10 Reasons Timeshares Are A Bad Deal
As a child of the 1980s, I always heard the word, “timeshare,” uttered in sitcoms but I never knew what they were. Some character was always being offered use of a timeshare by wealthy friends. It wasn’t until I matured that I learned the many reasons timeshares are a bad deal.
You don’t have to take my word for it. Financial expert Dave Ramsey calls timeshares, “one of the biggest scams on the market today,” and a financial, “black hole.”
The average square footage of a 2-room timeshare is barely 1,160 square feet. Timeshares are very expensive to buy.
It would probably be cheaper to rent a vacation place of similar aesthetics.
Nevertheless, timeshares remains a very popular financial instrument.
About 75% of timeshare owners earn $95,000 or more annually. And, they are usually sold to people who can’t afford them.
So, you should be earning a lot more money if you want the financial black hole of owning a timeshare.
Before listing the top 10 reasons timeshares are a bad deal, here is a basic primer on timeshares.
Reasons Timeshares Are a Bad Deal – Timeshare 101
A timeshare is a real estate initiative that offers a fractional ownership share of the property in a resort or vacation destination.
The timeshare concept works on the premise that you own a luxury or high-quality real estate property for one week out of a year.
So, as a timeshare owner, you share ownership of the timeshare for one out of 52 weeks annually.
You can also buy a timeshare on a monthly basis, but the weekly timeshare ownership model is the general investment model.
When it comes to timeshares, you will co-own the timeshare equally with 51 other fractional owners.
Now that you have a baseline understanding of this concept, here are 10 reasons why timeshares are a bad deal.
It’s an Expensive Investment for a Once-a-Week, Annual Habitation
Critics of timeshare rentals say it isn’t really an investment (more on that later).
But it should be considered a significant personal investment when you consider its cost.
The average cost of a once-a-week, annual timeshare ranges between $16,000 to $25,000.
Think that is pricey? A luxury timeshare will cost you between $100,000 to $250,000.
Think about those estimates.
Why would you pay $16,000 up to $250,000 annually for a timeshare property you can only use once a week, or monthly on an annual basis?
If you pay $16,000 for a timeshare, then you’re paying $307 a week to only use it once a week annually.
You will pay $4,807 a week to use a timeshare one week out of the year if you pay $250,000 for it.
Consider, you can buy a home for $250,000 in many low cost-of-living states and live in it 365-days a year.
Also, that $16,000 to $250,000 initial timeshare investment is just the beginning of your financial responsibilities for a timeshare.
You Must Pay Annual Timeshare Fees
Read the contract when you buy a timeshare. You will pay a lot of money year-to-year for ancillary timeshare fees.
For example, you will have to pay $1,000 for annual timeshare maintenance fees. Timeshare maintenance fees pay for cleaning, repairs, paperwork and so on.
Depending on the timeshare contract you sign, you will probably pay for various other fees as well.
Timeshare Property Taxes
You will have to pay property taxes on a timeshare relative to the property tax laws of your state of residence.
Additionally, you may have to pay property taxes in the state the timeshare is located in as well.
If you own a significant amount of assets and property, then your annual tax bracket could add up over the years.
Annual Travels Costs Commuting to Your Timeshare
The average American household spend $1,145 per person when going on a vacation.
A timeshare property will be located far from your home of residence in a resort, vacation, or luxury property.
Unless you are resigned to vacation at your timeshare every year, you will be paying extra commuting costs to vacation and visit your timeshare separately and annually.
You Own a Timeshare for Years, Decades, or Unto Perpetuity
Your timeshare lease contract may last for a decade, 20 years, 90 years, or unto perpetuity.
Think about that.
Why would you want to own a property you, and your heirs, can only use once a week every year forever?
Many timeshare owners bequeath timeshare ownership in wills or as financial gifts.
Consider that you are passing down the responsibility to pay annual timeshare maintenance fees and property taxes to your heirs.
