I have a confession to make. I’ve sold two holiday Timeshares. And the guilt hurts. Like most people who have done the math on these holiday resorts, I understand that they’re a good deal for salespeople, but they’re usually a bad deal for buyers.
Here’s my story. Eight years ago, I saw an ad in the paper: sit through a two hour Timeshare presentation at a local resort, it suggested, in return for a great restaurant meal and two nights of luxurious accommodation. Timeshares are also called “Fractional Ownership” or “Interval Ownership.” I jumped at it—a small price to pay for a free long weekend, I figured. When I got home, I bragged to my friend about it.
The following weekend, he went into the dragon’s lair himself, looking for the same deal. But he got scorched. He came home the proud owner of a Timeshare. Indirectly, I sold that Timeshare, and I felt awful.
As a travel junkie who has visited more than 30 different countries, I’ll admit that I’ve committed a few holiday bloopers. I once booked a couple of flights online and arrived late to the airport—one month late, to be exact. But I’ve never bought a Timeshare. To me, that ranks with burning your own passport during a Russian holiday. You might get some warmth from the flame, but expensive hassles await the drunken tourist (blame the vodka) who would do such a thing.
The first problem with Timeshares is the upfront cost. My friend’s Timeshare (and no, I didn’t earn a commission) cost $14,000 at the end of 2003. Not having a disposable five figures in his savings account compounded his problem. He had to finance the purchase at a usurious interest rate. “Your investment will increase in value,” purred the saleswoman, in consolation. Instead, he sold it three years later at a loss.
Savvier buyers might pay less for their Timeshares, but the annual maintenance costs, which run as high as $800 a year, can quickly dampen the party.
My friend, Maggie, paid $16,000 for a Timeshare in Cozumel, Mexico, but after a few years of enjoying the resort, she neglected her payments. And the Timeshare company tasted blood. If you fall behind in your payments, they might charge more interest per month than some credit card companies charge in a year.
Overwhelmed by the mounting liability, she gifted the Timeshare to me, after unsuccessfully trying to sell it. I paid the interest-inflated maintenance fees, which had ballooned to $3,500. Wanting to go to Hawaii that winter, I tried to trade my two weeks in Cozumel for two weeks in Maui. Salespeople might tell you that this is easy. But don’t believe them. I eventually sold the Timeshare at a loss to two gentlemen who wanted to share the albatross.
Does this mean you should save your money instead of taking luxurious vacations around the world? No, I think you can do both. Maggie paid $16,000 for her Timeshare in 1993 (not to mention her maintenance fees). If she had invested that money in a S&P 500 index fund, instead of buying the Timeshare, she would have roughly $57,000 by December 2011.
And if you look around, you can find screaming holiday deals for less than a Timeshare’s annual maintenance fees. In May, my parents took a 12 day Royal Caribbean cruise from Fort Lauderdale to England for $500 each.
A week’s accommodation in Hawaii, including airfare from the west coast, is currently offered for roughly the cost of an air ticket.
And next week, I’ll be flying from Vancouver for an all-inclusive week-long Cuban holiday, including airfare, for less than the price of a flight to Havana.
But don’t report me to the U.S. government. I’m Canadian. And after selling two Timeshares, I’m desperately trying to redeem myself.
Andrew Hallam is a Digital Nomad. He’s the author of the bestseller Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas