Are Timeshares Good Investments?
The concept of timeshares has been around for over 50 years. People don’t usually think of timeshares as good investments however and there are a few reasons why. For one, timeshares have front loaded contracts with high interest rates and are packed with unfriendly consumer terms such as perpetuity, meaning you’re obligated to make yearly payments on the timeshare property indefinitely. Secondly, it can be very difficult to sell a timeshare in the resale market, and even harder to get out of a timeshare contract if you decide you no longer want it.
Timeshare vs. Vacation Membership
While some timeshares are sold with a deed, others are nothing more than a membership contract. In this type of timeshare, there is no real estate ownership. Instead, you are buying the right to use the resort property for a certain amount of time each year. This can sometimes be a use it or lose it proposition. While a vacation club membership can be passed down to your heirs, it does not typically have any resale value on the open market due to developer restrictions.
There is also no appreciation in value with timeshares as with other types of vacation ownership. In fact, most timeshares lose most if not all of it’s value as soon as the timeshare is purchased. This is primarily due to the sales and marketing costs associated with the sale of timeshares. Those expenses include commissions, first day incentives and tour gifts which are typically in excess of 50% of a base timeshare and considered very high comparatively to other property investment purchases. Those expenses are also often financed into the timeshare purchase, and are not offset by any form of real estate depreciation either.
For many people, the initial cost of a timeshare, maintenance fees and other various charges associated with the timeshare purchase can be quite significant as well. In addition, it is not uncommon for timeshare maintenance fees which currently average over $1,000 to increase annually, while the services and amenities offered by the same timeshare property may not change or decline as the resort property ages.
Finally, an oversupply of timeshares in many popular tourist destinations, like Orlando, Las Vegas, and Branson, combined with a low demand in the secondary market decrease any potential investment value for timeshare owners and may expose owners to a number of potential timeshare resale scams.
Timeshares should not be considered as good investments but rather pre-paid vacations. To summarize the reasons why this is the case, those include high upfront costs, lack of resale value, maintenance fee increases, and oversupply in the secondary marketplace. If you’re considering purchasing a timeshare, be sure to do your research, become educated on the product and understand all the associated costs before making a decision. If you’re already a timeshare owner and are having difficulty selling your timeshare or are considering getting out of your timeshare contract, contact us for more information on how we can help.
Led by attorneys Michael D. Finn and J. Andrew Meyer with over 75 years of experience, the Finn Law Group is a consumer protection firm specializing in timeshare related issues.