Popular timeshare destinations in the US

Any guesses for which one tops the chart? You got it- Florida! Florida is the most visited vacation destination in the US, primarily for Orlando and the beautiful beaches. Florida offers something for everyone- the magical world of Disney, Magic kingdom, Epcot center, Universal studios, shopping, nightlife, beaches, entertainment.. you ask for it, and Florida has it.

California has been gaining popularity in the recent years. California offers a lot to visitors in terms of natural beauty- the mountains, the beaches, the vineyards, are all within a few hours drive. The magical world of Disney and ofcourse the glamour world of Hollywood are top California attractions. The temperate weather is definitely a plus.

Las Vegas attracts thousands of visitors each year because of its world class entertainment- whether you are a gambler or not! The recent real estate bust affected home prices and other real estate prices in and around Las Vegas. As a result, hotel prices have dropped a lot. At a nice hotel like Monte Carlo, you can get hotel rooms starting $50 for this month.

Hawaii is a beautiful vacation spot- it really is. And like me, a lot of people fall in love with this destination, and probably want to keep going back. Hawaii, with all its natural beauty, is a tropical paradise. So, no wonder, timeshare developers make an increasing effort to lure tourists into buying their property.

There are other US destinations that are getting popular, like Hilton Head in South Carolina, Colorado, and Texas.

I’ve always wondered why people buy timeshares when they can just rent a hotel room, or a vacation rental, for sometimes a fraction of the cost. Well, I think when people fall in love with a destination, they want to return to it every year. They are also looking for least worry, and not having to go through the hassle of looking for a hotel room, and making reservations. I guess they enjoy stability, knowing their unit or property will be waiting for them every year.

Just thought I'd share some interesting information I found on the TUG website. This map has RCI properties only, I believe, and the map was created in 2006, although the google map is current. Florida is a region by itself!

http://tug2.com/tsmaps/TimeshareMaps.html

Timeshare Depreciation

Ever wondered why timeshares depreciate or lose their value so much?

Well, think about it, most traditional timeshare sales happen when slick salesmen show you your ‘dream-come-true” property, and tempt you to buy your week. They over-price those units because, remember, they have probably also offered you free lunches, or free tickets, or even holidays- they need to cover those costs plus make a profit. They also have to account for taxes, maintenance, and salaries and commissions for those slick salesmen.

So as soon as you buy it, the value goes down, and you can probably never even recoup the price you paid for your timeshare when you sell it. You basically purchase the rights to use it- its like buying a new car. You purchase it for your own recreational use, an expense, whose value depreciates as soon as you drive it off the lot. Not the best investment strategy, is it?

Does timeshare constitute an investment?

I came across a very interesting article while doing my research on timeshares sometime ago, and I thought I’ll share it with you. The article is called- Time and Time Again: Buying and Selling Timeshares and Vacation Plans. This article is published on the Better Business Bureau website: http://www.bbb.org/us/article/4786, in cooperation with the Federal Trade Commission. This is an old article, but not much seems to have changed in the timeshare industry since. The second paragraph talks about “You should know that the value of these options (timeshares & vacation ownerships) is in their use as vacation destinations, not as investments.

As a real estate investor myself, I do not consider timeshares as an investment, and here are some of the reasons why:

• No increase in value overtime – Timeshares depreciate, just like any other real estate property (with the exception of land), but unlike real estate, they do not increase in value over time. Even if the property value itself increases, you don’t get a benefit- your resort developers will. And you can never really get the price you paid for it, when you sell it.
  
• Tax Benefit- When you own real estate, for example an investment home and rent it out, you are able to deduct certain expenses related to home improvement, repairs, etc. in your income taxes. Very few deductions are available for a timeshare, and are subject to different conditions, based on whether it is for personal use or business use. Also, deduction of property tax is usually determined based on who is billed for it, and other conditions. In short, you spend all this money, few tax deductions, and there is no equity building.

So, the idea of timeshares really is usage, and not investment. It is supposed to save you time and money in terms of giving you a luxury ‘home away from home’, where you don’t have to spend on maintenance or worry about furnishing it when you want to use it. But, you do pay a pretty big fee for this purpose, right? And you give a down payment to buy it!!

I consider a timeshare to be a contractual agreement and obligation where you agree to commit your money, time, and energy. The only ones making a profit on timeshares are the developers and resellers. Hey, my 2 cents- if you are in love with a destination and want to visit every year, think about buying a second home or an investment property there, and rent it out for the rest of the year!

Alternatives to selling your timeshare

I got an email the other day from a person asking- "well, does it make sense to sell a timeshare in a market like this?" As a real estate investor, I would NEVER sell my properties- I would like to retain it till the end of time. This is ofcourse presuming all goes well for me, and I do not have a dire need for money at some point in my life. Then maybe, I will be left with no choice but to sell, but till then.... nope. This is because you can never go wrong with real estate- it is like wine- the longer you keep it, the better (financially) it gets. But here is the BIG difference, and VERY important to remember that timeshare is not a real estate investment, and hence you need to wear a different thinking hat.

