You may have heard good and bad things about timeshares – they’re a huge waste of money, visiting the same spot year after year is just a dumb way to vacation. Then again, to many people who have a timeshare, timeshares are great!
All opinions aside, are timeshares a sound financial investment? Let’s take a look at how timeshares work and the fees and costs involved to find out if a timeshare could be a good purchase for you.
The word “timeshare” has a few different meanings. Let’s talk about the differences between deeded and non-deeded timeshares.
Deeded Timeshares: in a deeded timeshare, the owners have actual deeds recorded in the country where the property exists. It’s kind of like buying a home, but you only have access to that home for a specified period of time each year. You can sell the timeshare, rent the timeshare or even will it. You have to pay the maintenance fees each year, just like property taxes. Additionally, if you don’t make your payments, the timeshare company can foreclose, just like on any real estate.
Non-Deeded Timeshares: Are more like a rental agreement. Non-deeded timeshare owners don’t own any actual property, but they may have a lease, license or membership to use the property for a specific amount of time each year for a specified number of years and can have other restrictions. This type of timeshare can often be more flexible than a deeded timeshare. Since you’re not necessarily buying into a specific property and you could have the opportunity to visit another resort location.
Is the cost of a timeshare it comparable to buying another home? Well, the cost varies due to things like the length and frequency of your visits and the type, size and age of your property or membership. Here are the costs you’ll need to cover if you’re buying a timeshare.
- Buy-In Costs: Firstly, you have to buy the timeshare and the price varies with location and if you have the option to “exchange” your shares for accommodations at other resorts around the world.
- Maintenance Fees and Utilities: You’ll most likely have to pay an annual maintenance fee, which covers things like taxes, insurance, repairs, upkeep and staffing. These fees also vary widely and may increase whether you use the timeshare or not.
- Occupancy Charges: You may also have to pay an occupancy charge for the time you’re actually spending in the timeshare. This could cover things like housekeeping, room service and other services that you charge to your room.
- Travel: Unless your timeshare is in your neighbor’s backyard, there will be travel costs so you will have to make some kind of annual travel budget to and from your location.
Real estate is generally a good investment, but timeshares aren’t your typical real estate. The value of your timeshare will most likely decrease sharply after you purchase it. Even if it’s in a highly sought-out location, the constant increase in the supply of timeshares means that the properties are more likely to depreciate in value. In fact, some financial advisors liken the purchase of a timeshare to buying a car -“You may get a lot of use out of it over the course of twenty years, but it won’t be worth much once you try to sell it.”
Timeshare properties aren’t for those who are looking to make money on real estate as the only investment most owners make are good vacation memories. If you’re buying your timeshare only because you want to enjoy a yearly vacation, it may make sense for you. But to get the most out of a timeshare, you have to use it as more that 75% of persons trying to sell their timeshare say they have actually never used it.
Before you buy, do all the research you can. Get the numbers on buy-in costs, maintenance fees and anything else you’d be expected to pay. Figure out if you’d really be saving money over what you’d pay for a comparable annual vacation in a hotel the same area.
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