Paul purchased a timeshare in 1999 that he still owns and uses.
Do Your Homework Before Investing In a Timeshare
people found Paul's experience helpful.
My wife and I were in the midst of a life-changing development. I had recently retired after 25 years in one career and moved back to the town that both my wife and I called home. We were "empty nesters," had come back home, and were beginning a fresh life among family and old friends. Investing in a timeshare was just part of this new life we were beginning.
Problems and Issues Encountered
I encountered a problem with my timeshare from the beginning. I was unable to get anyone in the reservation office without first leaving a voice message. When I received a call back, it sometimes was not convenient. That was very frustrating. Fortunately, that situation did not last long, as the original timeshare company was bought out, after which reservation service improved significantly.
Before you begin the process of investigating the purchase of a timeshare, decide the maximum price you are willing to pay. The agent will start at the resort's offer price because he wants to maximize his commission, but will come down the longer you delay your decision. After I delayed until I felt the price would not be reduced any further, I agreed.
Another consideration is the annual maintenance fee. You will be the owner of a unit in the resort, therefore, you will be obligated to pay annually the cost to maintain that unit. The cost depends on the size of the unit and the amount of time you purchase. The cost will go up over time just as everything else in life does.
An investor in a vacation timeshare needs to evaluate how to finance the purchase. If you’re a new investor in a vacation timeshare, you should compare the financing offered against taking the money from an income-producing source such as stock or another investment you may own. Of course, you can seek your own financing and perhaps beat the terms offered.
What Would I Have Done Differently
Every individual has unique circumstances. My mistake was to purchase a second week, which doubled my maintenance fees. I also doubled my time available, but I eventually purchased a condo in the area where my vacation investment is located, and I didn't need a second week. My motivation was to provide more space for our two daughters and their families during the same week, not necessarily at the resort where I owned, but at other resorts I could trade into, such as in Orlando, Florida. I could have accomplished that by upgrading to a three-bedroom unit. The maintenance fee would have increased, but it would not have doubled. I eventually sold the second week, which brings up another point.
Don't think that, like other real estate investments, your timeshare will increase in value. Nothing could be further from the truth. I lost my entire investment but was able to write it off my taxes over a three-year period.
Acquire as much knowledge as possible about the company that operates the resort. Don't make a "spur of the moment" decision. That's what I did, and most timeshare buyers do the same thing. Make sure the resort company has the size, experience, and facilities to provide you with the quality and services you expect when you and your family vacation. Reservation services are critical. If you can't reach the reservation organization directly, you could be in for a very frustrating experience.
Factor into your decision-making the fact that the annual maintenance fee will increase. My maintenance fee has more than doubled in the years I have owned the timeshare.
If you decide to finance the purchase, check out the financing offered by the resort. If the resort is owned by a large corporation, it perhaps has the financial clout to negotiate a good rate with a bank, which it then offers to buyers as an incentive to purchase. However, make sure that you are not precluded from paying off the loan early without penalty. Check out other financing sources as well; you might get better financing at your local bank.
Finally, don't assume your vacation investment will save you vacation expenses in the long term. Do some financial analysis. Consider the amount of money you would spend annually for a vacation hotel and compare that with the annual maintenance fee, plus the lost income you would receive from the original investment had you put that money into stocks, bonds or some other income-producing investment. To be even more precise, factor into your analysis the time value of money.
I was attracted to a timeshare presentation by free theater tickets. I had not done any homework. You have the opportunity to do your homework. Consider the above and decide if timeshare ownership is right for you.