Devil's Advocate 
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Timeshares Are Good Investments

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This is a Devil's Advocate post.

This Devil’s Advocate post comes from my friend Lazy Man of Lazy Man and Money, owner of a timeshare in Aruba.

Almost every personal finance guru will tell you that it rarely makes sense to buy a timeshare. They often cite scary fine print, travel inflexibility, and difficulty in selling the timeshare. These are legitimate concerns for some timeshare owners, but not all. Back before I was heavily into personal finance, I considered a timeshare. And my girlfriend (now my wife) on a trip to Aruba actually bought one. Was it a bad decision? I don’t think so. Why? Well here are a few details that make our purchase seem “worth it.”

(Click to continue reading…)


 Personal Finance 
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Consider Bed & Breakfasts Instead of Hotels

In the two and a half weeks we spent in the island of Hawai’i, we stayed at a timeshare, two bed & breakfasts, and a resort hotel. We did it in that order because, as more avid hikers than beach loungers, we figured we’d tire ourselves out in the first ten days and then lounge around at a Marriott for the last five. The two bed and breakfasts we stayed at were on the Big Island, the Shipman House in Hilo and then the Hale Maluhia Country Inn in Kailua-Kona.

Bed & Breakfasts often have better rates, significantly more personal service, but their variance in quality is much greater. If better rates and more personal service appeal to you, the variance in quality might be the only sticking point in the whole deal. The appeal of a major brand, whether it’s a Marriott or a Hilton or a MacDonalds, is that you expect consistency regardless of location. A Marriott in one city should give the same level of service as a Marriott in another. There might be small differences but the quality should be above a certain level. You also know that if you don’t get the quality you feel you’ve paid for, there’s a big megacorporation you can complain to. With a bed and breakfast, you’re often dealing with the owner-operator and the best they can do is say they’re sorry and refund you some of the money.

With many bed and breakfasts, you’re essentially renting a room in someone’s house, albeit a much nicer and probably more organized house. With the Shipman House and the Hale Maluhia, we really saw both ends of the spectrum when it comes to bed and breakfasts. The Shipman House was this elegant and refined Victorian building that had so much history and culture to explore. The Hale Maluhia was far more rustic and less refined but certainly had a “tree-house” type atmosphere that we also enjoyed. Both places served breakfast with a beautiful selection of locally grown fruits and incredible Kona coffee. The next time we go back we would certainly stay at the Shipman House (Hale Maluhia was okay too, but we probably wouldn’t go back, especially if the owner is trying to sell it).

Local Flavor & Personal Service

Bed and Breakfasts aren’t always cheaper but you can always depend on a more personal level of service and a better sense of local life. I like nice hotels as much as the next person, but you always pay a premium (even if it’s a discounted premium) and you always get a ‘sanitized’ version. If that’s your preference, there’s absolutely nothing wrong with that. However, if you want a better taste of local living, you can’t go wrong with a bread and breakfast. At the Shipman House, the proprietor was so kind to us and told us where all the good places were.

Variance

As mentioned earlier with the variance between the Hale Maluhia and the Shipman House, it’s difficult to know if you’re going to get a good place, a great place, or a so-so place. I would categorize Hale Maluhia as a so-so place and the Shipman House as a great place (but you do pay a premium), but it’s hard to tell from the online reviews and testimonials. My advice is to read a lot (I’m now a huge fan of unbiased Hawaii blogs like GoVisitHawaii, I’m addicted to that particular one though) and try to find as many pictures as you can, pictures can lie but they’re better than nothing.

So, before you just book a room at the Marriott, consider a bed and breakfast; you might be pleasantly surprised!


 General 
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Listen to a Timeshare Pitch, Get [insert freebie here]

I’m willing to bet that on more than one vacation, someone has come up to you and offered you something free to sit in on a timeshare sales pitch. This happened to me on a vacation to Las Vegas, NV, in 2004 outside Treasure Island. The pitch was for Polo Towers, which is a piece of property closer to the Mandalay Bay end of the Strip than the TI end. I was apprehensive so we passed. The next day we’re walking through the mall in the Aladdin when we passed a booth and that’s when we agreed to go do it in return for eight tickets to Folies Bergere at the Tropicana, which is a classic Las Vegas second or third tier show.

