Buying a condo -> Turning it into a timeshare?

H

Human

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Nov 24, 2009
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I've been lightly researching the possibility of this. Find a beachside condominium in a highly touristed area, take out a mortgage to get it. Advertise like crazy and turn it into a timeshare.

Was debating doing this in Daytona Beach in the next five years or so. Ran a little scenario, and here's what I came up with:

Grab this place up: 350 Atlantic Avenue - Daytona Beach, FL - Ocean Walk - MLS 515121 - 386 Real Estate

$250,000

Estimating $10,000 down payment, so $240,000 mortgage, 20-year monthly fixed-rate, 6% interest, $4,000 yearly property tax and $1,500 yearly homeowner's insurance.

That's a $2,178 monthly mortgage payment. Add in $20,000 for furniture and renovations and such, and I'm looking at an initial investment of $30,000 (plus payments to get it inspected, timeshare specialist, etc) and monthly payments of $2,500 (estimating $322 per month for cleaning and maintenance related expenses).

Estimate I charge $1,200 per week in the spring/summer months and $750 per week in the fall/winter months, plus $1,500 per week for Bike Week and the Daytona 500.

Now I estimate that in one year, I get timeshare owners for the two busy weeks ($3,000 total), 16 out of 24 of the spring/summer weeks ($19,200), and 12 out of 24 of the fall/winter months ($9,000). That's estimating low. These things fill up.

That's income estimated of $31,200 for the year. My expenses would be $30,000. The remaining $1,200 would go into the mortgage, plus some additional income if the number of renters increases.

I know these are just rough estimates, but here are my questions:

1) Is this more trouble than it's worth, i.e. just rent it out at $3,000 or a little less per month and keep the profits?

2) Is there some kind of special steps to take to get started selling timeshares on owned property?

3) I'm 21 years old. Would I ever get approved for a $240,000 mortgage?

4) Has anyone ever done or thought about doing something similar?

Thanks!
 


Now that I wrote all that out, it seems like more trouble than it's worth. I might just search around and look into buying and renting, then using the profits to repeat the process until satisfied. Deal with just one renter, instead of 30+.
 
The problem with one rental house. Your occupancy is either 100% or 0%.


Def start smaller for less risk

Look for foreclosures that you can buy for $30k renovate and then rent for $50k

A lot of bad credit renters are fucked or fucking stupid.

Example some pay $600 a month on a rent house rather than getting a $300 a month mortgage because the bank won't lend them money or they don't understand that owning would be better.

This would increase your margin of profit.
 
Property taxes are a lot higher than that if you're an out of state resident and/or it's not your permanent residence. That's why it costs 2.5k/mo to rent something nice downtown when it only costs 250k to buy. On a 30yr mortgage @ 5% that's like 1.2k (guess). At first it appears very attractive from the buy and rent perspective but once you consider taxes, absurd condo fees, insurance (hurricane) etc..... and that's why Miami and a lot of Florida has a ton of vacancy and properties at half their original value.
 
The numbers wouldn't work in your favour. Unless you get a foreclosure or property off auction and do it up yourself, you won't have a positive equity and expenses would kill you.
 
Human said:
I've been lightly researching the possibility of this. Find a beachside condominium in a highly touristed area, take out a mortgage to get it. Advertise like crazy and turn it into a timeshare.

Was debating doing this in Daytona Beach in the next five years or so. Ran a little scenario, and here's what I came up with:

Grab this place up: 350 Atlantic Avenue - Daytona Beach, FL - Ocean Walk - MLS 515121 - 386 Real Estate

$250,000

Estimating $10,000 down payment, so $240,000 mortgage, 20-year monthly fixed-rate, 6% interest, $4,000 yearly property tax and $1,500 yearly homeowner's insurance.

That's a $2,178 monthly mortgage payment. Add in $20,000 for furniture and renovations and such, and I'm looking at an initial investment of $30,000 (plus payments to get it inspected, timeshare specialist, etc) and monthly payments of $2,500 (estimating $322 per month for cleaning and maintenance related expenses).

