Many consumers are attracted to the idea of owning a timeshare because it gives them the opportunity to take a prepaid vacation at a favorite location each year and/or trade with another owner. However, many consumers fail to think that timeshares should be viewed as a way to enjoy a destination rather than as a money-making investment.
Although you can get good value when purchasing a timeshare, it can also be a pretty bad investment. The business is perceived as being beneficial for some and potentially predatory for others that may result in timeshare exits. If you’re interested in purchasing a timeshare, you should learn more widely about them, regardless of what you’ve heard. Keep on reading to learn more.
What is a Timeshare?
A timeshare, also known as a vacation ownership, involves annual trips to the same resort or group of resorts for life. An upfront lump sum plus annual maintenance fees is paid in advance or financed. When you want to stay somewhere different from where you originally booked, you will have to pay an upgrade or exchange fees.
Time-sharing is a form of fractional ownership, where buyers purchase the right to occupy a unit of real estate over specified periods. These are available for various types of vacation properties such as resorts, condominiums, and apartments. Timeshares confer upon buyers the right to annual exclusive use of a vacation property for a defined period that is generally measured in one-week increments.
Further, timeshare is not the same as buying a real estate property because buying a timeshare does not mean you own a specific property and you are only buying the right to go on vacation at a certain place. By the end of it all, you should have figured out what to expect from the company and, most importantly, if this kind of ownership is indeed worth it.
What are the Two General Ownership Schemes for Timeshares?
Timeshares are based on the concept of fractional ownership. Even though the concept of timeshares sounds simple enough, they come in different forms. Your agreement will either give you a set week every year or a floating week where you can choose when to vacation based on your contract and availability. There are also timeshares that operate on a points system where you purchase points and use them at select properties. Some points can be carried over for a few years, which may or may not be a benefit to the owner.
Ultimately, there are two types of timeshare contracts available (deeded timeshare, or non-deeded), which will outline who owns the property and how it works for you to visit your timeshare.
You purchase an ownership interest in the property. You own a specific time of the timeshare that you can use, rent, or sell.
You lease the right to use the property for a specific amount of time each year for a preset number of years. Instead of owning part of the timeshare, you agree to lease the property for a set time each year. You usually get more flexibility here and often you’ll get access to more than one property.
Considerations in Taking on a Timeshare
The first thing you have to consider in taking on a timeshare is that there is an increasing complexity to the ownership structures. You may choose to get a fixed week, which means you will have the right to stay on the property during a particular week each year, or you may opt for a floating week, which gives you the right to stay on the property for a specific period every year.
Moreover, some properties operate on a point system. These are usually referred to as “vacation clubs.” You purchase a specific number of points that can be redeemed at a variety of destinations and some plans let you “bank” unused points. The points that impact the cost of a timeshare include the following.
- Unit size and type
- Ownership Type (deeded vs. right to use)
- Time period purchased
- Usage Type (fixed or floating week, points)
- Usage Frequency (annual, biennial, etc.)
- Points Allocation
- Brand and/or Exchange Affiliation
Many timeshare properties offer larger and more luxurious accommodations than standard hotels and are generally located in desirable areas. The initial purchase price is not the only cost to consider, however. Each timeshare resort charges its owner’s annual maintenance, utility, and tax fees. Annual fees are typical, although larger shares or peak-season shares can have higher annual fees. However, some timeshare contracts include a specific clause that limits future fee increases.
Occasionally, the annual fee does not cover the property tax, so shareowners are then responsible for them. Travel is often overlooked as a hidden cost. Owning a timeshare is useless if you can’t afford to get to it.
Lastly, timeshares in resorts charge extra fees for selling timeshare shares, such as a transfer fee and a recording fee. If the resort decides to make a major improvement to the property, or it has to make major repairs, it might be able to assess a large fee to the shareowners to cover the costs. Check the terms of your timeshare contract carefully to see if the resort could hit you with a large, unexpected special assessment fee in the future.
How Do You Buy a Timeshare?
A timeshare is a great way to return to a vacation destination you absolutely love every year if you have found one that greatly appeals to you. However, it is recommended to buy a used one. Buying used gives you all the benefits of ownership at the fraction of the cost.
Even if you choose a more expensive unit, you can save money by financing your timeshare purchase with a personal loan, which should offer you an interest rate that is considerably lower than the rate the timeshare company charged the original owner. With that, buying a timeshare involves the following sources and options:
- From current owners that are tired of the maintenance costs
- From current owners that are tired of the destination
- From current owners that have grown frustrated with their efforts to trade their slot. These owners may be willing to give their timeshares away at a fraction of the original cost so that they can visit a different destination
- There are dozens of offers that let you choose cheaper timeshares if you search “timeshare resale.”.
