The Pros and Cons of Buying a Timeshare

A timeshare is basically a piece of vacation property that you purchase from a resale company or the developer for a given period in a year. This is cost-effective in the long run if you are already visiting a particular resort and staying there for one or two weeks annually. Under this setup, several timeshare individuals share the same unit through deeded ownership or shared lease ownership.

Before going into the pros and cons let’s discuss the difference between deeded and shared lease ownership. Deeded ownership refers to the arrangement where you get to own a percentage of the unit corresponding to the amount of money that you invested. If there are 10 investors, you have 10 timeshare deeds.

Meanwhile for a shared lease ownership the deed remains with the developer and you get a lease agreement. The contract will specify the fixed number of days you are allowed to use the property. There’s also another arrangement, which is called a “floating” schedule, where you may extend your stay beyond the schedule specified in your contract.

Below is a list of the benefits and downsides of buying a timeshare.

PROS:

• You don’t have to book in advance as long as you arrive in your allotted period
• You are guaranteed a spot for those last-minute vacations
• You actually pay for the duration of your stay as opposed to the upkeep of a vacation home
• You can arrange to change schedules with the other owners for greater flexibility
• You can allow your relatives and friends stay in your timeshare unit for free
• This arrangement is very affordable for long-term stays instead of paying for a hotel room by the day
• You may also get discounts to other resorts owned by or affiliated with the same developer you bought the timeshares from
• You can also sublet the unit to friends, which means you can recoup some of your investment if you’re not going to stay there yourself

CONS:

• They don’t have a high yield of returns
• You will have a hard time reselling your deed or lease agreement
• You pay maintenance and upkeep fees
• The property is not tax deductible so selling it at a loss will hurt you more
• The property is bound to depreciate, which makes it even harder to resell
• Maintenance and other fees tend to increase almost yearly

Some will say that timeshares are a bad investment. There could also be a perpetuity cost. That may be viewed as an advantage or a problem, depending on where you sit. It’s beneficial because you can hand it down to your children and grandchildren. The drawback is that it depreciates. However, if you can arrange with the developer to refurbish it from time to time and share the cost with the other timeshare owners, then theoretically the unit will last a very long time.

These are the advantages and disadvantages in theory but you must weigh all the pros and cons yourself with your own unique mindset in order to determine if buying a timeshare is a good investment for you personally.