Have you wondered what a timeshare is, and if it could be a good investment? Are timeshares worth it?
Picture this. You’re on vacation in Hawaii, and a pretty lady offers you free pina coladas in exchange for a brief presentation on a timeshare. You think to yourself, “Why not? Free drinks! I’m not gonna buy anything.”
Two hours and 4 pina coladas later, you find yourself with a pen in your hand, about to sign on the dotted line for a timeshare. It seems like a great deal! It’s exciting!! You love Hawaii, you love pretty timeshare lady and—wait, this pineapple juice is fresh squeezed?!
Ok, you get the picture. So…is it actually a great deal? Are timeshares worth it?
And here’s why.
A timeshare is NOT an investment!
Despite popular belief, a timeshare is not a financial investment. Buying a timeshare is like buying a new car. The second it’s purchased from a resort developer, it decreases in value by 50 – 90%.
In 2019 the average price of a timeshare was $22,942, so that means from the moment you sign, you’ve basically just thrown away thousands and thousands of dollars.
So why do so many people buy timeshares? Are you still wondering, “Are timeshares worth it”? Well, before we get ahead of ourselves, let’s look at exactly what a timeshare is.
What is a timeshare?
There are many different types of timeshares, but in general they are a type of vacation ownership in which you own a piece of a unit within a resort. The timeshare is usually divided into 52 pieces because there are 52 weeks in a year and most timeshares are for 1-week each year.
Timeshares can make you feel like you’ve purchased a vacation home, but, in reality they’re nothing more than an extremely overpriced piece of paper.
What does a timeshare cost?
If you head over to Ebay and do a search for a timeshare, you might be surprised to find that there are timeshare being sold by an individual owner for just $1. This is because many timeshare owners have found that their fees never end and they just want out. Timeshare owners are required to pay yearly fees that average around $1,000 per year. Some owners are paying $2,000 or more in maintenance fees!
Even worse, the maintenance fees aren’t fixed! They could actually go UP a few percentage points every year!
Many timeshare owners find that it’s much cheaper to book a room in a hotel than to continue paying their obnoxious yearly maintenance fee. They just want their timeshares to disappear.
Unfortunately, they soon learn that there is barely a market for their timeshare, and it can be nearly impossible to get rid of it. Eventually they resign themselves to offer it up for only $1. Ouch.
Can you get out of a timeshare?
Some resorts allow timeshare owners to give the timeshare back to them, but others do not. This is actually a recent development.
In the past, almost all of the timeshare resorts refused to accept the timeshare back. Why would they? They get to sit back and collect that sweet, sweet maintenance fee money each year. Eventually though, timeshare developers learned that they could sell you a $9,000 timeshare, charge you to take it back, and then sell it again to someone else for $9,000. Capitalism at its finest folks!
If you own a timeshare and your resort refuses to take it back and you’re unable to sell it, you may want to look in to one of the many timeshare exit companies. Timeshare exit companies usually work with lawyers to help you cancel your contract with the resort. Sometimes their techniques are a little shady though, so you need to be careful.
In 2020, Diamond Resorts sued and shut down two timeshare exit companies, who were found guilty of fraudulent schemes. Timeshare exit firms will charge you huge fees upfront, and then never actually get you out of your timeshare. It seems the whole timeshare industry is fraught with deception.
So why do so many people buy timeshares?
With all of this negativity, why would anyone in their right mind buy a timeshare? Well, for the most part, many people are pressured in to it.
High pressure sales tactics are ripe in the timeshare industry. Lies are rampant and it’s not uncommon for a sales person to describe the product in a way that is absolutely untrue.
Furthermore, when you’re on vacation, you’re usually in a fantastic mood! You don’t want the vacation to end! Sales people know that you’re in this susceptible state, and take advantage with their “too good to be true” sales pitches and free gifts.
In addition, if you can’t afford the timeshare, they may even offer you a loan! No! Stop! Don’t ever finance your timeshare! You will be paying sky high interest rates. Just think of the interest! It will be way more painful than your pina colada hangover.
Are timeshares worth it…ever?
Yes. Maybe. Sometimes purchasing a timeshare through a resale can make financial sense.
A timeshare resale is for sale by owner, so it can usually be purchased extremely cheap. You’ll be on the hook for the yearly maintenance fees, but that’s not a big deal if you actually use the timeshare each year.
Most timeshares are more spacious than hotel rooms and come with a kitchen, so it can feel a little more homey. Some people like this enough to buy it.
In conclusion, never buy a timeshare from a resort developer directly. If you’re interested in purchasing one, make sure to buy resale.
If you already own one, be careful when you’re trying to sell it. Don’t be fooled into thinking it’s worth more than you paid for it, as this is very rarely the case. Look at what others are pricing your timeshare for on Ebay, and you’ll get a good idea of its worth.
If you have money to spend, don’t waste it on a timeshare. Instead, use it for a real investment. Could you buy a vacation property and rent it out to help pay the mortgage? Or perhaps you invest in a turnkey property? However you invest your hard earned money, make sure it’s working hard for you.