Originally Posted by Ice Queen
We own a timeshare at Trapp's in Stowe, we paid $9,500 for it, the maintenance fees are about $500 a year. Right after they were built they were going for $14,500. I figure we pay our $500 a year for a really nice two bed, two bath condo with a great view and new rec center, then when we don't want it anymore, we sell it. My impression is that the timeshares at Trapp's sell pretty well, so I don't think we'll be stuck with it. Anyway, we own a deeded week, so it's "real" property (no it isn't, it's merely a block of time that you have deeded to you. the whole concept of timeshare is that no real estate is ever deeded to a buyer), although unlikely to appreciate significantly.
I think we'd have to pay about $2,000 per week for an equivalent condo if we rented. So in 10 years, with our maintenance fee, we'll spend $9,500 plus 5,000 in maintenance, so that's 14,500 (probably a little more with increases in fees and taxes) for 10 week-long vacations, which is less than the 20,000 we'd have spent renting. Plus, we can then turn around and sell the unit (no you can't because you don't own the unit with a timeshare, you merely have a contract allocating you a share of time to use it - all you can sell is a contract for time). Let's say we have to sell at a loss so we sell at $4,500, now we've had 10 vacations for $9,500, which is way cheaper (I'd guess) than renting the equivalent unit in Stowe.
Let’s look at the property ownership scenario (and I won’t even initially look at fractional or rental pool scenarios, which generate revenue for owners).
You purchase a $500,000 condo or townhouse
You pay 25% down ($125,000) and mortgage the rest
Monthly mortgage, condo fees and property taxes come to approximately $2,900/mo. You use the property for 10 years, so it has cost you $348,000 in additional payments, which has a Net Present Value of approximately $400,000 added to the original $125,000 going in.
You sell the property after 10 years. At a conservative rate of appreciation for owned resort property of 10% compounded annually, the property has a future value of $1.3 million (a more realistic value of 15% yields $2.0 million over 10 years).
Rather than your holiday property costing you money, you have turned the value of your $525,000 NPV investment into a profit of between $775,000 and $1.475 million.
Of course, the preceding scenario assumes that you didn’t participate in the opportunities to generate rental revenue by participating in a rental pool (if you purchased in that type of project). At an average of $1,500/month returning to you to defray your monthly mortgage and fees, your additional outlay over 10 years will be reduced from $348,000 to $168,000 (with an NPV of approximately $195,000). In this case you have made an even larger profit of between $980,000 to $1.68 million on an original investment of $320,000.
Owning in a managed property also provides the same benefit as a timeshare where you can visit other properties under the management company's umbrella (a la Intrawest).
This is why the smart people always buy property rather than rent or purchase timeshares (the rich get richer, as they say). Owning property provides you with a handsome profit in the long run, while renting (timeshares) is simply an expense that people try to justify by thinking they have saved money versus paying full price at hotels.
Based on some of the comments I have read, I also strongly suspect that a lot of people are confused about what a timeshare actually is. There is no such thing as an 'owned timeshare'. A timeshare is simply pre-paid use of a facility and doesn't involve ownership of the property in any way, shape or form. If you own a unit in a project (either the full title or a fraction of the title) then it is, by definition, owned property and not a timeshare. Of course, depending on the contract agreement, you may or may not be entitled to full use of your unit if it is part of a rental program, and you may also be entitled to use other properties under the management company's umbrella, but again this type of ownership is not a timeshare. It is merely a more creative way to put owned property to use that provides some of the trading benefits of a timeshare combined with some of the benefits of property ownership (such as capital appreciation and revenue generation).