Timeshares used to be all the rage. For a reasonable price, you can visit the same (or sometimes different) exotic location every year and have a spot guaranteed for you. Well, at least that’s what they tell you during the sales pitch. But are timeshares worth it? The short answer is no.
Timeshares are often associated with scams. Although you can good value when purchasing a timeshare, generally speaking, they’re a pretty bad investment. The whole business is a bit deceptive and arguably predatory. Timeshare companies are aware of their reputation which is why they’ll offer some pretty generous gifts just to attend one of their presentations.
Despite what you may have heard, you may still be interested in purchasing a timeshare. There’s nothing wrong with that, but here’s what I know about timeshares and how they relate to your money.
What are timeshares?
Let’s be clear, timeshares are still very popular with travellers and are a huge business. Timeshares are based on fractional ownership in a property. If you purchase a one-week timeshare, you own 1/52 of the property. Alternatively, if you purchase a month, you own 1/12 of the property. Costs are split between the owners which is why timeshares are appealing.
Even though the concept of timeshares sounds simple enough, they come in two different forms.
Deeded – You own a specific time of the timeshare that you can use, rent, or sell.
Non-deeded – Instead of owning part of the timeshare, you agree to lease the property for a set time each year. You usually get more flexibility here and often you’ll get access to more than one property.
Now, this may sound simple enough, but things can still get complicated. Your agreement will either give you a set week every year or a floating week where you can choose when to vacation based on your contract and availability. There’s also timeshares that operate on a points system where you purchase points and use them at select properties. Some points can be carried over for a few years, which may or may not be a benefit to the owner.
Fees and charges
Since timeshares are a unique type of property, you likely won’t be able to qualify for a traditional mortgage. What that means is that you’ll need to get a loan from the timeshare company or some other source. Of course, that means you’ll be at the mercy of their interest rate. Now, you could refinance your home so you’re getting access to better rates, but as you’ll soon find out, you probably don’t want to do that.
Besides the loan, you also need to factor in any annual maintenance fees and possibly property taxes. That could run you anywhere from $500 – 800 dollars a year. That might sound reasonable, but you’re essentially paying a fee to possibly go on a vacation every year. That’s not a good deal.
Are timeshares worth it?
Not at all. When you buy a timeshare from a developer, the value decreases instantly. Quite often timeshares are even “worthless” as soon as you buy them. It doesn’t matter if you’re buying a popular brand, the resale value isn’t there. Check eBay, kijiji, or any resale site and you’ll see that people are trying to give them away at a considerable loss. The salespeople will tell you how they’re great investments, but there is no market for resale timeshares.
Now, if you were gifted a timeshare at no cost, you may think you’re getting a deal, but you’re still paying those maintenance fees we talked about which only increase every year. If you happen to be on a points system timeshare, you may end up paying additional fees when booking a different resort.
Timeshares are often positioned as a vacation with options, but that’s simply not true. Quite often you’ll run into some pretty strict rules about the dates you have and the ability to switch them. Although you can carry points over, they tend to have a three year limit. Points can also be sold, but look online and you’ll see people who are practically giving them away.
Even if someone tells you that timeshares are a great deal because they only pay $X per year, it means nothing unless you get proof. Timeshares are expensive to own!
That said, timeshares can be valuable to some people. Some travellers love going to the same resort or property every month and a timeshare pretty much guarantees them a similar rate every year. There are also some timeshares such as Disney Vacation Club which are incredibly popular since it allows you to stay at Disney owned properties.
Some people also think of timeshares as an investment, but I’ve made it pretty clear that they’re not worth it. If you’re looking for ways to invest your money, invest in ETFs with a robot advisor such as JustWealth, Wealthsimple or Wealth Bar. I personally think it’s better to invest in the market, not a single asset. Note that those are Canadian robo advisors
Are timeshare presentations worth it?
Yes and no. The appeal of timeshare presentations is the gifts that come with it. All you need to do is sit through a presentation and you’ll be given tickets to a free dinner, concert, or other “valuable” things. If timeshares are such great investments, why do companies have to give you free stuff just to sit through a presentation?
It’s fine if you decide that 3 hours of your time is worth a $100 meal or an 8-hour session is a good value when you’re getting a $1,000 trip in return. I personally sat through a timeshare presentation in the Caribbean that lasted about two hours. I said no to every attempt at a sale and got vouchers for free activities and meal upgrades that lasted me for the rest of my trip. I probably got about $500 in value out of those vouchers so my time was worth $250 an hour. Not a bad deal.
During the presentation, salespeople will tell you how a week in your timeshare is worth $3000-$5000 as a way to convince you to buy. Those numbers are never accurate, and can’t be believed. Also note that timeshare salespeople are trained in high-pressure sales tactics. They’ll start at a high price, say $15,000 and keep offering discounts to make it sound like you’re getting a deal of a lifetime. You’ll never end up ahead.
Sitting through a timeshare presentation could be worth your time if you’re going for the free gifts, but rarely is getting an actual timeshare worth it. If you’re unsure, just take the paperwork and do additional research after.
Are timeshares worth it? I’m pretty sure that you’ve figured out by now that they’re not a good investment. Timeshares are hard to sell and it may even be difficult to give them away. That being said, if you like going to the same destination every year, then perhaps timeshares may have value to you. If you’re just looking for cheap accommodations when you travel, use a website such as booking.com where you can browse hotels, serviced apartments, vacation homes and more.