Thanks to Lazy Man, I've been reminded to write on whether Timeshares are a good investment or not.
Some of the reasons the Timeshare companies give are
1. Its a good investment. If you get title to the property as a fractional owner, you get all the tax deductions of home ownership.
2. The cost of your vacations never goes up. So you beat inflation.
3. You can exchange you timeshare with other people in different parts of the world and live for free whenever you go on vacation.
On the surface it sounds really good. A while ago I had the misfortune of being conned into attending one of these in Vegas in exchange for some free show tickets. The reason they can afford to hand out $200 worth of free tix is because they use high-pressure tactics to persuade you to buy an overpriced condo.
Lets do the math...
They wanted $35,000 for a 1 week rental of a bedroom condo. So basically they took a $300,000 condo and sold it for $35,000 x 52 weeks = $1.825 million!!!!
Plus you pay an annual $850 "maintenance" fee. That doesn't sound like putting a cap on the cost of my future vacations, since this maintenance fee will go up with inflation.
Also, in order to exchange you timeshare with other timeshare owners you needed to subscribe to a service that charges around $185/year. Out of kindness, this fee was waived for the first year and I would get 2 round trip tickets to anywhere in the world plus a 7 day fully paid for vacation to Cancun.
Hmmm....if I invest the $35,000 at 8%, thats $2800. Add $850+$185 to that and I get $3835. I don't think I've ever spent that much money for living accomodations on a 2 week trip anywhere in the world. Granted, I didn't stay in 5 star hotels, but I'm pretty sure you can rent a condo for about $1,000/week anywhere in the world in peak season. And if you can get more than 8% return on your investments, you're losing even more money.
I think its a big scam. The presentation I went to was offered by the Hilton. They had 4 huge towers on a tiny postage stamp of a lot. I think there were probably 400 condos on 1 block of land. Thats like selling 1 building for around $720 million!!!! DAMN, I need to get into business!
Update:
Buying timeshares from the resale market can be a lot more cost-effective. You can buy cheap timeshares for less than 25% of the original cost from the original buyers and at that point it often makes sense. Check out this link for discounted timeshares.
Incidentally, you can get great deals on real estate on that link. There are listings for land & homes for under $5,000! It doesn't get any cheaper than that.
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8 comments:
That's an excellent point about how that money can be invested. The place my fiancee bought was closer to 20K and you get two weeks at a very nice Marriott. So by doing the same 8% math, it's around $2,400 ($1,600 + $800 maintence fee) or $1200 a week. So I'm not excited, but I'm not sure it's a scam either.
Don't buy a timeshare for $30k. You can buy one for less than $5k through the resale market.
I don't know of anyone who has ever been able to sell their timeshare for more or anywhere equal to what they paid for it.
Definitely buy from the resale market - even ebay is a great place.
We mistakenly bought a timeshare years ago and sold it at a pretty big loss for a couple young, newly married, new parents. Huge mistake but great learning experience
This is an excellent view of the timesharing business. We were also in Vegas when we got coerced to attend one of those timeshare presentations. But we felt that it was not worth it. The representatives do use pressure tactics to trick you into buying the stuff. That made us more suspicious about the whole business. But we did do our math and saw that it was not worth it.
Thanks once again for summarizing in such a great manner.
FIREFinance
I agree Timeshare are a great investment IF
you travel several times per year in many locations
Enjoy staying at full service resorts with LOTS of space and amenities
for another point of view and our families personal experience check out my site
http://rcitimeshare.blogspot.com/
I've learned my lesson. I've made a mistake - i bought my timeshare from Point To Point Destinations in Vancouver. Use your head, check the facts first (unlike u did).
I posted the facts which i found out after i bought it here:
www.TimeshareRevealed.com
.
My partner and I purchased a Vegas timeshare for $17000US for 1 week every 2 years. We were able to pay half and make the payments for the remainder over a year with no interest. The total payments equal the difference in what we paid up front to the $17000. We only pay maintenance fee every 2 years, and it's $534 or something like that. So, when we go back, we have to pay for flights from Canada, which we can get on seat sales. So doing the math, for a weeks holiday, we probably save @ $200/person. Also, you can have as many people stay as you want in your unit. These timeshares work : A) If you can pay them off without financing through them. B) If you use them, either for yourself or rent out your time.
The perks on the discounted trips are good too.
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