What I learned about timeshares, and you can, too

Last weekend my wife and I spent a weekend in Las Vegas, with the cost of the hotel partially offset by having to visit a time share presentation. Anybody who has hit a certain income level has probably received a call from a timeshare company at least once, offering a free vacation, free hotel stay, or some other nice-sounding perk in exchange for visiting a “no-strings-attached” presentation. There’s nothing wrong with signing up for those perks, as long as you know what to expect, and what to do during one of those presentations. Here’s some random tips that I gathered after attending a few of those.

What are timeshares?

Whenever a real estate developer builds one of those nice towers in a highly touristy place like Orlando, Las Vegas, San Diego, etc., they would like to sell those condo units to interested parties. However, unless you happen to live in a highly touristy place, your interest in purchasing one is probably quite minimal. Spending vacation there, however, is another story. Hence the timeshare company breaks up a single condo ownership into roughly 50 weeks. Buying a timeshare entitles the owner to one week at the aforementioned property, with 1-2 weeks of the year left for various maintenance work, like replacing the carpet, or installing a new dishwasher.

Ok, I get it, so you buy a week?

The weeks sold can be of different variety, and sell for different prices. It’s a no-brainer that being in Las Vegas for New Year’s or at Lake Tahoe in the midst of the ski season beats Las Vegas in July, or vacationing in Florida during hurricane season. Not all weeks are created equal, and companies selling timeshares know that. They apply different pricing to their weeks, marking them as peak, high and low season. Naturally you pay less for a low season week than what you pay for a peak week.

Some trickier ones (like Westgate) tell you that they’re selling a floating week – the week you can use whenever, as long as you call the company in advance. The trick here is that the concept of peak weeks still exists, and you’ll be charged extra for it.

Some get even trickier, and sell you points. Points are assigned to your account, as you’re making your regular timeshare payments, and they generally seem lavish, as you’re told that you’ll be given 500,000 points each year, which you can then use to reserve the weeks and properties you’re interested in. Naturally, peak weeks cost more points, and generally the only way to get more points is either to skip the vacation this year, and let those points accumulate, or pay up to get more points.

Wait, did you say you could reserve other properties?

As going to the same spot will eventually get tiresome, timeshare companies are doing two things to add variety to your future vacations.

Number one: you can generally work out a deal to stay at a property belonging to the same company, if someone else wants to exchange. This might or might not cost extra, and usually involves calling the company, and letting them know which one of their other properties you’d prefer to visit. During the presentation the sales rep will make it seem as easy as it can be, but note that generally everybody wants to take their vacation during the peak seasons, nobody wants to go on vacation during a dead season. So when you call up the company and tell them you’d like to exchange your Orlando time share for a week in company’s San Diego property, people who own that timeshare in San Diego get a higher priority than you.

Number two: there are brokers on the market, like RCI or Interval, which work out deals for timeshares belonging to different companies. They charge for their services, as they’re not affiliated with the resort developers, but they do allow traveling internationally, since their directories generally include thousands of participating resorts.

