If the American Dream is to own your own home, then owning a timeshare or a vacation home may not be far down the list. Many people dream of having enough money to spend a couple of weeks every summer at the beach or in the mountains.
Owning a timeshare allows you to dip your toes into the vacation home market even if it’s just for one or two weeks during the year, even if you can’t afford the luxury of a second home. Many people are looking for ways to save money on travel, but a timeshare may not be the best way use of your hard earned income to accomplish your vacation dreams.
The savings may not be as great as a hotel
Don’t be fooled into thinking that purchasing a timeshare is an easy way to purchase a piece of your dream vacation home at a fraction of the sticker price. Timeshares are still very pricey even if you’re buying the equivalent of just one or two weeks at a time. In fact, many timeshare programs are run by hotel chains with locations around the country, but owning a timeshare may cost you as much or more than renting a comparable hotel room.
Like chips in a casino, points often hide the true cost of what you’re spending, as it’s hard to equate them with actual dollar values. At one popular timeshare company in the US, you could use your yearly timeshare points to purchase a two week vacation in Hawaii in a one bedroom place for approximately 300, 000 points during the peak season.
To put the above in perspective, I have a friend who receives 89k points/year, and he paid $10k to receive those points. If you financed your timeshare using a ten year loan like he did, you would have purchased those 89, 000 points for about $1, 000 per year plus a ton of interest. That two week hotel stay in Hawaii ultimately could cost you approximately $3, 370 — again, ignoring the interest payments — once you convert your points into a dollar value. Could you have found a nice hotel for two weeks in Hawaii for less?
Timeshares add to your debt
Given how expensive they can be, it should come as no surprise that timeshares can put you into debt very fast. Remember my friend from above? That loan that he took out cost him a whopping $230/month! By the time he finishes paying off his loan for the timeshare, he will have paid $27, 600 (!) for a $10, 000 timeshare purchase. So, technically, a Hawaiian vacation like the one mentioned in the earlier example really costs over $6, 000 if you take into account the interest that he’s paying.
The fees keep coming
Even after you pay off your loan and own your timeshare free and clear, you’ll still have to pay monthly maintenance fees. These fees are very similar to HOA fees, or dues that you have to pay for the upkeep of the property. The maintenance fees for many popular timeshares can be upwards of $45 per month. So that “free” vacation that you’ve finally paid off will continue to cost you hundreds of dollars per year. And like HOA fees, timeshare maintenance fees can increase over time.
Timeshares are hard to resell
Another major downside of timeshares is that there is practically no secondary market for reselling your purchase. Thus, if you have buyer’s remorse or you just need to recover your money, you’ll have a hard time recouping anywhere near what you spent. In many cases, timeshare owners wind up selling their timeshares back to the property management companies at a tiny fraction of the original price.
While saving money on vacations is an admirable, don’t get swept away by the dream of owning your own vacation home. When you purchase a timeshare, you may be buying a small piece of that dream, but purchasing a timeshare is not for everyone, and it’s not a particularly good investment.
If you’ve owned a timeshare, I’d love to hear about your experiences. What’s the best part of timeshare ownership? And the worst? Any lessons that you’d like to share with the rest of us?
Did you also know that you can write off almost all of your timeshare fees on your taxes! You can write off the homeowners insurance, maintenence fees, rental fees for advertising the property and any other rental related costs, the mortgage interest, etc! You can’t put a price on a vacation, it’s a priceless opportunity!
Make sure if you do own a timeshare and you want to buy a home down the road, you let your lender know! It can hold up a purchase and doesn’t always show up on your credit report.
My husband and I bought two timeshares. One in Panama City Beach and one in Destin. We love them both. We have plenty of family that shares vacations with us. And we get a lot of enjoyment from our vacations. We bought ours resale and paid $1000 a piece for them so we did not finance anything. I understand this is not for everyone. But please understand, timeshares are no a financial investment. They are an investment in family vacations. I have had vacations with family members that would never gone on vacations due to owning our own timeshare. It’s great. And we don’t have to go to the same place each year, we can bank our week and go somewhere else. If you can’t afford the maintenance fees it probably isn’t for you. But, overall I would do it again, and again.
