Timeshares: When an Investment is Not an Investment

We know that some timeshare owners enjoy their timeshares immensely — especially those with disposable income and want to know where they are going to vacation every year.  But, if you are not an owner and are considering to “invest” in a timeshare, you really need to consider the costs involved.

Many timeshare owners finance their timeshare purchase.  The interest payments and the total cost of repaying the loan can make the timeshare enormously unprofitable.  Timeshare loans are not like “normal” real estate mortgage loans on a primary residence or vacation home.  The interest rates are typically much higher and can go above 15%.

Even if you pay in full at the time of purchase, you lose the opportunity to invest that money into other financial interest-bearing instruments like CD, bonds, and money market accounts.  Imagine if you took $20,000 (the average amount of a timeshare in 2008) and put it into a modest CD that could net a small interest gain.  Over time, that could be hundreds or thousands of dollars that could be given to your children, instead of passing along a timeshare that continuously requires more fees.

The American Bar Association Family Legal Guide reminds potential owners that the investment is less of an investment when you consider that “your time-share contract will make you responsible to pay any increases in taxes, maintenance, or repairs. If you think any of these amounts are going to decrease, you’re in for a big surprise.”

A true investment in real estate means you can one day sell it and see a return on that investment.  With upwards of millions of timeshares up for resale, that will not be the case.

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