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As a timeshare owner and someone who has consulted for a timeshare company, I can assure you that timeshares are poor, even horrible, investments. Here are the top 5 reasons you should never consider timeshares as an investment.
1. Time value of money
Investors should always be conscious of the time value of money. This is the basic assumption that money in hand today is better than the same amount tomorrow, or at any other time in the future. This assumption continues to be proven true thanks to inflation and opportunity cost (opportunity cost reflects the inability to pursue other opportunities because the funds are tied up).
With timeshares, you are charged a chunk of money up front for something you are planning to use in the future. Those of you who think financing will solve this may not be familiar with the rates being offered, which fluctuate in the range of unsecured credit card rates (but without the discount for those with high scores). That leaves one of two choices: pay high interest rates or pay a significant opportunity cost (since you’re essentially pre-paying vacations). Pre-paying for your vacation accommodations is the antithesis of leveraging cash flow producing investments.
2. Maintenance fees
All timeshares have maintenance fees. This means that every year, regardless of whether or not you actually use your week, you have to pay a fee. This maintenance fee goes up every year. The developers of these vacation properties have to charge enough in maintenance fees to not only cover the costs of running the resort, but also to cover the profit that the company doing the property management needs to make. Imagine if you bought a home and had to pay enough in maintenance fees to cover close to what you would have spent in rent.
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Author: Jeremy Ames
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