Steadfast FinancesInvesting in a Timeshare - Is It Worth It?

Investing in a Timeshare – Is It Worth It?

Filed in Consumer Education , Frugal Living , Investing 101 7 comments

Exclusive membership, unique settings, beautiful resorts, fabulous locations, great marketing pitch, and access to above ordinary amenities. These are just some of the things that may encourage an individual to invest in a timeshare.

You may already know the wonderful perks included in timeshare offers, and since it’s been made obvious from day one by agents with great marketing schemes, there is one question you need to consider before putting your hard earned money in this arrangement. With all the wonderful amenities that you will receive, is it all worth it? Will you get your money’s worth? Timeshares are not cheap because you have to pay for exclusivity, but is it a good investment in the long run.

What is a timeshare?

A timeshare, also called vacation ownership, is a type of ownership wherein you may not actually own the whole facility or property, but you get rights to use it. Timeshare arrangements can be applied to condominiums, resorts, hotels, houses and even vehicles like private jets and yachts. There are many types of timeshare arrangements. Timeshares can be considered real property if the timeshare is purchased with deeded contracts. You become a part owner, and you can use the facility for the time allotted to you. You can also leave it to an heir.

Another type of timeshare arrangement is the “right of use.” With this arrangement, you get less security since you only get the right to use the facilities or property for a fixed period of time, and the contract can expire and all rights will be turned over to the owner.

What do you get from a timeshare?

With a timeshare, you get exclusive members-only (or owners-only) access to different facilities (as in a resort). You are allotted a specific time (it can be flexible depending on the contract) wherein you can use the property. Timeshares mostly are used for vacations and out of town getaways. Compared to actually buying a vacation home or a condominium, buying properties in timeshare actually costs less, but, of course, you do not actually own the property. You can also purchase a timeshare as a gift or give it to charity.

Timeshares as an Investment

Some people consider timeshares as an investment because you can sell it, or you rent out your time allotment. Especially if the resort or property is popular, you can actually get quite a nice income from renting it out. There are many people who may rent your timeshare if the resort is exclusive and offers amenities they can enjoy. You can rent out the all the time or save some for yourself. Usually timeshare resorts and hotels have more amenities and perks as compared to ordinary hotels.

Point systems are available in some timeshare contracts wherein you can get a certain amount of points each year depending on your ownership level. Some points can be exchanged for airline tickets, amusement park tickets, hotel accommodations, etc.

Why can timeshares be a bad investment?

  1. The value of timeshare does not appreciate in time. They may be considered real property but unlike real estate, the possibility of reselling timeshare in a higher amount than the purchase price is small. A buy and sell investment set-up with timeshares is not a good money making scheme.
  2. Annual maintenance and service fees are usually expensive. The maintenance is fixed whether you use the property or not.
  3. You can only visit or use your property on a specific date and for a specific limited time only each year. It is unlike any other property where you can go and use your property anytime and anyway you like.
  4. You also need to pay for property taxes. You are only a part owner of the property yet you have to pay property taxes.

Is it worth it?

If you have a lot of money to spare and if you are into vacationing in exotic and unique places then a timeshare may be reasonable for you. However, keep in mind that unique may only be applicable to the first few visits to the property, and you have to use the property over and over again to get your money’s worth. After a while, the property may lose its unique appeal to you. If you are considering buying serviced apartments or a timeshare as money-making investment, it is a bad idea. Aside from the huge upfront payment, it is laden with fees and other yearly expenses, making it an expensive investment that is hard to sell.

Weighing the facts, do you think timeshare is a worthy investment? Do you have a timeshare? Why did you buy yours?

YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances.

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Posted by Dominique Brown   @   7 May 2012 7 comments
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7 Comments

Comments
May 8, 2012
10:15 pm

You forgot another downside to timeshares. About the only way to get out of a contract with one is to die.

May 9, 2012
5:56 am
#2 YFS :

I had no clue the only way to get out of the timeshare is to die. Ouch!

Jun 13, 2012
10:27 am
#3 Marie :

I being a corporate lady, won’t ever go for a timeshare investment and risk my future…..certainly not under any circumstance….There are too many simpler investment opportunities for businessman and corporate owners to go for timeshare…..!!

Aug 13, 2013
5:56 pm

Timeshares need to be looked up as a purchase and not an investment. Regardless of how timeshares are presented, they don´t perform as well as a house or stock investment. If you look around the resale market for timeshares on websites like EBay, Redweek, or TUGBBS will find that you can buy a timeshare for far less money than what the first owner purchased it for.

Aug 28, 2013
6:15 pm

The price will be determined by the resort, the location, and the number of weeks you own, but the real value is almost zero, as most timeshares are worthless.

The trend to appreciate things for their price, and not for their real value, induces us to waste our hard-earned money, inasmuch as we frequently lose the capacity to distinguish between what it’s valuable and what is not

Oct 7, 2013
3:27 pm

When you buy a timeshare, you have to make sure you understand all the terms and conditions established in the contract, like the obligation to pay timeshare annual maintenance fees.

Jan 7, 2014
4:12 pm

Timeshares need to be looked up as a purchase and not an investment. Regardless of how timeshares are presented, they don´t perform as well as a house or stock investment. If you look around the resale market for timeshares on websites like EBay, Redweek, or TUGBBS will find that you can buy a timeshare for far less money than what the first owner purchased it for.

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