Investing in a time share

We don't have the prices on the specific ones we would buy just yet, but they seem to average around $20,000 for a week. Do you think this is a good investment and vacation plan for us? What are the ins and outs of time shares? Thank you.
-- Annie Adroitly

Dear Annie,
I don't think you should look at this purchase as an investment. Regardless of how you feel about fractional ownership or time shares, it's rare for them to perform well as investments. Although there's a technical difference between fractional ownership and a time share -- the purchaser owns part of the title to the property with a fractional ownership -- the rest of my reply won't differentiate between the two purchases.

Take a look at the resale market for fractional ownership in your vacation spot and that should show you why these purchases aren't good investments and demonstrate a way to buy in without paying primary market prices for the weeks you want.

While you have accumulated quite a sizable investment portfolio, spending 4.4 percent to 6.7 percent ($40,000 to $60,000) of those funds on a vacation location doesn't make sense to me. Don't forget to consider the maintenance fees, property taxes and other annual costs associated with this purchase. You also have to place a lot of trust in the property manager to keep up the place and protect the value of your purchase.

The industry has taken steps to reinvent itself over the past decade to correct some of the problems purchasers associated with time shares. These steps, however, aren't consistent across properties or organizations. Wikipedia had one the best overviews of the that I've read, including the pros and cons of fractional ownership. The Bankrate feature, "7 tips for buying a time share," is one of several time share stories on Bankrate that will also help guide you if you decide to purchase the weeks.

My advice is to be very cautious before buying. Interview some purchasers at properties in the area that have owned for five or more years, and try to buy used. Next, benchmark the purchase and annual expenses against the expenses you currently face in taking these vacations without owning the weeks, and review the company's before buying.

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