Time Shares,Vacation homes, RVs

Time shares: No, don’t take the tour and sign up!

While this might seem like a good idea they are hard to sell once you are in. You will end up going to the same place over and over. Wouldn’t it be better to go to different places and stay at hotels? It will most likely be cheaper.

Calculate the cost per night versus hotel and Air bnb to see if it is really worth it. If you do insist on going to the same place over and over maybe your should buy a condo or vacation home in the area. Then you can rent it out when not using it. Plus it will be easier to sell than a time share and could appreciate in value.

Vacation homes: You should not be buying a vacation home if you don’t own your existing home. Once that is paid off we can consider this. You don’t need two mortgages at once.

People often think “hey I can always rent it out”. Well yes, but the best time to rent it out is probably when you want to use it the most, meaning the summer. No one is renting your beach house/lake house in the winter unless you live in Hawaii or Florida or it is close to a ski resort. Also, can the rentals really cover the full year of mortgage? Probably not. What about maintenance fees and repairs?

The only positive about vacation homes is that they might appreciate over time. Unlike….

RVs and trailers:

These are normally a bad investment. You pay the price, financing, insurance, maintenance and gas. Plus you may have to pay to park it and the gas/ electric hookup. The cost of usage per day is high. You may be better off staying in a hotel or motel from a cost standpoint. Also if you don’t have a place to park the RV you will need to pay for a place to store it. My HOA for example does not allow them. RVs also depreciate like cars well because they are like cars, well more like buses.

Example #1: Retiree Ronnie RV

Ronnie dreams of buying an RV to cruise around in for retirement. He prices out a new RV that meets his needs for $112,000.

  • Price: $112,000 class A gas model
  • Interest: 9%
  • Term: 10 years

Ronnie would have a payment of $1418/month! This is as much as poor Ronnie’s mortgage on the house he has not yet paid off. He plans to retire in five years to ten years. Ronnie also needs to rent a place to store the RV as his HOA does not allows RVs and the garage is too small. That adds $150 per month in a lot plus he has to pay the insurance of $200 per month. All in all he would pay $1769 per month.

Should RV Ronnie buy the RV for retirement? No way. He needs to pay off his house first and ensure he has enough saved for his golden years before he takes on the equivalent of a second mortgage on a depreciating asset.

Travel Trailers:

Travel trailers are cheaper to buy, don’t require insurance or much maintenance. You do however need a vehicle capable of towing them and a place to put them in your destination. Consider used if you’re going this route or maybe just avoid the hassle and stay in a hotel or Air bnb.

Example 2: Trailer cost per use for Tina Trailer

Tina Trailer loves the idea of getting her own trailer and going to the beach. She plans to buy a small trailer to tow behind her SUV. Let’s see if this is a good idea.

  • Cost: $13,000 with trailer hitch
  • Interest 9% over three years
  • Monthly payment: $413/month.
  • Total payments: $14,882 including $1882 in interest

This isn’t that expensive Tina thinks. It’s only another car payment. The problem is Tina already has a car payment on her SUV of $500/month. So her total payments would be $913/month.

Tina wisely decides not to get the trailer as she doesn’t want the extra payments and only goes three times a year anyways. She decides to Air bnb instead spending $600 total for the year instead of $4956. The cost per stay would have been a whopping $1652 per use.

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