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 Dear
Dr. Don,
My husband and I are 60 years old and we have over $900,000
invested in stocks, bonds, mutual funds, CDs, etc. We have a favorite vacation
place we go to a minimum of two weeks a year, and when my husband retires we hope
to go more often, and we like the off-season. Someone suggested we buy two to
three weeks of time shares.
We don't have the prices on the specific ones we
would buy just yet, but they seem to average around $20,000 for a week. Do
you think this is a good investment and vacation plan for us? What are the ins
and outs of time shares? Thank you.
-- Annie Adroitly  Dear
Annie,
I don't think you should look at this purchase
as an investment. Regardless of how you feel
about fractional ownership or time shares, it's
rare for them to perform well as investments. Although
there's a technical difference between fractional
ownership and a time share -- the purchaser owns
part of the title to the property with a fractional
ownership -- the rest of my reply won't differentiate
between the two purchases.
Take a look at the resale market
for fractional ownership in your vacation spot
and that should show you why these purchases aren't
good investments and demonstrate a way to buy
in without paying primary market prices for the
weeks you want.
While
you have accumulated quite a sizable investment portfolio, spending 4.4 percent
to 6.7 percent ($40,000 to $60,000) of those funds on a vacation location doesn't
make sense to me. Don't forget to consider the maintenance fees, property
taxes and other annual costs associated with this purchase. You also have
to place a lot of trust in the property manager to keep up the place and protect
the value of your purchase.
The industry has taken steps to
reinvent itself over the past decade to correct
some of the problems purchasers associated with
time shares. These steps, however, aren't consistent
across properties or organizations. Wikipedia
had one the best overviews of the time
share industry that I've read, including the
pros and cons of fractional ownership. The
Bankrate feature, "7
tips for buying a time share," is one
of several time share stories on Bankrate that
will also help guide you if you decide to purchase
the weeks.
My advice is to be very cautious
before buying. Interview some purchasers at properties
in the area that have owned for five or more years,
and try to buy used. Next, benchmark the purchase
and annual expenses against the expenses you currently
face in taking these vacations without owning
the weeks, and review the company's Better
Business Bureau report before buying.
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