Suze Orman said timeshares are a silly investment

[MrsPete]

Dh and I were watching Suze Orman last night. A caller had a question about whether or not they should purchase a DVC membership. Suze said ALL timeshares are a silly investment! Dh and I were shocked to hear her say this. Her financial advice was to just pay each vacation as it comes up.

Who here thinks timeshares are a "silly" investment?

Who here thinks timeshares are a wise investment?

In this type of thing, extremes are rarely correct. To say that ALL timeshares are a silly investment is an extreme; however, there's a grain of truth in her statement:

As many other people said, a timeshare isn't an INVESTMENT. An investment is a financial holding that grows and builds money for your future; i.e., your 401K, pension plan, or your house -- hopefully they are worth more every year. Speaking financially, a timeshare is a LIABILITY. It's like your car -- though you may enjoy its use tremendously, it will not accrue in value, and it's going to cost you money every month/year.

People have started throwing around the term investment for all sorts of things that aren't really investments at all, and we've started accepting the idea. We "believe" that a good classic blazer is an investment in our winter wardrobe; no, it isn't -- you couldn't resell it for a quarter of what you paid. You may love the blazer, and you may get a great deal of use from it, but it is a useful item, not an investment. We buy into the idea that it's an investment because it "gives us permission" to spend a great deal of money on the blazer, but that doesn't make it the truth. Bottom line: If you can afford it and will get good use from it, buy it, but don't fool yourself into thinking it's an investment.

Also, buying a timeshare takes a CHOICE (whether to go on vacation this year) and makes it a MUST-DO (because you're paying for it whether you go or not). Lay-offs, gas prices, surprise twins . . . doesn't matter whether a vacation is practical for you this year, you've paid for it! Sure, you can always rent your timeshare or save it for next year, but you get the point: you're giving up your option to say, "Not this year."

If you try, you can find some pretty great deals on "pay as you go" vacations; however, if you've tied up all your vacation money in a timeshare (if you've put all your eggs in one basket), you may not be able to take advantage of those great deals. I'd never suggest that someone stretch his budget to buy a timeshare; it should genuinely be bought with "extra" money.

I think timeshares appeal to people for the reason another poster gave: they're a COMMITMENT to fun and family time. When you buy a timeshare, you're agreeing that vacations are a priority in your life, and you're putting your money on the line, saying you'll take one every year.

Most people will never SAVE money by buying a timeshare. Instead, they get nicer accomodations for the same money they would've paid anyway, or they end up spending more on meals, souveniers, etc. because their room is "free". Few people actually spend less because they own timeshares; instead, they just reallocate what they would've spent anyway.

If there is one hard and fast rule for timeshare buying, I think it'd be NEVER finance a timeshare. It's a luxury, not a need. If you really want it and think it's a good idea for your family, save the money and buy it outright (perhaps on the highly discounted re-sale market). If you can't save the money for the timeshare, you probably can't afford to make the payments (plus interest) on its loan either.

If there's another hard and fast rule, I think it's INVESTIGATE all your options. DVC seems to be the timeshare of choice on these boards, but it would not suit my family's needs. I highly recommend the book Timeshares for Dummies, which is written by an impartial author who's not trying to get you to buy specifically DVC or Hilton.

Anyway, I disagree with the overall idea that ALL timeshares are a silly choice, but I would agree that for many people they're not the best choice.

Overall, I like Suze Ormond's advice -- occasionally I watch her on late-night TV -- she's very practical and particularly addresses her advice towards women who traditionally have been taught not to worry about financial matters, and I like her philosophy about people first, money second; but I don't agree with everything she says. Plus, she spells her name wrong; phonetically, it doesn't match the pronunciation. How can you completely trust someone who doesn't grasp 1st grade phonics?

 

[dvcgirl]

I see this kind of hand-wringing number crunching all the time, but your numbers don't add up for us.

We bought in when points were in the 60 dollar range. Paid it off easily in five years, before we had kids. It was around 10 grand. Now our dues are around $70 a month.

But we typically don't stay in studios when we go. What's the point of that? And we don't usually stay weekends, which cost too many points. We stay in one or two bedroom units for five nights. That's where you see the glory of DVC!!!!!!!!! To me a vacation isn't being crammed into one room with kids..

None of our DVC points have ever expired. We bought in at the low end of the point scale, so we can always use them up.

With Pop Century rooms and even Days Inn going for $100 a night with taxes, we are incredibly happy with DVC.

To each his own. But we chuckle, margaritas in hand, at all of those folks who walk by our 2 bedroom unit on their way to the hotel room.

I totally agree, to each his own, but you're not mentioning the lost opportunity cost on your original investment (plus whatever interest you paid over that five years). And for the $840 you're paying in dues, I can rent points and stay six nights in a studio at the Beach Club Villas (great location...staying in Sept, Jan or early December). So don't assume that the folks walking by your 2 bedroom unit aren't chuckling back at you . Just kidding really, but there are certainly other cost effective ways to stay at a DVC property. And you don't have to be a member to put them into action.

Still, I think that if you vacation at Disney at least every other year and already stay at moderates or deluxes (and can actually afford that)....it can be worth it. However, when you finance it and only use Disney rack rates as the comparison figures...well, then the math gets a little fuzzier.

 

[leafette]

In my opinion, I don't think that it is at all wise to consider a Timeshare a good INVESTMENT (that you will make money on your money).

A timeshare may be a good BUDGETING TOOL for vacations, but not a good investment.

I agree. If you're buying as an investment, it's probably not a good idea. If you're buying for fun/leisure, okay.

Disney does a better job than most controlling the secondary market prices of their timeshares, but they still typically depreciate.

 

[CathrynRose]

In my opinion, I don't think that it is at all wise to consider a Timeshare a good INVESTMENT (that you will make money on your money).

A timeshare may be a good BUDGETING TOOL for vacations, but not a good investment.

I agree.

 

[jodifla]

I totally agree, to each his own, but you're not mentioning the lost opportunity cost on your original investment (plus whatever interest you paid over that five years). And for the $840 you're paying in dues, I can rent points and stay six nights in a studio at the Beach Club Villas (great location...staying in Sept, Jan or early December). So don't assume that the folks walking by your 2 bedroom unit aren't chuckling back at you . Just kidding really, but there are certainly other cost effective ways to stay at a DVC property. And you don't have to be a member to put them into action.

Still, I think that if you vacation at Disney at least every other year and already stay at moderates or deluxes (and can actually afford that)....it can be worth it. However, when you finance it and only use Disney rack rates as the comparison figures...well, then the math gets a little fuzzier.

That's assuming I was ever going to invest that money, which I wasn't. I have a 401K for that!

What we did was this: Instead of vacationing elsewhere while we paid off our DIsney loan, we only did Disney. That way, all the money we were spending on accommodations was going to pay off the loan.

And I don't use my points to stay a week in a studio. I spend about about 10 to 14 days a year to stay anywhere from a studio at BVC for a night or two to two-five day vacations at OKW in a two bedroom.

Renting is a pretty big risk. Look over on the DVC boards now, and you'll see that a couple of people got taken for their money.

Again, I don't see it as an investment...just a commitment to FUN! Having it prepaid makes it easy to enjoy luxurious accommodations we wouldn't otherwise afford now that we are largely a one income family.

 

[lost*in*cyberspace]

I do not think that any financial adviser would consider a timeshare to be an investment. I personally wouldn't buy one.

 

[eliza61]

I work with senior citizens and these topics always tickle me, mainly because most of the regrets I hear from the seniors always concern not fulfulling a dream (eg. regret not going to paris, regret not going back to school, regret not spending more time with their family and friends). never do I hear " I regret not saving more money"

I agree with most posters that time shares are not a financial investment but I did not buy my DVC to make money. I brought it for the other investment in my life which is quality of life. The one thing I hate about these so called financial Gurus is that they seem to put a dollar value on every thing you do. I once heard Suze say staying in a 4 star hotel was a waste of money, when you can stay at a budget hotel for a lot less money.
I brought my dvc membership not as an financial investment but as an investment in my life. The memories and wonderful vacations with family and friends are worth way more than any interest I would have made putting my time share money in a bank

 

[corndog]

Of course a timeshare where you actually own an interest in real estate could be considered an investment. But DVC ownership obviously is not since its value is guaranteed to go down because "ownership" is for a limited time only.

 

[disneysteve]

Yes it is a silly investment, because it is NOT an investment. DVC tells you that is a prepaid vacation.

I haven't read all the responses, but I agree with this. A timeshare is NOT an investment. An investment is something you purchase for the purpose of making money. It may be stocks, bonds, mutual funds, gold, real estate, antiques, etc.

A timeshare, which you buy for your family to use and enjoy during vacations, is not purchased to make a profit.

Personally, I wouldn't buy a timeshare, not DVC and not any other. They aren't a good deal financially for my family for the way we vacation. But I don't fault those who like what they have to offer. I have lots of friends and family who own timeshares and are very happy with them. But I think Suze Orman is correct when she says they aren't good investments.

 

[dvcgirl]

I work with senior citizens and these topics always tickle me, mainly because most of the regrets I hear from the seniors always concern not fulfulling a dream (eg. regret not going to paris, regret not going back to school, regret not spending more time with their family and friends). never do I hear " I regret not saving more money"

I agree with most posters that time shares are not a financial investment but I did not buy my DVC to make money. I brought it for the other investment in my life which is quality of life. The one thing I hate about these so called financial Gurus is that they seem to put a dollar value on every thing you do. I once heard Suze say staying in a 4 star hotel was a waste of money, when you can stay at a budget hotel for a lot less money.
I brought my dvc membership not as an financial investment but as an investment in my life. The memories and wonderful vacations with family and friends are worth way more than any interest I would have made putting my time share money in a bank

While I agree with you that not everything is about money.....it's important to find the balance. Going into debt to purchase a membership in DVC in order to stay in luxury accomodations, well, that to me is "creating magical memories" that you probably can't afford.

We made the decision to purchase because we were already spending about a week each year at Disney in a deluxe on-site hotel. At the time we saw ourselves taking that same trip for a very long time into our future. For us, that changed and we sold when we no longer saw ourselves using the points solely for Disney.

As for seniors never saying "I wish I'd saved more"....well, keep in mind that our current set of seniors are in much better shape financially then those who will follow. Talk to some 40-60 year olds and see if you can't find some who wish that they'd saved a bit more for retirement. They've been out there spending and in many cases going into debt to finance their "magical memories". Trust me when I say that *many* people who are spending thousands on DVC and following that up with thousands in dues/Disney tix and transportation costs can't afford it.

 

[disneysteve]

Watching the ticket prices rise out of control the tax hikes on the hotels and the hotel rates going up... I think it would of been silly NOT to lock our hotel prices in for the next 48+ years... DVC is a great investment if you plan on vacationing AND staying on resort at WDW.

You aren't locking in your costs because the annual maintenance fee can and does increase.

Also, I've been going to WDW since 1978. Thanks to competition, prices haven't gone up at all. In fact, they've gone down significantly over time. We are now able to get a 2-bed, 2-bath condo for the same price we paid for a cheap hotel room at Days Inn 15 years ago. Thanks to sites like Skyauction and vrbo.com, we can rent a beautiful timeshare unit or private home for the same or less than a plain hotel room.

We've looked into timeshares numerous times and the numbers never add up. For us, for the way we travel and the type of accomodations we enjoy, it is much cheaper and easier to not own a timeshare and pay as we go.

 

[brivers222]

You aren't locking in your costs because the annual maintenance fee can and does increase.

Also, I've been going to WDW since 1978. Thanks to competition, prices haven't gone up at all. In fact, they've gone down significantly over time. We are now able to get a 2-bed, 2-bath condo for the same price we paid for a cheap hotel room at Days Inn 15 years ago. Thanks to sites like Skyauction and vrbo.com, we can rent a beautiful timeshare unit or private home for the same or less than a plain hotel room.

We've looked into timeshares numerous times and the numbers never add up. For us, for the way we travel and the type of accomodations we enjoy, it is much cheaper and easier to not own a timeshare and pay as we go.

When I was talking about hotel prices rising I was stictly talking about disney property... I have stayed offsite down there and for us nothing beats being right there on the disney property. So far the fees and dues we have been paying are far less than the taxes alone were on the hotel portion of our last OOP disney trip at the ASmv and AKL. But like others have said... its pretty much to each their own..

Suzy should also say going on Disney Vacations when you are in any amount of debt is silly, but people still do

 

[Slakk]

But didn't you actually pay for them?

The reason we would not buy is that I ran a projection for 15 years on a simple spreadsheet comparing buying 104 points (a one-week studio stay) vs putting the same money in a money market earning 5%. The average secondary price/point is about $95, using the first 10 contracts up for sale today. That would cost me about $9900. Also, the dues would average about $470 per year for the first year, so the first weeklong vacation would cost me $10,370. After that, the weeklong stay would only cost the dues. When I crunched the dues increases averaged over the last 10 years, they increase at an average of 13% (sometimes more, sometimes less, but that is the average).

I stay offsite where you can get a nice room for $150/night, but let's say the room is $215 which gives us a good amount of leeway, and assume it is increasing at 4% a year (hotels have decreased in price recently, but over time, they go up). So, on the cash system, I put the $9900 in the bank at 5% and take out enough every year to pay the ever increasing hotel bill (because I haven't "locked" in the price of my vacations). For the first year, that is $1500 and it goes up every year.

So, what is the end result? After 15 years, if I never waste a single point, the present value cost (in today's dollars) of doing DVC is about $25,000 and the present value cost of the cash system is about $23,600. The only difference is that I can still use DVC, but the maintenance fees are now the same as I would pay for a hotel room, so it is a wash from then on. Keep in mind the maintenance fees vs a hotel room today is low because the buildings are by in large young. As they age, it costs more to keep them up and expensive things like roofs and heating systems need replacement.

In the end, I make no money and loose no money either way, so it makes little sense to shell out the money upfront and be locked in.

I do admit that I compared it to a moderately priced hotel and if you compare it to a $400 room, the outcome may differ, but for our family, we are not a $400/night family.

You can argue about % increases of hotel rooms and where you are going to vacation for the next 15 years, but the morale of the story is that if you enjoy staying at DVC properties and want to do that every year, and have the money, you can prepay and enjoy what it offers. You will have many fun vacations and lasting memories, while staying onsite and near the parks vs offsite.

If you borrow the money, let any points expire, or trade them out for other things (always at a bad exchange rate), you will loose. If you use every point every year and run it over 18-20 years, you may win. I don't worry about what I will be doing 30 or 40 years from now because I am just as likely to take a vacation in outer space as Disney.

In the end, it is more about whether you want to stay at DVC every year or the freedom of possibly choosing somewhere else. I just don't see how you can either make money or loose tons of money unless you do something that isn't too smart like letting your points expire.

Sorry but your math is wrong. You cannot do apples and oranges math. DVC is a DELUXE WDW room...you need to look at the $300 a night range or at minimum $275. The fact that you and your family are not interested on on-site deluxe accomodations means DVC is not for you but for many of us it does make sense.

Instead of chasing cheap rates, praying for a postcard or going when it was cheapest I now go when I want, how I want - MY TERMS.

In the next year I will spend a long weekend on Hilton Head, 4 days in a 2BR with my parents at VWL and 10 days at BCV and SSR.

Checking WDW site for my dates:

HHI - $500
VWL - $4,800
SSR/BCV - $4,000

That comes to $9,300 worth of hotel rooms (excluding taxes). My original purchase of DVC cost was around $19,000 so in one year I *spent* almost half the initial cost. Next year we will be doing a Grand Villa and bringing all my family. That is $1500-$2000 a night.

So for us, DVC allows us to do things we never would have afforded on our own.

 

[brivers222]

So for us, DVC allows us to do things we never would have afforded on our own.

And i too enjoy the freedom of not being locked into a certain week each year and all the different varieties of hotels accross the globe that we could not other wise afford to stay even one night.

 

[Kay1]

I have seen some of my Disney friends go a bit crazy in buying multiple DVC contracts. For some it becomes an addiction. And almost all of them went with Disney financing. That's when the whole thing gets a bit more shaky in my opinion. Going into debt to "pre-pay" a vacation just isn't a good financial plan.

Goodness! When you say that, it almost likes like the Housing Bubble. Could there ever be a vacation club bubble, I wonder? Is that possible?

 

[Sorcerer's Dad]

We have both DVC and another timeshare and have enjoyed them. We definitely don't think of them as investments, but like the fact that we get good quality accommodations where we stay. Part of the pleasure is in anticipating how/where to use them.

 

[dvcgirl]

Goodness! When you say that, it almost likes like the Housing Bubble. Could there ever be a vacation club bubble, I wonder? Is that possible?

I don't think it's a timeshare bubble, but sure, as a nation we have clearly over-extended ourselves with respect to financing consumer debt. This is most certainly consumer debt if financed. I do see posts from time to time where DVCers are forced to sell their membership because they can no longer handle the payments. Or they can handle the payments but can't afford the tix/transportation/food once they get there.

 

[sk!mom]

I work with senior citizens and these topics always tickle me, mainly because most of the regrets I hear from the seniors always concern not fulfulling a dream (eg. regret not going to paris, regret not going back to school, regret not spending more time with their family and friends). never do I hear " I regret not saving more money"

Well I could introduce you to two senior couples (my parents and DH's) who wish daily that they had spent less and saved more because now, in their senior years, they have few choices due to lack of retirement savings.

So as not to hijack the thread, I'll add that it seems that many of us agree that timeshares are fine if you can afford it and want to prepay your vactions just not an investment.

 

[grlpwrd]

... I brought it for the other investment in my life which is quality of life...

I brought my dvc membership not as an financial investment but as an investment in my life. The memories and wonderful vacations with family and friends are worth way more than any interest I would have made putting my time share money in a bank

I haven't gone DVC or plan to, but I like your thinking.

 

[Az Pirates]

Goodness! When you say that, it almost likes like the Housing Bubble. Could there ever be a vacation club bubble, I wonder? Is that possible?

Interesting question.

I remember seeing just one DVC sales kiosk in the resort lobby on our 2001 WDW trip. Last weekend it seemed there was a DVC sales kiosk around every turn. Not just at the resorts, but at Downtown Disney and all the parks as well. We also got some pretty flashy sales materials from the DVC folks while on our cruise.

Obviously there is big money being made on DVC sales since I'm sure they're not spending all that money promoting it out of the goodness of their hearts just because they want more folks to be able to experience a bit of Disney Magic every year.

But it seems there is still plenty of demand; I've seen posts from folks waiting in anticipation for a possible DVC offereing at AKL, and most DVC folks seem genuinely happy with their memberships, so who knows.

I'm with the folks who would love for a DVC membership to make sense for our family - but we've also run the numbers and it just doesn't.