Just remember, the decision to purchase a timeshare should be carefully considered, as with any major purchase. It involves a large amount of money upfront and significant recurring costs so take your time to make a decision and ask a lot of questions.
Benefits of Timeshares
Timeshares can be a risky financial decision for many owners and investors. There is a lot of uncertainty as to whether it’s worth the money or if it is something that will end up regrettable. However, there are still a lot of people who can enjoy and be happy with this decision. The following are the reasons why there are happy timeshare owners:
They understand that timeshares aren’t a financial investment
The average cost of timeshares sold by resort developers has risen over time. Despite that, some unethical sales tactics claim that you’ll get a higher return on your timeshare which is far from the truth. Most timeshares sell on the resale market for 10% or less than what the original owner paid, and other sites are full of “for sale” ads from owners willing to sell for just a penny.
They don’t buy a timeshare on vacation
Salespeople at timeshare resorts are generally better at selling than you are at resisting, especially when you’re relaxed and having fun. There’s no way to be in that frame of mind when you have to look over a contract, determine potential exchange options, and discover things that can go wrong, such as rising annual maintenance fees and difficulties trading shares.
In order to determine how much you like a property, it is recommended that you rent from an existing timeshare owner and never sign up on the spot.
They don’t pay retail
Remember that you could save thousands buying directly from other timeshare owners who no longer wanted to pay their annual maintenance fees. These people are usually the ones who simply stop paying their fees and put themselves at risk of being sued and having their credit destroyed by collection agencies.
They buy in attractive locations
In order to be a happy timeshare owner, never buy a timeshare in an unfavorable location, even if you’ve been told you’ll be able to trade it for one in a more desirable location in the future. Timeshare transfer service is intended for clients who have timeshares that are paid in full and who want to get out of paying maintenance fees and other costs associated with timeshare ownership.
However, you have to remember that if you don’t want to vacation there, chances are you won’t want to exchange with your partner either. Many claimed that it’s better to buy fixed-week timeshares. That way, if you don’t want to trade for another property, you’re guaranteed access to their properties each year without having to make advance reservations. Floating-week and point systems typically require more planning because desirable weeks are snapped up earlier or more points are needed the longer people delay.
They enjoy research and planning
It takes time and effort to learn all the ins and outs of each timeshare system. While it may seem that point systems make vacationing at the last minute possible, to get the best deals you have to book 9 to 12 months in advance. It’s actually an advantage for couples who typically begin researching their vacation options more than a year in advance.
Drawbacks of Timeshares
Owning a piece of a vacation home sounds perfect, but you have to know whether they are worth all of your hard-earned cash and worth parting with even more of your money year after year once you’ve hopped on board the timeshare train. Exiting a timeshare may be the result of regrettable decisions. The reasons why this occurs are outlined below.
Timeshares Have No Investment Value
A timeshare is a vacation home split between folks who buy into it for the right to use it once a year for a set period of time. You have to pay a lot of money upfront to guarantee your week every year to vacation in this timeshare location.
It all means that the timeshare has no value because you don’t own anything in the normal sense of the word. It’s not like your regular home, which likely has some equity built up. In fact, a timeshare goes down in value from the moment you sign the contract. There are much better ways to invest your hard-earned money.
You Can’t Resell Timeshares
Timeshares are worth absolutely nothing, so they are hard to sell. There are lots of timeshares for sale at really cheap prices on the Internet. Timeshares cannot be given away since they do not increase in value like regular real estate. You’re trying to sell something that comes with a lot of baggage, including rising annual fees.
Moreover, if you want to get out of a timeshare, it’s not as easy as you think. Obviously, a timeshare salesperson will try to make you feel like you own a little piece of this home, but what they fail to disclose is that you would lose thousands of dollars if you sold it at some point.
Timeshares Come With Rising Annual Maintenance Fees
If you’ve bought a timeshare, don’t put away that checkbook just yet, because you will have to pay a timeshare maintenance fee to cover the resort’s operating costs. It is possible to pay thousands of dollars in maintenance fees each year if you own a timeshare in an expensive location and size, and it gets worse as time passes. As a result, your timeshare value doesn’t rise, and it truly takes away the perks of timeshare vacations.
