While winter is at its height here in New Jersey, I can’t help but think about vacationing somewhere warm and tropical. Vacationing is something I really enjoy, just like most people who like to get away from it all. You could just sit home and relax, away from your job, and enjoy your own backyard. You could take a stroll in the park and admire the flowers, but I much prefer travelling and seeing the sights as well as going to places I have never been before. And one way to do that is timeshare vacations.
The truth is I’m not going to paint a rosy picture about timeshares for you. They aren’t for everyone and depending on whom you talk with, they can be anything from fabulous to warning, warning, stay far, far away! You may be invited to visit a beautiful timeshare for a free mini-vacation and be highly pressured into making a purchase from really experienced salesmen who will only tell you the good news about timeshares. That’s how it started for me over 15 years ago. I bought my timeshare after being enticed with a free cruise and a 3-day Florida vacation for a nominal registration fee. I had no intentions of buying the timeshare, just enjoying a frugal vacation. But when the salesman asked me whether I intend to take a vacation each year, and asked how much would I need to spend on a small hotel room without all the perks of this beautiful timeshare, I started to waver. When I was quoted the asking price of $40,000, I snapped back to my senses for a moment, until the negotiations brought it under $10,000 and I was hooked. At the time, I didn’t consider the disadvantages, but I still haven’t had any regrets…yet.
There are many advantages to owning a timeshare, but there are also serious disadvantages that I will cover here. But my most basic rule of thumb to remember is:
Timeshares are not a real estate investment. They are pre-paid vacations you purchase for a week (or more) every year for life!
What are Timeshare Vacations?
If you’re not familiar with how timeshare vacations work, they allow you to buy a share of a vacation property for a specified period of time each year. Often it is a week (or 1/52), but it can be longer (a month, or 1/12) or shorter (a week every other year, or 1/104). Most timeshares are deeded, meaning that the buyer is purchasing an actual share of ownership of the resort. However, there are also vacation clubs where the buyer is simply purchasing the right to use the property for a specific interval, and these usually have an expiration date.
While you purchase the share at a specific vacation property, most timeshares are part of a network of properties that allow you to “trade” for a week at a different resort in the network. The method for trading can vary, such as by weeks or points. Some weeks and resorts may be assigned higher values than others and trades may require an additional fee.
Pros of Timeshare Vacations
There are some benefits to owning a timeshare:
- You avoid the expense and use of hotels and motels which are ever-increasing in cost. Once your timeshare is fully paid, there are no “per trip” costs for lodging at your home resort during your time period.
- Large families or those who like to travel with friends may find units that accommodate up to 8 people to be an ideal alternative to booking multiple rooms. We know a family of 7 that absolutely loves their timeshare.
- You can save money on food by eating in during your vacation as most timeshare units offer a full or partial kitchen and a dining room as well.
- In addition to the resort’s amenities (such as swimming pools, fitness centers, and computer access), you can save on entertainment with in-room amenities such as large screen TV’s, Blu-ray disc players (along with a selection of movies to borrow) and “boom boxes”. A hot tub or a designer shower can be sweet perks as well. Plus many timeshare resorts offer social activities throughout the week.
- While you can select your vacation resort in a highly desirable area, you can also trade your location for use at many others through your timeshare management entity so you’ll never be bored or tired with your home base. Choices may include cruises and all-inclusive resorts (for an additional cost) as well as the standard timeshare resorts.
- You can rent out your timeshare if you choose to do so, and in many cases can do it for a substantial profit (especially if you own a prime time or “red time” week in a highly sought-after area). If you rent your timeshare for less than 15 days per year, the rental income is not federally taxable.
- You can pass on timeshare ownership through your will to your children or other loved ones if you desire.
- Real estate taxes you pay on any timeshare that’s deeded, as well as any mortgage interest, may be deducted from your federal taxes as a “second home” (see IRS.gov for more information on how this may apply to your situation).
- If you don’t want to use all your time yourself, you can transfer a week to a relative or friend for a one-time fee.
Demographics show that a typical timeshare owner is about 50 years old, earns around $75,000 per year, and is a very social and outdoorsy type. If you enjoy the social environment that a timeshare vacation offers, it will greatly appeal to you.
Cons of Timeshare Vacations
There are some substantial drawbacks to owning a timeshare as well:
- While your initial purchase price is clearly defined when you buy your timeshare, you will still have to deal with annual fees to maintain the property and real estate taxes plus nominal membership fees to trade, and these only increase as the years go on. Lose your job, have health problems, or can’t travel for any reason (perhaps you can’t afford the airfare to your destination) and you’ll still be responsible for paying those expenses.
- Sometimes your choices to trade weeks and locations aren’t available when you want them (or book up years in advance) and you may have to choose a second or even a third choice vacation.
- Timeshares are managed by holding companies, and sometimes after they have made their profits, the properties are left to deteriorate leaving the timeshare holders with increasing maintenance, repair assessments, and issues that could make the properties less desirable, less tradable, and even in extreme cases, worthless.
Getting Out of a Timeshare
And then there’s the ugly:
Selling your timeshare, if you decide at some future date to do so, can be very difficult and even expensive. The resale market is flooded with timeshares and in almost all cases the prices are significantly lower than when originally purchased (a loss that usually cannot be claimed on your taxes). In fact, some owners choose to give away their timeshares or just donate them to be relieved of their financial responsibilities. After learning about this depreciation the hard way, I would recommend that if you are seeking to purchase, look at the resales first. A few years after the initial offering of a timeshare opening, you will almost certainly be able to buy at a vastly reduced price and if your goal is to trade often, then the location you choose may be a place you almost never go to visit. As long as it’s a desirable location and season (red time is the most desired), you will likely save money.
Timeshares were extremely popular in the nineties and then became less popular when they seemed to flood the market by the year 2005. The average timeshare can cost between $10,000 and $20,000, even when you will shockingly hear a salesperson quote prices of $40,000-$50,000 or even higher when first offered.
Remember, all timeshare prices can and should be negotiated! And always physically see the resort and tour the property before you consider buying.
I have been a timeshare owner for over 15 years and I have had a very pleasant experience with many wonderful vacations. However, I have become wiser and more savvy after learning some lessons the hard and more expensive way. I do foresee a time in the not-too-distant future when I will be looking to sell my timeshare. There are many sources who may be interested in buying and may contact you if you’re an owner. Be wary as there are people who are looking to scam you in this field and will say anything to get you to pay them to list, show, advertise, and sell your property. Never pay anyone up front to do that. Research the company online to be safe.
So now that you know the good, the bad, and the ugly, does a timeshare vacation appeal to you? What experiences have you had with timeshares?