Timeshares have often been pitched as a budget-friendly way to own a piece of vacation paradise. They promise the luxury of guaranteed vacation spots at great locations and can seem like a smart investment in real estate. But is that really the case? Are timeshares a good way to invest your money, or could they end up being a money trap? This article will take a closer look at timeshare real estate, their real value as an investment, and what you should think about before buying one.
Salespeople and advertisers often highlight the idea that timeshares are a solid real estate investment. It’s a tactic that works well because most people see real estate as a good investment that will grow in value over time. However, even though timeshare marketing continues to attract people with the promise of real estate ownership, the truth is the timeshare industry has moved away from the idea of truly owning a “piece of the rock,” meaning an actual, deeded interest in the property. Despite the marketing spin, the reality of timeshare ownership can be quite different.
What is a Timeshare?
A timeshare, a concept that emerged around 50 years ago, is a special kind of real estate agreement that permits multiple individuals to have ownership and usage rights to the same property. These properties are typically vacation resorts or condos, with each owner allotted a specific period each year to use the property. Let’s take a deeper dive into the evolution of this concept and how it stands today.
The Birth of Timeshares
The concept of timeshares was born in the 1960s in Europe, particularly in the French Alps. It was first introduced by a resort developer who owned the SuperDevoluy ski resort. The developer, credited with coining the phrase “timeshare,” marketed his resort by suggesting that customers could “buy the hotel” instead of renting rooms.
His innovative sales pitch was based on the idea that instead of paying for a hotel room year after year, vacationers could purchase a share of the property. This share entitled them to use a unit for a specific week each year.
This idea caught on and quickly spread across the globe. By the 1970s and 1980s, the timeshare industry had expanded to the United States and other parts of the world.
Timeshares Today: Deeded and Points-Based
Fast forward to today, timeshares have evolved and diversified into two main types: deeded timeshares and points-based timeshares. In a deeded timeshare, you own a small fraction of the property, which translates into a specific period (typically a week) each year when you can use it. This type of timeshare gives you a physical deed, much like owning a traditional piece of real estate. You can sell, rent, or bequeath your timeshare, but you’re also responsible for a portion of the property’s maintenance fees and taxes.
Points-based timeshares, on the other hand, are supposed to be more flexible. As a member, you purchase a certain number of points that you can access a reservation system to book vacation time at various locations within a network of properties. The number of points required for a stay can vary based on factors such as the property’s location, the size of the accommodation, the season, and the length of stay.
The Evolution of the Timeshare Industry
The timeshare industry has undergone significant changes over the last 50 years. Presently, timeshare companies offer various packages with different loyalty tiers like VIP, Presidential, Elite and so on. Nonetheless, the industry faces some enduring challenges.
Some developers in the timeshare industry have often been criticized for aggressive sales tactics, complex contracts, and difficulty in reselling timeshares or even getting out of a timeshare. While the industry has made minimal efforts to address these issues, potential buyers should proceed with caution and fully understand their commitments before purchasing a timeshare.
Moreover, today’s timeshare market faces new challenges. Travel Clubs and the rise of online vacation rental platforms like Airbnb and VRBO offers vacationers flexible and often less expensive alternatives. These shifts in the vacation market have led some to question the value proposition of timeshares.
Exploring Timeshares: Smart Real Estate Investment or Money Trap?
Timeshares are often sold as a low-cost way to enjoy a luxury vacation lifestyle. But, the big question is, do they make for a good real estate investment, or could they lead to financial trouble?
The Money Side of Timeshares
Timeshares today promise owners an opportunity for a surefire vacation spot, which seems like a deal for those who love to vacation. But when it comes to making money from them as an investment, timeshares don’t meet the mark. Unlike traditional real estate, where properties usually increase in value over time, timeshares often lose value immediately. This means that selling a timeshare can be quite hard.
On top of this, owning a timeshare can come with big financial responsibilities. Owners have to pay yearly maintenance fees, property taxes, and other costs that can go up each year. For many people, these ongoing costs might be more than the benefits of owning the timeshare, turning what looked like a good investment into a potential money trap.
Timeshares: Not the Investment You Think
While buyers are often led to believe that a timeshare is a real estate investment that will have value that can be re-made through a sale or passed on to loved ones, “Nothing can be further from the truth,” as our own Michael D. Finn told the New York Times.
In the absence of tangible real estate ownership and the rise of the “right-to-use” points model, the residual value and ultimate re-marketability of a timeshare is severely impaired, and most have no resale or inherited value whatsoever.
Things to Keep in Mind Before Buying Timeshares
With changes in the timeshare industry, moving away from owning actual property to a “right-to-use” points system, the value and ability to sell a timeshare have gone down a lot. In fact, most timeshares can’t be sold on the secondary market. This hard truth shows why it’s really important to do your homework and really understand what you’re getting into before you decide to invest in a timeshare.
If you’re thinking about buying a timeshare, you need to really understand what it’s going to cost you and whether it fits with your lifestyle and financial plans. Make sure you know what the contract says, especially about the ongoing costs and how to sell or get out of the timeshare if you need to. The decision to buy a timeshare is a personal one, and each buyer should approach it with caution and make an informed choice.
This article is for information purposes only and is not intended as legal advice. If you need help understanding an ownership contract, please contact a timeshare attorney.
Led by timeshare attorneys J. Andrew Meyer and Michael D. Finn with over 75 years of combined legal experience. The Finn Law Group is a consumer protection firm that specializes in Timeshare Law. If you feel you need to speak with a legal professional, contact us for a free consultation at (727) 214-0700 or to schedule an appointment, email us [email protected]
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