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Mexico real estate: timeshares

J. Brad Grieve

This may not sound like a Mexico real estate or home maintenance issue, but I thought my experience was worth sharing. Recently, my wife and I purchased a Mexico vacation package offered by our bank. And after various delays, we finally managed to take the kids to Puerto Vallarta for a four-night stay at one of the beachfront real estate resorts.

Shortly after arrival, we were greeted by a hotel "employee", who offered a free breakfast buffet and hotel orientation tour. Yeah, yeah… free breakfast and a tour? After a few questions, we thought, why not? We have been through it and we were curious about all the small villas on the property, how they were configured, how much they rent for, special facilities, etc.

After the promised 90 minutes extended to more than 150 minutes, we were at our limit with the vacation club/timeshare promotion and were not interested after being confused by the numbers during the presentation. I found the presentation to be very aggressive and to say the least, after correcting the presenter's math several times, confusing. Remember, timeshares are not a real estate investment but a membership to access vacation programs, even though it appears you are sharing a specific accommodation.

Anyway, for a junior suite that sleeps four and has a small kitchenette, the final number was $14,900, apparently promising use of it once a year for 25 years (although it was not clear it was for every year). The maintenance fees were $250 USD per year. Now using simple net present value calculations and assuming my money can normally earn about 2% over inflation, I actually would be paying approximately $1,300 USD per week over the next 25 years. Consider this - the advertised rate for the same unit was $250 USD per night (or $1,750 USD per week) without promotion or discount. I am sure the hotel would provide a discount if I was looking for a one week rate.

I was not impressed with the effective discounted rate, the upfront payment and the lack of control of the maintenance fees, which likely would increase. Also purchasing this timeshare represents a commitment for 25 years of vacations, which is longer than my economic commitment with my own house and my children's education.

However, what is interesting is the secondary market for timeshares. There are various websites that promote timeshares for sale and these are typically available for much less than the promotional "new" price available from the developers. This is partially due to the high cost of promotion; in some cases, as much as 50% of the cost is spent on marketing. This secondary market for timeshares is essentially one person selling their timeshare to another person, if the timeshare contract permits the sale.

Now there are some benefits to timeshares, which include access to the RCI (Resorts & Condominium International) network, which will allow you access to places around the world at discounted rates. However, you will need to be flexible on dates available. Also, if you enter a system with points, you are at the mercy of the value of those same points. There is, of course, a cost to enter the network as well as annual fees, deposits to put on a vacation unit, etc.

Remember, read your contract thoroughly and assure everything discussed is in the contract. Also PROFECO (the Mexican government consumer protection agency) is available to help you if you feel you have not been fairly treated. By Mexican law, you do have a five-day cooling off period after signing should you want to cancel the contract with a full refund of deposit.

On the novel side of timeshares, I have learned of people who have economized by planning their vacation around the bonuses they receive for the timeshare presentations. In some cases, timeshare promoters will give cash to draw in clients for their presentations. One case I read about was a person who programmed timeshare presentations for the morning and afternoon to receive the cash bonuses - in total these bonuses effectively paid for the vacation. To me, it sounds too much like work during a vacation - isn't a vacation to help get away from a work schedule? What is the value of your vacation time? I know the time I spent sitting at the table with the presenter while my daughter was pleading to go to the pool was very valuable time for me.

Published or Updated on: June 1, 2011 by J. Brad Grieve © 2008
Contact J. Brad Grieve

J. Brad Grieve is a professional civil engineer who has lived and worked in the Lake Chapala area since 1994. He is the owner of Ajijic Home Inspections and you can be reach him by phone: (376) 766-2836 or e-mail.

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