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Ah, vacation! For many people, it’s the best week (or two) of the year. But vacations can also be expensive, between time off, the cost of travel and hotel or house rental costs. Enter timeshares: a way to “own” a property to use for a vacation without the expense or hassle of outright ownership. But are timeshares worth the cost? What impacts their long term worth or value?
A timeshare involves a specialized type of ownership where you pay for the right to use a piece of vacation property for a set period of time each year (usually one week annually). When you buy a timeshare, you are not buying a piece of property, but the right to use it for a specified period of time each year.
There are different types of timeshares available where the owners can use the vacation property at a predetermined time each year (fixed week timeshare), use the property at a time that is convenient for them (floating timeshare), use the property for a certain amount of time each year for a certain number of years (right-to-use timeshare), or use their timeshare “points” to visit different properties (points club timeshare).
Timeshares can seem like a great idea since they often are a far less expensive way to have a vacation somewhere that you otherwise may not be able to afford to visit. But there are potential pitfalls to timeshares to be aware of before you sign on, so read on to learn more about the pros and cons of timeshares. We hope this guide helps you to decide if timeshares are worth your precious vacation days.
The Advantages of a Timeshare
Timeshares are a great way to go on a vacation in a dedicated space without sinking your savings into a vacation property of your own. Because you’re only paying for what you use, an otherwise expensive property would be available to you for a fraction of the cost of owning it yourself.
You’ll also be able to go back to the same place each year, making it like a home away from home, complete with neighbors, favorite restaurants and stores, and exploring hidden gems of the getaway each visit. A timeshare can give you a predictable yearly vacation with no worries about finding and renting a house or having the place you want be unavailable.
Of course, if you crave going to different locales, you can often do that as well. You could trade both times and locations with other timeshare owners, which will let you travel around the country or even the world for the same value as your already purchased timeshare. If your contract allows it, you can also rent out the property for years when you aren’t able to use it, which can help you recoup the costs of your ownership. Alternatively, you can let friends or family use your vacation time or even donate your timeshare to charity.
The bottom line is if you want a vacation spot without the financial burden of owning a vacation property, a timeshare may be the right choice for you. However, there are certain drawbacks to timeshares that you should be aware of before signing a contract.
The Disadvantages of a Timeshare
While a timeshare can be a great way to take a yearly vacation, it isn’t always a smart financial choice. A timeshare is not an investment; you will not make money on it even if you can rent it. It may end up being more expensive than just booking an annual vacation on your own. In fact, in some properties, it may actually be cheaper to rent a unit without a timeshare than it would be to purchase the timeshare.
You can also get into trouble with the fine print on a timeshare contract which may hold you responsible for costs far beyond the initial investment. You may see annual fees go up without warning — regardless of whether or not you actually use the property. If you don’t pay these fees, the developer who sold you the timeshare could foreclose on your property, leaving you with nothing.
Along the same lines, timeshares can be hard to sell because there are so many on the market. Timeshares went through a boom period where developers built more timeshare properties than there were purchasers, so the market is flooded and hurting. It is often very difficult to determine the long term worth or value of a timeshare.
A new or used timeshare unit could be very difficult to unload — and fraudulent timeshare resale schemes are rampant. And if you sell your timeshare at a loss, you cannot take it as a capital loss on your taxes since you have not actually purchased property — just the right to use it. Capital losses can be worth a lot come tax time.
Beyond the financial issues, you may have difficulty just using your timeshare. If you are not guaranteed a certain week in your contract, you may struggle to schedule usage of the property with other owners — leaving you without a vacation entirely.
For many people, a timeshare is still a way to be able to afford a regular vacation for a fraction of the cost of purchasing a property. However, contracts are often highly unfavorable to the buyer, so be sure that you read the fine print carefully before agreeing to anything.
Author: Jeff Gitlen