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Is Buying a Timeshare Right for You?

A timeshare can be a great investment -- in some cases.

[Updated: Feb 04, 2021 ] Feb 24, 2020 by Maurie Backman
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Buying a timeshare can be a smart thing to do, but only under certain circumstances. If you're thinking of going that route, here are a few important things to know.

What is a timeshare, and how does it work?

A timeshare is a resort or vacation property that you don't own outright. Rather, you split its ownership with other timeshare owners.

With a timeshare, you get the right to use the property in question for a given period of time during the year. That may be a single week, several weeks, or a month, depending on the terms of your timeshare purchase. Timeshares are usually available through vacation clubs or timeshare companies, both of which are often affiliated with popular hotel brands. Furthermore, your timeshare can be an apartment, villa, or hotel unit -- it depends on what you buy.

Types of timeshares

As a potential timeshare buyer, you may have a few different options at your disposal:

  • Fixed-week timeshares: This is the classic timeshare model you may be familiar with. You own the same week (or weeks) every year at the exact same property.
  • Floating-week timeshares: Under this model, you get the right to use a specific property for a week or several weeks, only you get to choose when you want to use it each year.
  • Fractional timeshares: These timeshares are similar to fixed-week timeshares, only you're entitled to a larger use period of the property in question -- usually, four-week blocks or longer. Fractional timeshares are typically reserved for higher-end resorts or properties, making them a bit less common and less affordable.
  • Timeshare points: Timeshare points give you more flexibility when scheduling vacations. When you buy timeshare points within a certain network of resorts or properties, you can then redeem them for stays at any property within that network. Different properties and dates are assigned a points value based on factors like size and popularity so that you might spend a larger number of points on a week-long stay in one resort than you do in another.

What are the benefits of buying a timeshare?

Buying a timeshare is a great way to make recurring trips more affordable. Say you have a favorite family vacation spot you tend to travel to at the same time each year. By owning a share of a property in that area, you're guaranteed the right to use it. You don't have to worry about properties in the area being sold out during your vacation period of choice, because as a timeshare owner, you can lock in the right to use that property when you want to. You also don't have to worry about increased tourism driving rental prices up -- you simply pay the amount your timeshare purchase contract calls for, and that's the amount you're locked into.

Another advantage of buying a timeshare is that you often get the flexibility of trading dates or locations with other timeshare owners. Say you have the right to a specific week at your Miami timeshare, but you'd rather spend that week in Orlando one year. You can see if a swap is available within your vacation resort or timeshare company's network, and if so, you can switch up your vacation plans easily.

Furthermore, some timeshare agreements let you rent out your timeshare if you don't want to use it yourself (or you can't use it -- say, you run into a busy period at work or have local obligations that make it impossible to get away). Even if you're not allowed to rent out your timeshare, you can generally let others use it for free. Imagine you have grown kids on a tight budget who can't easily afford a vacation. You can grant them the use of your timeshare one year and give them a gift to remember.

Finally, when you own a timeshare, you pay an annual maintenance fee that covers upkeep for your property. As such, you don't have to deal with maintenance yourself. That fee generally covers everything from keeping your individual unit in good shape to the community amenities your property gives you access to, like gyms or swimming pools.

What are the drawbacks of buying a timeshare?

While buying a timeshare can be a smart move, there are a few disadvantages you should know about. First, while you're not required to perform maintenance on your timeshare, you will need to pay the aforementioned maintenance fees, which can not only be expensive to start with but can also increase over time. The average annual maintenance fee for a timeshare is $980, as per the American Resort Development Association, so keep that in mind -- but prepare to see that number climb.

Another thing you should realize is that the resale market for timeshares isn't all that robust. The reason? There are so many timeshares on the market already, so unloading yours for the same price you paid may prove challenging.

Furthermore, with a timeshare, you're often limited to vacationing in the same spot year after year. That may seem like a positive thing at first, but your needs and preferences may evolve over time. Imagine you buy a timeshare near a popular kids' resort when your children are preschool-aged. By the time they get into middle school or junior high, there's a good chance they'll have outgrown that resort, leaving you with a relatively useless ownership share of a property.

Buying a timeshare versus a vacation home

Say you're convinced you want to vacation in the same place every year. Should you buy a timeshare, or just buy a second home?

If money is an issue, a timeshare could be a better bet -- it's generally far less expensive to buy a share of a property than an entire property outright. Additionally, with a timeshare, there's less risk. If the value of your timeshare goes down, and you want to sell it, you only take that loss on your ownership share of it. If you sell a property you own outright at a loss, you absorb that entire loss.

Also, with a timeshare, you're only paying to use that vacation property when you want to. As such, you don't have to cover the cost of year-round maintenance as you'd be responsible for with a second home.

On the other hand, a vacation home can be a solid investment. If that property's value increases, you have the option to sell it and enjoy the gains involved. You can also opt to rent out a second home when you're not using it, thereby enjoying a steady stream of rental income.

And with a second home, you get flexibility. You don't need to limit yourself to a single week or several weeks of usage during the year; you can stay at your property when you want to, whether that means moving in for an entire summer or traveling during periods that fall outside your usual pattern.

Is a timeshare right for you?

Clearly, there are pros and cons to buying a timeshare. Before you decide to own one, weigh the advantages against the things you'll lose out on. You may be better off buying a vacation home over a timeshare, or buying neither and simply paying for lodging on a case-by-case basis when you travel.

If you are going to buy a timeshare, make sure you understand the costs involved. These include maintenance fees and any closing fees you're liable for at the time of purchase (the typical range is $300 to $500, but this can vary). The last thing you want to do is get in over your head with a timeshare and regret your decision to purchase one.

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