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Should I Buy a Timeshare?

Have you ever dreamed of owning a home in your favorite vacation spot? There are over 7.5 million second homes scattered throughout the US! The fact is though that for many of us, the cost of owning a vacation home is prohibitive.

But what about buying a timeshare? You get all the perks of owning a vacation home for a week a year but at a much lower cost. But if timeshares are so great, why do they get such a bad rap?

We’re going to take a deep dive into exactly what owning a timeshare involves. Join us as we explore the pros and cons, and help you to answer the question, ‘Should I buy a timeshare?’

What Is A Timeshare?

Simply put, a timeshare is a form of shared ownership of a vacation property. Typically, you’ll find them within resorts in popular tourist spots.

Most commonly, people buy a week a year at a timeshare property. There are two main forms of timeshare ownership. With a deeded timeshare, you buy an ownership interest in the property.

With a non-deeded timeshare, you buy the right to use the property for a set amount of time, over a certain number of years. Essentially, you own a vacation, rather than a property.

Some schemes, like the Hilton Grand Vacations Club, give you an annual allotment of club points. You can then put these points towards stays at other properties in the Hilton group.

Annual Fees

In addition to the upfront cost, you will also pay annual maintenance fees. These can be a few hundred dollars or can be in excess of $1000 each year. They are also likely to rise year on year.

You may also be hit with assessment payments in the future.

A Timeshare Is Not An Investment

A timeshare should not be considered an investment. Unlike a regular property which normally appreciates year on year, timeshares are often sold at a loss. There may also be fees associated with transferring ownership of your timeshare.

Also, many timeshares are sold as vacation ownership. You’re buying rights and responsibilities, not real estate.

You buy the right to vacation in a particular spot year on year. However, you have to pay your annual fee whether you use it or not. Even if you have a deeded timeshare, it still does not give you the flexibility of owning a vacation home.

Pros Of Buying A Timeshare

There are many people who love timeshares. However, they can be complicated and you need to be willing to do your homework.

Stable And Predictable

If you love to go to the same spot, at the same time each year, then a timeshare could be a great option for you. Effectively, you’re buying years of vacations at once. If you’re comfortable with this and can afford it, you could actually reduce your vacation costs in the long run.

Zero Maintenance

If you own a vacation home, you have to maintain it. Whether you do the work yourself or arrange a contractor to do it, it takes a lot of time and hassle.

With a timeshare, the company uses your annual dues to perform all needed maintenance.

Buy A Used Timeshare And Save Money

When you buy a timeshare directly from the developer or timeshare company, costs can be pretty steep.

But you have a chance to save big time when you buy a used timeshare that is no longer wanted. Sometimes, people will let these go for $100 or less if they really want out.

Of course, you take on the responsibility for the annual dues, plus any outstanding payments the current owner hasn’t made. But if it’s in the location you want or part of a scheme you want to get into, you could save a small fortune.

Comfort And Amenities

Although timeshares come in many styles, most are condo-style apartments. This makes them much more spacious than most hotel rooms.

Many are also often equipped with a kitchen, giving you more dining options. As they’re located in resorts, many include access to amenities such as pools, gyms, and sports facilities.

Cons Of Buying A Timeshare

On the flip side, there are some unhappy timeshare owners who have discovered the cons of timeshare ownership. Most people’s unhappiness with their timeshare comes down to the cost of financing them.

No Longer Affordable

Changes on the world scene, like the pandemic, have affected many people’s disposable income. Therefore, you may find that you are tied into a timeshare that you can no longer afford.

Another common complaint is that the timeshare is not as affordable as it first seemed. If you rely on the salesperson’s figures, it might look like better value than it actually is.

For example, they may use figures that assume you will always pay full price for your vacation. In reality, most discerning consumers shop around to get the best deal for everything – including their vacations.

Also, many people use financing to cover the upfront payment. That can come with a high interest rate that was not factored into the initial calculations.

Not An Appreciating Asset

The secondary market is full of timeshares being sold for much less than their initial value. No one should buy a timeshare expecting to make a profit or recoup what they paid.

Some people buy timeshares hoping to rent them out and generate a passive income. The fact is, you’ll be competing with many other timeshare owners trying to do the same thing.

Annual Fees Rise

Annual fees cover maintenance costs and the costs of running the resort. With inflation, these costs will naturally rise over time, and there is usually no upper limit.

If major repairs are needed, you may be hit with a special assessment to pay.

Hard To Dispose Of

Timeshares typically last for decades, and a lot can happen in that time. Simply not paying your annual fees anymore is not an option, and selling your timeshare can be complicated.

Some resorts do have a buy-back scheme. Before you sign up for a timeshare, make sure you fully understand how to walk away – and the costs involved.

How To Buy A Timeshare

Chances are you did not set up your 401(k) while sipping a free margarita as the sun sets over a perfect sea.

Why not? Because almost none of us are in the right frame of mind to make sound financial decisions while on vacation.

We’re relaxed, detached from the reality of daily life, and in the mood to be impulsive. At all costs, avoid the hard-sell presentation.

Make the decision to buy a timeshare just like you would any other major financial decision.

Always Buy Used

Just like buying a used car saves you thousands off the dealer price, the same is true of timeshares. You can pick up a cheap timeshare from owners who are bored, can no longer afford it, or are simply moving on.

Take HGVC resorts as an example.

The Hilton Grand Vacation Club (HGVC) has resorts in 58 spots throughout North America and Europe. They are normally sold at presentations.

But now you can also buy a Hilton timeshare for up to 65% off by purchasing through Hilton resales. You can find timeshares for sale for as little as $450.

Watch Out For Financing

Arranging to finance with the timeshare company might be convenient, but it’s often not the most affordable route. They typically offer a higher interest rate than a personal loan.

Count The Cost

Work out the pros and cons based on your circumstances, and crunch the numbers. If they add up and you still want to go ahead, great! If not, you can walk away without spending a penny.

Consider Flexible Timeshares

If you know you don’t want to vacation in the same spot at the same time each year, consider more flexible options.

Some companies offer points that you can use to stay at other resorts in the group. But make sure you read the small print and understand exactly how much you will pay. Points may not cover the whole cost.

Also, how flexible are those schemes in reality? You may still find that you need to book 9 months to a year in advance to get the resort you want at the time you want.

Ready To Buy A Timeshare?

For the right person, the decision to buy a timeshare could be a great one.

You know you’ve got a vacation to look forward to every year in a place you love. As with any major purchase, the key is doing your homework.

Think realistically. Crunch the numbers. Then you’ll have no regrets – whatever decision you make.

Are you looking for more great hints and tips on how to make the most of your hard-earned money? Check out our Business and Finance section today!

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