Estimate I charge $1,200 per week in the spring/summer months and $750 per week in the fall/winter months, plus $1,500 per week for Bike Week and the Daytona 500.

Now I estimate that in one year, I get timeshare owners for the two busy weeks ($3,000 total), 16 out of 24 of the spring/summer weeks ($19,200), and 12 out of 24 of the fall/winter months ($9,000). That's estimating low. These things fill up.

That's income estimated of $31,200 for the year. My expenses would be $30,000. The remaining $1,200 would go into the mortgage, plus some additional income if the number of renters increases.

I know these are just rough estimates, but here are my questions:

1) Is this more trouble than it's worth, i.e. just rent it out at $3,000 or a little less per month and keep the profits?

2) Is there some kind of special steps to take to get started selling timeshares on owned property?

3) I'm 21 years old. Would I ever get approved for a $240,000 mortgage?

4) Has anyone ever done or thought about doing something similar?

Thanks!
Click to expand...

I don't get your numbers. So you are charging $1,200 per week spring/summer. Is this to purchase the timeshare (i.e. one off payment)? What would the maintenance costs be for the buyer (this would be the income). What it looks like you are trying to do it short term rentals not timeshare. Maybe I am not seeing something or understanding how timeshare works over there.

Here it works like this, you pay $x,xxx amount to purchase the right to use that week in perpetuity (usually like $5-10k) and then pay annual "maintenance" dues (say around $500 a year per week). So the idea is to pay for the condo outright plus a profit with the initial money and then ongoing profits from the maintenance.
 
Human said:
I've been lightly researching the possibility of this. Find a beachside condominium in a highly touristed area, take out a mortgage to get it. Advertise like crazy and turn it into a timeshare....
Click to expand...

A friend of mine (in his late 50's now) started like that back in the 80's when timeshare was booming over here in canary islands.

He began with a few studios, then a few apartments, eventually buying out the whole complex and expanding from there on into many other related ventures.

However:

He had investment money to start with.

He had the right contacts in the industry.

He had experience property-wise, since he essentially used to flip properties in the uk over and over for a living.

He is now extremely wealthy, although if you saw him you'd think otherwise.

Point being, not all plans go accordingly, he slogged to get it, he nearly lost it all a few times.

I dont know the reputation timeshare has over there, but here it has a hard reputation.

One thing that made him stand out was the fact that he had a personal rapport with each and everyone of his customers. In fact, most of his recurring clients would only deal with him personally. Most other companies are very aggresive in the sales division, looking for a quick sale.

.:: Club Olympus Resort ::.
 
This is actually called a condo-hotel (except you're the operator) and I think you'd have a hard time with any HOA once they see what you're doing. Also, I don't know why a bank would give a 21 year old a loan for non-owner occupied property in Florida unless they just want to relieve the last real estate crash. LMAO
 
Human said:
Estimate I charge $1,200 per week in the spring/summer months and $750 per week in the fall/winter months, plus $1,500 per week for Bike Week and the Daytona 500.
Click to expand...

Move a little further south, switch your seasons (winter is better down here), and find something in foreclosure. Plenty of 60k-80k waterfront (inter coastal) condos (2br). Hustle and pay cash, less risk if you can find a deal and come up with most of the flow. Timeshare to me sounds like to much headache, you can rent for a decen price and have 1000p/month coming in for life. Get a property management company to handle all of the work (they usually take 10% of the lease).
 
You're going to need more than $10k down also. 20% is the norm for "investment" properties nowadays. I think the only way you'll get any home without 20% is to do a FHA loan. They allow as little as 3% down but it has to be your primary residence.
 
Hav3n said:
The problem with one rental house. Your occupancy is either 100% or 0%.


Def start smaller for less risk

Look for foreclosures that you can buy for $30k renovate and then rent for $50k

A lot of bad credit renters are fucked or fucking stupid.

Example some pay $600 a month on a rent house rather than getting a $300 a month mortgage because the bank won't lend them money or they don't understand that owning would be better.

