I recently sat in a sales presentation at a Marriott Vacation Club so I could earn a free trip snorkeling on the catamaran. As I sat there listening to the sales pitch I had a lightbulb go on and I wanted to find out if anyone else has come up with the same idea, or if anyone has tried it. I'm new here so I'm sorry if this has been discussed, but Brandon invited me to post this here:
Marriott now sells "Vacation Club Points" instead of timeshares. You don't purchase a deed to a specific property, you purchase the deed to a number of points. With those points you can then "rent" a vacation property that is part of their network. The points renew each year, so if you buy 1000 points, you have 1000 points to use towards vacations each year. You are essentially participating automatically in a property exchange (like Interval International if you are familiar with timeshares). With Marriott now you don't need to be a part of II, you simply buy points and turn them in when you want to go somewhere.
There are 3 levels of ownership depending on how many points you own. The highest level is Premier Plus, for people that own over 13,000 points. The advantage of being a Premier Plus member is that you are treated like a king when it comes to reserving a property. You have first dibs on any property you want, 13 months in advance.
The concept is this: You reserve the highest valued property well in advance. Then you rent the week to someone else, using airbnb, craigslist, or redweek.com (which is created for this purpose), for a profit. The highest week on redweek goes for $12,500 that I saw. This week is at the Ritz on St. Thomas over over Christmas. To rent this week as a Premier Plus member costs 6,000 points. If you bought 13,000 points to become a premier plus member, you can rent 2 villas at the Ritz over Christmas week (costing you 12000 points), and then rent those 2 weeks out for $12,500 each (earning you $25,000). You can also bank points for 3 years so with your excess (extra 1000 points/year) you will have 3000 points after 3 years to rent a different week to re-rent, or double the whole scenario so that every 3 years you'll have 6,000 points and be able to reserve a third week earning an extra $12,500 that year.
There are maintenance fees associated with the points. You have to pay 45 cents/point each year. This equals $5,850 if you bought 13,000 points. Of course there are income taxes to figure in, as well as interest if you take out a loan for the points up front. Other than that though, how is this structure different from rental property other than not dealing with depreciation on a brick and mortal house, or bad tenants? (Marriott is fully supportive of this use of points. They also said that they take the credit card of the vacation renter upon checkin to pay for added room charges and liability). This seems like a huge improvement on the rental income game. Any thoughts?
Welcome to Bigger Pockets.
Your idea is a very interesting arbitrage opportunity. Because you've already paid for your points, and your guest leaves their CC on file, and Marriott is not assuming too much risk. The only risk your assuming is being able to find a tenant.
I've met one person, at a meetup, who's done this with some successes. He owns Christmas weekend for a timeshare in Cabo San Lucas. He uses a local property management company to screen tenants, and he's been booked solid for the last couple of years.
By using a PM, he gets around of the reputation problem of listing a timeshare on Airbnb/VRBO.
One issue of filling your timeshare with the sharing economy is reputation. On websites like airbnb and VRBO, hosts build a good reputation though the reviews of past guests. If you are only hosting for one week a year, it becomes hard to build a reputation.
A handful of operators on airbnb are doing listing their timeshares already. There about 20 people renting timeshares in Cabo San Lucus. Here is the text for one of the listings.
This is a 1 week timeshare - SELECT YOUR DESIRED DATES & I'LL CHECK AVAILABILITY. The earlier you inquire, the greater likelihood of finding your desired week! Cabo is a popular destination so space is limited.
Redweek has a forum where people discuss arbitraging timeshares like this.
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