One of the reasons timeshares are a bad deal is the concept of floating timelines.
To better explain this concept, we need to differentiate between a fixed week and floating timelines.
For most timeshare contractual arrangements, you can only inhabit the timeshare during the same week every year. This is called a fixed week timeline.
For example, imagine you signed a fixed timeline timeshare contract. You may be only be allowed to use your timeshare during the first week of August.
This would be the case for every year of ownership. That means you wouldn’t have any wiggle room in choosing other weeks.
With a floating timeline, you can choose other weeks of the year to use your timeshare instead of the same fixed week.
Sounds good? It’s not as simple to do as it sounds.
Remember how we previously talked about timeshare fractional ownership?
You own a fractional ownership in the timeshare. Even if you have a floating timeline timeshare, you may have to negotiate with the other 51 owners of the timeshare.
The other timeshare owners may want to use the timeshare at the same time you do.
Why own an expensive timeshare just for the privilege of habitation haggling rights with 51 other owners?
You Don’t Really “Own” a Timeshare
“Owning,” a timeshare is a relative term when thinking about reasons timeshares are a bad deal.
You actually lease a timeshare. The timeshare remains the property of the developer who leased it to you.
Depending on the timeshare contract you sign, you have the right to pass deed ownership to family, share it, and possibly sell it – but nothing else.
Still, considering the cost you will pay to buy it, is it worth it knowing you will never own it?
Timeshares Lose Value the Moment You Buy Them
Remember how I told you how that timeshare is a personal financial investment?
It’s true. Unfortunately, they aren’t a very good or wise personal financial investment. That is one of the prime reasons timeshares are a bad deal.
Timeshares don’t increase in value because most of their perceived value to people who buy them are based on marketing.
Timeshare prices are steeply marked up to compensate for advertising, pitch presentations by salespeople, and free swag given away during pitches.
A timeshare will be pitched to you, by aggressive salespeople, as a luxury investment. They are anything but that. And, they basically have no resale value.
Even if you could sell a timeshare, who do you know who would want to share the financial cost with 51 other owners?
If you own a timeshare with an option to sell, get used to owning it because you are not going to find a lot of buyers.
Timeshares in the Era of COVID-19
Some timeshares allow you to swap weeks with other fractional owners.
You may be even able to visit timeshares on other properties annually if they are owned by the original developer.
Of the many reasons timeshares are a bad deal, coronavirus panic is a new and legitimate one.
You Will Be Harassed and Pressured Into Buying a Timeshare
One of the starkest reasons timeshares are a bad deal is because you will be tricked, pressured, harassed, and prodded into buying one.
Timeshares are advertised in conjunction with seminars, luxury tour packages, and vacation pitch sales presentations.
If you take part in one of these timeshare deals, you may rent a property at a discount. You may then get free meals, a spa treatment, or a complimentary golf game.
However, part of the initial timeshare experience involves you attending a pitch meeting or seminar. Timeshare pitch people sell timeshares on commission.
So, these pitch salespeople will prod, cajole, pressure, harass, and trick you into signing a timeshare contract.
They will guilt you for the treatment you’ve experienced on your initial timeshare vacation to get you to sign.
How much of a good investment can a timeshare be if most are sold by such deceptive methods?
Especially if they are sold on the premise of the salesperson making a commission, not helping you make a good investment?
Reasons Timeshares Are a Bad Deal – There are Better Ways to Generate Property Value
There are numerous reasons timeshares are a bad deal.
For one thing, you can generate income and interest value with a timeshare investment in many other ways.
For example, if you took $16,000, put it in a bank account at 1%, and add $100 monthly, you would have $46,119.07 after 20 years.
You can’t own a timeshare. They contain minimal square-footage, have no inherent value, and are impossible to sell.
Worst of all, after paying so much for it, you can only visit once a year because 51 other people have fractional ownership in the same timeshare.
You must be able to think of many other things to do with the money you’ll throw into the financial black hole known as the timeshare.