Originally Posted by JoeSchmoe
Further to my above point is that I have friends that have a timeshare that they got on the cheap...
Every year, they scramble to make use of their timeshare through the exchange program. I know that some of the Disney places they've stayed at could be had for similar prices (or less) than what they're paying in dues. Other times, they end up at places they wouldn't otherwise want to go to, but they have to use the points.
You may be correct, assuming your investor purchases one week. If that person invests in multiple weeks or even a quarter share, the results could be different.. Assume three weeks use in the winter for skiing at a top resort(s) would cost $150 - $450 per night (one bedroom, full kitchen, sleeps 6, ski in/ski out/ in-room jacuzzi, etc.). That comes out to $5,000 in lodging per year. So if the quarter share costs $100k, the "return" is 5% per year, which isn't terrible assuming rental income from the other weeks at least covers the yearly maintenance costs. Appreciation? No way. So you view the investment like a bond and not a stock. At some point you hope to get "par" value (if you eventually sell and don't give it to the kids). There are no problems associated with typical condo ownership either, like fixing plumbing, finding renters, painting, etc. because a management co. does this. There are also no surprises since you know what you are getting every year.
If the OP wants a place to go to every year and if he can buy a week cheaply enough, it could be a good deal assuming he can eventually sell his week for what he paid for it and the yearly maintenance fees and taxes are low enough to give him a decent economic return. It will certainly be convenient going to the same unit. If the ongoing fees are too high, his "return" will be lower and as you explain above he may be better investing his money elsewhere. If the OP pays too much or doesn't expect to use the unit, he may be better off renting every year.
One thing that was not mention in any post above is inflation. We used to have it paying more for vacations every year , and now we don't. If inflation does come back he time share owner will have the advantage of having his vacation "prepaid." The maintenance fees will also rise, but so will any rental income. If the maintenance fees, taxes and reserving requirements are too high from the get go, then inflation will not make the investment better.