Are Time Shares Ever
Worthwhile Investments?

Dear Mr. Irwin:

I recently received an invitation to attend a timeshare presentation. We were offered half price at the resort for two nights plus $100 in a certificate to be used for food while we were there. Before we go, I wanted your opinion on the value of timeshares. Are they really a good investment? How much should I pay for them?

Karey, Bend, Ore.

Dear Karey:

Historically timeshares have been the worst possible investment in real estate. Most have gone down in value, not up.

Consider this, you might be asked to pay $15,000 a week plus maintenance (perhaps another $600 a year) for a nice resort timeshare. (That means you get to use it one week out of the year.) If you multiply that amount by 52 weeks, you quickly find that the full price is $780,000 (were you to buy all the weeks). Compare this to the fact that the unit itself probably only cost around $250,000 or less to construct including land. You are, in effect, paying three times its value. This is reflected by the fact that many aftermarket timeshares are today selling for only a third of their original price. (Check the many websites offering timeshares for sale.) Things tend to settle down to their true value.

An exception appears to be the timeshares offered by brand name resorts such as Marriott or Westin. Here, you’re offered not just a physical timeshare, but an exchange package that allows you to more easily exchange your unit for others in exotic locations. It typically consists of points that can be converted to air travel as well as hotel and/or timeshare rooms in a complex system. Many who have bought into these programs love them. Even here, however, you have to weigh the realistic exchange possibilities against their true cost to you. Would you be better off simply by buying the exotic vacations without the timeshare? Will you actually be able to use the service? How much are your annual costs going to be?

A recent twist involves constructing the unit so it’s in two parts; there are actually two small units in one. The idea is that although you’re only buying one week, you can exchange half thus getting a double benefit. I’m sure this works sometimes, but chances are those on the other end are getting wise to this and are becoming increasingly reluctant to exchange their week of a full unit for a week of a half unit of yours.

Ultimately you have to ask yourself why do timeshare promoters need to give away hotel rooms, meals and other bonuses just to get you to look? If the product were really that great, wouldn’t it sell itself? If you are determined to buy, check out the resale market. You’ll pay far less for someone else’s mistake.

Robert Irwin

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-- Mr. Irwin has more than 25 years' experience as a Los Angeles-area real-estate broker. He is the author of more than two dozen books about real estate and is recognized as one of the most knowledgeable writers in the real-estate field. Mr. Irwin's most recent book is "Tips and Traps When Building Your Own Home," (McGraw-Hill, 2000).

Email your comments to rjeditor@dowjones.com.