Spring is coming, and it is impossible to visit Las Vegas, Orlando, plus many other places, without being bombarded with time share hawkers on every street corner, promising you free tickets or other such stuff if you will just ’attend a meeting.’ Of all the American sales schemes, the time share condo is perhaps the cleverest. The sales pitch is almost irresistible. “Luxury condo time share. The ultimate luxury for your vacation every year. Buy your dream vacation villa for $10,000 with 5% down, and easy low payments and terms. Own it forever or sell it. A vacation getaway that belongs to YOU!” The spiel goes on to tell you the interest is deductible. all maintenance is furnished, full facilities are free for your week’s vacation, including pool, tennis courts, beautiful views, golf, etc. Sound Great? Let’s analyze it.
For that $10,000, you own this admittedly beautiful condo, (usually with a cheap bed), but for only one week a year. Prices depend on the season, but that’s a good average. The developer can sell a condo costing $50,000, including land and extras, for 52 times $10,000, or $520,000. If he builds a 200 unit time share resort for $10 million, he can sell it for more than that, or $104 million. That’s a hefty $94 million profit for the builder before sales expenses. Sell them for 5% down, and carry the balance at interest. and you have the entire thing paid for with a receivable of $90 million, plus perhaps $9 million income a year in interest. A developer can easily afford to put on hefty promotions, free weekends, lavish advertising, and big name sponsorship.
For the buyer, this seemingly wonderful bargain really isn’t. $10,000 isn’t the final bill, because there is an average of $200 per year in “maintenance charges,” which includes taxes, utilities and repairs. This is for a one week stay, or about $30 per day. You can’t rent a hotel room of this high quality for $30 a day, but if you took your $10,000 and put it in the bank at interest, that may be an additional $100 a day plus the $30 a day in maintenance charges for your dream condo, and you are up to $130 per day. Put it in gold or silver and it would do much better than any bank’s interest. Who wants to go to the same place for a vacation every year anyway, and especially for $130 a day? The developer has $10,400 per unit to maintain the place, and pay taxes and insurance, which I can assure you is more big profit…in the hundreds of thousands of dollars per year for management. Don’t forget, each unit’s price and maintenance must be multiplied by 52. There are 52 weeks in each year.
Some ads proclaim that you can exchange your week with other owners, but there is always a charge for that, and people tell me that these charges as well as maintenance charges go up every year. Some time shares sell for a lot more, and maybe a few for a bit less, but I base this on a combination of one about a hundred miles from where I live and one in Las Vegas I investigated last year, which was for two weeks and a lot more than $10,000 per week. And if you ever want to sell, you can practically forget it.
America, I thought a long time ago was getting wise, but I was wrong. The time share selling to the gullible continues unabated, year after year, with huge commissions paid to the sellers who could also sell used cars and the Brooklyn Bridge, so slick are persuasive are they. If you walk away from it after committing, you might ruin your credit rating, as it would be an official default on your credit sheet. Time shares are not for the smart investor. If you just have to have one, select one of the millions that are for sale, and take over the payments. The owner will usually be delighted! This morning, there were over a thousand of them on E-Bay!
Correction in prices? Doesn’t seem to be happening, does it? I wish I could peer into the future and tell you if one was coming, but the last one was brief, small, and seemed to last only a few hours! A year from now, I can absolutely assure you, today’s prices will be comparable to prices a year ago…namely seem high at the time, but in retrospect, a bargain. Unless of course, you can assure me that all other prices will go down, including chicken, auto parts, gas, taxes, and politician’s lies.