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PRC owners typically incur expenses in three general categories.
Purchase Price
PRC memberships can be purchased directly from the project developer or from a current owner that advertises through the local real estate community. Consumers can buy with cash, a home-equity loan against their primary residence, or financing through lenders that specialize in fractional real estate loans.
According to research by Ragatz Associates, the average price for PRC membership is $230,280, regardless of the ownership ratio or square-footage. Ragatz also reports that 50% of all PRC buyers finance their purchase.
Home Owners Association (HOA) Fees
PRCs operate under management companies that oversee all member and club related activities. The management functions are funded by an operating budget, which is raised through HOA fees paid by each owner. Annual dues are typically collected every quarter to pay for staff salaries, supplies, maintenance, transportation, window washing, trash removal, legal/accounting, insurance, utilities, property taxes, and replacement/refurbishing of facilities. In some cases, housekeeping and gratuity fees are also included.
HOA fees typically range from $4,000 to $12,000 a year, dependent on the ownership ratio, square footage and local employment standards. However, some PRCs collect nearly $20,000 on an annual basis. Ragatz Associates' research shows that the average PRC week owned represents $1,330 in HOA fees.
Occupancy Charges
PRC owners incur charges on a per use basis, which are due upon check out of each visit. Expenses vary by PRC based on services and policies, but commonly include long distance phone calls, pre-arrival grocery shopping, room service, transportation, housekeeping and gratuities.
Collecting incidental costs (versus including them with annual dues) prevents PRC owners from subsidizing select operating expenses for fellow owners that may use the PRC more often.
Comparative Analysis
The table below is a comparison of annual costs between lodging options in a given resort market: PRC Ownership, Vacation Home Ownership and Vacation Home Rental. Under the assumption that all accommodations are of similar size and quality, PRC ownership is least expensive on an annual basis.
| |
Private Residence
Club Ownership |
Vacation Home
Ownership |
Vacation Home
Rental |
| Purchase Price |
$230,2801 |
$1,116,5092 |
N/A |
| Down Payment (20%) |
45,056 |
223,301 |
N/A |
| Financed Amount |
184,224 |
893,207 |
N/A |
| Furniture |
Included |
100,000 |
N/A |
| Financed Acquisition Cost3 |
$46,056 |
$323,301 |
N/A |
| Cash Acquisition Cost4 |
$230,280 |
$1,216,509 |
N/A |
| |
| Annual Costs: |
|
| Rental |
N/A |
N/A |
$37,8005 |
| Mortgage Payments6 |
$21,126.49 |
$96,340.79 |
N/A |
| HOA Costs |
7,8907 |
19,125.098 |
N/A |
| Housekeeping9 |
Included |
1,350 |
Included |
Opportunity Cost
(financed acquisition)10 |
2,302.80 |
16,165.09 |
N/A |
Opportunity Cost
(cash acquisition)11 |
11,514 |
60,825.45 |
N/A |
Total Annual Costs
(financed acquisition)12 |
$31,409.29 |
132,980.37 |
$37,800 |
Total Annual Costs
(cash acquisition)13 |
$19,494.00 |
$81,300.54 |
$37,800 |
| |
| Real Estate Equity |
YES |
YES |
NO |
| Possible Appreciation |
YES |
YES |
NO |
| Hotel Services |
YES |
NO |
MAYBE |
| Private Clubhouse Facilities |
YES |
NO |
MAYBE |
| Maintenance, repair responsibilities |
NO |
YES |
NO |
| |
1 Equals the average price of a PRC membership*
2 Equals average price of a PRC membership times most common ownership ratio* divided by PRC industry multiplier on traditional real estate: $230,280 x 8 / 1.65 = $1,116,509.
3 Equals the down payment + furniture
4 Equals the purchase price + furniture
5 Rental costs based on most common weeks per owner* (42 days annual use) times $900 per night
6 Based on 15 years @ 8% for PRC ownership and 15 years @ 7% for Vacation Home ownership
7 Equals the average HOA fee per week* times the most common weeks per owner*: $1,330 x 6 = $7,890
8 Equals the average square footage of a PRC unit* times $4.00 per square foot for HOA fees plus a 1% property tax assessment: (1,900 x $4) + (.01 x $1,116,509) = $19,125.09
9 Equals the most common weeks per owner* times housekeeping charges of $225/week: 6 x $225 = $1,350
10 Equals the Financed Acquisition Cost invested at a 5% annual return
11 Equals the Cash Acquisition Cost invested at a 5% annual return
12 Equals Mortgage Payments + HOA Costs + Housekeeping + Opportunity Cost (Financed Acquisition)
13 Equals HOA Costs + Housekeeping + Opportunity Cost (Cash Acquisition)
*Source: Ragatz Associates: "Fractional Interests: A Market Profile 2003." |
