Are they a good investment?
With the goal of earning money and also enjoying nice vacations, some people end up purchasing timeshares. It certainly sounds like a good idea at first. You're purchasing real estate and gaining partial ownership of a property, and you'll have a place to stay each time you visit your favorite vacation spot.
Some people really enjoy their timeshares. But are they a good investment? That's a completely different matter. Owning a timeshare can be fun, but in most cases, there are better ways to invest your money. Here are a few key reasons why timeshares are not typically a good investment.
Timeshares do not typically increase in value.
In order for a purchase to be an investment, it needs to earn you a profit. There are two ways real estate holdings can earn a profit. You can rent the real estate out and make money on the rent, or you can let the place appreciate in value and sell it for more than you paid.
Clearly, you're not renting out your timeshare, so you can't make money that way. And sadly, timeshares do not tend to appreciate in value. There are almost always plenty of new ones to be found, so buyers purchase those ones directly from developers. The market for "used" timeshares is just not that great, and most people who resell end up taking a loss.
You might, for example, buy a timeshare for $100,000, but then, when you go to sell, only get $80,000 for the timeshare. You will then have lost money on the deal, which makes it, by definition, a bad investment.
Timeshares can be really hard to resell.
If you do decide to sell your timeshare, making a profit may actually be the least of your concerns. Many timeshare owners have trouble even selling the timeshare in the first place. As previously mentioned, most buyers want a new unit, not a secondhand one. Your only option may be to sell back to the development company, and this usually comes with a pretty major loss. Plus, you'll have to spend money on a real estate lawyer to get rid of your timeshare— another expense that eats into any profits you might have been hoping for.
Fees are often higher than you realize.
Sometimes it may look, on paper, as though you can save a lot of money by buying a timeshare versus renting an apartment or condo each time you go on vacation. This may not, on its own, make a timeshare a great investment, but it may make it a money-saving option if you are going to take vacations anyway.
But here's the catch: timeshares often cost you more than you initially realize. There are often fees, such as an annual maintenance fee and publication fees, that you're responsible for, but that don't always appear on the initial quote provided to you by the timeshare company. Sometimes, timeshare owners will also be called upon to split bigger maintenance costs down the road. So, you're likely to spend more on your timeshare than you initially assume, making it a poor investment.
If you enjoy vacationing in the same spot year after year, buying a timeshare can be a fun and convenient choice. However, you should look at this purchase as an expense, and not an investment. A timeshare will bring you plenty of fun, but they almost never earn you any money. Count on other types of real estate to be a good investment, and just let your timeshare be a fun destination.