Maintenance Fees

[bournehall]

List,
I am a newbie to the TS concept. Went to a Bluegreen presentation this past weekend. It seemed to be a scam with the price they were charging. I do have a question on MF's. They said at the resort that when the development is 51% completed the owners take control of the admin., therefore the owners are in charge of the MF's. I find it very difficult to believe that one small condo e.g. takes $500 per year per week to maintain (to include the resort). 50 weeks time $500 is $25,000 per unit per year for maintenance. Why on earth would owners OK this amount of MF's or is the company simply pocketing a ton of cash?

[Dave M]

That's about typical as far as MFs go.

Yes, $25,000 for upkeep on what amounts to a single condo seems like a lot. However, the expenses are not the same as for a condo that you live in all year long.

I live in a condo as my primary residence. I pay $547 per month to the homeowner's association for landscaping maintenance, maintenance of the property (including amenities such as tennis courts and swim pool), a reserve fund to replace roofs, decks, sidewalks, building siding, parking lot pavement and a host of other "common area" items that need replacing from time to time.

In addition, I have my own property tax, owners' insurance, heat, electricity, water, phone, cable, etc. that I pay for myself. That adds about $800 per month to the costs. Property tax alone is about $350 per month of that. I haven't added in my costs for furniture and supplies.

Thus, before I consider the additional costs that I would pay if my condo were a timeshare, I'm up to about $1,350 per month or $16,200 per year!

Now for the timeshare resort, you have to add in the costs for a reservations staff (for a floating-weeks resort), accounting, billing, housekeeping, the cost to maintain and repair the inside of each unit, the cost to replace furniture, carpeting, drapes and other items inside each unit, a newsletter (for some resorts), the profit for the outside management company that will handle much of this stuff, check-in staff, an annual audit, legal costs, tax returns and a host of other expenses that are associated with a residential property that hosts a transient population.

Thus, the surprise (for me) isn't that the total costs are an extravagant $25,000 per unit. The surprise is how well the developer (and eventually the HOA) is able to pay for everything and still keep fees as reasonable as they seem to.

Still, what's reasonable for one resort may be at a much different plateau for another. There are numerous resorts where the fees per week are in the $300 range. There are also quite a few where fees per week exceed $1,000. The differences can be attributed to different amenities, different levels of luxury, difference in costs in various geographic areas and many other reasons, including occasionally, yes, mismanagement.

[Jya-Ning]

If you look at a normal condo 's fee against this, look high. But if you look closely then you will realize this is very reasonable even if you are running the show.

A pool open from 10: am to 10m probably need 2 to 4 lifeguards to take turn. When you check out, the clean lady come up and pull all the stuff out and clean the room, it probably will cost $50. Then you add one or 2 supervisor there. There will be $100 there

The norm condo does not work like hotel, the front desk does not have people there to cut you a key, check-in and check you out. Also it will have no activities unless the condo's HOA volunteer. There will be another $100 here

The norm condo's condo fee does not include interior expense. Add sofa, bed, Window dressing, paint, TV, bathroom, tower, soap it will be another $200 here.

A norm condo does not pay each units' own electric bill, water bill, gas bill, it is $50 there.

A norm condo that usually charge about $200 per month in condo fee, so it is another $50 per week here.

Add all these, you get a $500 condo cost per week, if you just try to maintain it at low profile.

Jya-Ning

[aliikai2]

That $500 a week includes new furnishings, linens, property taxes, front desk staff, cleaning crew, lawn/garden staff, pool maintenance, etc.
Then and on the electricity, water, sewer, phone service, a staff to handle reservations, it all adds up.
Try to rent a hotel suite that has a kitchen and sleeps 4 for a week for $500!!!

It sounds like you need to spend some time reading and learning about how a timeshare may or may not work for you, before you buy anything.

For us it makes great sense. We spend our 6-8 weeks a year in units we own, at various Ocean Front resorts and enjoy it immensely.
Does it cost us more that a Motel 6 inland somewhere??? Of course it does, but we are in very nice 2 bedroom suites on the ocean, with full kitchens and nice surroundings.
My folks used to RV, and to save money they would park in Safeway lots at night. This just isn't my idea of a vacation.....

fwiw, Greg

[BocaBum99]

I've done the actual cost analysis of the total maintenance costs of a Condo Hotel unit I considered as an investment property. I was amazed at how much it cost. Housekeeping and furnishings were huge.

Dave M did a great job explaining it.

[bournehall]

I see more clearly now. I never thought of ALL the expenses. Thanks for your reply.

Originally Posted by Dave M

That's about typical as far as MFs go.

Yes, $25,000 for upkeep on what amounts to a single condo seems like a lot. However, the expenses are not the same as for a condo that you live in all year long.

I live in a condo as my primary residence. I pay $547 per month to the homeowner's association for landscaping maintenance, maintenance of the property (including amenities such as tennis courts and swim pool), a reserve fund to replace roofs, decks, sidewalks, building siding, parking lot pavement and a host of other "common area" items that need replacing from time to time.

