The True Cost of Ownership

Financial planners around the world can still make numbers dance and sing that would show us that renting a house and investing the difference with them would be smarter than buying a home.  This approach needs to be tempered with the assumption that we would faithfully invest with the same regularity that we make our mortgage payments and most people simply aren’t that disciplined.  We may also wonder what rents will be when we’re no longer working.  We also need to remember that the planners are paid commissions on the funds we place with them and have probably used them to buy a house for themselves.

Similar calculations have been used for decades to sell timeshare.  Why rent vacations when you can own them?  There’s a case to be made for both approaches.  Of course if we’re just trying to stash away as much cash as possible, why squander it on vacations, evenings out, Christmas/birthdays.  Why not just hoard it all and assume we’ll live long enough to enjoy it sometime in the future?  And let’s not forget that the term “timeshare” says it all… you don’t own it, you share time with other people.  This is shared ownership… big difference.

Sunrise Ridge Waterfront Resort is a fractional resort development here in beautiful Parksville.  1, 2 and 3 bedroom, fully furnished condominiums in shares as small at 1/8 (there can be as many as 8 owners of any particular strata lot that share ownership, not time).  Seems like a small detail, but it’s a very important one.

Is it the cheapest way to vacation?  It depends.  You could go online and find what seem to be awesome prices on vacation packages around the world.  In order to do a comparison, you’d have to match quality, location, ease of use and more to make an accurate comparison.  In many cases you’d be comparing tomatoes to apples (apples to oranges is so 50’s).

Here’s a synopsis of the process I went though with prospective owners about purchasing a fractional share here..

The total for their Eighth Share (6 weeks of ownership) was around $35,000.  Here’s what they came up with during our discussions….

 

 

A) They paid more than that for their car which will continue to depreciate every year.

B) They would own real estate in a luxury resort in Parksville.  They wouldn’t be spending the money.

C) The money they’d be using was in the bank earning a whopping 2.4% interest (taxable)

D) They understood that most of the gain with real estate is equity gain, not rental income.  It just helps pay the on-going expenses.  But they’d also be using some of their ownership for their own vacations with family and friends which for them, had no dollar value.

E) They wouldn’t have the hassles that owning investment property normally involves.

F) They believe that Parksville will continue to attract renters with it’s temperate climate combined with a couple of million Baby Boomers across Canada starting to plan their own retirements.  They believed a large percentage of them would choose to rent rather than own.  They chose to be the owners, not the renters.  They also chose to own two separate Eighth Shares… one a Snowbird principally for themselves, and a High Season to share with their children and grandchildren.  They even put their children on title so it would pass directly to them after they went on the Big Vacation (their words!)

They’d been thinking about this for 8 years and had taken a couple of nice vacations, but also a couple of years when they didn’t get around to deciding anything.  Now they have.  How about you?

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