Not all time shares are bad, actually, a time share can be a good purchase for someone who does enjoy revisiting the same destination each year. However, vacation properties are not for most people, being that they only seem to work for people with very specific vacation desires. Time shares are not for people who like to enjoy trying a new vacation spot each year, nor for people who like to travel spontaneously, or families who do not use to stay at expensive resorts.
Vacations are a good opportunity to get out of the busy daily life and to spend quality time with our beloved ones, however, with the struggling economy; it is every time more difficult to find a destination that fits our budget and meet our needs. In the effort to find economical ways to travel, fractional ownerships appear as an attractive vacation option.
Time shares can become a huge financial problem for those who have bought one, and don’t know what to do with it. Should they sell it, donate it, rent it or cancel the contract? The truth is that the cancellation of the contract has always been the best and most viable solution to get out of a timeshare legally.
Not all time shares are bad, actually, a time share can be a good purchase for someone who does enjoy revisiting the same destination each year. However, vacation properties are not for most people, being that they only seem to work for people with very specific vacation desires. Time shares are not for people who like to enjoy trying a new vacation spot each year, nor for people who like to travel spontaneously, or families who do not use to stay at expensive resorts.
The truth is that the cost of owning a timeshare doesn?t just stop by paying the total purchase price. There are other timeshare fees that must be taken into consideration. By the time you pay the maintenance fees on your timeshare, plus the other fees and expenses, you?ll realize that you?ve paid as much, if not more, that the total cost to stay it a good and nice hotel.
Timeshares can be a terrific purchase for some families, as they also can be a giant rip off for others. 50 years ago, also known as Holiday Home Sharing or timeshare travel, timeshares were created with the idea of offering fully furnished accommodations for a lower price than a full-time ownership. Nowadays, timeshares have become a very popular vacation option, yet lots of people do not completely understand how timeshares operate.
There are good timeshares out there, as well as there are people who feel happy about their timeshare purchases, especially those who enjoy to vacation at the same place and are not spontaneous travelers. Unfortunately, due to the big number of timeshare scams being committed against many vacationers, the industry has gained a terrible reputation.
We own a timeshare in Florida and absolutely LOVE IT! We get a vacation every year when you want it (and if you don’t you can rent it out (very easily) or we’ve even let our in-laws go there and enjoy themselves (we didn’t charge them anything but you could if you wanted). Obviously timeshares are not for everyone.
We also get a full kitchen and we are more comfortable in cooking in. We go out too but if you are in a location for an entire week we actually don’t like to eat out every day for every meal. We feel like we are home when we are at our home resort.
We have the option of “locking out” a section of the place where we can actually still stay in one part, rent out the other part AND get another week anywhere we want. We haven’t taken this up only because our daughter comes with us and likes the separate bedroom but it’s still an option for us in the future.
Overall … for us, it was a good choice. Again, it’s not for everyone.
Ahh, I finally got out of mine. The amazing people that helped me transfer mine out of my name: http://www.directtransfers.com
One downside you didn’t mention is the timeshare company trying to get you to “upgrade” your membership to a higher level. My in-laws own 2 memberships at Silver Leaf resorts. It seems just about every time they go, the sales team calls trying to get them to go to a sales presentation.
We use the VRBO website for vacation rentals of 2 days or more & have been very pleased with all the house rentals we’ve rented. Generally you can find rentals in just about any price range, with discounts the longer you stay. Most are professionally managed & many are people’s second/vacation homes they’re renting out to help pay their expenses on.
I have a few friends who really like their timeshares & going back to the exact same spot year after year; we prefer variety and don’t want the long term obligation & inflated expense.
