By Steve Gillman - 2006-2014
One advantage of timeshare investments is that they don't
take much money. What other forms of real estate can you get
for a few thousand dollars? Now, it might be true that timeshares
make the most money for the initial developer. They get to take
a little apartment or condo that is worth perhaps $140,000 and
sell the use of it for as much as $7,000 for each week of the
year. You can do the math.
The problem from the buyer's side is that many, if not most,
timeshares go down in value after the initial purchase. They
have a bad reputation because of the "free vacation"
offers and hard sales techniques used to sell them. People have
also found that with the annual fees and the difficulty in planning
their schedule around the week or weeks that they have use of
their unit, they are not such a great idea for everyone. It can
be simpler and even cheaper to just pay for a nice hotel at the
However, this is primarily a problem for retail buyers, and
many of these people do like the idea of owning a timeshare
in a ski resort in Colorado, or on the beach in Florida. And
they do work out financially for some buyers. It sure
is cheaper than buying a condo that you only get to use a week
or two a year anyhow. For example, in the ski resorts of Colorado,
you can buy a 1-bedroom timeshare (one week per year) for as
little as $4,000, (as of 2011) and a many 2-bedroom units go
for under $10,000.
2009 sales of timeshares were falling at a record pace. Fortunately
we are past the worst of the fall now. But how do you make money
as an investor with these? You can't just buy cheap and resell
for more. The spread is too narrow to be worth the trouble. Suppose
you get a unit for $3,000 and sell it for twice that. You will
be lucky to find such a deal, and after expenses you'll be lucky
to make just $2,000 for your effort.
However, like in every other area of "consumer real estate"
you can make more money if you make it easier for buyers. How
do you make it easy for them? Sell the timeshare with a small
down payment and with high interest, but with low payments.
For example, if you pick one up from a desperate seller for
$3,000, and it is worth closer to $5,000 or $6,000, you might
be able to sell it for $7,000. You just have to make it easy.
Ask for $500 down and payments of just $105.65 per month. At
12% interest, that pays the balance off in 8 years. Make sure
you price it competitively but also keep your profit in mind.
If you can find a buyer at $7,000, you'll be walking away on
top while he also receives a better deal than buying directly
from the resort.
The buyer gets to tell his friends he has a timeshare unit
in the mountains of Colorado. It costs him less per month than
a rent-to-own large screen television. Meanwhile, you have invested
perhaps $3,500 with closing costs ($1,000 minus the $500 down
payment) to get a profit of $3,000, plus 12% interest on the
Those payments, by the way, will total $10,100 with interest
over the 8 years, but it is hard to figure your real rate of
return on the $3,500. You would also have collected interest
if the payments were going into the bank that whole time. In
any case, you are making at least 16% on the money.
Of course there will be those who don't pay on time and other
issues. I wouldn't bother with this strategy unless I was going
to do ten units or more to spread the risk and make the returns
worth the effort. In any case, if you have you own timeshare
that you want to get rid of, you can see how to make some more
money in the process.
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