This would increase your margin of profit.
Click to expand...

People also rent, because they don't want to be tied to an area. For example I live in Las Vegas. I moved here knowing I wouldn't live here for more than 5 years. I'll either be moving to Oklahoma, Texas, or San Diego pretty soon. It's looking like I'll be moving to SD and if that happens I'll only be living there for a couple years. So I won't buy a house there either. After that I plan on moving to either Texas or Oklahoma where I will buy a house, because I'll be there for a very long time and don't mind being tied down to an area where all my and my wifes family live.
 
ibroke said:
Move a little further south, switch your seasons (winter is better down here), and find something in foreclosure. Plenty of 60k-80k waterfront (inter coastal) condos (2br). Hustle and pay cash, less risk if you can find a deal and come up with most of the flow. Timeshare to me sounds like to much headache, you can rent for a decen price and have 1000p/month coming in for life. Get a property management company to handle all of the work (they usually take 10% of the lease).
Click to expand...

Yeah, everyone knows how easy it is to buy INTRAcostal condos along the water around here for 60-80K...

I mean, totally ignore the fact that banks list them at market price down here since they'll get snatched up in days and that they normally cost three times as much and up for a crappy building.

Good plan! :thumbsup:


http://miami.craigslist.org/search/rea?query=intracostal&srchType=A&minAsk=&maxAsk=&bedrooms=2


P.S. I wish condos were that cheap around here, I wouldn't of paid what I did for a house then.
 
crackp0t said:
People also rent, because they don't want to be tied to an area. For example I live in Las Vegas. I moved here knowing I wouldn't live here for more than 5 years. I'll either be moving to Oklahoma, Texas, or San Diego pretty soon. It's looking like I'll be moving to SD and if that happens I'll only be living there for a couple years. So I won't buy a house there either. After that I plan on moving to either Texas or Oklahoma where I will buy a house, because I'll be there for a very long time and don't mind being tied down to an area where all my and my wifes family live.
Click to expand...


You're not the renter I am talking about.

I know of some $30k rent houses (aka dumps) that have had the same tenants in them for the last 15 years, paying about $600 a month in rent.

They can't or won't realize the economics of the situation and buy or leave the house.
 
I used to live there. The parking is an absolutefuckingnightmare. That hotel gets fucking packed, and it's fairly nice but you can find better for the same price.
 
I have never bought any property before but I've looked into it a lot.

1. From what I understand, you're going to struggle getting into a non-owner occupied property with less than 5% down. I believe the standard is 20% on investor property these days. But real estate can be a creative thing so I wouldn't consider this set in stone by any means.

2. There's a conservative rule of thumb for vacation property owners: 12 peak weeks should pay your annual mortgage. What you rent in your off weeks should cover your other expenses plus some profit.

3. You make money when you buy real estate at a discounted price, it's probably not wise to shop the MLS if you're looking to make a profit.

4. I live in a place where they sell timeshares and they're a really hard sell. I don't think its the kind of thing where you could casually offer it and people would take you up on it (this could totally depend on your market, idk...but there's a big reason they give people TVs to go to to timeshare presentations). You might look into fracational reserve ownership as a fairer alternative.

Human said:
Now that I wrote all that out, it seems like more trouble than it's worth. I might just search around and look into buying and renting, then using the profits to repeat the process until satisfied. Deal with just one renter, instead of 30+.
Click to expand...

5. If you wanted to get into residential buy and hold then check out biggerpockets forums. There's a lot of guys especially out in the midwest that do very well with rentals. They have a rule of thumb over there called the "50/2" rule. Your total expenses shouldn't be more than 50% of your gross income, and your rents should be roughly 2% of your total purchase price.

GLB
 
Don't know, but myself, if I was doing something like that I'd be gearing myself towards business travelers, not vacationers.

1.) They have T&E accounts, corporate credit cards, etc.
2.) Much less of a chance they're going to get blind drunk, and trash the place.
3.) Most people would prefer a nice 1bdrm condo with kitchen vs. a hotel room. Find them.
 
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