In addition, I have my own property tax, owners' insurance, heat, electricity, water, phone, cable, etc. that I pay for myself. That adds about $800 per month to the costs. Property tax alone is about $350 per month of that. I haven't added in my costs for furniture and supplies.

Thus, before I consider the additional costs that I would pay if my condo were a timeshare, I'm up to about $1,350 per month or $16,200 per year!

Now for the timeshare resort, you have to add in the costs for a reservations staff (for a floating-weeks resort), accounting, billing, housekeeping, the cost to maintain and repair the inside of each unit, the cost to replace furniture, carpeting, drapes and other items inside each unit, a newsletter (for some resorts), the profit for the outside management company that will handle much of this stuff, check-in staff, an annual audit, legal costs, tax returns and a host of other expenses that are associated with a residential property that hosts a transient population.

Thus, the surprise (for me) isn't that the total costs are an extravagant $25,000 per unit. The surprise is how well the developer (and eventually the HOA) is able to pay for everything and still keep fees as reasonable as they seem to.

Still, what's reasonable for one resort may be at a much different plateau for another. There are numerous resorts where the fees per week are in the $300 range. There are also quite a few where fees per week exceed $1,000. The differences can be attributed to different amenities, different levels of luxury, difference in costs in various geographic areas and many other reasons, including occasionally, yes, mismanagement.

[timeos2]

Where the scam portion of timeshare ownership is far more likely is in the purchase price not the on going fees. As shown here it is easy to track where the money goes each year and the results (or lack of them) if they are mismanaged or under funded (poor maintenance, no upgrades and dissatisfied owners/guests if too low). On the other side the purchase cost is lost money. Buying a timeshare for $1 or $25,000 does nothing to make the overall experience better. In fact the higher the original expense the more you begrudge the necessary on going fees that will actually make your resort better. That purchase money paid to the developer only covers the original cost of construction and their profit. The resort is already "using up" those investments from the day the doors open and needs cash flow to sustain itself going forward.

Now no one should think that a developer doesn't deserve a fair profit from the major risk involved in building a resort. But the model that has evolved that requires 50% or more of the original purchase cost to go to marketing and other lost expenses means that few if any timeshares make sense to buy at retail. But it also opens the door to the knowledgeable buyer who swoops in after the depreciation kicks in to pay pennies on the retail dollar and then the true cost - the annual fees which are the same for both types of buyer. The timeshare concept is a great one especially if you buy a good resort or resort group at resale pricing.

[Theo]

I am not disputing the statement, but I am curious to know how/where you have come to obtain and cite "50% or more of the original purchase cost to marketing and other lost expenses".

You might very well be correct and I am not (and do not claim to be) in any position to dispute the statement. I would just like to know where the claim originates and/or what backs it up.......

[T. R. Oglodyte]

Originally Posted by Theo

I am not disputing the statement, but I am curious to know how/where you have come to obtain and cite "50% or more of the original purchase cost to marketing and other lost expenses".

You might very well be correct and I am not (and do not claim to be) in any position to dispute the statement. I would just like to know where the claim originates and/or what backs it up.......

That number has been pulled from financial reports of some publicly traded companies where timeshare sales info can be extracted from the financial. You will probably also get a similar number if you take a unit at a typical timeshare project, project what the developers gross revenue would be for selling the units, then compare that with what the unit would sell for if it were whole ownership.

For example, consider a developer building ocean front condos in Hawaii that would sell for $1,000,000 each average in whole ownership. If a developer markets that as timeshare, the developer will sell 50 slices of each condo for about $40,000 each, grossing about twice as much as if the project proceeded as whole ownership. The end returns on the project aren't that different - if they returns were significantly greater in TS developers would build more timeshares instead of whole ownerships. So much of the difference goes to marketing and lost costs.

There are also some timeshare projects that have eschewed the traditional marketing practices, and their sales prices have been about one-third to one-half of developer pricing for similar units in the area.

Obviously a developer who can sell timeshares for less cost is going to find the market much more profitable. Conversely, a developer who looks at the timeshare market but doesn't know how to set up and run a TS marketing organization will take a beating.

[BocaBum99]

Originally Posted by Theo

I am not disputing the statement, but I am curious to know how/where you have come to obtain and cite "50% or more of the original purchase cost to marketing and other lost expenses".

You might very well be correct and I am not (and do not claim to be) in any position to dispute the statement. I would just like to know where the claim originates and/or what backs it up.......

It is an industry wide and well recognized number. Cost of Sales and Marketing (and some include overall G&A) for resort developers is roughly 50% of sales. All you need to do is look at the income statements for publically traded timeshare companies.

A more normal percentage cost of sales and marketing is 15% of well established companies. It's a lot higher for startups who need to establish a brand and have relative low sales volume.