Investing in a timeshare: should you take the plunge?

If I were to describe typical timeshare owners, I’d say they are retirees who now have the time and money to travel. They have worked long and hard and it’s time to enjoy the benefits of their labor. They can spend their money however they want. They are the target market of timeshare companies.

With a traditional timeshare, buyers shell out a lump sum upfront and retirees can afford this. This allows them to use a specific unit at a predetermined time every year. It is usually a one-week period, but this can be shorter or longer. The average cost of a one-week timeshare is $19,000, with a maintenance fee of around $600 per year. Some owners own several timeshares to allow them multiple vacations annually.

When the United States was hit by the recession, the timeshare industry was badly affected but not to the point that they had to close shop. As of 2011, there are still more than 1,500 US timeshare resorts.

Nowadays, timeshares mostly operate on a points system. This allows the timeshare owners more flexibility with destination and travel period. The number of points a member earns in a year can be rolled over to the following year. He can also borrow points from the year ahead.

I have talked to several satisfied timeshare owners who have spent a week of vacation each in several resorts for a period of one year. There is a good ROI in timeshares if you know how to use it well.

If you are thinking of getting a timeshare, read the following inputs we got from other owners, financial advisers, and timeshare representatives. This will help you gauge the pros and cons of owning a timeshare.

Pros:

  1. Timeshare is more practical than owning a vacation house – A lot of us dream of having a vacation house that we can go to every summer or any long holiday. While the idea is nice, it’s not practical. If you only use the house during the summer holidays, who will take care of its upkeep during the months you’re not there? You’d end up hiring a caretaker or a security company who will check on your property. Maintaining a house is also expensive. It can be too much to maintain a house that you only use a few months each year. You will not get this type of headache with a timeshare. You get to enjoy the perks of a vacation home without having to buy a house.
  2. A timeshare can help you save on travel expenses – You don’t need to bring a lot of travel outfit when you own a timeshare. Most units have laundry facilities so you can just wash your clothes when needed. They also have a fully-equipped kitchen. Cooking home-cooked meals is less expensive than dining in restaurants. Timeshare units are huge compared to hotel rooms. Big families end up booking several rooms if they stay in a hotel and this can rack up expenses. With a timeshare, everybody stays in one unit that usually has several bedrooms.
  3. Timeshare guarantees a vacation each year – A timeshare provides a vacation lifestyle. It’s great for people who want to plan ahead their trips. Skiing over the winter holiday is assured because you can lock-in your booking months ahead.
  4. You can trade-in your timeshare and travel to other locations – There are companies that allow you to trade timeshares for units outside of your timeshare’s menu. It comes at a cost but will allow you to go on a holiday in places such as Portugal, Spain, and Paris.

Cons:

  1. Timeshares are difficult to sell – Timeshare is an investment that will not yield money. Its value goes down as soon as the contract is signed. If you no longer want to keep your timeshare, you can sell it, but a much lower price. The demand for it is low vis-à-vis the supply. Selling it at a bargain is actually a better choice than holding on to it. For as long as you’re keeping the timeshare, you continue paying the maintenance fee which goes up annually.
  2. It is a long-term commitment – Timeshares don’t have an expiration date. As previously mentioned, for as long as you own it, you pay the annual fees. You cannot get out of paying these fees regardless of your financial capacity.

So, is owning a timeshare right for you?

There is no black or white answer. It depends on your needs and lifestyle. At the end of the day, you just have to do a thorough study to see if owning a timeshare will benefit you.

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