It’s a beautiful Friday morning, you’ve just had your first cup of coffee and are looking out of your window at the still, crisp air pervading your city.
You smile knowing that there is one more day until the weekend and although you have nothing planned, nothing is exactly what you’ve been hoping for.
As you finish breakfast and get ready for work, you hear the mail come and decide to have a quick gander at what has come your way. Looking through the post, you see that your good morning has just gotten better: free tickets to LA! What amazing luck!
And all you have to do is attend a 90-minute vacation seminar about the wonders of timeshares. Yay. If you are anything like me, the joy of those free tickets was immediately stomped on by the idea of a vacation timeshare seminar.
That offer probably went in the bin too.
I know many people would jump at the opportunity of such an offer, only 90 minutes out of your free vacation for the potential to own a timeshare. However, I think many more would run for the hills rather than even consider the idea.
Since these offers are so prevalent in our society today and with salespeople champing at the bit to get people to invest in them, it makes people wonder why everyone has such a knee-jerk reaction – both in a good way and a bad way – to timeshares and most importantly, are they worth the hassle?
Today, we delve into the world of timeshares and look at their investment value to you as the customer, whether it is a good idea or whether it’s a trap for the unwary.
What Is A Timeshare?
First things first, we have all seen these advertisements for timeshares with free Disneyland tickets, Cape Cod holidays, or mountain biking adventures, but they never really explain what a timeshare is or how it functions.
Basically, a timeshare is a form of property with divided ownership, or the property has certain use rights for the individuals who have bought into the timeshare.
The properties in question are almost always secondary vacation properties and owned by a resort or hotel company that has a vested interest in having people essentially rent a permanent space for their future vacations.
These timeshares are normally condominium units and multiple people, or parties have the rights to use these units, which is allotted to them for set periods of time.
Now this sounds like a very American idea, considering the Homeowner’s Associations and whatnot that are dotted around the landscape. However, the idea was actually started in the UK in the early 1960s, due to the increase in vacationing after World War II.
Since that devastating conflict, people had been rebuilding their lives and their homes, with the focus being on returning to a sense of normalcy.
Holidaying was seen as a mark of success, economically and socially, and so when the British public started to pine for the idea of holidays, families started to find ways of doing that easily.
This idea sprouted into vacation home sharing, where roughly four different families – maybe more, maybe less – would go all in and purchase a vacation cottage together, with each family having exclusive access to that cottage for one season.
Seeing that the properties were vacant for a lot of the year, the idea was broached that a resort room or house could be divided into 50 with 50 different owners within a year, with 2 weeks for repairing damage or wear and tear, thus beginning the modern timeshare idea.
However, it wouldn’t be until 1974 that the first timeshare in America would be sold in Florida and since then it has gone from strength to strength, with many property and hotel firms becoming enamored with the idea of continuous sales of a room multiple times a year.
So, Are Timeshares A Good Investment?
No, not at all. As an investment, they are a terrible idea. For starters, you are sharing a vacation condo with 51 other people. Unlike hotels, there is no resident cleaning staff or maintenance staff to make sure everything is up to snuff.
Sure, the hotel chain or developers have cleaning and maintenance staff, but for their main properties, not the timeshares. It is rare that they will make an appearance at your property, and you’ll notice when you go there.
The only time action is taken is when something goes wrong and the person who will suffer when it does, will be you. Imagine if the people who used the timeshare before you are incredibly messy or never cleaned, you will be the person cleaning after them.
If that is the case, then your timeshare is liable to attract unwanted guests, such as roaches or rats, which will depreciate your investment in value and while there are maintenance fees that cover cleaning and repair, how much of it is getting done when as soon as people leave the timeshare another group move in.
Another problem with timeshare investment is the only gain you have from your investment is time. The time to spend at your timeshare. That’s it. They say you are the owner of the property along with 51 other owners, but you hold not actual power or rights.
This comparison to fractional ownership is a clever, but insidious ploy by the hotel’s salesperson. Fractional ownership’s operate like homeowner’s associations, the owners retain authority and are maintained to the standard of the owners.
This is easier as well, as fractional ownerships have at most 12 different owners, so communication and establishment of rules is easier. Timeshares are controlled solely by the property developers and hotel chain; you are only a guest in their property, and the only thing you have rights to is the time to spend at this property.
As an investment property as well, a timeshares value has nowhere to go but down. With most properties, their value fluctuates based on several factors: their age, their use, their facilities, their location, their upgrades, the value of the town or city they are in, these kinds of things are important.
However, with a timeshare a lot of these things don’t matter, because they only matter to the hotel or developer.
The real owners of the property will be the only ones to gain from a lot of these factors, as they can sell more and newer timeshares in that location, and the only things that you contribute to and can adjust – age, use, and facilities – will only make the timeshare go down in value as you continue to use it.
No one wants an old timeshare, when there are newer ones available for the same price.
In fact, to give you some idea of how bad this idea may be, a study was conducted by the University of Central Florida into timeshares and timeshare ownership. When owners were asked whether they regretted their purchase of a timeshare, 85% of participants said yes.
Good Alternatives To Timeshares
There are many good alternatives to timeshares, I would say most alternatives are good when compared to timeshares, but for the purpose of this article we will stick to similar vacation ideas.
The first alternative you can potentially use is straight up buying a vacation home or your own condo in the location of your choice. I know most people don’t have this option, but if you’re able to, I would recommend it.
For starters, you have full control over this house and come sell, upgrade, or rent out at your discretion. You can also choose its maintenance options and where it is in your desired location, rather than have it relegated to the hotel’s complexes.
A standard hotel room is another option. Shocking, I know that I should suggest something so silly, considering this is an article about investment.
But there is a new concept on the market for Condo hotels, where you buy a room or unit within a luxury hotel itself. That unit is yours when you want it, but at other times of the year it is managed by the hotel itself and will take a cut of the proceeds during that time.
Lastly, proper fractional ownership – mentioned earlier – is a better way to go as well. You will actually have a say in what goes on at your vacation spot, and it is an investment, in that when you sell, you’ll probably make some money from it.
These are three solutions to an alternative to timeshare investment, but the issue is that there really isn’t a good alternative without making some sacrifices.
My suggestion if you really are only purchasing a timeshare for a holiday is just book a hotel, it’ll save you hair pulling stress in the long run, and if you are purchasing a timeshare as an investment, just don’t. Don’t.
Final Thoughts
So, you are still at the breakfast table, rolling the offer for various free items or services around in your hand, wondering what to do.
If you decide to go to that seminar about a potential timeshare in order to get that free massage they offered, fair enough, I admit it’s a tempting deal.
But it is also a honeypot trap, and you are the bear they are trying to trap.
You may think you won’t fall for it or that you will be taking them for a ride, however their salespeople are really fantastic at what they do – insidious, but good at their job – and have convinced many who thought like you, who only later saw the folly of the timeshare.
My advice? Ignore it completely, spare yourself my friend and just book a nice room in a bed and breakfast or a hotel, because once they have you, it is very hard to leave a timeshare.
There are plenty of good investments in the world, properties and items that only increase in value as time goes on, a timeshare is not one of them.
Hi, my name is Matt Roberts, and I have been a financial analyst and advisor for the past 7 years.
While my job is based within the money industry, in my spare time I enjoy looking into potential new investment opportunities. From cryptocurrencies, to purchasing vintage cars, everything has the potential to gain you money if you are wise and make the correct investment decisions.
Through this site, I hope to educate others on investing in general, and hope to provide others with useful information that can benefit them and the opportunities they have. If you are not confident with finances, investing money can be a daunting step, however, it is a lot easier than many people are led to believe.
