Are Timeshares A Scam?
Several people have asked me whether Timeshares are a good investment or not.
Some of the reasons the Timeshare companies give are
- Its a good investment. If you get title to the property as a fractional owner, you get all the tax deductions of home ownership.
- The cost of your vacations never goes up. So you beat inflation.
- 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 tickets 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 accommodations 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!
But if your heart is still set on “investing” in a timeshare, make sure you check-out the resale market at my Timeshare store.
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October 19th, 2006 at 9:44 am
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.
October 23rd, 2006 at 3:03 pm
Don’t buy a timeshare for $30k. You can buy one for less than $5k through the resale market.
October 24th, 2006 at 8:45 am
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.
October 24th, 2006 at 1:12 pm
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
November 11th, 2006 at 10:51 am
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
March 8th, 2008 at 7:51 pm
My wife and were intrigued by these presentations and attended several in locations such as Virginia and Myrtle Beach and Orlando.
At first we were genuinely in the market to buy. But after going through the high pressure rigamarole a couple of times, we began to see the pattern. So we simply took advantage of the free stays.
However, to echo the comment of a previous writer, we later saw nice deal on a timeshare on eBay. By the way buying a timeshare is not an investment. But, if you buy one, there’s no point in giving your money away. Vacations are more fun when it costs you far less than the average Joe.
August 6th, 2008 at 5:40 am
I have never seen a good deal on a timeshare either. You generally don’t get the weeks you want so your forced to vacation when you don’t want to. I have also seen some timeshares that do like airlines and over book (sell 54 weeks a year or more). I am not sure if that is still legal, but it had been done in the past.
August 8th, 2008 at 4:43 pm
awesome post. I’ve had so many people come back from timeshare things and complain about the high pressure sales. Not to mention that every 30k timeshare I have looked up could be found online elsewhere for about 5k.