Buying a timeshare might seem like a personal investment or a way to own vacation property so you never have to search for rentals again. Is it smart? Is buying a timeshare as good of an idea as the ads and salespeople make it sound?
Before you spend thousands of dollars on a timeshare, it is vital that you speak to a financial advisor. They will look at your income, investments, and the deal itself, and be able to suggest whether it is the best choice.
Until you speak to an advisor, this guide will attempt to answer as many general questions about buying a timeshare as possible. The short story is, there might be a way to buy one, but it isn’t always a good idea.
What is a timeshare?
With timeshares, multiple people share in the ownership rights of a vacation property. A timeshare is typically a condominium unit located within a rental property, but it could also be a rental house.
When someone purchases a timeshare, they usually buy the right to use it for a specific date each year – usually for one or two-week periods.
Types of Timeshares
There are a few different types of timeshares – from the type of ownership to where they allow people to stay and when they can stay. Before you buy, you must understand which type you are purchasing.
Fixed Timeshare Weeks
The most popular type of timeshare gives the buyer a specific date each year when they are allowed to use the property.
Some people love the comfort and tradition of taking their vacation at the same time and place every year. Others don’t like how difficult it is to change the fixed week to a different time if they can’t make it.
Floating Timeshare Weeks
Some timeshares offer the option of purchasing floating weeks. This means the buyer has the ability to choose a week (or weeks) within a certain season or period of time. Then, the timeshare owner can reserve a week each year within that period.
This is always subject to availability, so you might not be able to book your ideal vacation week. Some people like the flexibility, others don’t enjoy the stress of the possibility of not having their first choice of dates.
Fractional timeshares are not as popular, but they are certainly available. This type of arrangement gives the buyer use of the property for longer lengths of time. They can last from as little as a few weeks to as long as a few months.
Timeshares That Pay With Points
Some timeshares sell points that people can then use in a variety of timeshare locations at different times of the year.
Several factors will affect the value of a buyer’s points, such as the size of the property, time of year, and where the resort is located.
The point system opens up a lot more choices for people, which is desirable if they don’t want to return to the same place every year. It can be risky, however, since so many outside factors affect the value of the points.
Shared Deed Ownership
Shared deed ownership isn’t sold as often. In this model, each buyer owns a percentage share of the physical property. That means a condominium could have a maximum of 52 different deeds and each person would own 1/52 ownership interest.
With shared deed ownership, the deed can be resold to another party or willed to someone’s estate.
Since this option gives people a right to sell their deeds, it also comes with a higher price tag.
Shared Leased Ownership Interest
The shared leased ownership is the most common type of timeshare people buy. Through this model, the developer owns the deed to the property and the timeshare buyer holds what is called a “leased interest” in it.
Leased interest works a lot like renting. The lease agreement gives the buyer the right to the property during the agreed-upon time and usually has an expiration date.
This is typically priced lower than deed ownership because the buyer cannot sell it or transfer it to someone else.
In addition to the upfront cost of buying the timeshare, there are often annual expenses that buyers are responsible for.
Many timeshare owners also pay an annual maintenance fee. This covers the cost of property upkeep. This may be a really high cost that people regret.
One of the biggest benefits of owning a timeshare is knowing that you have a location reserved for vacation every year. There is security and relief knowing you don’t have to spend hours searching for hotels or vacation rentals.
The deed ownership is alluring because it can be sold, gifted, or transferred. Some people like the idea of passing their timeshare down to their kids or other family members.
That is essentially where the benefits end. There are more drawbacks to timeshares than there are benefits.
It’s very important to understand the drawbacks of buying a timeshare before you sign on the dotted line.
Even if you buy a deeded timeshare, the resale market is so crowded that you might find it difficult to recover your buying price. Many timeshare resellers find they are selling at a loss.
Another downside is that they require either full purchase price upfront or they will offer to finance it. This means that some people take out loans or go into debt for something that won’t make them any money.
One of the biggest downsides to timeshares is that the salespeople are relentless and many people buy timeshares for more than they can afford. The fine print sneaks in fees and other things that drive up the price tag – all things that the buyers are unaware of when they buy it.
Even the points system isn’t always reliable. They are subject to inflation and can lose value over time. What costs 100 points this year might cost 150 points next year.
Should I buy a timeshare?
Whether you buy a timeshare or not is a personal decision. It can be beneficial to some people under some circumstances and a money sink for others.
Timeshare salespeople are extremely persuasive. Before you agree to talk to one, please speak with a financial advisor. Then, you will know how much you can afford, the terms you need to ask for, and whether you should even consider it.
If you look at buying a timeshare like renting a vacation unit each year, and your finances allow the extra spending, it might not be a bad idea. However, if you think this is an investment, you should reconsider. Timeshares are not worthwhile investments.
There is one option to consider. If you are able to buy a secondhand timeshare at a heavily discounted rate, then it might not put you more into debt. You’ll get the enjoyment of the timeshare without the hefty price tag.
Contact a Financial Advisor
Timeshares can be alluring but also confusing and costly. Before you make this important purchase, reach out to a financial advisor in Green Bay, WI.
Advisors Management Group can look at the pros and cons with you and help you decide whether you should buy a timeshare or make a different purchase for your future vacation plans.