Are Timeshares Worth It? Here Are The Benefits And Risks

Are Timeshares Worth It? Here Are The Benefits And Risks

If a timeshare company ever offers you free tickets to a show, a hotel stay or dinner discounts to attend a “brief” meeting, it’s likely you’re going on a lengthy tour of a timeshare.

There certainly are benefits to having a vacation place to call your own once a year that often comes with an option to trade places nationally or globally. But there are also risks you need to be aware of before making this lifelong commitment.

The effort required, and time spent touring a timeshare while on vacation, to understand what you’re getting into could be better spent simply going on a vacation with no strings attached. And let’s be clear: Timeshares should not be seen as an investment like stocks or a retirement fund plan.

Still, have you ever wondered whether it’s worth attending that timeshare presentation, even just to get a free vacation? Learning about the benefits and risks of timeshares may help you decide whether it’s worth it in the long run.

What You Need to Know About a Timeshare

When you think about buying real estate—especially a property that’s not your primary residence—you probably think of it as an investment. Perhaps you might rent a property out to earn income, with the intent to sell it one day at a profit. Along the way, you’ll get special tax breaks as a real estate investor.

A timeshare, however, is not that kind of investment. Here’s why:

  • When you buy a timeshare vacation interval option, you don’t actually own any specific property outright. What you’re buying is the right to use a property, or a group of properties.
    In this case, you don’t have the same rights to modify a timeshare, rent it out or even resell it in the same way as when you hold the title to a piece of real estate.
  • The timeshare industry tries to make this clear by using language online like “vacation ownership,” but buyers may still misunderstand. What you’re really buying is the right to go on a vacation at a certain place (that can be traded for a different location) every year for decades—and the obligation to pay for that vacation annually, even if you stay home.

A deeded timeshare does provide you with real property ownership, collectively with other timeshare owners. This arrangement is less common today than when the industry started out decades ago.

“Timeshare should not be considered an investment, deeded or not,” says Lisa Ann Schreier, who previously worked as a frontline sales manager and director of communications in the timeshare industry. She now blogs at The Timeshare Crusader as a consumer advocate.

“There are some rare cases where the value of the timeshare is the same or even more than the purchase price,” Schreier says. “An example would be a timeshare purchased in Sanibel Island 20 years ago. That has to do more with supply and demand than anything else.”

5 Benefits of Having a Timeshare

Understanding that a timeshare is not an investment, here are the benefits timeshare owners can enjoy.

1. You Don’t Have to Think About Where You’re Going on Vacation

Timeshares can be a good choice for people who like to vacation in a specific place each year. So ideally, this should be a place you want to go back to every year for the foreseeable future. If you like routine, stability and predictability, this type of vacation experience may be ideal.

Typically, you will also have an option to exchange your vacation home for a different location of equal or lesser value, but it does require some additional planning and time.

In fact, consumers often purchase timeshares not because they want to visit the same place every year, but because they want to visit multiple properties in the timeshare company’s portfolio. But it does require some advance planning in knowing your vacation dates (often a year out), and additional fees may apply to exchange your week or points for another property.

2. You Don’t Have to Maintain the Property

While you will be financially responsible for keeping the timeshare property in good shape through annual dues, you will not have to personally handle maintenance or improvements. The timeshare company will do these things.

As long as it does them well, this lack of responsibility can be a great perk of timeshare ownership. Owning a vacation house or condo entails more responsibilities.

That said, if you rented someone else’s vacation home or timeshare each year, you also wouldn’t have these responsibilities, nor would you face financial risks of increasing annual fees and special assessments.

3. It Can Be More Financially Accessible Than Buying a Vacation Home

The average sales price for a one-week timeshare was $22,942 in 2019, according to the American Resort Development Association (ARDA), an industry advocacy group. But almost half of timeshare owners in an earlier survey from ARDA said they paid less than $10,000 for their timeshare, significantly less than what you’d pay to own a vacation condo outright.

However, the timeshare prices above don’t include financing, maintenance fees (annual dues) or exchange fees, which can more than double the first-glance price over a lifetime of ownership. Nor do they reflect the industry’s resale market, where you can often acquire a timeshare for next to nothing.

4. You Can Buy a Secondhand Timeshare for Less

Sometimes people don’t like their timeshare, get tired of it or can’t afford it, so they will look for an out. That means you may be able to acquire a timeshare from another owner for free instead of directly from a timeshare company at full price. “Used” timeshares typically sell for 0% to 10% of the retail price, according to Timeshare Users Group, a consumer advocacy group made up of timeshare users.

Why would someone give away their timeshare? The most common reason is that they want to stop paying the annual maintenance fees. You’ll be taking on those fees, but you won’t have to pay an upfront cost for the timeshare. There are drawbacks to buying secondhand, however.

Examples include not being able to convert the timeshare into other options, such as hotel points or cruises.

Buying a secondhand timeshare also comes with the risk that the current owner is behind on maintenance fees and/or owes a special assessment. You need to know if you’ll have to pay these fees as the new owner before making such a purchase.

5. Timeshares Are Spacious

In addition to more square footage in a timeshare, you usually get bedrooms that are separated from living areas, along with a kitchen and ensuite washer and dryer. The timeshare originated as a way for the condo industry to unload its excess inventory, so that’s why timeshare units tend to resemble condo units rather than hotel rooms.

