BY FAZAAD BACCHUS
Last issue we addressed those who did not go on a vacation this year and were planning on doing so later on. Well some of us were more fortunate and we did go, to visit families, to hotels and some to resorts.
Did anyone go to a time share presentation…it’s supposed to last an hour and a half, includes a free breakfast or lunch and you walk away with a prize for attending, sounds familiar? The presentation however takes more than an hour and a half, especially if you have questions and can run you up to three hours. You are usually being interviewed by three salespersons all with the attempt to sell or as they put it “invest”.
That’s not the issue I’d like to discuss today. What I’d like to discuss is the fact of whether or not you bought a time share and if you did what you can expect going forward.
So the first thing is that if you didn’t buy, don’t feel too bad. The option to buy is always there and they would gladly offer you a free stay plus taxes to do the presentation again.
But if you did buy, here are some items we should discuss.
The sales representative would have told you that you are purchasing a piece of the property which has equity and therefore you can will it to your kids who can will it to their kids and so on. Would you buy a piece of property for $30,000 knowing that you can resell it for only $10,000? I imagine your answer would be a straight out no!
Well this is exactly the case when purchasing a time share vacation property. You cannot recover the money you paid for it. The vendor is usually not willing to buy it back, so it is sold on the open market with listing fees of approximately $1,700 plus closing fees etc., causing you to lose 80% of what you have paid.
How did you pay for it…with their easy financing approval where everyone is guaranteed? Did you notice that the interest rate on the loan is 17.99% annually?
If you took the financing method, you made a 20% down payment plus closing costs and processing fees all adding up to an initial payment of $8,500. The balance will be amortized over the next ten years at a payment of $417.11.
If you can afford it, it doesn’t seem too bad a deal. Well, you do have to pay the maintenance and property taxes annually as well, another $900.00 per year and this is whether you use it or not. And all of these go up every year, notwithstanding any special assessments.
Your rep may have told you about the thousands of resorts available to you through various exchange programs, but it will cost you another $89.00 per year and exchange resorts are subject to availability.
By the time your ten years are over, you would have paid a total of $69,353….and as I mentioned before, your resale value is $10,000.
Have you really made an investment? Unfortunately you haven’t; you may discuss this issue with a Financial Advisor on the future value of the timeshare. You have made a lifestyle choice.
If you are to benefit from your purchase it is advisable that you continually use your weeks, rent them out or allow friends the benefit of a free vacation.
And finally please remember to advise your Financial Advisor of your purchase so that it can be included in your list of assets.