Spring Real Estate 2004

Publication Date: Wednesday, April 7, 2004

Where would you like to be?
Timeshares are an investment in vacations, not property

by Susan Golovin

Imagine that you could own the most desirable beach-front property in Hawaii, or a two-bedroom apartment in a luxury building near Lincoln Center, or a flat in London a stone's throw from Harrods -- for far less than each property is worth. The caveat? It's only for a limited time -- usually a week -- every year.

Menlo Park residents Esther and Richard Sirinsky bought their first Marriott timeshare, in Palm Springs, nine years ago when Richard retired. They now own three two-bedroom units. "Each has a master bedroom, a luxury bath, a living room and dining room," explained Esther, who her husband describes as a "timeshare maven."

"Basically, with a timeshare, you pay the bulk of your money up front and from then on in you have inexpensive vacations," she said. "We just returned from two weeks in Kauai, and the total room cost was $300."

Of course, that low rate did take some clever manipulation on her part. And, how did they get from Palm Springs to Kauai?

Timeshare owners can earn points when they don't use their unit. This enables them to trade their unit for anything else in the exchange fund that is worth the same number of points -- including airline tickets and cruises. Or they can put part of their unit into the exchange fund to accumulate points. For instance, for a $75 fee the Sirinskys often lock out one bedroom in order to accumulate exchange points.

"We request that the points be exchanged for wherever we want to go," said Sirinsky, pointing out a thick book of worldwide Marriott resorts. "Now that doesn't mean that we will get our first choice," she added. "This system works best if you can make your plans 13 months in advance. Since we own more than one week, if we make timely reservations we usually get first dibs."

Most of the well-known resorts -- Marriott, Four Seasons, Westin, Hilton, Sheraton, Hyatt -- belong to an exchange company that facilitates the process. Each timeshare owner pays a yearly fee to belong to an exchange company -- and another fee if the exchange goes through. The fees are higher for international trades.

You can either specify "floating time," i.e., you tell them where and approximately when and they search -- or specify "fixed time," a specific date, such as Christmas. The latter is more expensive.

Further, some plans include three "colors" of time, each indicating popularity. For instance, ski season in Tahoe falls in a higher color category than the less popular (thus lower point cost) summer in Miami. Hawaii is "red" hot: popular all year round.

"This is not a good purchase for someone who is in it purely for exchanging, because someone has to put their property into the exchange for you to take it out. And, when you're requesting a much-sought-after locale (such as Hawaii) you often have to wait," Sirinsky said.

However, if you are interested in doing any exchanging, it is prudent to consider if your location is popular and if the property is appealing. You can't exchange a studio for, say, a one bedroom. So it is a good idea to buy the best unit you can afford. These factors, plus how far ahead of time you can plan all effect the success of your exchange.

One other way to utilize the system is of great benefit to local fundraisers. Some owners donate time in their timeshares.

The upfront costs of a timeshare vary according to location, seasonality and size. Currently, the least expensive Marriott unit is a $7,200 two-bedroom, garden view (as opposed to ocean view) in Hilton Head, North Carolina, in January. By contrast, you could shell out $85,000 to usher in New Year's at the Penthouse (ocean view) in the new Ko-Olina resort in Oahu.

If you want to get good utilization from your unit, buy where you primarily intend to use it, Sirinsky advised, adding that if you don't use it on a regular basis there is really no point in owning one. Some people buy enthusiastically and over time tire of their location or feel like they are slaves to their vacation.

"If you have to finance in order to purchase then it's not worth it because you have to pay interest," she warned. Also you want to make sure that you buy from a quality vendor so that the property is properly maintained, she said. There is a yearly maintenance fee.

"One of the reasons we chose to buy a timeshare is that it's a very comfortable vacation. You're not coming back to a hotel room, you have the comforts of home," she said. The Sirinskys also appreciate the fact that they can provide their children and their families with inexpensive vacations.

Sirinsky, who is currently enjoying their annual Palm Spring vacation, also cites yet another advantage of taking the same vacation time and location each year: "We've made friends away from home who have similar timeshare arrangements."

"The people who pay the most are the ones who buy from the developer," said one Palo Alto resident who owns timeshares in Venice, London and New York -- all in prime locations. She tells of the secondary market: auctions and real estate companies who specialize in timeshare sales, where one can often get a much better deal.

Both owners emphasize that timeshares are not an investment in property, but an amortization of vacation expense. (The Sirinsky property is fully amortized 12 years after purchase.)

Of course your money is tied up in timeshares and is not providing any income. Also, you cannot expect a profit when you sell. "If you sell through Marriott, they take a big chunk," Sirinsky said.

"It's an investment in vacations, not in real estate. If purchased when you're young enough, you'll have many years of enjoyment. And then you can will it to your children," Sirinsky said.