Saturday, June 16, 2012

Why Timeshares Are Bad Investments

Even though I focus on Injury Law, I am often asked about consumer legal matters, especially when speaking to churches and community groups.

On subject that comes up occasionally are timeshares.

Those yearly maintenance fees are not forefront in the consumer's mind at purchase. I have sat through some presentations, and I understand why it can seem like a good idea at first. They ask you questions like this:

1. Do you want to make vacationing a priority for your family? (Of course, who wants to be "Bad Dad.")

2. Have you enjoyed your complimentary (or greatly reduced) stay here the "Almost Water View, But Close Enough Resort and Spa?" (Yes.)

3. Do you plan to vacation in the future? (Beats working. See answer to One, above).

4. Is it usually better to own or to rent? (There is a trick here, but most say "own" right off. Own stifles flexibility. They say you can trade points and so forth, but who needs more bureaucracy in their life? If I rent, I can leave or change on a moments' notice.)

5. Do you understand that you will receive a "deed to the property" that can pass down in your will to your children?  (You bought time, that invisible, ethereal thing, not land. Besides, you can leave a three-legged spotted hamster to your children in your will, but that does not make it a good investment.)

6. So would you like to buy one week or two? You know we are running a special --today only! (Hurry!!)

Look, you may use and even enjoy a timeshare, but financially you are very unlikely to come out ahead. If you want one, you can research them online.  "No, wait! This sale is only good for today!" will echo in your ears. The representative will not let you research at all-- you agreed to 90 minutes of rapt attention and she will take every drop and go in for the close. If she can't do it, she'll get one of the slick, useless-looking guys with the great tan to "explain it to you so you can understand it better."

Escaping a timeshare is a feat worthy of Houdini and is almost always done at a loss, especially if you total up the maintenance fees and the (not really mentioned occasional "special assessment fees") paid out, along with the weeks you could not use it and gave it your brother in law for free!

50% off or more is what you can save by buying after market, but also what you will lose when you sell yours. You could always rent one, though. Most resorts have people who would love for you to rent their unit for a week just to cut losses.

Financing is the selling of money to impatient people. The earlier in life that you understand that most money is made by selling not stuff--but money itself-- the more successful you are likely to be. GM sells cars only so they can sell you money (financing).

You cannot even write off the interest like on a home mortgage. Not like that idea is really good, either. Even if you are in the highest tax bracket at 35%, for every dollar you give a bank in interest (profit), you get .35 cents back on an interest deduction. Heck, I will trade you .35 cents for every dollar you have right now! Bring your friends! (If your CPA recommends buying a house only for the tax deduction, you might want to rethink your advisor's advice.)

In short, I am not mad at you if you bought, or still go out and buy a time share. And, you can be a pretty generous guy when you loan it out to people.

But, just understand, that it is an attempt at a luxury, not a good investment.