This is the time of year when many Canadians prepare to spend part or all of the coming winter in warmer weather down south. For some, this could raise the question of time-shares as an option for cheaper vacations. 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 your money in a time-share rarely provides you with any real advantage. Before putting money into any time-share, you should check the Internet for resales of comparable time-shares. You’ll find they often sell well below the initial time-share sales price.
Lack of flexibility limits the appeal of 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. It’s unlikely you’ll 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. 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. [ofie_ad]
Why time-shares are usually overrated as an investment
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. 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 in many different countries. COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members If you have bought into a time-share, what was the biggest selling feature that convinced you to make the purchase? If you considered a time-share but decided against it, what was the main reason you rejected the idea? Let us know what you think.