What you will be told at a timeshare presentation

  1. The general script of any timeshare presentation I’ve been to starts with the sales rep asking the couple to list their favorite vacation spots. You’re told that this will be used for research on where to build next vacation spots, and those destinations will reappear in the conversation, as the sales guy as making a pitch on exchange programs (see above). If you feel like disrupting that part of the presentation, tell them your vacation destinations for the near future include Nepal, Greenland, and Iraq.
  2. You will be asked about the vacations you took. From here the script diverges two ways. One – the easiest – is if you haven’t taken any vacation, obviously money is the problem, and the timeshare company is here to help. Second – you list the vacations or trips you took over the past 12 months – involves tedious calculation of how much you spent for it.
  3. This is where it gets interesting – you will generally be asked to quote the entire price of vacation. In future comparisons these numbers will be used to compare with timeshare costs, and how much money you could’ve potentially saved, but you’re rarely asked to break down the price of airfare, hotel, and attractions. Most vacations are bought as packages, so rarely you have a clue as to what the exact cost of the component was. Usually you and the sales rep begrudgingly agree that you probably spend $180-200 for that hotel room.
  4. If you spend two 6-night weeks on a vacation every year, that means $2,400 of your budget goes towards paying for a hotel (12 nights at $200 each). So far so good. So what’s that going to be over the next 25 years? Well, you say, looks like $60,000 to me. And are the prices of hotels going to decrease or increase, asks the rep. You’re no fool, you know inflation theory, and you’re pretty sure it’s only going to increase. Is it fair to say that the prices of hotel rooms will be double of what they are now in 25 years? Year, pretty reasonable. Boom! Your sales rep multiplies everything by 2, and you’re obviously going to spend $120,000 on just hotel stay in the next 25 years. I will let you figure out what’s wrong with multiplying the whole sum by 2.
  5. At this point you’re probably indignant at hotel companies and yourself. Well, it turns out, your sales rep informs you, that you never get that money back. You’re just giving the money away without getting back anything, but a bag of receipts. You’re renting your vacation, spending $120,000 on it in the course of the next 25 years, and receiving 0% return on investment on that money.
  6. Introducing the concept of vacation ownership. Each timeshare company claims to have invented this, and according to sales rep, it’s only due to the goodness of their heart, helping doofuses like you and me save that $120,000 over the next 25 years, and also get something back in return. For something like $150 a month, you can be a proud owner of your vacation.
  7. At this point it totally makes sense. Why throw your money away to evil hotel companies, when you can be an owner of your own week, be able to own it forever, and gift it to your children, if you choose to (this concept of gifting or willing comes up often).

So why doesn’t it make sense?

The financials presented sound pretty good, right? Generally if you look at the pure numbers, they come to around $60-70 a night, generally pretty competitive rates when you line up the hotels in the same area. Well, the secret is that there are two kind of fees – your timeshare payments and maintenance fees.

The payments go towards collateral and interest (if you chose to finance), the maintenance fees go towards hiring people to maintain the resort (duh!) While your monthly payments are set in stone (a contract, that is), maintenance fees fluctuate from year to year, or so you’re told. Well, unless you’ve witnessed a strike of maintenance workers asking for lower wages, there’s only one way they can fluctuate – up. Those fees are applicable even if you decided to skip vacation for a year, either due to time constraints, or desire to accummulate points. Also, maintenance fees never go away. Even if you’re completely paid up on your timeshare payments, the maintenance fees still have to be paid. If you gift the paid-off timeshare to anybody, they will be stuck with maintenance payments set by the resort.

Another highly objectionable technique used by timeshare companies is points inflation. As the years pass by, and you keep paying stable payments and rising maintenance fees, you will find out that either you get fewer points for your money (few companies do this, as this is pretty obvious attempt) or things cost more and more points, requiring you to buy up some extra ones each year. Combine the payments + maintenance fees + any points fees or any peak/high week fees, and you’re most likely looking at $150-200 a night, the exact price quoted to you by the sales rep, only in reference to the evil hotel industry.

So does it ever make sense to buy a timeshare?

Generally the high dreams of getting any return on investment never materialize, as deteriorating properties require higher maintenance fees each year, and there are always more people selling timeshares than buying them. However, does it make any sense to get one?

  1. It seems to be a reasonably good deal for large families, or families taking vacations together. Since most of the timeshares can accommodate two families, in price comparisons you’re looking for 2 hotel rooms or hotel suites, which generally cost much more. But even then, your costs may very.
  2. It seems to make sense if you have any recurring travel. Every year I go to a conference in Las Vegas that always happens to be during the same week. But even then a timeshare would not make sense for me – the week is in August, when hotel rooms are cheap, and the conference might move to another location, which would imply getting a different hotel that year.
  3. If you happen to have a week in a property that someone else wants to buy out, you might make some money. But even then the investment return will most likely be obliterated by various fees attached by timeshare resorts.

