Is Investing in a Timeshare Worth It?

 

 

Are you ready to start traveling and go holidaying again this 2022? If so, you’re not alone: more than eight in 10 surveyed U.S. adults said they’re in a “ready-to-travel” mindset this year. Moreover, they want to splurge; the typical traveler plans to spend over $4,100 on leisure travel.

So if you plan to go big yourself, you may be eyeing a timeshare vacation destination. After all, timeshares are now so popular that millions of U.S. households now own at least one.

But what exactly is a timeshare? Most importantly, are timeshares worth it?

In this guide, you’ll learn about these vacation real estate products and how they work. Keep reading to discover whether investing in timeshares is a good (or bad) idea.

What Is a Timeshare?

A timeshare is a binding contract for the shared ownership of a piece of vacation real estate. They’re available for holiday properties like apartments, condominiums, and resorts.

Each timeshare entitles an owner to use the property for a week per year. Thus, each vacation property can have up to 52 shares (1 year = 52 weeks). However, buyers can purchase one or more timeshares on a single property.

Many timeshares only provide usage rights, not actual property deed ownership. In this case, your interest in the property is a shared lease and a one-week guaranteed usage. Your name won’t be in the title, meaning you won’t have a claim on the property, either.

Timeshares can also take the form of a shared deeded ownership. In this scenario, each timeshare you buy entitles you to a 1/52 share of the deed. Your name will also be in the title, alongside the names of all the other deeded timeshare owners.

When you can use a timeshare property depends on the kind you purchase. The most common is the fixed-week type; for example, a share for the first week of June or the last week of December. Either way, you can only use the property during the specific week you buy.

If you want some flexibility, you may be able to purchase a floating-week timeshare. With this, you can select any available week of the year you wish to use your timeshare property.

Are Timeshares Worth It?

A timeshare may be worth it if you like vacationing in a familiar location every year. Likewise, it may be ideal if you’re sure you can regularly go on a weekly holiday each year. It may also suit your tastes if you prefer predictability in your leisure travels.

Many timeshares are also in desirable locations, like Hawaii, California, and New York. Moreover, big names in the hotel industry, such as Marriott and Sheraton, often own and run them. So, you can expect these properties to offer luxurious amenities and facilities.

The bottom line is a timeshare may be worth it if your only reason for buying one is to use it for vacations.

When Are Timeshares Not Worth It?

The initial price of a new timeshare can cost about $10,000, but depending on the size and location, it can go higher. Shared deeded contracts also cost more since each owner has to pay a portion of the monthly mortgage. On top of those fees are the ongoing annual maintenance, utility, and tax fees that can sum up to $300 or even up to $1,000.

Owners must pay for those annual fees, whether they use their timeshare or not.

Also, remember that a timeshare property can have up to 52 different shareowners. Thus, it can age, wear, and depreciate much faster than a single-owner property. That can result in the value of your timeshare investment plummeting significantly.

There’s also the restrictive schedule of fixed-week timeshares, offering little to no flexibility. And even if you can rent it out during your allotted week, you may have difficulty finding a guest. You can choose to offer it at a discounted rate, but doing so won’t be enough to compensate for what you pay for your share.

Floating-week timeshares may be more flexible, but you still have to book them well in advance. Otherwise, other owners may beat you to it. If that happens, you’ll have to do with a not-so-desirable schedule.

If those cons are too heavy for you, a timeshare may not be worth it.

Can You Resell or Cancel a Timeshare?

Not all timeshares allow for their resale, and even if they do, the process is arduous and complicated. That may also deter prospective buyers who may want to resell it in the future.

Moreover, as mentioned above, timeshares often depreciate fast. Therefore, even if you can resell your share, you can expect it to fetch a much lower price.

As for timeshare cancellation, it may be possible if the seller told you that it comes with tax benefits. You may also be able to cancel it if the seller didn’t tell you about all fees and limitations before you bought it.

Another way to cancel a timeshare contract is within its legal rescission period. The law varies from state to state, but in most cases, it only lasts a few days. For instance, in Colorado, you have up to five calendar days from the date of the sale to rescind your purchase.

What if the seller didn’t tell you about the rescission period, and it’s been a month since you bought the share? In this case, the seller’s failure to give you all the necessary information may be enough to let you cancel it.

Think Many Times Before Buying Timeshares

We hope this guide has provided you with all the answers to the question, “are timeshares worth it?” Now you know they can be, provided you’re sure you can use them yearly as a vacation property. However, if you want an income-generating investment, you better put your money elsewhere.

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