable weeks or points systems as well.

I own too many timeshares, so it's a bit difficult for me to show I'm buying. But as I sell off my less desireable units and free myself fom the annual fees I'm buying higher end units because they are a bargain right now. And as the economy imporoves and rental rates increase I'll be glad I did it. You might be able to wait another year. I'm not buying all out right now. All I'm saying is do not be among the people who didn't buy, and five years from now end up realizing you could have bought now for thousands less (I'm talking abought the Marriott and SVO and other higher end resorts).

I don't believe the market for timeshares will ever be pre-2007 (when babyboomers flooded the timeshare market) .... too many people have been burned by this economy and all the scams involving timeshares are being outted, especially on the internet.

If I was in the market for a timeshare (which I'm not) I would buy resale only where I wanted to go every year in a certain area, at a certain time but I'd never buy a timeshare to rent .... to each his own.

Well, in 1-3 years we probably won't even remember this thread to see who had better foresight. But it's been my experience with investments and personal use items that the best time to buy is when a lot of people are taking about how something will never be as good as before, or talking about why it's a bad time to buy. It can certainly become worse but I look to the initial feeble attempts made recently by DA offices and a huge increase in owner awareness about poor developer / manager tactics as a sign we stand a good chance to see improvements in the industry in the upcoming years.

That's not an indication our maintenance will decline mind you...

peterp151 wrote:

This is a great time to buy. Period. Exccept maybe if you already own too many timeshares.

Mark my words. Timeshares are a bit like bonds, and a bit like cars. We all know how they are like cars, the moment you buy one direct it loses 30-80% of its value. But do you understand how timeshares are like bonds?

The purchase price of a bond is, among other things, affected by current interest rates relative to the rate the bond offers, and economic conditions of both the economy and the specific condition of the entity which offered the bond. - When general interest rates rise the price of the bond must fall so the effective interest rate paid to the owner is similar to current interest rates. Opposite when general interest rates fall. - When the economy becomes worse or better, this will also affect the price of the bond. US Treasuries for example are considered a safe haven and thus the price will rise in times of uncertanty whereas many corporate bonds can fall due to the same reasons since investors worry the corporation might not be able to meet its obligations. - The health of the specific entity which sold the bonds will likewise affect the bond price.

So how are timeshares like bonds? - The annual maintenance you pay (and special assessments) affects the value of a timeshare sort of like interest rate changes. What is your annual maintenance compared to though? I feel it's comparable to hotel and resort rates, but it is also comparable to the price owners receive for renting their units. Currently maintenance has been rising while hotel rates and owner rental rates have been falling. Thus, timeshares are worth less. In the next three years we will see lodging rates rise again and thus the value of our timeshares will increase (but see the other two factors). - We've all seen the condition of the economy, and I'm pretty certain we can agree buyers of resale timeshares are hammering for lower bargains now more than ever. And it's unfortunate that owners feed the reduction of timeshare value by helping others find bargains on auction sites and other super discount opportunities. But that is the nature of the beast. As the economy imporves, less owners will feel the need to sell and more people will want to buy more resale timeshares. Generally speaking this will cause many timeshares to rise in value (but see the next factor). - Finally we come to a very important factor. The specific condition and desirability of a unit, and how you are allowed to use the unit, and the condition of the resort or management. Even if annual maintenance fell and rental rates increased two or four fold, this last factor can still render a timeshare basically worthless. I feel the higher quality resorts will see value increases in the years to come and on a case by case basis many other resorts with desirable weeks or points systems as well.

I own too many timeshares, so it's a bit difficult for me to show I'm buying. But as I sell off my less desireable units and free myself fom the annual fees I'm buying higher end units because they are a bargain right now. And as the economy imporoves and rental rates increase I'll be glad I did it. You might be able to wait another year. I'm not buying all out right now. All I'm saying is do not be among the people who didn't buy, and five years from now end up realizing you could have bought now for thousands less (I'm talking abought the Marriott and SVO and other higher end resorts).

And, there are so many timeshare rental outlets now .... back when we bought timeshares there were very few internet rental outlets .... by the time we sold there were several including Redweek. And, when you rent you're not responsible for ever increasing maintenance fees and possible special assessments and worrying about selling it when the time comes .... it's MUCH EASIER to buy a timeshare than to sell a timeshare.

It's easy to sell a timeshare, it's just not easy to sell one these days for more than you bought it for ... I say this based on buying resale. To "sell off" a timeshare you have to bite the bullet and accept the fact you will sell it for less than what you bought it for. Some of my units where I paid $1,000-$8,000 I'm selling for $1-$1,000. But other units I bought for $500-$2,000 I'm selling for $1,500-$4,000. As I get out from under most of these, I'm trading up to Marriott, SVO, and I'm beginning to look around to see if I might find a fractional or upper elite timeshare.

I bought my timeshare for a very simple reason. I need to go see my parents every couple of years. I own an every other year timeshare in Branson. My parents go to Branson every year for a couple of weeks total. If I can't make it, they use it. And when I can, as I just got back yesterday from using my week with them, we have a wonderful time, just being with one another, plus the added attraction of having music shows etc. to go to during the day and evening. For me, the money factor is not as important as the chance to be with my parents. Of course I could exchange my timeshare, but I won't as long as my parents are alive and able to go. It was so wonderful, just rocking on the porch, talking to my mom and watching the wildlife that still comes down among the houses, even though there are lots of folks around. We saw bats and butterflys, bluebirds and buzzards, mom and dad saw a fox and mom saw a skunk wandering thru the creek gully by our cottage. How can you put a price on this?

josephm171 wrote:

Greetings Lisa.....With the recent promotion of rentals at Redweek.com can you give us the facts on how one decides to rent for a week versa buy a time share? Do you simply look at a weeks' rental versa the cost of buying plus the fees every year? What else should we consider...... At first glance rentals seem the path to take? Many thanks Joe

I think the primary factor in making this type of decision is the expectation of savings in the future and convenience.

Right now a lot of people are basing expectations an current conditions where rentals can be had for less than maintenance. and this is an excelent example of why not to own. In a bad economy the renter can get better pricing than the owner. However, that is short sighted since in good economies the owner has better pricing.

Convenience is another matter entirely. The renter has an advantage in the fact they can choose any available unit for rent at any given time, and for planning less than 2 months in advance it is far more likely the renter will find a unit to be available. just remember that in good economies the renter will be paying a lot more, especially if traveling in a high demand location/season. The renter also doesn't have to pay the obligatory annual costs, or can choose to shop around or change to a less expensive location/resort rather than pay - they can also choose to not travel and then don't incur any cost.

But I also feel owners have great convenience. They get to choose the best units/locations on thier schedule when planning in advance, or they take advantage of thier fixed week/unit such as an Ocean Front New years week - often this component is not as available to renters because most units aren't rented out. Owners also can get better deals when exchanging, especially when the opportunity to split a lockout unit allows the owner to get two 2BR units out of the split. This provides affordability and selection which the renter is not as privy to.