Caring About Sharing: Straight Talk on Vacation Timeshares
1. A timeshare is not an investment in real estate — it is much more like paying a lump sum for the use of a piece of property every year for a fixed period of time. As such, timeshares almost never appreciate in value. As the property gets older, and as newer, more desirable timeshare properties are constructed, the value of a timeshare will generally go down.
2. The secondary market for timeshares is usually not very good. If a new car depreciates 15% the moment you drive it off the lot, then a new timeshare may depreciate by as much as 50%. While a developer will hire a marketing agent to sell new timeshares, there is no person or entity (generally) who will help you sell a timeshare if you decide it’s not a good deal. Again, it is important to realize that a timeshare is not an investment in real estate, it is more like creating and funding a “vacation” account from which you are going to pay for the use of a property every year, with no expectation that you will see that money again.
3. In general, it is cheaper to rent a timeshare from someone who has purchased an interest in a particular property than it is to buy a timeshare in that same property. Again, the secondary market is weak compared to the marketing-fueled initial market. Indeed, many timeshare agreements prohibit share owners from “marketing” the rental of the timeshare in any way – the developer does not want to compete with rentals of units in the same property.
4. Trading a timeshare for another timeshare (especially in another location) can be harder than it is made out to be. It depends in part on whether the same club/developer has other properties in its portfolio. If it does not, there are several entities that exist to help people trade their shares, but in general timeshare owners report that it requires diligence to make an exchange work.
5. Buying a timeshare outright is generally a much better deal than financing the purchase. This is true for most things, of course, but particularly when balancing the cost of annual rental against the annual effective cost of a timeshare, having to pay interest will generally make the timeshare a comparatively bad deal.