Well, to sell or not to sell depends on many factors: which market it is that you own your timeshare for demand-supply and price point, your financial situation- i.e. whether or not you need to pull money out, and ofcourse your personal choice. But, it is important to know that there are alternatives to selling.

If selling is something you don’t want to consider yet or your unit has been on the market for sometime and you want to consider alternatives, here are some. I will go into further details in my later posts.

1. Rent- Might be an easier way than selling, in order to recoup your expenses on the unit. But  do make sure you consult with your resort on their rules, speak to a real estate agent, have a rental agreement in place with the renter and the resort, get a security/ damage deposit, use paypal as a secure way of payment, etc. - just common things you would think of while renting any property.

If your timeshare is in a different country, things would become a little more complicated, in which case, might be worth the money to consult with a tax attorney or someone who understands international tenancy laws just to understand the process. Determining rent generally follows the same rules as determining a sale price- your real estate agent will be able to guide you better, based on your specific market.

2. Trade/ Exchange – At  resorts like Marriott for example, which are present worldwide, you can have an option to trade your week for any other resort for any other time, for a comparable timeshare. Companies like RCI (Resort Condominiums International) are called exchange companies; these exchange companies work with your resort, and can help you look for a comparable timeshare wherever you want.

3. Donate to charity- Folks do this in order to get a big tax break. Consult with your tax attorney before taking this step. Also, keep in mind, there are limited charities that accept timeshares.

Selling your timeshare?

Like any other venture, owning timeshares has its pros & cons. If you’re reading this blog, you are either looking at buying a timeshare, or you already own one and you’re not a happy owner who is looking to sell or rent it.

If you’re looking at buying one, please be very wary, talk to owners, real estate agents, other investors and be informed about what you’re getting into. If you’re on the market to sell/ rent your timeshare, this post sheds a little light on what alternatives are out there. I will provide more details on such alternatives in later posts.


Selling your timeshare:

It is not a sellers market and its a rough road ahead for sellers - bear in mind, people like me, who love to travel are always looking for good bargain deals, and there are plenty available in this economy. If I can get the same unit/ property for a fraction of the cost of the unit for a week, plus not pay fees associated with a timeshare, what would I do? It’s a no-brainer.

Let me give you an example: I recently visited Canmore & Banff in Canada last month. I got an awesome deal in a resort called Lodges at Canmore. It was the peak of summer (end of August), and I got the deal for $110 USD a night. It was a beauty- 2-bedroom condo, with a patio, fireplace, full kitchen, washers, parking, grill, etc. Now if I google timeshares for resale on Canadian Reort Vacation Club, I see a 2-bedrom comparable in Canmore is selling for approx. $7,000, with an annual membership fees of $500. Why would I buy it?

Well, if you have decided that selling is what you want to do, there are several online resources available, websites like myresortnetwork.com, and these websites usually charge a listing fee (anything from USD $30 - USD $500). You can also go through brokers or other organizations. Remember, it is a very tough market out there, especially for timeshares, so it might be a while before you can find a buyer, and you might have to incur huge costs, just trying to sell it.

Some things to keep in mind when selling your timeshare:

1. Please do lots of research and homework on the market, current resale price of comparable units, demand & supply. Talk to other owners, agents, brokers, and get as much data as possible before you actually price your timeshare for resale.

2. Resale price is very important. Research on a comparable resale-, and try to price at or below the lowest average to have the best chance of selling your timeshare.

3. Be very careful about upfront payment fees while selling your timeshare. I have heard horror stories about sellers being charged thousands of dollars, on the pretext of ‘reaching out to prospective buyers’, but nothing concrete is ever done. Do not pay upfront fees, if it looks fishy or not legitimate.

4. Negotiate a commission/ payment after the deal is done- this motivates the broker or the agent to work hard for you. Always use a licensed and legitimate broker. Keep in mind though that broker fees might cost you almost 20% -30% of your sales price.

5. Your resale price will never equal what you paid for it to the developer. Times depreciate over time, and due to the economy, some have depreciated almost 99%.

6. Advertise as much as possible, and for as little as possible- use free advertising websites, posters in your resort, etc. tug2.net is a good marketplace for timeshares. Ebay and Craigslist are good websites as well- they will also give you a good idea of what other timeshares are selling for.

7. Some companies offer to buy your timeshare for their own use and in return want you to get an appraisal from an independent appraisal company that they recommend. Sounds like a good deal, right? Refuse such a offer- many such companies have cheated sellers for millions of dollars in the form of appraisal fees. A good forum to learn more details is: http://tugbbs.com/forums

8. Be careful of foreign buyers/ transactions/ banks- avoid those if at all possible.

9. Be wary of your resort company or any other offering you some amount for your timeshare and in turn tempting you to buy another.