My wife and I read your column and have attended many of your talks over the years and hope you can help us. My wife and I just returned from a vacation and while on vacation we attended a presentation for a timeshare. We had no intention on buying one but went because we got tickets for a free show. After sitting down with a representative of the company and going through the numbers it seems to me that whether we use the timeshare for our vacation or just rent it out, that a timeshare could be a pretty good investment. My wife disagrees with me and doesn’t want to buy it- she thinks it is a lousy investment. We both trust you so would you tell us what you think of timeshares in general. I should mention the timeshare we’re thinking of purchasing is located in Las Vegas a city that my wife and I both love.
Without looking at the numbers on your specific timeshare I tend to agree with your wife in that on the whole, timeshares are not good investments. A timeshare may be good for future vacations, but it’s not an investment where you can hope to make money.
When I think of an investment, I think of something that’s either going to generate income on a regular basis or appreciate where I can realize when I sell it. Unfortunately, timeshares don’t fit this criterion. First, from an appreciation stand point, it is very difficult to sell timeshares. Even though the internet has made it easier, there are still a lot more sellers than buyers in the market. Historically, when you look at what timeshares have sold for on the secondary market, they’re generally selling for less than half of what people originally paid for the timeshare. Therefore, since they are not appreciating in value they are not good investments for the long-run.
With most timeshares, you can sell your allotted time. So, if you have a week in Las Vegas you could sell that week. However, once again, selling a particular week is not necessarily the easiest thing to do. In addition, the prices are not that favorable once you factor in the commissions. When you look at some of the resale sites where they will sell your week, it’s not unusual to pay upwards of 30 percent in commissions. The bottom line from a growth standpoint and from and income standpoint is that timeshares do not seem as a whole to provide a return on your investment.
As far as I’m concerned, if someone was thinking about buying a timeshare I would tell them to focus on quality of life and not on the investment potential. In addition, if I was thinking about buying a timeshare as opposed to buying directly from the developer, I would look at purchasing one on the secondary market. In many situations you can buy a timeshare for one-third of the price of what the developer is selling it for. There are a variety of websites that you can use to purchase timeshares.
Whether you buy a new timeshare or one on the secondary market, it is important that you understand your rights and responsibilities before you purchase it. Remember, not all timeshares are the same. You need to do your homework so you’re not buying into a property that’s not maintained nor managed properly. In addition, it is also important to know what you are going to pay in maintenance fees on a yearly basis. Not only do you pay for the timeshare upfront, in addition, you have an obligation to pay a yearly maintenance fee. Whether you actually use the property or not you are still required to pay the maintenance fee. The bottom line is before you buy a timeshare, make sure you understand what you are buying and all the ongoing costs involved.
I have known many people who have purchased timeshares; some of them think they made the right decision, others have regretted their decision. However, one thing I have yet to see is anyone who’s made money by selling their timeshare. Therefore, if you are thinking about buying a timeshare, look at it as investment in your future vacations, not as an investment for your retirement.
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