You’re Paying for Timeshares When You’re Not Using Them
If you skip a year at your timeshare, you still have to pay those pesky maintenance fees. That’s a thousand dollars or more that could have gone towards booking your vacation. Rather than buying a timeshare, you could book a resort or rental at a different destination every year. The same resort is available to you down the road with better views and facilities (like no annual fees) if you own a timeshare.
Renting a Timeshare is not Easy
Taking the timeshare off the market means it may take you a while to find someone to rent it to. It’s not popular with timeshare companies for their clients to rent their timeshares to strangers. The majority of companies simply don’t allow it, and if they do, there are strict rules and restrictions. The company may even take a commission from you since they are competing against you to rent their own inventory!
Renting out your property will require you to pay a cleaning fee once the guest has left, as well as a fee if the guest damages the property. As you can see, once you have paid these fees and commissions, there will not be much rent. All of this assumes someone is actually interested in renting your timeshare.
Timeshare Loans Have High-Interest Rates
Assuming you have purchased your timeshare with cash, then that cash is pretty much gone if you ever try to get it back. Alternatively, you could have invested that money in a mutual fund, and used the return every year to fund luxury vacations galore.
Timeshare companies will offer you loans if you’re not able to pay for the timeshare in cash. Timeshare property isn’t like a regular property, so the loan on it isn’t like a conventional mortgage. The mortgage companies are trying to avoid lending money to people to buy timeshares since they know how quickly they lose value when sold. Timeshare mortgages have much higher interest rates than regular mortgages and that’s even more of your money you won’t see again.
All in all, if you’re one of the many who own a timeshare, you’ve probably wondered if there is a way out knowing that you can’t resell it for much, and the salesman won’t take it back. You can check out the Timeshare Freedom Group, a timeshare exit firm that claims to be able to get you out of your timeshare free and clear.
|Pros and Cons of Owning a Timeshare|
|Pros# 1: You don’t have to worry about where to go on a vacation.||Cons #1: You’re paying for your timeshares even when you’re not using them.|
|Pros# 2: You don’t have to do anything for the property’s upkeep.||Cons #2: Timeshares come with increasing maintenance fees per year.|
|Pros# 3: You can buy a second-hand timeshare for less money.||Cons #3: You cannot re-sell timeshares easily.|
So, Is a Timeshare Really Worth It?
Timeshares will promise benefits like a vacation where you want when you want; a larger unit that may include multiple bedrooms, a kitchen, and in-unit laundry; a customizable vacation; and the ability to exchange your usual stay for something else.
However, buying a timeshare also has aggravating disadvantages as timeshares have no good investment value, points may lose value over time, are not easy to rent, and loans have high interest rates which you may not be able to afford over time. Purchasing a timeshare through a resale can make financial sense but you’ll still be on the hook for the yearly maintenance fees.
Now that you know the pros and cons associated with purchasing a timeshare, you certainly now have your own informed decision on whether to purchase one and whether it’s worth your money. If you already own one, be careful when you’re trying to sell it. You should never believe that you will get more for it than you paid, as this is very rarely the case.
Lastly, if you own a timeshare and are stuck in a property you don’t want, don’t lose hope. That’s where Timeshatter comes into play. We analyze your current contract and pair you with an expert who can help you legally exit your timeshare contract. You’ll save thousands in fees, and finally have peace of mind again.
Frequently Asked Questions
There are definite benefits to attending a timeshare presentation, but it does require some planning. Remember that most timeshare sales presentations will require you to attend for 90 to 120 minutes. Also, remember that you’re sitting with trained sales professionals — they will keep you there as long as they can if you let them. Ideally, they will find an emotional trigger to make you purchase one of their packages before you leave. So it could be a disadvantage if you attend unprepared because the presentation can force you to invest more of your time in the pitch, which may make you feel more inclined to buy.
A timeshare is a way for a number of people to share ownership of a property, usually a vacation property such as a condominium unit within a resort area. Each buyer usually purchases a certain period of time in a particular unit. Timeshares typically divide the property into one- to two-week periods.
Yes, you can get a deduction from the property taxes you pay on your timeshare. To make this work, just make sure you follow the rules. This includes the fact that taxes must be assessed separately from maintenance fees. Also note that the property tax on your timeshare may be assessed to the entire resort, or as part of a tax parcel larger than your individual share. In that case, you’re not liable for the taxes, but you can’t deduct them either. A tax professional can help you determine how much of a deduction you can take for each timeshare you own. Just make sure you get all the deductions you’re eligible for.