Are Timeshares a good value?

I sat through a "90 minute" seminar last December in Park City Utah which lasted 3 hours.  My prize, $150 cash and all the chicken wings and cheese sticks I could eat.  Unfortunately I am a recently converted vegetarian and could not slop down on the wings like I would have 4 years earlier. But the hot water was very tasty!

During the seminar me and friend sat through while they went through the spiel of how great it would be to spend $55,000 on a timeshare with annual maintenance dues of $800 a year.  I told her before hand that timeshares were not a good deal and I would show her why.  I sat and listened patiently.  The guy loved to talk, and me... Well I love to listen.  As I drank my hot water and crackers he went on about the awesome benefits.  Funny, he never bothered to ask what I did for a living.

After 45 minutes of ranting, he finally asked if I had any questions.  I then proceeded to rip their model to shreds.  His response was.  "People don't buy timeshares as an investment, it is an emotional issue with them".  I then proceeded to tell him how I get very emotional about my money, especially when someone is salivating over it sitting  across the table from me.  By the end of the presentation you could see it in his eyes that he was a beaten man.  As we were leaving he finally asked the question, "What do you do for a living?" And I calmly said.  "I build homes for a living".  If you have ever played Mortal Combat you have seen the move where the one fighter does a karate move and rips out the guys heart and holds it in the air.  Well this guy looked like the guy who had just gotten his heart ripped out when I said that.  He slumped down in his chair and exclaimed "Oh F%*&!"

So back to the Question.  Are Timeshares a good value?

The short answer is no.  The long answer is "It Depends"

No

Timeshares are not a good deal because

#1 They don't appreciate in value (Unlike whole ownership)

I have never seen a case (although I am sure that it has happened somewhere) where the value of a timeshare when up.

In most cases they depreciate substantially from their original value.

Why is that?

Well my universal principle is this.  Anything that depreciates in value shortly after you purchase it was OVERVALUED in the first place.

Let's look at some things that depreciate in value soon after you purchase them

• Diamonds

• Automobiles

• Boats

• Timeshares

Let's look at some things that generally appreciate (or at least hold their value short term) after you buy them

• Real Estate (Whole Ownership)

• Gold

• Rare Collectible Items (Art, Comics)

Why timeshares are a bad investment

First of all th

e builder takes 52 weeks and breaks them up and sells them for each unit that he has.

Let's say he has 100 full condo units.  That means he has 5200 (100 x 52) fractional units that he will sell.  Lets say that each full unit costs him $400,000 to build.  So his total construction cost is $40,000,000.  He then sells each timeshare unit for an average of $30,000 each.  So he will make $30,000 x 52 = $1,560,000 so he is making a profit of $1.16 million for each unit that he sells (1.56 Million - 400k).  So his total revenue for all 100 condos is $156 million and his total profit is $116 million.

Typical construction markups are roughly 35%.  This builders markup is 290%.

So if you buy something that is 250% over priced.  When you sell it you can expect to take a substantial hit.  That is why I was able to pick up a very nice Timeshare in Park City Utah for $2000.  My guess is that they originally sold for about $10,000.

Maintenance Dues

Anyone who owns a timeshare will pay maintenance dues.  These dues are typically equal to or just under what you would normally pay if you went on vacation somewhere.  Not always, but in many cases.  For example many dues are $500-$750 annually.  On a per person basis it's easy to any reasonable destination and expect to pay under $500 per person for a 7 day stay.

My Advice

If you cannot afford a whole ownership purchase I would recommend getting 5 or 6 people that you trust and enter into a partnership with them and purchase a whole ownership unit.  Your note will be about the same as if you had financed a $40,000 timeshare, and you can make money off of it as a vacation property.

If you don't want to do that then buy a used timeshare.  They are the best deals in the world.  Or are they?  Not really they are just selling at the fair market value.

RCI & Property Exchanges

Boy I am so sick of RCI I don't know what to do.  RCI is a vacation exchange company.  Let's say you don't want to go back to your timeshare property in Wichita Kansas this year that you paid $100,000 for and you want to exchange your week for a property in Hawaii.  Well in theory you can do it through RCI.  You deposit your week with them and then instead of going back to your location you can choose among supposedly over 40,000 vacation rentals in the world.  All for a small exchange fee of $159.  That sounded reallleeee good when I signed up with RCI until I started to travel.  It seems that I can never go where I want when I want.  I am either booking to early, too late, or too in-between.  Personally I think RCI is a big sham.  However for property owners reading this www.Itravex.com  is to property owners what RCI was supposed to be with timeshare owners.  You list your property with them for free if you are with www.vrbo.com and another site and then other property owners can stay at your place for virtually nothing and you can do the same.

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