Are Timeshares Ever a Good Idea?
The word itself evokes images of tours of high-rises in Las Vegas, tours people take to get a free dinner at the end.
The dinner, of course, comes with a side of sales pitch, usually a pretty aggressive one. (Pro tip: Give them a fake phone number or the pitch will never end.)
Conventional wisdom is that timeshares, often called interval ownerships, are bad investments. Generally, owners don’t have equity, the use of the property may be more restricted than they like, and selling a timeshare can be tough.
Most financial advisers would recommend not buying a timeshare, or only buying one if you’re prepared to lose the money and you realize that you’re buying a little bit of fun, not making an investment.
But what if your timeshare is just a shared place with a group of people, with some reasonable rules? And, for the uninitiated, just what is a timeshare, anyway? How much can you expect to pay for it?
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What is a timeshare?
A timeshare is a piece of vacation or resort property that you decide to put a financial stake in.
Basically, in exchange for an upfront fee and additional annual maintenance expenses, you become part owner in a vacation property (with a handful of others) that you're able to visit during set times each year.
How much does it cost?
According to our research, timeshare stakeholders usually shell out close to $900 for annual maintenance fees, and the upfront costs to become a part of the timeshare in the first place averages around $21,000, according to the American Resort Development Association (ARDA).
And don't forget the incidental expenses associated with visiting, period. Airfare, trainfare, carfare: it all adds up after a while. If you're going to go broke peddling that old jalopy halfway across the country just for a week of beachside satisfaction, it might not be worth your while to make this kind of purchase.
Shouldn't I just buy vacation property outright?
Ah, the age-old dilemma. Which is the better economic decision, to buy a timeshare or a vacation home? To be or not to be?
If investment property is what you're in the market for, something that will accrue value over time rather than depreciating significantly, then a vacation home is probably more your speed.
Timeshare stakeholders who decide to sell off their partial ownership in the property usually do so at a deeply discounted rate, and oftentimes end up losing money as a result.
Not necessarily so with a vacation property. Real estate, by and large, tends to appreciate in value over time, and even though you've got to attend to all of the upkeep-related concerns that accompany any normal residence, with a vacation property there's also the chance for rental income, which represents another potential stream for revenue.
If you're in the financial position to do so, purchasing vacation property outright is the better decision, always.
But if you know what you like, if you're a creature of habit and you enjoy vacationing in the same spot year after year, and don't want to be pestered with all of the concerns of owning a second property outright, a timeshare is a better option for you.
If I wanted to sell my timeshare, could I?
Yes. Definitely. This is a free country, after all, and you're a partial owner of this property.
Let's say you bought that timeshare many years ago. You had your fun, but it's time for something new, because you're getting tired of visiting the same old vacation spot year after year.
How do you sell your stake in the timeshare if the time to part ways has come?
First thing's first: if you're preparing to sell, be on guard from predatory real estate brokers and salespeople who claim they "specialize" in turning over timeshare properties.
The Federal Trade Commission (FTC) urges potential sellers to go into what they refer to as "skeptic mode" when dealing with these potentially shady characters, particularly if said shady characters keep referring to your area as a "hot market" and keep making distorted claims about all of the would-be "buyers" that keep coming out of the woodwork (without any substantive evidence to back up these claims).
A few good rules of thumb? Do your research, get everything in writing (and review the fine print first), and never agree to anything sight unseen or over the telephone. Explore more of the FTC's recommendations for selling a timeshare here.
Oh, and we hate to be a spoilsport, but don't expect to get much in the way of a return on this investment when you're selling it, particularly if it's in a less than desirable location and you haven't owned it for terribly long.