Are Timeshares A Scam?

Thanks to Lazy Man, I've been reminded to write on whether Timeshares are a good investment or not.

Some of the reasons the Timeshare companies give are
1. Its a good investment. If you get title to the property as a fractional owner, you get all the tax deductions of home ownership.
2. The cost of your vacations never goes up. So you beat inflation.
3. You can exchange you timeshare with other people in different parts of the world and live for free whenever you go on vacation.

On the surface it sounds really good. A while ago I had the misfortune of being conned into attending one of these in Vegas in exchange for some free show tickets. The reason they can afford to hand out $200 worth of free tix is because they use high-pressure tactics to persuade you to buy an overpriced condo.

Lets do the math...

They wanted $35,000 for a 1 week rental of a bedroom condo. So basically they took a $300,000 condo and sold it for $35,000 x 52 weeks = $1.825 million!!!!

Plus you pay an annual $850 "maintenance" fee. That doesn't sound like putting a cap on the cost of my future vacations, since this maintenance fee will go up with inflation.

Also, in order to exchange you timeshare with other timeshare owners you needed to subscribe to a service that charges around $185/year. Out of kindness, this fee was waived for the first year and I would get 2 round trip tickets to anywhere in the world plus a 7 day fully paid for vacation to Cancun.

Hmmm....if I invest the $35,000 at 8%, thats $2800. Add $850+$185 to that and I get $3835. I don't think I've ever spent that much money for living accomodations on a 2 week trip anywhere in the world. Granted, I didn't stay in 5 star hotels, but I'm pretty sure you can rent a condo for about $1,000/week anywhere in the world in peak season. And if you can get more than 8% return on your investments, you're losing even more money.

I think its a big scam. The presentation I went to was offered by the Hilton. They had 4 huge towers on a tiny postage stamp of a lot. I think there were probably 400 condos on 1 block of land. Thats like selling 1 building for around $720 million!!!! DAMN, I need to get into business!

Update:

Buying timeshares from the resale market can be a lot more cost-effective. You can buy cheap timeshares for less than 25% of the original cost from the original buyers and at that point it often makes sense. Check out this link for discounted timeshares.

Incidentally, you can get great deals on real estate on that link. There are listings for land & homes for under $5,000! It doesn't get any cheaper than that.