Timeshares…good financial planning or a long-term headache?

As is the case with many things, sinking money into a timeshare has its own set of pros and cons. Your overall lifestyle goals and financial objectives will shed light as to whether or not investing in one makes sense.

In a nutshell, timeshares allow you to have limited use of a property without becoming a full owner. They’re an easy way to secure a vacation spot without buying an entire house or condominium. However, timeshare ownership may not always be what it seems.

Purchasing a timeshare is a long-term commitment. Before committing any of your assets, you owe it to yourself to do the necessary research first.

  1. Read the contract for the timeshare. All timeshare contracts aren’t the same. Each contract can have specific fees or rules. So yes, actually read the fine print! Don’t buy based off of a slick sales presentation.
  • Take note of the fees and maintenance costs for the timeshare you’re considering.
  • Be aware of every detail before you sign. Timeshares can be difficult to sell, so you don’t want to make a purchase you’ll regret later.
  1. Understand the real estate implications. When you purchase a timeshare, you’re not actually acquiring real estate – only the right to use the property subject to the rules in the contract.
  • You may not be able to sell, change, or rent the property under the timeshare contract.
  • You can sell your timeshare, but this only transfers the usage to another person. You can’t alter the land or building.
  1. Be aware of the sales issues. Timeshare owners often complain about their inability to sell or exchange their timeshare.
  • If you are able to sell your timeshare, you’re likely to suffer a loss. It’s difficult to get the full asking price because it’s a saturated market without a great deal of interest.
  1. Remember to negotiate. Since timeshares don’t increase in value and are hard to sell, you may be able to negotiate a better deal than the initial asking price.
  • Pay attention to the perks. Timeshares may come with extras such as gift cards or restaurant reservations. Bargain for the maximum number of perks that you can get.
  1. Be aware of foreclosure risks. Did you know that if you don’t pay the annual maintenance fees, you can lose your timeshare to foreclosure?
  • The timeshare company can foreclose on the property, but the process is different from the one you may see from a home mortgage company. You may end up owing money to the timeshare company after the foreclosure.
  • Timeshare foreclosure rules vary based on the location of the property.
  1. Learn about trade rules. If your timeshare is part of a large resort, you may be able to trade it for another option.
  • Resorts may offer you the chance to trade your timeshare for another property.
  • You may have to pay transfer fees and other fees for the new timeshare. You’ll have to sign a new contract for the new timeshare.
  1. Find out about booking issues. Another frequent complaint from timeshare owners is their inability to use the properties during their vacations. They discover that someone else has already booked the timeshare during the time they want.
  • If you don’t have a fixed schedule, you’re more likely to encounter these types of issues. You may have to book a year or two in advance to use your timeshare.

Before you sign up for a long-term commitment, always read the fine print. If you love vacations and want to save money on accommodations, and you’re fine with the contract details, then timeshares may work for you. However, you may also be equally satisfied by putting the potential costs of a timeshare towards alternative experiences. Only you can be the judge as to what is best for you.

This information is provided for general information purposes only and is not intended to provide specific investment advice. The information in the articles should not be relied on for tax reporting, accounting, or valuation purposes. Past performance is not a guarantee of future performance. It is not possible to invest directly in an index.

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