This a short and totally off-topic post on the pitfalls of buying timeshares.
Out of pure curiosity, Laura and I sat through a timeshare sales pitch back in 2009 during our last trip to Hawaii (it was at the Wyndham resort in Waikiki).
I get why timeshares are popular with certain types of vacationers. If you find yourself enjoying the same place year after year, or if you really like the various network of locations that a timeshare company offers, they can be--in some cases--a way to save some money on travel.
But there are problems you have to watch out for.
First, taxes and maintenance fees usually grow far faster than you expect. In the prior three years, the fees at the timeshare project we looked at in Waikiki had a double-digit growth rate per year. At that rate in 30 years the annual fees would exceed the entire purchase price of the timeshare!
Second, you have to calculate out the price of the timeshare on a per-square foot basis and compare to market prices. In other words, take the price of the two weeks of time you're going to buy, multiply by 26 to annualize it, and then divide by the square footage of the unit. The unit style we looked at was triple market prices. Triple.
Third, if you think you can resell your timeshare at some point in the future and recoup your investment (or more delusionally, make money), remember the part above about paying triple. And then read this article from SmartMoney magazine. People struggle even to give these things away, especially during an economic downturn. It's those pesky and steadily growing maintenance fees: they simply destroy the value of the asset.
There are other problems to watch out for with timeshares, but to me those are the three biggies. If you pay triple market price for an asset, and if it has a negative dividend with a huge growth rate... Well, in the future you may find yourself wanting to give it away too.
Readers, what do you think about timeshares?
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