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Archive for November, 2010

Are Timeshares a Bad Investment?

November 4th, 2010 at 01:32 am

I recently read an article about bad investments and was not surprised to see timeshares on the list. Timeshares frequently get a bum rap, although there is some truth to the notion that timeshares can be a bad investment. If you buy a timeshare as an investment, you will be disappointed if and when you go to sell and see how much it's depreciated. But it’s hard for me to wrap my head around the idea that people actually buy timeshares thinking they will resell them for profit.

Most timeshare owners I know bought for a variety reasons, but investing to make money is usually not one of them. However, I want to make a distinction here between making money and saving money. We think of our timeshare as "pre-paid" vacation time, and so far we are on track to save quite a bit. Read on and I will illustrate how, using our own timeshare as an example. But first let me share the "plan" we had in mind when we bought.

We intend to use our timeshare about 20 years (hopefully more) before we hand it over to an interested family member. Or, if no one in the family is interested, I can guarantee we will find someone willing to take it over. This means we would put the title in their name and they'd be responsible for the annual fee, currently about $400 a year. We're not interested in selling... we'll be happy to give it away when we've had enough. And yes, as the years go by, the fees will go up. No doubt about that, but so will the cost of hotel rooms. So here is how I break down the actual cost of owning our timeshare:

2003: Paid $10,300 (cash... no finance charges or loan fees to include)

Divide $10,300 by 20 years = $515 a year
Add $400 maintenance fees: $515 + $400 = $915
We use our timeshare an average of 10 days* per year: $915 divided by 10 = $92 per day
This is for accommodations that would normally run ~$250 to $300 a day or more. Not bad, even if you add ~$200 a year in lost interest on our original expenditure of $10,300.

*By leveraging our time and/or points, and traveling during off-peak times, we might stretch it to 14-21 days a year, greatly reducing the cost per day. We are also able to split weeks, convert to points, borrow from next year, and carry over for further flexibility. This will be an option now that we're retired and can travel during the off-peak months.

Our timeshare accommodations are typically a modern condo that sleeps 4-6 people. The unit will have a fully stocked kitchen, linens, washer and dryer, several bathrooms, and many other amenities such as swimming pools and workout rooms. We enjoy inviting friends and family to join us, and we can do this at no additional expense.

Some of the places we've been through our timeshare exchange network include:
Wolf Creek, Utah - 7 days
Sonora, Mexico - 7 days
Sedona, Arizona - 4 days
Carmel, California - 3 days
Bear Lake, Utah - 7 days
San Antonio, Texas - 7 days
Payette Lake, Idaho - 3 days
Las Vegas - 2 days
Orlando, Florida - 7 days
Mérida, Mexico - 7 days
Honolulu, Hawaii - 7 days
Brian’s Head, Utah - 7 days
Oregon Coast - 7 days (planned for 2011)

So, the bottom line is that we pay the equivalent of ~$92 per day for accommodations that would cost ~$250 per day minimum, and this approach supports our quest to save money while we enjoy traveling to different states and countries.

Sonora, Mexico:

Sedona, Arizona:

Carmel, California:

Bear Lake, Utah:

San Antonio, Texas:

Payette Lake at McCall, Idaho:

Orlando, Florida:

Merida, Mexico:

Honolulu, Hawaii:

Brian Head, Utah: