Online Investing vs Timeshare Investing

My wife and I just got back from Kauai. We checked out of the hotel at noon on Saturday and did not fly out until 10:30 PM. To get about $400 off our helicopter tours and other activities we agreed to spend part of that downtime Saturday afternoon going to a timeshare sales presentation.

Timeshares are a bit of a weird investment, especially when compared to the internet. Online if I invest $50,000 I expect to turn that into a $50,000 a year revenue stream. And you can do that project after project as long as you push them…just keep building stronger cashflows and reinvest into further growth.

Offline investments are generally not like that though…yielding much slower returns. In spite of that (and the recent real estate downturn), our timeshare salesman guaranteed us that they increase their rates 7% a quarter (which compounds to 31% annually), and that the value of the real estate keeps going up. Since we were there on the last day of the month the rates were increasing the next day by 5%, and then 7% again one month later.

When they sell you points you have to pay maintenance on them. A waterfront room costs many more points than a garden view room. Both rooms are the exact same, but even the cheapest room had a $700 a year maintenance cost for fractional 1 week ownership. Weather or not you stay in the room their maintenance and electricity charges come out to $36,500 a year or more per condo!

Given the maintenance costs, the only aspect of the timeshare idea that sounds reasonable is inclusion in a service like Interval International, where you can buy access to vacation in other unused timeshares for about 20% of retail value – and the key to turning that into a value play is to take about 6 vacations a year, which is risky strategy if you are still in your 20s.

A friend of my wife teased my wife into asking for the lowest price possible. They offered to eat the $500 closing cost, give the first year maintenance fee for free, and take $6,000 off the $20,000 opening price. But the offer was take it or leave it, and since I was more interested in the sales pitch than the product we decided to pass. 😉

While on vacation I also read Clay Shirky’s Here Comes Everybody, a book about how social networks and social interactions will change businesses and institutional structures. Online there is so much competition for attention and so many people talking that the take it or leave it offers rarely work. Even when it does work it often gets criticised, which makes it hard to keep building a brand from.

To sell information online you really need to add interactivity to keep it fresh. You also need to build a strong personal brand to draw in way more customers than you could ever want to handle, and then use price to filter based on how much you want to work and what you intend to offer. The easiest way to build such a brand is to give away a lot of great content and hope that it builds a strong traffic stream and a network of people who follow, trust, and talk about you.

As far as timeshares go, it looks like bidshares.com is a free auction service which allows you to bid on low priced timeshares that are part of Interval International, and other services like SellMyTimeshareNOW.com also allow you to hunt by program.

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