Cabo timeshare rentals; every sales person promises you the world, but reality is something entirely different. We’ve all been there, that moment during the presentation where the timeshare sales person draws some version of the chart to the right. You see, if you’re going to vacation every year, then purchasing a timeshare is ultimately cheaper than renting every year. The chart is data I collected from credible sources, and given the averages, that timeshare sales person is correct. If you travel and rent a hotel room every year for 30 years, it would be cheaper to buy a timeshare and pay the maintenance fees.
Here’s where the honesty in that story ends with Cabo Timeshare Rentals. I say Cabo, but really I mean anywhere in a Mexican resort area, and it is specific to Mexico because of Right To Use contracts. Every tour I’ve ever been on had the same pitch, “these villas are in very high demand, and you can easily rent your week for $xxxx (where xxxx is rack rate”).
Of course, anyone who has been in the Cabo Timeshare Rental business knows, the rates at which the sales people say we can rent our units is a dump truck load of…
Valuing Your Cabo Timeshare Rentals
While you’re never going to get rack rate, you can certainly rent your unit out for a price commensurate with your costs. In the chart to the right, I used fair market value for the rental rates. Had I used hotel rates, the rental rate would have been 3 times higher, and the break even point hits at year 4 instead of year 12. That said, it’s pretty easy to get the current market rate for any timeshare using Redweek.com if you’re a member. If I take those market rates, and subtract them from the purchase sum for X number of years, the inflection point moves left rather quickly. If owners simply raise their rent at the same rate as maintenance fees, and rent 6 weeks over their 30 year RTU, they can shave another 4 years off of the rent vs. buy inflection point.
It is important to understand exactly how much one of these right to use timeshares is going to cost you over the life of the contract. You need this information as the basis for determining a fair market value rental rate for your unit. Failure to keep rents high enough results in many problems, as I described in article: Right To Use Timeshare: Why Renting for Maintenance Fees is Like Lighting Money on Fire.
This is where things get a little tricky. Anybody who has spent more than 5 minutes on the Cabo Friends @ Solmar Facebook Group is aware that there are contract owners out there who are willing to rent for maintenance fees. You can also find these on Redweek,VRBO, and others. This isn’t the post for that debate, but realize there are plenty of people who do this and using their prices will impact your evaluation of FMV. In my opinion, a rental rate that ensures you are getting a better value from your purchase, versus renting, occurs between 10 – 15 years from your date of purchase. This is how I define FMV for my units.
If you would like me to build a chart like this for your timeshare contract(s), please email me at [email protected].
Creating a Trustworthy Method of Brokering Your Rental
Of the lessons I’ve learned in Cabo timeshare rentals, it’s that everyone handles money transactions differently. There are several profiles that I have run into over and over that led me to the system I use today. It took me 10 years of work and building a reputation to act as a broker between owners and renters. Unfortunately, that’s not very realistic for you to rent out your own units.
There are many ways to accept payment. Below I have listed many of the ones I’ve worked with, plus their pros and cons:
- Pros – many people have accounts already, widely used and accepted, fast (when it works)
- Cons – ridiculous fees on both sides of the transaction. They can put a hold on your transfer for any reason they want, for as long as they want. Requires verification for large transactions
- Google Wallet
- Same as paypal
- Facebook Pay
- Pros – Easy transaction when working with people already on FB. Fast transfers. Better fee structure
- Cons – Can withhold transfer for several days
- Zelle Pay
- Pros – Integrated with many large banks. Sends money instantly. No transfer holds
- Cons – Many smaller banks and credit unions don’t accept Zelle
- Wire Transfer
- Bank Check / Bill Pay
- Personal Check
The Keys to Accepting Payments:
- You need to define a policy that you use for all transactions.
- The policy needs to be written out, and available to send to any renter who requests it
- You must have a written cancellation policy.
- You must have a written refund policy
- It is ok to not allow cancellations or refunds, which is what I recommend.
- You must explain the end to end process, and how long it takes to complete
- You must be responsive to the renter, and send status updates frequently.
How to Broker Your Rental
Brokering the rental is where things get sticky for most contract holders, IE, how do I accept payment and make my unit available to the renter while protecting myself financially. Ultimately, every renter is going to want a trustworthy method of paying, while ensuring that the week they’re paying for is real. If you are using any of the Facebook forums, this is relatively easy. By simply participating in the forums frequently, over a long period of time, you can build a trust relationship with other members of the forum. This is much more difficult for folks who don’t have the time or desire to invest in social media forums. It is also difficult to build a reputation on a site like AirBnb or VRBO when you are renting 1 or 2 weeks per year. You’ll have to find a system that works for you.
One method of building trust with a renter is to have a process document. A simple flow chart / timeline that details the process and explains what happens when goes a very long way. Providing this at the same time you present your rental / payment / cancellation policy is one way to build trust.
The Guest Registration Process
The first step in brokering your rental is to request the first and last name of every adult staying in your unit during the rental period. This information is required for the guest registration process.
The second step is filling out the guest registration form with your contract information, and the guest information.
The third step fax / email the completed form to the resort
The fourth step is to collect payment
The fifth step is to validate payment
The sixth step is to forward the guest confirmation to the guest. They must print this form and bring it with them at check-on
Dealing with the Needy Renter
Unless you always rent your unit to another owner or Cabo veteran, you’re going to run into a needy renter. On average, I spend over 3 hours in phone and email conversations with a new renter, answering their questions (even though I send them a pamphlet with lots of information) and ensuring they are comfortable with the agreement. It is important that you keep track of these questions every time you rent your unit, as they will definitely come up again. Some of the things I’ve already discussed help you interact with your renter. Having a little welcome document with your various policies that you can send via email goes a long way.
One trick I use is to ask previous owners and renters to write a little note about their experience in the rental process. This isn’t particularly helpful if you only have one or two examples, but once you have 10+ I’ve noticed it makes a big difference. In this case, a hand written card that you can take a picture of works wonders!
The Most Difficult Part of Renting Your Timeshare is Finding a Renter
For most, this topic is where most owners have difficulties. Folks on the Facebook forums will tell you they have great success renting to other members of those forums. Others will say they have good luck on Redweek.com. Unfortunately, a group of 3500 people, and a website with about a 1 in 30 success rate (this is my own estimate) has left many, many owners with unused weeks that they can’t rent, and banked weeks which expire!
I don’t mean to discourage any owner from using these avenues, they are definitely a good source of high quality and knowledgeable renters. If you are lucky enough to get a rental from one of these sites, the process should be fairly painless.
For everyone else, my rental assistance service is available. I only charge 10% of the agreed upon rental rate upon successful rental. If you are interested, please add your listing to my system using the following links:
Grand Solmar Lands End: https://www.vivaloscabos.com/grand-solmar-timeshare-rental-service-request/
Playa Grande and The Ridge: https://www.vivaloscabos.com/playa-grande-rental-service-request/
Others: coming soon