When you think that getting (or not getting) one might make sense for you, make sure to check eBay Timeshares, Sell My TimeShare Now, or places that rent timeshares just to get sense of the going market rate. From reading the forums, it looks like the biggest mistake one can make (outside of buying a timeshare) is buying it retail as a result of a high-pressure presentation, that has a special rate going on that’s going to expire today (isn’t that convenient).

Another good place to do some reading is tug2 – forums for timeshare owners, run by people who actually bought timeshares, not companies that sell them. There’s apparently also a huge market to get rid of timeshares, and Timeshare Relief is the primary buyer for those. Most of people unloading timeshares are willing ti give them away for any price, just to get rid of high maintenance fees and property taxes, and hence you can frequently get a bargain if you’re looking for a secondary market timeshare. Vacation Rentals by Owner site will give you a good idea of what the vacation spots rent for in the markets you’re looking at – would suck to get a timeshare costing you $2,000 for the week, when larger vacation houses rent for half the price at the same location.

  • Steven

    You mention gifting timeshares. If I receive a gift of a timeshare, fully paid up, is it then a good deal? I realize I’d be paying the maintenance fee…

  • Alex

    Steven.

    It certainly might make sense. Total your expenses for maintenance fees + taxes (if applicable), and if the rate you pay per night is lower than comparable hotel rooms, then you definitely have a good deal.

  • http://www.time-share-fun.com Cary Johnson

    Hello:

    As a former timeshare salesperson who owns two deeded weeks, one gifted to my family and another purchased on the re-sale market, we have had great vacations.

    To begin with, both weeks are 5 Star resorts in the Interval International system.

    The maintenance fees between the two resorts come to less than $900 per year. We budget $75 per month total between both resorts, paying those funds monthly. We figure it is hard to find a decent motel for less than that, so figure the monthly fee for two weeks vacation is well worth it.

    We purchase the 2nd timeshare week via the internet for $3,000. It was at a resort in Missouri and a prime summer week. That same week at the 5 star resort I was selling at sold for $24,000.

    We have never been disappointed in our 5 star vacation exchanges. We do plan ahead and usually do the exchange directly on the Internet.

    Shop around. There are plenty of deals on the re-sale market that can be picked up a reasonable prices.

  • http://www.rcitimeshare.blogspot.com rciblogger

    Alex,

    Excellant article, well writtena and extremely thourough.

    Our family has attended several timeshare presentations to take advantage of the benefits, in the end we found it more economical to purchase a TS on the resale market $5.85 through an auction with low maintenace and tax <$300.00

    rcifamily

    http://www.rcitimeshare.blogspot.com

  • bryan

    We have a timeshare in Orlando. We bought it on the resale market, getting it for a quarter of what the developer wanted (bought a 2 br unit for 8k and the developer wanted 35k). The maintenance fees run about
    900 for the year, making each night 128 for a two BR condo

    to us, it’s a good price.

    plus, being able to use Interval to buy extra weeks is a bonus. Got a second week at the same resort through Interval for 400.00

  • Amber

    Can anyone explain the RED WEEK term I keep seeing everywhere?
    Thanks in advance

  • Joe Piccola

    Hey Guys I can’t tell you which TS company I work for because my company does not want us on these websites. My Job is to allow people to try out a TS before purchasing one. Please write me at JoePiccola@gmail.com. I would be happy to answer any questions you have about TS in general or if you want to try one. For the record I have been working for this company for 2 years and TS’s are not for everybody! But it truely is a wonderful product.

  • bin wang

    Good article!
    I have been trying to buy a TS. A lot of up-and-downs during period. I still have not decided what to do.

    The thing that really bothers me is the MAINTENANCE FEE. This is the hidden killer. TS developers will tell you,once you spend one-time cost, $10, 000, you will have a vacation home for your whole life. Even more, your off-spring can continue use it for free forever. You pay your all vacations right now, once and for all. Well, while you are thinking about $700 2b luxry condon in a resort(pretty good deal), the real cost could be $1450. The worse thing is that you are under the risk of being forced to pay even more, wheather or not you want a vacation. Why? Because of the MAINTENANCE FEE and RCI FEE/CHARGE. The scarey thing is that there is no cap for the MAINTENANCE FEE. I know a resort whose MF doubled in 2 years. The developers down play the MAINTENANCE FEE. They don’t even mention it while they are trying to compare the costs of regular vacation with the TS. They’ll mention it when they have to. This give you an impression that MAINTENANCE FEE is nothing comparing with the money you spend. But the real truth is that when the MF is added, you’ll see your cost doubled or more than doubled, and nobody knows how fast the MF will grow in next few years. It all depends on inflation in general. But the oil price and natural gas price could really double or even triple the the MF.

