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.
, 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.
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 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.
Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.