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January 1, 2013, Bedford, NY
By Jonathan Winter
This article will highlight both the positives and negatives of timeshare ownership. It addresses the realities and fiction put forth by the army of highly trained timeshare salespeople that represent their organizations, and replaces these points with the good and bad of timeshare ownership. Then, for those that choose to venture into the brave world of timeshare ownership after reading this article, I address the least expensive way to acquire a timeshare (at about half the price of what the timeshare companies are selling the same units for!), by acquiring your timeshare from owners selling timeshares.
To an outsider the process of buying a timeshare must look second only to the process of buying a used car, financially painful with the words “rip-me-off” stamped all over it.
It’s true that the industry has a dodgy reputation, and there is a reason for this: marketers selling timeshares often make their money from high-pressure tactics combined charm, charisma and even “bait” – receiving an expensive free gift in exchange for sitting in on a “one-hour” presentation while on vacation doesn’t really come for free. If the lead conversion rate (i.e. you) wasn’t high, or the unit wasn’t overpriced, then timeshare companies couldn’t give each couple a $100 American Express gift certificate, free round trip airplane ticket, three day cruise or whatever the promotion of the moment is. To amplify the problem, timeshare owners often buy their units at their most vulnerable point financially, while on vacation, feeling good about life and wanting more, especially near the end of the vacation when the thought of going back home starts to sink in . . .
At the same time owning a timeshare can be both rewarding and financially the most practical way to own a slice of paradise, if it is done right.
Full disclosure, I own a timeshare, so I speak from experience. Candidly there are times when I love it and times when I hate it.
Why I hate timeshare ownership
Owning a timeshare is not the same as owning a vacation home. Yes when you’re sitting in the sales office the person selling timeshares is painting a picture of a place that “you can gift, will or sell,” so it feels like you’ll own it just like a real vacation home; yes, he will tell you that you are buying a place that you and your family will spend the “family years” together building memories just like a real vacation home and yes you will get to know the neighboring town and perhaps even get to know fellow unit owners just like a real vacation home. But when Friday (or whatever your final day is) rolls around, you must leave. If the airport is closed because of a storm, you still must leave. If you feel the urge to keep the kids out of school to stay a few extra days, you still must leave. The next vacationer will be in your unit in a few hours.
Next, owning a timeshare is not usually the cheapest way to vacation. In fact it can be really expensive. Here’s why: When one buys a timeshare, they almost always finance it – I’ve never heard of anyone getting turned down for a timeshare loan. I’m sure it has happened, just not to anyone I’ve ever talked with. Because of this the default rate on a timeshare loan is high and therefore the interest rate on the property loan is ridiculously high. Buying a $40,000 timeshare and financing it at 12% for 15 years yields a payment of $432 per month. Maintenance fee payments run about the same every 6 months, so your total yearly payment is about ($432 X 12mos)+($432 X 2 times a year) or $6048 per year. For seven nights, this equates of $864 per night. You can stay in a really nice, 5 star hotel in most parts of the world for half that.
All-inclusive does not mean free – you pay for it in the price of the timeshare. Yes all-inclusive usually includes free food and basic drinks and often “on resort” activities. The list that they provide to you will be substantial, but the reality is that all-inclusive is great if you eat and drink on the property all of the time, use most of the available activities and go only to the nightlife prescribed. In fact if you do this the entire vacation you might think you’re getting away with something that you shouldn’t. However the second or third trip down you will likely start to want more. You can only sing so much karaoke, eat at so many midnight buffets, play only so much shuffleboard and order only so many glasses of house wine before the process becomes monotonous. After that you’ll likely venture off campus – the bargain that you thought you had will turn out not to be a bargain at all.
Marketers selling timeshares will say that ownership forces you to take a vacation each year. Not really. The timeshare owners that I have talk to have routinely missed using their unit because of business or other family reasons. Ownership entices, but does not guarantee usage.
Along those lines, owning a timeshare basically means you’re committing to the same vacation every year, for as long as you own your unit. Yes, you can swap, use points/weeks for other locations, etc. but this is secondary and candidly the best units in the best locations are usually not available for a swap. At some point your family gets tired of the same theme park, or resort restaurants and pools, so purchasing a timeshare in touristy areas means that you will commit to finding something new to do if you get tired of the standard fare.
I like timeshares that are centered on activities that the family continues to enjoy throughout the years – just make sure that you really want to do them for a very long time. Skiing, golf, and surfing come to mind, but I’m sure there are many more just like them.
Why I love timeshare ownership
Give what I just told you, you would think that I am against timeshare ownership – this is not true. I am just making sure you go into ownership with your eyes wide open because it is a BIG commitment, both financially and personally. Here is why I love timeshare ownership.
Once the unit is paid for you have a free vacation (maintenance fees excepted) for as long as you are alive, and then your heirs do too. When you get older and have more time and less income, a timeshare is a godsend.
When children grow up, a timeshare MAY become a place where the family can meet and spend time together at least once a year, even after the kids have moved out. This is far more important than you think, because the kids will have their own lives at some point – even when they are still under your roof. As long as everyone is committed, this becomes a way to stay connected.
There is truth to the fact that memories are created with a timeshare – if you use it. Some of my best family memories are there. Seeing the kids grow up over the years in our unit has been amazing. It becomes a yardstick of growth. In fact we play a game called “what has changed since last year,” every year on New Year’s Eve.
No price inflation – This used to be a bigger benefit, but hospitality prices have subsided over the last few years. Locking in the payment of your unit means you are subject only to an increase in the maintenance fee.
A timeshare can be a source of income. You can rent it if you don’t use it in a particular year. I don’t want to overplay this as the timeshare owner is competing with a myriad of hotels with rooms in exactly the right locations, so the price must be right – under most circumstances you will not likely be able to recoup what you’ve paid that year in loan payments and maintenance fees.
Smart timeshare ownership
Okay. If you’re still interested after all that, here (in my humble opinion) is how you buy a timeshare in the most cost effective manner. Two words: timeshare reseller. For example, timeshare reseller buyatimeshare.com is one of many companies on the internet listing a similar unit to the one I own in my building, for half of what the timeshare office in town is selling timeshares for right now.
This is the method that I used to acquire our unit and it works beautifully. There is of course a catch. Financing is not automatic. You’ll either need to apply for and receive a loan from your bank or pay cash – for a unit that costs say, $20,000 this is significant. A third option, utilizing a home equity loan to purchase your timeshare, is one that is thrown around frequently on many of the timeshare reseller websites, but it’s one that I feel uncomfortable with. Taking equity out of your home is what got a lot of people in financial trouble during the global financial crisis of 2008/09. Still it is an option to acquire the timeshare at a relatively low interest rate without cash coming out of your savings – and the interest may be deductible.
The other catch is that, once the timeshare changes hands the accompanying non-property benefits may not transfer. You may have to purchase “a package” from the timeshare office of what ever it is you are going there for. If for example your Kissimmee Florida timeshare comes with 4 one-week passes a year to Disney if bought from the timeshare company, you may need to purchase another Disney package (probably from the same timeshare company) if you purchase your unit from a selling owner. For owners that need accompanying tickets such as Disney, golf, skiing, etc, understanding this charge ahead of time is very important.
Timeshare ownership can be a wonderful experience if done right. Just remember that with a little planning, you are much more in control when it comes time to making the decision. Don’t fall prey to lack of information and salesperson “spin.” You’ll be much better off for it.
Until next time,