Whether or not to own a timeshare is an interesting discussion. Timeshare solicitations are very common these days and so conversations about a timeshare are not out of the ordinary. Is it financially worthwhile? The answer really depends on the reason why you purchase it. I will discuss the reasons why it would make sense to own a timeshare, and you can see if this applies to you.
The main point of timeshare ownership is exactly that: you own your vacation resort. The question then becomes just like any question involving real estate: does it make more sense for you to rent or own?
One of the most traditional answers could be that you own it, but when you rent something you don’t own it. Then the question is do you vacation often enough that it is worth your while to own the timeshare? That is one reason the timeshare industry grew is because many people did find that they wanted to vacation in the same spot almost every year and decided to look for ownership opportunities instead of renting every year.
Timeshare math is no different than real estate math. If you end up vacationing every week for thirty years, you can envision the payments and how they would compare. With hotels, you pay the full week rental of the hotel for thirty years. If I take a nice round number as an example, say $1000 for a week. That would be $30,000. You could also pay the same amount in monthly loan payments towards ownership, or you could pay the entire $30,000 up front and own your property. Taking into account on the renting side that the full week of rent is not protected against inflation and comparing that too ownership where only the maintenance fees are not protected against inflation, you may find the costs will be fairly close.
And now to compare the positives and negatives:
A benefit is that you only pay maintenance fees after you own. So if you had a loan payment for thirty years which was comparable to a hotel rate for thirty years, after thirty years you only pay the maintenance fee where if you rent you continue to pay the full rental fee for a hotel.
In addition, with the possibility of being able to pass down ownership to your heirs, a third benefit is that for many years to come only a small maintenance fee needs to be paid to enjoy the vacation rental for a week each year. This is much more cost effective than having to pay the increasing costs of a full hotel rental each week every year.
This definitely makes financial sense if you take a vacation every year. If you take a vacation in the same destination each year, it definitely makes sense. If you take a vacation every year but to different destinations, then exchange programs are helpful for this but it requires more time and possibly fees to be paid for administrative expensive. If you do not take a vacation every year, it still may make sense if you want to rent your vacation to someone else that year or even just give it as a gift to a relative or friend.
Most people are familiar with real estate in terms of houses. So this comparison may be quite helpful:
To compare a home with a timeshare: it makes sense to buy it if you plan to use it for a long time. Buying a house and not using it would be a waste of money. The same can be said for a timeshare. However, one contrast is that it is common to buy a house and not use it if you plan to rent it. Many real estate owners will buy property with the intent to rent it. Renting is a bit easier of a proposition because people must live somewhere. And they will want to usually live somewhere for an extended amount of time. Vacationing on the other hand is not a requirement, so renting a timeshare means a smaller and more difficult prospect list to reach. Plus, this feat of renting needs to occur every year as vacationing is temporary versus living in a residence is more permanent. On the plus side for timeshares, vacationing can add variety as you can vacation in different destinations each year. The advantage of exchange programs is evident here versus living in a residence: it is hard to fathom doing an exchange for a few months with someone else just because you want to live somewhere else.
The bottom financial line is this: if you do not vacation a lot, then it probably is not worth your investment money to buy a timeshare unless you really enjoy working to rent it every year. If you do take vacations often, then it is possible owning a timeshare makes perfect sense for you. Finally, if you find you take vacations often and you go to the same destination often, then it really might make a lot of sense to own a timeshare in that destination. That is the logic my wife and I used when we purchased our Hawaii timeshare. In fact, new developments in timeshare ownership include the possibility of just owning a week every other year. This involves less commitment on your part both financially and in having to take a vacation to the same spot every year. If that sounds desirable to you, then owning a timeshare is something you should seriously think about.
Hopefully this article has given you some great reasoning as far as why you would or would not own a timeshare. Feel free to contact me with any questions and good luck on your decision making!