A timeshare is a popular way to guarantee accommodation if you enjoy vacationing in the same place year after year. According to the American Resort Development Association (ARDA), there are nearly 10 million homes that own timeshares.
Some see it as an investment, while many others see it as a bad use of money. If you’re thinking about buying a timeshare, make sure you understand the risks and benefits.
What is a timeshare and how does it work?
A timeshare is a shared vacation home where multiple buyers pay for the opportunity to stay in one property or set of properties over a period of years. These buyers are guaranteed their own time in the property, usually a week or two each year.
There are two types of timeshare, deeded and non-deeded:
- A documented timeshare This is where you acquire part ownership of a property and receive a percentage of the property, usually in the form of when you intend to use the property. Legally, this type of property can be inherited or inherited.
- A non-transferrable timeshare is like renting a property. You are guaranteed to use the property for a certain period of time (e.g. a few years) but you have no ownership rights to it. Sometimes they are referred to as “right of use” or point-based timeshares. You can use your points at various timeshare properties and businesses as long as they are within the agreement you have signed and coincide with the time you wish to use them.
Points-based timeshares have grown in popularity over time, offering customers greater choice over where and for how long they stay, but without other legal benefits of ownership.
Is a Timeshare a Good Investment?
“Good” is a relative term, but even many experts say timeshares should not be considered as one.
“The sales force can tell you that a timeshare is a sound financial asset, but the value of a timeshare is in its use as a vacation destination, not as an investment,” according to the Federal Trade Commission (FTC).
While timeshares give you a place to go and stay on a regular basis, you can’t make money from timeshares, so the return on investment isn’t in a dollar amount. It comes in the form of a guaranteed vacation spot. This may be a good investment for you and your money, but it’s not an investment in the traditional sense where you can get a financial return.
If you are looking for a real return, you should invest your money elsewhere, e.g. B. on the stock exchange or in real estate. While all investments involve risk, these offer a financial return when compared to timeshare.
Pros and cons of timeshare
Before deciding to buy a timeshare, make sure you understand the risks and benefits that come with it.
- A guaranteed holiday every year at the same time. A big problem for families around the world is choosing a vacation spot that everyone will love. If there’s a place you love and visit often, like Myrtle Beach or Disney World, a timeshare means you’ll always have a place to stay when you visit. And you can go annually (sometimes more, sometimes less), which takes the planning stress out of putting together a vacation schedule.
- It’s yours, but without maintenance. With your home (whether it’s a vacation home you bought or a rental home), you’re on the hook for upkeep and maintenance. With timeshare, you pay annual fees that cover the cost of maintaining, repairing, or improving the property.
- They buy second hand timeshares for a discount. Some timeshares are sold at a discount on a used market. Not everyone enjoys their timeshare purchase, so they list it for sale. This means you can close a deal while also getting into a timeshare that is otherwise costly.
- You pay for the time you use. When you have bought a holiday home, you pay for the property even if you do not use it. With a timeshare, you only pay when you use the property. The maintenance and upkeep costs are already baked into the fees.
- You can borrow it when not in use. There are companies that bring together timeshare owners in a marketplace with those who are visiting a place but are not yet interested in buying a timeshare. Most timeshare companies offer a rental program, so you don’t necessarily have to use a third-party option to list or find a place.
- It can get expensive. According to ARDA, the median price for a timeshare is $22,942. That is your cost whether you stay there or not. If you don’t rent out your timeshare, you could lose that money regardless of whether you use the space. And that doesn’t include annual maintenance costs or fees, which can run up to around $1,000.
- It’s yours, but not entirely. If you have a timeshare, you technically own the property and can pass your timeshare on to immediate family members. But selling it is its own expense and sometimes more trouble than it’s worth. When you sell it, it’s usually at a loss, and you probably never get what you paid for it.
- You could fall for a scam. Timeshare scams are real. If you are unfamiliar with a company, you may think they are offering you a timeshare deal that could save you money. In reality, they make you think that if you don’t pay money right away, you could lose a deal. When speaking to timeshare companies, make sure you do your homework and deal with a reputable company so you don’t fall for a scam.
- You may be locked into the same vacation spot. Securing a gated vacation spot can go both ways. That said, with certain timeshares, you may be forced to go to the same place year after year, while your preferences may change over time.
If you are considering purchasing a timeshare, make sure you understand the risks involved first. Good investments don’t necessarily mean the same thing for everyone, so try to figure out what a good return on investment is for you. Remember that timeshare ownership is not the same as traditional home ownership. You could lose more than you bargained for if you don’t know what you’re getting into first. (Here’s a look at the best and worst places for first-time homebuyers in 2022.)
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that past performance of the investment product is no guarantee of future price increases.