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.
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 with similar aesthetics.
Yet, timeshares remain 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.
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.
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 an Annual Habitation
The average cost of an 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.
Why would you pay $16,000 up to $250,000 annually for a timeshare property you can only use once on an annual basis?
If you pay $16,000 for a timeshare, then you’re paying $307 a week to only use it once 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 may pay a lot more annually for ancillary timeshare fees, which include $1,000-timeshare maintenance fees 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 probably 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 visit your timeshare.
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 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 fractional ownership in the timeshare. Even if you have a floating timeline timeshare, you may have to negotiate with one of the other 51 owners of the timeshare.
The other timeshare owners may want to use the timeshare at the same time you do.
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
Timeshares don’t increase in value because most of their perceived value is 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?
Timeshares in the Era of COVID-19
The world is grappling with the worst pandemic in a century. Would you want to spend a fortune on a timeshare and develop coronavirus panic about the fact 51 other people use it throughout the year?
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. The sales representative sells timeshares on commission. These people will prod, cajole, pressure, harass, and trick you into signing a timeshare contract.
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?
People feel good when they buy a timeshare due to instant gratification. Instead of investing their money and waiting to buy a rental with their own money, buyers will buy shares of a location as fast as possible to avoid missing the opportunity. The Stanford Marshmallow experiment was performed and showed that those who can participate in self-control exercises are much more likely to have a successful future. Timeshares are a perfect example of this, as those who are quick to buy are quick to regret.
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.
Getting Rid of Your Timeshare
In most cases, if you have a timeshare, you’ll want to get out of it. Timeshares are in effect, financial cancer, and getting rid of them will cut expenses and improve your mental health.
Here are some options for getting rid of your timeshare.
- Recission Periods: Timeshare contracts have something called recission periods, which is a short period of time when you can cancel your timeshare contract. The recission period is generally governed by the laws where your timeshare is located. Generally speaking recission period are short – between three days and two weeks. So, check your paperwork fast. If you’re still in the recission period, send the timeshare company a cancellation letter.
- Give The Timeshare Back To The Resort: Another good way to get rid of your timeshare is to ask. Many of the major resorts have deed back programs. Generally speaking your chances of a successful deed back are higher if you have the mortgage paid off and are current on your fees.
- Hire a Lawyer: Getting rid your timeshare isn’t easy, you could always hire professional help. Be sure you get an attorney who specializes in contract law and has a track record of getting people out of their timeshares. You don’t want to hire someone who will muddle through the process – good attorney’s are expensive.
- Sell your timeshare: A good way to rid of your timeshare is to sell it. Here are a few factors to consider: First, a timeshare will be hard to sell if you owe money on it. Second, since most timeshares are a financial drain, there are usually a lot of people looking to get rid of them. That said, you’d want to approach selling them like you would any other piece of real estate. Look around and get a sense of their market value, and then list them.
- Go With A Timeshare Exit Company: This is an excellent option for most people. There are several companies in this space. The hands down best option for hiring a company to help you get rid of your timeshare is The Newton Group. Their fee structure is based on your timeshare costs, and what they do is equip you with legal representation and manage the legal process of getting you out of the timeshare. They have something like a 4.7 rating on TrustPilot. You can contact them below:
The Newton Group: Helping Timeshare Owners Since 2005.
No Money Upfront – Low Monthly Payment Options
Call 877-354-4321 For A Free Consultation
Allen Francis is a full-time writer, prolific comic book investor and author of The Casual’s Guide: Why You Should Get Into Comic Book Investing. Allen holds a BA degree from Marymount Manhattan College. Before becoming a writer Allen was an academic advisor, librarian, and college adjunct for many years. Allen is an advocate of best personal financial practices including saving and investing in your own small business.