If you live in the northern part of the United States like Mrs. ROB and I do then you probably think about getting away for a week or two during the winter. Popular destinations include going skiing in Colorado or Vermont or you might go to warm destinations like Florida, Arizona, or the Caribbean. Each spot has its own virtues, but you have to plan the trip, choose where to stay, get the tickets, transportation, and other items. What if you could possibly pick a place every year and have a specific hotel/location already designated? Sound great? Well, you can certainly get those by purchasing a timeshare.
I personally don’t know anybody that has a timeshare. And I have been thinking about this post for a while because Mrs. ROB and I are headed to Las Vegas in November for a conference. During the last time we were in Vegas Mrs. ROB and I got free tickets to a show in exchange for going to a sales presentation where a salesperson attempted to sell a timeshare. We didn’t buy it, but in the back of my mind I was tempted. Considering this blog is about personal finance, learning about different aspects of finance, and trying to get the best advice possible I have been investigating a variety of things regarding timeshares.
The Pros of Buying a Timeshare
As I was doing some research for this article I didn’t realize it but there are actually different types of timeshares. There is one type where you can pick a specific week(s) of the year where you can go to a specific location. This works great if you have a favorite place to vacation and/or you plan your vacations for the same time every year.
Another type of timeshare is a floating option. You give up the specific week per year, which gives you more flexibility, but in order to get that specific week(s) you are competing against other people who may want the same time you want and you may not get your preferred vacation time.
A third type of timeshare is where you have a right-to-use. This is where you lease a property for a set amount of time per year for a set amount of years, but the developer actually owns the property.
Finally, there is the points timeshare. This similar to the floating timeshare, but it is based upon the number of points you have accumulated. You can purchase points from a club and/or given a certain amount of points based upon what you have bought at the time of purchase of the timeshare. Of course this limits you to certain destinations, properties, etc.
There are some potential positives for buying a timeshare:
- You don’t have to worry about upkeep in purchasing a vacation property. If you love a specific place where you vacation this is an opportunity to go back often without worrying about property taxes, renting out to others, etc.
- Depending on the timeshare there are some nice destinations with time shares.
- Sometimes you can rent out your timeshare times. Technically, when you buy a timeshare you receive a deed. It is almost like you are owning a small piece of the property where you have your timeshare.
- You can give it to your friends/family to use a vacation.
The Negatives of a Timeshare
The lure of a timeshare can be compelling, particularly if you go to a sales presentation and they present you with all of these properties you can go all over the world. A number of hotel chains have timeshare properties as part of their real estate portfolio and they have locations all across the planet. However, there are some major drawbacks with timeshares.
- First, timeshares can be really expensive. Often you have to pay $10,000-$20,000 up front for a time share and yearly maintenance fees of $300-$500 even if you don’t use it. If you don’t pay you lose the timeshare. Most people don’t have the upfront costs and paying those maintenance fees every year can be a pain.
- It restricts your vacation options. On the surface you might think it doesn’t particularly if you do a points timeshare. However, there maybe places on there that you don’t want to go or maybe you want to do a different vacation. I mean if you don’t use it you will lose that opportunity to use that timeshare for the year.
- Timeshares go down in value. Unlike vacation homes or other properties timeshares are like cars. The minute you buy one the value of it goes down. So, for example, if you tried to sell your timeshare a year later you would be lucky to get 80% of what you paid for it.
- You often have to negotiate with other owners of timeshares for specific dates. There can be times when you might have to adjust your vacation plans because you can’t get the time you want during the year, which can cause a pain in terms of planning.
- Timeshare contracts are really hard to get out of. You can’t cancel a timeshare. Once you pay for it you have to maintain the maintenance fees or you will lose it. You can’t just go to the place you bought it and take it back. You either have to sell it or bite the bullet and pay the yearly maintenance fee. You can just not pay it, but you will lose the timeshare and lose the money that you basically put into it.
- The math on the timeshare doesn’t work out to a good deal. In fact, one could argue it is cheaper to just go one vacation. Look at this way. Let’s say you pay $10,000 up front for a time share and yearly maintenance fees are $500. Over 10 years that is an investment of $15000. Considering that most vacations are a week long we are talking 70 days total over 10 years. That works out to about $200 a night. However, there are plenty of nice hotels that you can pay only $100 or $150 per night. If you pay $150 a night (which is certainly not a bad price for a hotel) that 70 days only costs you $10,500. That is $4500 difference. Now of course this example is imperfect and hotels do go up, but with all kinds of sites like Booking.com, AirBNB, hotels.com, you are more than likely to find a nice hotel at a cheaper price potentially in a similar location than the time share.
I Want a Timeshare
Let’s say you read this and you still want to buy a timeshare. That is fine to each his own. However, here are some things to think about.
- Shop around. With timeshares it is a buyers market. You should be able to get some nice used timeshares for dirt cheap. You might be able to get it for 1/2 of what you pay for it. There are several dealers out there that resell timeshares.
- Make sure that if you are buying a timeshare that these are the places you want to vacation. If you have a specific location and/or property (e.g. Disney World) make sure that you love Disney and that you will use it. If you like going to different properties or vacations a timeshare might not be right for you.
- Make sure you fully understand what you are getting into. Don’t fall for the sales pitch. Read the contract. Understand the points system and make sure that you will actually use it. If you don’t think you will don’t buy it. This isn’t an investment. Most people don’t rent these and make money.
- Make sure you can afford it. The upfront price of $10-15,000 is steep. I don’t know about you, but I don’t have that kind of scratch lying around. Even if they offer for you to make payments that is still a lot of money. If you have unstable employment, have big life events happening (e.g. kids college, buying a house, car, etc) a timeshare is a luxury you can’t afford.
The Bottom Line: For Mrs. ROB and I timeshares are just not something we want to purchase. We love to vacation, but paying $10,000 upfront is something we couldn’t afford and I am not sure we would even want to. The great thing about my job is that we can combine some vacation with work. Timeshares, to me, seem much more of a financial hassle and racket than anything. If you do buy one and use it that is great, but make sure you shop around. Get a good deal. And please make sure you read the contract ahead of time.