Real Estate (72)
Tax Deductions (4)
Should you buy that new timeshare? What is a FAIR PRICE for a timeshare?
This article has not been rated yet. After reading, feel free to leave comments and rate it.
Question:During my last weekend getaway, I was talked by a real estate agent into buying a timeshare. I have now 3 days left to think about this and possibly void the purchase contract. How can I determine if the price for that new timeshare is fair?
Answer:When you own a timeshare, there is still ongoing cost - maintenance, repairs, property tax. If you plan on renting it out, factor in your time and/or money to find a renter.
All these expenses apply as well if you buy a regular townhouse or condominium.
Is the price for that timeshare right?
Let's look. At the time of writing, a pretty basic timeshare unit for 2 weeks in South Lake Tahoe is offered for $27,000. A better equipped one in the Marriot resort (prime location next to the ski gondola) goes for around $50,000.
Now comes some simple math. You can buy a reasonable condominium for $280,000. The high-end condo might cost $500,000 in South Lake Tahoe. (For $380,000 you get a full sized free standing house.)
The year has 52 weeks. So buy a town house for $280k, that's $280,000 / 52 * 2 = $10,700 for a 2-week period.
Same math for the high end condo.
$500,000 / 52 * 2 = $19,230.
Looks like the timeshare builders make 130% profit. They sell a high end unit to 26 customers, each pays an $50,000 for two weeks:
That's a total of 26 * 50,000 = $1,300,000.
If they would sell it as a whole unit .. they'd get only get $500,000.
You tell me if that price of $50,000 for two weeks is fair or not. I suggest cancel!
See also the other article on why a timeshare is not a good investment.