Basically it was three hours of aggressive sales marketing of the Polo Towers and the vacation club/network. The price started at around $15k and soon dropped to somewhere in the $3-4k region by the third hour. We lied about our credentials (you needed to be 23+ and have a salary greater than $40k), because otherwise only I would qualify since the others were still in school, but they didn’t check. We were handed off twice and different sales pitches were used (nice guy peddling a good deal, not as nice guy peddling a great deal, mean bitch who was pissed of we weren’t jumping on an awesome deal). After taking our tickets and walking out we were offered $200 for the four of us to go back the next day and try it again but we declined because we valued our three hours more than $50 a person.

My advice to you if you’re asked to do it… take the freebie if you’re willing to say no to people who will grow increasingly abusive as the hour goes on. If you can’t stop your impulse buying, do not do this.

When I returned home from the trip I had a few questions and so I wrote them down, collected the answers, and here they are.

What’s the deal with timeshares? Why are companies willing to give you all sorts of free stuff just for you to sit down and listen to a timeshare presentation?
They do it because they can make a ridiculous amount of money if only a small percentage of people buy the timeshare. This page is designed to answer the lesser known questions as to how timeshares work, not necessarily the better understood parts of timeshare types, trading timeshare rights, etc. I wanted to tell know about how the soft underbelly works like how they can afford to give stuff away, the resale value of timeshares, and other quirky things you probably didn’t know and didn’t know how to ask.

How can they afford to give people such good incentives to listen?
The developer creates a timeshare by buying land and developing a resort, then selling units to people willing to buy them. Some of these developers are shady and cheats (the first bunch were, that’s why timeshares have a bad reputation) but some are well known like Disney’s Vacation Club. Once done building, they start their marketing program to peddle the units to buyers and will spend upwards of 50% of the final sale price of a unit on marketing alone. They might bring in an outside outfit to do the marketing, but eventually when you pay $10,000 for a timeshare, about $5,000 was on marketing.

How is the resale value of timeshares?
Terrible. Bad. Awful. Supply far exceeds demand, as evidenced by the fact that the original developers are giving away huge freebies just for people to listen to pitches. An individual can’t possibly compete on that level with developers! Add that to the fact that you can’t even research how similar units are selling, as you would in traditional real estate, and you’ll find you’re in a very bad situation. This is the perfect buyer’s market. That means if you want a timeshare, buy it used!

How can I buy it used?
If you know where you want the timeshare, call them directly. They usually have listings of units looking to sell. There are also resale brokers specializing in timeshares, otherwise, just do a search online or in the newspaper for a listing. Online there are various sites that have listings of people looking to sell along with prices so as a buyer you can do a little comparison shopping. Getting a 50%+ discount on a timeshare for buying used is not unheard of.

Shoot! I bought and now I don’t want it, help! How do I cancel a timeshare purchase?
Usually the contract will have a cooling off period of less than two weeks, check the contract and if you still have time, cancel! Past that time? Chalk it up to buyer’s remorse, enjoy the vacation because it beats getting a hotel at the last minute and paying out the nose. Timeshares in general aren’t a bad idea, otherwise no one would get them, but playing the waiting game is the way to go. Always wait if you’re hesitant because you can 1) always get more freebies to listen to a presentation and 2) get the next timeshare offer.

This timeshare is too good to be true! How is it this cheap?
Either no one else wants that timeshare or you’re really lucky. Actually, there are annual fees, maintenance fees, usage fees, trading fees (say if you trade resorts), and other various fees you probably aren’t thinking of. Timeshares are a good deal (if you don’t mind being “forced,” in some cases, to use a vacation each year) for some so the fees are overcome.
Another thought is that perhaps you are being scammed. If it sounds too good to be true, walk away. They will be pushy, but just walk. Then do an internet search and see if it’s shown up because chances are it wasn’t tried on you first and someone else blew the whistle. Worst case? You don’t get a timeshare and you can do it some other time. No big loss.

The more information I find, the more I will post.

Resources:
Timeshare Secrets Exposed – Comprehensive site detailing much of what you need to know about timeshares.
The Timeshare User’s Group – Most of the information I’ve provided was learned from reading that site and the advice it’s given. Stephen J. Nelson’s Timesharing 101 presentation is a definite must see if you have the time.


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