Picture this: You're in a conference room with several other people with the understanding that if you sit through a 90-minute presentation, you'll walk away with a free two-night stay in a hotel or free tickets to a show. Next thing you know, though, you're shuffled from room to room, and 90 minutes turns to two, three, even four hours of your time. Then the seemingly inevitable happens: You walk away with way more than you bargained for. You walk away with a timeshare — and one huge unanswered question: Did I just make a big mistake?
According to senior real estate investment analyst at The Close Allison Bethell, timeshares aren't worth it. "Buying a timeshare is not an investment, and instead, it creates more debt and can be difficult to sell," she says.
However, owner of DollarSprout Jeff Proctor says it all depends on what you value.
"From a purely financial perspective, I've found that the vast majority of timeshares are not smart investments," he starts. "However, if you love the idea of having a fixed vacation spot every year and like the idea of being committed to use your vacation slot each year, owning a timeshare might be a good fit for you."
Clearly, many are on Team Fixed Vacation Spot: The timeshare industry is on the rise — and has been for eight straight years.
According to a 2018 study conducted by the American Resort Development Association, timeshare sales rose from $9.2 billion in 2016 to $9.6 billion in 2017 and increased more than 26 percent since 2013. To add to that, the average occupancy rate was more than 81 percent compared to a 65.9 percent hotel occupancy rate.
But, and here's the tens-of-thousands of dollars question, are timeshares really worth it?
What are timeshares?
Let's start with breaking down exactly what timeshares are. There are four different types: fixed week, floating, right-to-use and points club.
Fixed week has very little flexibility, as you have access to a specific unit the same week out of the year, year after year. A floating timeshare, however, has more freedom, as you can reserve your own time. With right-to-use, the developer owns the property, but the buyer can lease the property for a certain amount of time each year for a set number of years. Lastly, the points club timeshare allows buyers to rack up points via buying into a specific property or purchasing points and using those points to stay at various places.
But how exactly does it work? Proctor breaks it down for us with an example.
"I purchase a timeshare in Florida. The initial investment is $10,000, and the yearly maintenance fees start out at $750. In return, I'm guaranteed seven days and six nights a year that I can stay in my timeshare.
"Over the next 10 years, I will end up paying $17,500 for a total of 60 nights. This comes out to about $291 a night — not exactly cheap. I'm sure I can find plenty of decent hotels for under $175 a night, which would save me thousands of dollars (and add some variety to my vacations)."
According to the aforementioned ARDA study, the average sale price for a timeshare was $22,180 per interval, with the average maintenance fee at $980. Like Proctor said, not exactly cheap.
The pros of timeshares
Based on all this information so far, it sounds like we're pushing you away from even considering timeshares. But believe it or not, there are advantages to owning one.
For starters, timeshares are perfect for workhorses who find it difficult to carve out vacation time for themselves each year.
"In my opinion, the biggest pro to owning a timeshare is the way it ‘forces' you to take a vacation each year," Proctor says. "By having a set time and location set aside each year, you feel obligated to use it — otherwise you're literally spending money on a vacation you don't take! No one wants that."
Timeshares also take the guessing out of your vacation. "Not having to deal with the logistics of destination and hotel planning is also a nice luxury to have, especially if you are perfectly content with going to a familiar 'home away from home' each year," he adds.
Timeshare resorts also typically offer larger accommodations and more amenities than your typical hotel room. In fact, about 72 percent of timeshare units are two bedrooms or more, and the average unit size is over 1,000 square feet according to the ARDA study.
Plus, according to Bethell, the insurance and utilities are not your responsibility.
The cons of timeshares
First off, timeshares are not investments — and that's likely the biggest misconception about owning one. Plus, the costs we discussed earlier aren't pretty, either.
"Timeshares are one of those rare real estate investments that routinely depreciate in value — making them a horrible investment choice," Proctor warns. "They also have high yearly maintenance fees that often increase faster than the rate of inflation."
You have zero control over these yearly maintenance fees, and you pay that fee whether you use the timeshare or not.
You also do not receive property owner benefits like tax write-offs, appreciation or building equity, Bethell says. And, here's the biggest drawback: Timeshares are difficult to sell — and if you are able to sell, it will not only likely sell at a reduced price because there are so many on the market (according to ARDA, there were 1,570 timeshare resorts in the U.S. in 2017, representing approximately 205,100 units), but according to Forbes, the IRS also won't let you claim a capital loss as you would with other investments and real property.
The bottom line? Timeshares aren't an investment — and they're costly.
"If you want a consistent vacation spot for the long haul, then consider going for a timeshare," Proctor says. "If you are looking at an investment opportunity in lieu of purchasing a rental property, timeshares might not be your best option."