Why Timeshares Investments Are Bad and What to Do If You Own One

timeshare investments

Sales of timeshare vacation rentals have been consistently growing for the past 10 years, according to the American Resort Development Association (ARDA)’s State of the Vacation Timeshare Industry 2020 U.S. report. The same report also found the average weekly timeshare sold for more than $22,000, resulting in more than $10.5 billion in American consumer spending on timeshares in 2019. But how can this be? Aren’t timeshare investments known for being terrible money pits?

Not necessarily. As this comparison from Consumer Reports shows, the first several years of timeshare ownership make little financial sense until you reach a point where the costs of renting similar accommodations for the same timeframe would have outweighed the costs of the initial timeshare buy-in and annual expenses (maintenance fees, interest, etc.).

In other words, a timeshare could make sense as a long-term financial savings strategy if you are committed to going on vacation at the same place year after year to make your timeshare investments worth it.

Why Timeshares Investments Are Bad

Now that millions of travelers have experienced an unprecedented and undoubtedly frustrating period of flight cancelations, hotel closures, and widespread refund debacles during the Covid-19 outbreak, stability seems to be a core goal for everyone’s vacation plans, and timeshares could make that more attainable.

What’s Involved in a Timeshare?

A timeshare is a vacation property pool in which people typically purchase a certain period of time for the same unit (1-3 weeks in most cases). Requirements and regulations vary widely for timeshares, but owners generally get some flexibility in selecting a timeframe or specific dates for when it’s their “turn” to use the property. Some timeshares also have different pricing for high/low seasons (e.g., premium pricing for mountain ski condos in wintertime).

You may have already been to one of the high-pressure timeshare sales pitches offered in touristy areas, but take time to think about exactly what you want from a potential vacation property before diving in (it can be tricky to escape these electrifying sales personalities, so it’s generally recommended that you avoid them unless you have an iron will to avoid signing anything). Questions to ask yourself before even thinking about buying into a timeshare include:

  • How many years (preferably in a row) have you visited this place?
  • Can you see yourself (and/or loved ones) visiting this place consistently over the next several years? Is there a risk you’ll grow bored of this place or want to travel to new places instead?
  • What is every single cost you’re expected to pay (both upfront and annually)? Make sure to read any timeshare contract very thoroughly before agreeing to anything.
  • How much money can you comfortably afford to put towards a timeshare?
  • Are there any causes for concern in that area, such as rising sea levels for coastal properties or falling property values in neighborhoods surrounding the resort community?

What Are the Costs of Timeshares?

There’s so much more to timeshares than just the initial buy-in (over $22,000 for one week, according to the average price cited in ARDA’s 2020 report). There are also maintenance fees, utilities, and taxes charged to all timeshare owners (ranging from $300-600 per year on average), and other fees associated with closing and real estate transfers, as applicable.

By comparison, you would be paying full price for a hotel room, which could range from $100-700 per night, depending on how nice it is, where it’s located, amenities, etc. If you’d prefer to stay in the same exact unit each year – and continue visiting the same location annually – then the costs of a timeshare could outweigh hotels, especially if you look into timeshare re-sales.

timeshare investments

Are Timeshare Investments a Waste of Money?

In the past, a timeshare was almost always guaranteed to be a waste of money, but new changes to the ways timeshares operate – as well as changing consumer travel preferences and potential long-term public health concerns – may prove worthwhile for individuals and families considering timeshare investments in a vacation rental

It’s important to note that timeshares are inherently not investments unless you earn more money from the timeshare than you put into it (e.g., leasing it out to Airbnb or VRBO guests). If your primary motivator for buying into a timeshare is because you and your friends/family genuinely enjoy vacationing there and you have the means to come back to the same location (year after year), then a timeshare could be considered a valuable use of your money.

However, if you don’t have the means to pay for the timeshare upfront, then it might be best to avoid it until you’re able to afford it. Since timeshares generally tend to not maintain the same high value over time, banks tend to charge hefty interest rates on loans for timeshare rentals (if they offer you the financing at all).

Timeshares have had a bad reputation for decades, but that doesn’t mean they should be automatically dismissed as undesirable if there’s a chance one might truly work in your situation. If you tend to gravitate to visiting the same place(s) for vacation every year, you prefer long-term affordability and familiar accommodations, and you can afford the higher upfront cost, then a timeshare might be worth considering for your lifelong vacationing plans and budgets.

Timeshares Investments

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