The timeshare property itself will often have amenities like swimming pools, hot tubs, a gym and beach access that tend to be of higher quality than what you’ll find at hotels. Of course, that also depends on the timeshare property and whether you’re comparing it to a high-end resort or fast overnight hotel stay.

Risks of Buying a Timeshare

While many timeshare owners do enjoy their property (like the annual family vacation to Disney), there are many others who have said they were pressured into a purchase by salespeople during the initial tour, and are now trapped in an expensive ongoing obligation. Here are some of the risks of purchasing and owning a timeshare.

1. You Were Talked Into Something You Can’t Afford

Like walking into a car dealership, timeshare sales agents are going to show you their best (and typically highest price) offer first, and then push hard for a sale. If you decide to proceed, ask for the fine print first and cross-check that with what you would typically spend on an annual vacation—not what the salesperson claims vacationers spend.

For example, a sales agent will often cite calculations that show how much you can save on a lifetime of vacations by purchasing a timeshare, assuming you don’t finance the purchase, and that without owning that timeshare, you would pay full price for the same level of accommodations every year.

In reality, many people do finance the purchase, and the market offers opportunities to pay less than the full price for a resort vacation. You can also quickly look up vacation package costs on any of the main travel booking sites to get an idea of what you would pay for a desired location without purchasing a timeshare as a comparison.

2. Timeshare Financing Is Often Pricey

You can’t finance a timeshare with a traditional mortgage because you’re not buying ownership of a piece of property, which is what mortgage lenders require as collateral if the loan goes sour.

If you finance a timeshare, your options may include financing through the timeshare company, getting a personal loan with no usage restrictions, using a credit card or the proceeds of a home equity loan. Further, unlike mortgage financing for a home, you’ll almost never be eligible for any real estate or investment tax deductions for owning a timeshare.

3. A Timeshare’s Value Won’t Appreciate

Timeshares do not retain their value, let alone increase in value. If you want to sell your timeshare on the secondary market, you will be competing with people who are practically giving their timeshares away. According to the Association of Vacation Owners, an independent advocacy group for timeshare owners, there are millions of timeshares available on the secondary market.

What about renting out your timeshare? You should not expect to be able to rent out your timeshare for a profit. You’ll be competing with thousands of other listings that Timeshare Users Group describes as often being priced at less than you’d pay for the cheapest hotel, especially if you’re trying to rent out your week on short notice. If your contract allows it, you may be able to rent out your timeshare to recoup some of your expenses, but it can be a lot of work.

4. Timeshare Points May Lose Value Over Time

Not all timeshares are points-based. There are also fixed-week and floating-week timeshares. But point systems are popular these days and have an important drawback.

“Points offer more flexibility but can oftentimes suffer from inflation,” Schreier says. “Meaning, what requires 100 points today may very well require 150 points next year.”

Further, the easy ability for people to buy timeshares on the secondary market for much less than what the developer sells them for can depress the value.

Another possibility is that the points required to use your timeshare during your preferred dates could change from year to year. For example, the developer may reevaluate point requirements annually to shift demand away from high-vacation periods and increase incentives for low-demand periods.

5. The Fees May Become Unaffordable

To understand how annual dues might increase over time, it’s helpful to look at the timeshare’s historical dues.

For Disney Vacation Club (DVC), for example, annual dues per vacation point ranged from $4 to $7 in 2010. That range jumped to $7-$10 for the same resorts in 2020, according to DVC member Tim Krasniewski’s website, DVC News.

Similar to owning a condo, timeshare ownership can require you to pay a special assessment if the property needs upgrades or repairs that can’t be covered by the reserve funds from timeshare owners’ annual dues. Higher assessments can lead to a downward spiral of owners not being able to afford their dues, and then the resort quality declining.

6. Timeshares Can Be Hard to Get Rid of

Purchasing a timeshare is a long-term commitment, often lasting decades. They’re a commitment that’s so hard to get out of that some people will give their timeshares away.

You can’t simply walk away from a timeshare by refusing to pay your annual dues in the same way you can walk away from a mortgage by refusing to make your monthly payments. Sometimes, you can give your timeshare back to the resort—a process that leading developers explain through their Coalition for Responsible Exit.

However, the process can be difficult and time-consuming. Timeshare owners have had varying results when trying to return their timeshare to one of these developers.

So…Is a Timeshare Worth It?

Timeshares will promise benefits like:

  • Vacation where you want, when you want
  • A larger unit that may include multiple bedrooms, a kitchen and in-unit laundry
  • A customizable vacation
  • The ability to exchange your usual stay for something else (e.g. cruise, tour, golf vacation)

However, you can accomplish any of these things without a long-term vacation contract, especially with the widespread availability of extended stay properties on travel websites like Expedia, Priceline, Airbnb and VRBO.

Deciding on a timeshare also depends on how much time you can take off to use your annual membership. If you can’t take off for say, a full week, or don’t think you will get your money’s worth every year, a longer term commitment like a timeshare may no be right for you.

So before you tour a timeshare, do your research—a lot of it. Get a good idea of how much it would cost to vacation in your desired places and research the property you’re about to tour online. The Timeshare Crusader, Timeshare Users Group, Redweek and even Facebook groups whose users all own timeshare from the same developer, are consumer-friendly sources worth consulting.

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