We get a wide variety of interesting questions from members of Pat McKeough’s Inner Circle. Most often, members ask us about specific investments, such as stocks, income trusts or exchange-traded funds, that they’re considering investing money in. However, they send us other types of financial questions, as well. To give you a sense of how the service works, I’d like to share a recent question from an Inner Circle member on investing money in time-shares. I hope you enjoy and profit from it. Q: Pat: What is your take on time-shares? They seem like a deal for a cheaper vacation. Thanks. A: If you visit a resort this winter, you may receive an invitation to a party or other event whose object is to try to sell you and other guests time-shares. It could be worthwhile to attend, depending on what else you have to do. But our view is that investing money in a time-share rarely provides you with any real advantage. Before investing money in any time-share, you should check the Internet for resales of comparable time-shares. You’ll find they often sell way below the initial time-share sales price.
Lack of flexibility limits appeal of investing money in time-shares
Even if you find what looks like a great deal on a time-share resale, we see no point in committing yourself to any one resort operator, much less one resort. You won’t be there often enough to develop any rapport with your neighbours or the staff. New resorts open up all the time. Management can get sloppy at existing resorts, especially after the time-shares are sold out. For that matter, your interests or tastes may change, or you may be unable to travel for health or other reasons.
[ofie_ad] You can always resell your time-share — many buyers do. But transaction costs are high and resale prices are likely to be below your cost. Time-shares are marketed as something of a cross between a real estate investment and a hedge against inflation. But generally speaking, only the land portion of any real-estate investment provides a hedge against inflation. The buildings and equipment that you pay for in a real-estate investment are going to depreciate, just like your car, though maybe not as quickly. If there is any profit to be squeezed out of the grounds of a time-share property — for instance, by building additional units on unneeded parking space — it will generally go to the management of the facility, not to holders of individual time-shares. But it may inconvenience time-share holders, or cost them money.
Consider renting instead of investing money in time-shares
We strongly doubt that buying a time-share will significantly cut your vacation costs, much less produce anything resembling a profit. But buying a time-share is a fair-sized financial commitment that could turn out to be a costly disappointment. The property, the location or the operator could run into all sorts of problems, and you’re stuck with it.
You can always rent one week at a time in the resort where the time-shares are on sale, or someplace comparable. It’s a big world out there, with lots of resorts to choose from. As economic liberalization spreads around the world, new resorts open up all the time. If you’re looking for authoritative advice on investment issues, or fundamental analysis of stocks you’re considering buying, you should join my Inner Circle service. When you do, you always get clear, concise investment advice that’s 100% independent, and untainted by commissions or other undisclosed influences. I swear to it. Click here to learn more.