This is a practice that’s always mystified me. You can stay in a lot of hotels and nice B&Bs for what a timeshare costs.
On the other hand, friends who own a couple of them leverage them into space at other vacation venues. They’ve been happy with it. Each to her own!
My family owns a time share and I don’t even understand why they keep it part of their investment, I’m totally out of it. But I notice some issues with it, like they keep complaining about the taxes and charges per year.
I own a timeshare. Actually I own one week once every three years. Because this weird arrangement I paid about 5000$ as a mortgage and I pay about 300$ per 3 years in fees/taxes/maintenance (so 100$ per year). Although I would probably not buy it again if I had a chance, at least I bought and paid 0% on a loan. I would not buy it again because it took too much cash from my cash flow. Also, I should have find a better initial price, though it is not hat bad for a Las Vegas timeshare (red week, high demand and so on).
Other than that it totally suitable to my schedule. Every once in 3 years I have a nice vacation with my family of 4 somewhere in the World. I also try to find another family, so we share our 2Br apartment and they essentially pay for my vacation. So far I managed to be close to even in fees. So, free vacations except a big payment upfront.
Timeshares are a horrible investment at this time. It is worse than leasing a car these days and going over the mileage everyday.
This is timely in that we saw a recent episode of House Hunters International where the buyers bought their vacation home with a variation of a time share plan. We were shocked as it was presented as a viable option that should seriously be considered!
Good article, but you missed a few other downsides:
1. Most contracts contain a recourse clause so even if you manage to sell your timeshare, if the new owners stop paying maintenance and you were the original owner, the timeshare company can come after you for the maintenance fee.
2. In addition to maintenance fees, you can also be subject to assessments for capital improvements to the property.
3. Even if you file bankruptcy, the timeshare company may not take back the deed and you may still be on the hook for future maintenance fees.
Steve – You are exactly right! He bought the timeshare directly from the timeshare company and financed it through them. And, that is one of the reasons that he received such a poor interest rate.
Get Out Of Debt Girl – I personally think that people buy timeshares because they want a taste of the good life. Everyone dreams of owning a second home, a vacation home in some far away exotic place. A timeshare is one way for “normal” people to afford a small bit of luxury that we typically would never be able to pay for outright. It is an off shoot of the “I want it now mentality” instead of making a reasonable purchase that you can actually afford.
We save money on vacations as well by having a kitchen and can sleep all 8 of us comfortably. But we will simply rent a house for a week when we go to a particular location. It is very easy to do without the annual fee.
I don’t understand why people continuously purchase time shares. My sister and her husband did years ago and can’t get rid of it. They’ve paid for it in full but still it’s a money pit.
I’ve found that you can usually contact the timeshare directly and they’ll rent to you by the week at a considerably lower price than if you were a member. I don’t understand how they stay in business.
We just sold our Kissimmee FL timeshare after 24 years of owning it. It was difficult to sell and we ended up selling for less than we wanted to and originally paid for it. if we were to ever buy one again we would check out the online resell sites first instead of purchasing directly from a resort.
We enjoyed using ours in Florida a few times and switched to different places in NY, MA, ME & NH (we’re from the northeast and so it was easy to drive to these locations). We enjoyed many of these units and found that overall during the vacation we spent less money because we had a kitchen to cook and usually some on-site activities for members at the resorts. It was also great having separate bedrooms for us and the kids rather than being crammed into a hotel room.
However, the fees continue to rise every year, this past year being $800 for taxes and maintenance. It was getting to the point that the expense outweighed the benefit and that prompted our decision to sell.
The biggest lesson? If you decide to get a timeshare, do NOT buy from the resort. You go to one of these sales presentations and you’re pressured into thinking if you don’t buy NOW, the opportunity is gone. FALSE! Check out the resale websites where you can find the same units for half the price or even less.
Your friend took out a loan at 25% to buy that timeshare? Or are there other fees etc in there?