    So far none of resort has a cap on MF. During the time of volatile energy market, you have to take that risk. My guess is that this is how TS company actually make money(through MF). So if they want improve the company’s profit, they’ll increase the MF. You, the ower, have to pay it, otherwise you loose your condos.

    Think about it twice before you buy a time share.

    -Wang

  • Mr Gee

    I have owned ts for 10 years, I own 2- 2 bed/2 bath, which I paid 14k at a top resort. My Maintence fees started at 400 and now are 675 but Ilike the fact that thru Interval I can deposit both my weeks and get 2 bouns weeks with allows me to travel up to 4 weeks a year. So I look at the fact that I get a month of traveling for 675 plus the 154.00 (316.00) exchange rate II charges. So for basically 1000-1100 buck I have a month of fun. especially if you take friends and charge them a small amount. :)

  • TT

    I own a timeshare at orange lake – studio – the thing is fully paid. It took me 7 years to pay it. I never used it once. For me it was money that I flushed down the toilet. I live in Toronto and never went back to Florida. Now I am looking to sell it, because I don’t want to pay the maintenance fee anymore, is about $500.
    I guess timeshare works for some but for me it did not.

  • Ceejade

    I want to thank the author for this info. I know someone who bought a TS for $8,000 two months ago. Thanks to this article, I found the same one on ebay for $1.00. Thanks much!!

  • http://www.timesharerelief360.com Timeshare Relief

    This is really one good article. It could really be frustrating sometimes to sell timeshares because majority of the timeshare owners also want to get rid of it because of the high maintenance fee that you have you pay annually.

  • Kevin

    Now I know. And knowing is half the battle.

  • Rvrgoddess9

    I want to gift my timeshare to a family member. How do I do that? I keep reading about title transfers and closing costs. As far as I know we only have a contract with the right to use the property, not a title. Not sure where to start. Does the resort need to be involved?

  • Nancy

    If I cannot use my points because I am out of the country, can I rent my weeks to someone else so I don’t lose points for the year?  Is eBay the best way to do that?
     

  • http://www.timesharescam.com Yeneli Roberts

    Timeshares need to be looked up as a purchase and not an investment. Regardless of how timeshares are presented, they don´t perform as well as a house or stock investment. If you look around the resale market for timeshares on websites like EBay, Redweek, or TUGBBS will find that you can buy a timeshare for far less money than what the first owner purchased it for.

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  • http://www.timesharescam.com/ Grace Evans

    The timeshare industry has been into the lion’s mouth for the last couple of years, and it has generated lots of controversy and discussions in many forums and blogs on the web. However, since we’re living an economic downturn, anyone would expect that the timeshare sales collapse, but instead of that the sales seem to be increasing… but this comes with a trap: timeshare scams are increasing too. That leads us to the question: then, why keep people investing on timeshares?

  • Grace Evans

    Timeshares need to be looked up as a purchase and not an investment. Regardless of how timeshares are presented, they don´t perform as well as a house or stock investment. If you look around the resale market for timeshares on websites like EBay, Redweek, or TUGBBS will find that you can buy a timeshare for far less money than what the first owner purchased it for.

  • Grace Evans

    Timeshare fraud has been around since the timeshare idea was created,
    but they increase during poor economy. When times are difficult, timeshare
    owners are stuck with properties they can´t travel to or even afford. Desperate
    to recoup some money to pay for bills, they can easily become victims to scams
    artists pretending to be their timeshare salvation who will take upfront fees
    -as much as five number figures in some cases- but fail to fulfill their
    promise.