If you love to vacation, you have been approached at some point to hear a sales pitch about purchasing a timeshare. You’ve mulled over the possibility of having a luxurious property you can return to year after year. The presentation was undoubtedly awesome, and you’ve even considered purchasing a timeshare. But is purchasing a timeshare a smart move to make? Based on our research, you should never purchase a timeshare. Continue reading to learn more.
What Is a Timeshare?
A timeshare is a vacation property or unit you pay partial ownership into. You pay an upfront price for the property, and then you pay an annual maintenance fee for the upkeep of the property. In return, you get partial (usually one week per year) access to the property and can bring family and friends to enjoy.
We see it get promoted often at travel conventions, where they lure you in with a “free vacation” after attending an informational session.
How Do Timeshares Work?
After you’ve purchased your fractional ownership in a vacation property, your family is given a period to stay there. Typically, these are 1-week intervals every year, for example, week 30.
That means that every year, week 30 is your turn to have access to the property. In most cases, you can trade your week for other locations, so you won’t have to visit the same place every year. The weeks during the year you’re not at the property are enjoyed by other families who likely also bought into the timeshare or rented the property.
How Much Does a Timeshare Cost?
Several things are taken into consideration when it comes to the cost of a timeshare. Some of those things include the size of the unit (the number of bedrooms and baths), the accommodations offered, and the ownership period. According to the American Resort Development Association (ARDA), as of 2022, the average cost of a timeshare was $23,940. The average maintenance fee is $1,000. Maintenance fees increase every year with no indication of how much it will be the next year or how much it could ultimately be increased overall.
In addition, potential timeshare buyers should also be aware that other hidden costs, such as resort assessment fees, special assessments, transfer fees, and closing costs, are associated with timeshare costs.
What Are The Risks Associated With Owning a Timeshare?
Increasing maintenance fee: You never know how much the maintenance fee will be from one year to the next. You only know it will increase, in some cases, faster than the rate of inflation.
Upkeep of property: You never know how well the property will be maintained or if it will be upgraded.
It’s yours forever: The contract seemingly never ends. Even after the property is paid for, you’re stuck with paying a maintenance fee every year for the rest of your life. Plus, most timeshare agreements have a “perpetuity clause,” meaning the obligation will be passed on to your heirs or inheritors upon death.
Not your property: The property is never ever yours.
Difficult to sell: Trying to get rid of your timeshare can be a hassle. You risk a substantial loss on your original investment if you sell it. Companies I’ve talked to who claim they can help you exit your timeshare ask for a hefty upfront fee (like $5,000) to do so. Even after paying this fee, there’s no guarantee they can actually sell your timeshare.
No power as fractional owner: A different company can take over your timeshare property at any time and change how you’ve become accustomed to using your timeshare property. Many property owners have sold their properties only for them to be bought by companies who try to sell timeshare owners into a point system. This is a system where your timeshare deed is given to them, and in exchange, you get a certain number of points to vacation anywhere you want to go. Remember that this offer is never official without requiring you to purchase additional points. Remember, you’ve already paid for the timeshare.
Trading is not always easy: Exchange fees are often associated with trading your week. Also, the options you want may not be available.
Decrease in value: Timeshares lose value once you sign on the dotted line.
What Are the Benefits of Owning a Timeshare?
You can vacation more: If nothing else, having a timeshare forces you to vacation at least once a year, which isn’t bad. Vacations are relaxing and great therapy for those of us who tend to overwork—owning timeshare forces you to take a vacation. Why would anyone waste their money purchasing a timeshare and never use it?
You can rent out your unit: If you’re unable to take your vacation in any given year, you could let the property owners rent your unit for you, or you can rent it out yourself. Renting it yourself would be the more reasonable option since the property management would likely take a percentage of the rent or limit the rental price for you. The money you receive could actually pay your maintenance fee the next year or put extra money in your pocket.
On a wider scale, timeshares offer many advantages for the economy. With over 1,550 timeshare resorts in the U.S. (201,600 units), more than $70 billion contributes to the U.S. economy, providing over 441,000 full and part-time jobs, nearly $30 billion in income and wages, and approximately 10.8 billion in tax revenue.
Is Buying a Timeshare a Good Investment?
Ultimately, it’s up to each individual whether a timeshare is a worthy investment for them. If you enjoy vacationing at least one week during the year or plan to rent it out when you can’t vacation, it may be of benefit.
However, coming from a financial perspective, a timeshare won’t appreciate over time, so its value will only spiral downward, thus making it difficult to resell. Taking into consideration other hidden fees, including increasing maintenance costs and the fact that it can be difficult to transfer your week, it may be wiser to consider other avenues for guaranteeing grand vacations.
The Bottom Line
At the end of the day, an investment is something that gains you something in the future. If it does otherwise, it’s an expense. While you may enjoy a timeshare one week out of the year for years to come, you’ll never get your initial investment back. There is no return since you’ll be paying thousands of dollars in maintenance fees for the remainder of your life, and the timeshare gets passed on to next-of-kin or the inheritors of your estate upon death.
- How to Invest in Stocks With the Best Investment Apps
- Upside Review: Earn Cash on Your Weekly Groceries