Do you like to go on vacation every year or so? And are you tired of the cost of getting a nice place to stay increasing every year? Wouldn’t you like to be able to manage your costs and know you’ll pay the same amount every year and be able to go wherever you want to travel?
If you said “yes” to any of those questions, do I have a timeshare to sell you. By definition, a timeshare is a resort property – usually with condo units owned by a company or sometimes by a hotel chain – in which you buy a share of the property and get the rights to stay in that place (or some companion location) for a week or so every year.
The concept of timeshares apparently began in Great Britain in the 1960s, when multiple families would jointly purchase a vacation home and each family would have the right to use the property for a specified period of time (usually a few months every year). From there, it evolved to companies buying hotel rooms and selling a one-week stay to multiple families.
Nowadays, the concept has spread globally and there are many different types of timeshares and vacation units available all over the world. Some are better than others, some have sales personnel with more scruples than others, some are more affordable than others. What you buy depends on how much of a financial commitment you’re willing to make, what type of flexibility to travel to various places you’re offered and what type of resort availability there is for you. Whether you buy likely depends on how comfortable you are with making a commitment (and – in essence – taking out another mortgage to finance what can be a fairly substantial cost) that will last for 25, 30 or 40 years.
First and foremost, you need to look at buying a timeshare as a way to know you’ve got a pre-paid vacation place every year. You cannot look at buying a timeshare as an investment. There are so many different types of timeshares available that there’s a glut in the marketplace. That means if you ever decide to sell, not only is it likely you won’t make your money back, you may even lose quite a bit of money compared to what you initially paid for it. And, in our still recovering economy, there are even more timeshare units than normal available for sale as people decided to liquidate their investment in the timeshare.
As mentioned above, unless you are able to buy a timeshare outright for cash, you’ll likely be offered the opportunity to finance the timeshare through the company offering them for sale. Since what you’re buying is an interest in real property, you’ll be assuming the responsibilities of another mortgage, with monthly mortgage payments.
There are also annual maintenance fees (which may be billed to you on a monthly or quarterly basis) used for the upkeep of the property. And, as with any property one owns, there are real estate taxes assessed to your portion of the property. (One positive thing is that you can deduct both the interest from the mortgage and the real estate taxes assessed on your income taxes).
The Federal Trade Commission (FTC)has a great description of the pros and cons of buying a timeshare and explaining the things you need to consider. It’s always worth a look at their website any time you need good, solid, reliable information about anything consumer- or financial-related.
Next time, we’ll talk about some of the different types of timeshares and the different entities that offer them and suggest some things you may want to consider that will help you decide if a timeshare is right for you and, if it is, what’s the best timeshare for you to buy into.