“Ask Your Mortgage Professional”                     July 2010

 Investing In Real Estate...Should I Buy A Time Share?

It is an inaccuracy to believe a time-share is a real estate investment, because a time-share is a vacation property that is owned or leased by many individuals that simply own a week or two of time in a variety of property locations for your vacations.  While you purchase a specific week in a specific resort you have the option of changing locations for a fee, as long as there is availability. The developer had a brilliant idea to sell the same piece of property 52 times.  The time-share concept is definitely a better investment for the developer than it is for the purchaser of the time-share.  There are many property types with the time-share options: condominiums, recreation vehicles, and even cabins on a cruise ship. Statistics show that time-share owners when going to sell their week of time typically loose between 50 to 80 percent of what they originally paid. 

Conventional Mortgages are not available on any time-shares.  In some newer developments the developer will offer a financing package that will carry an interest rate from 15 to 20 percent.   If you are purchasing a resale time-share you will have to obtain financing with either a personal unsecured loan, credit card cash advance, credit line, or a home equity line of credit that is secured by a home or other real estate you already own.   In most cases the interest paid on these financing options is not tax deductible.  It is advisable to consult your accountant to determine if any mortgage interest will be tax deductible.  

Many of us have been to the 2 hour presentations that will offer you a deal that you can’t pass up, and in the end you feel coerced to sign an agreement that is filled with hidden costs and fees.   All time-shares involve an up-front fee and annual management or maintenance charges.  The hard core sales are common in the time-share realm and the time-share agreements are hard to get out of and you can lose money if you are not careful.  Some developers have also started to auction off time-share weeks, again another sales technique that leaves little or no way out of the contract and sometimes the costs and fees are even more with the auction company adding additional fees for their services. 

Time-shares and vacation clubs can serve a purpose, and help many get away more often than if they didn’t own a time-share.   However, it is not considered a real estate investment.  If you are looking to invest in real estate you may consider purchasing a home, or condominium which you can obtain conventional financing with a much lower interest rate that can be tax deductible.  Time-shares are not real estate investments; there is no appraisal, no mortgage, and no tax advantage to owing a time-share.  You are simply buying a week of time in a vacation location.  Figure out how much the time-share will cost with the maintenance dues and management fees, how much are you really paying for this one or two weeks’ worth of time?  If you are truly interested in investing in real estate consider a second home or investment property because now is the time to buy.  Call me today to see how much home you can afford. 

If you have questions or comments please email them to andrew@askandrewconner.com  

Call Andrew today at 573-302-0600 

Website:  www.askandrewconner.com

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