Yahoo Finance Should You Invest in a Timeshare?
John and Barb Meninga bought their first timeshare in 1997 in Las Vegas. It cost approximately $10,000, and provided the Meningas with a furnished unit to use for one week each year. The couple liked the experience so much that they've purchased 15 timeshares since then, enabling them to spend much of the year doing what they love: traveling.
The Meningas, retirees from Kalamazoo, Mich., are among thousands of timeshare owners in the United States. Although the industry was hit hard by the recession, there were still 1,548 U.S. timeshare resorts as of 2011, representing approximately 194,200 units, according to the American Resort Development Association (ARDA), a Washington, D.C.-based trade association that represents the timeshare industry.
With traditional timeshares, buyers pay a lump sum upfront, which allows them use of a specific unit at the same time every year. A one-week interval is most common, but the time frame can be shorter or longer depending on the unit. Timeshare owners are also required to pay annual fees that cover maintenance costs.
The average sales price for a one-week timeshare is approximately $19,000, with an average annual maintenance fee of $660, according to Howard Nusbaum, CEO and president of ARDA.
These days, timeshares increasingly operate on a points system, which gives users more flexibility with where and when they travel. For example, the Hilton Grand Vacation Club program gives you points that can be used any time during the calendar year at a Hilton Grand Vacation Club property, a Hilton brand hotel, or through RCI.com, a vacation exchange network. The club also recently added cruise and camping options in exchange for points. Members can roll over points from the previous year or dip into points from the year ahead.
Joyce Baki, a tourism specialist in Southern Maryland, and her husband bought a timeshare in Las Vegas through the club about eight years ago. Since the purchase, they have used points to stay at Hilton hotels throughout the country. "In the past nine months, we spent five days in Orlando and four days in Vegas, and brought friends with us both times," Baki says.
Thinking about purchasing a timeshare? U.S. News spoke to timeshare owners, financial advisers, and industry representatives to help you identify the costs, benefits, and drawbacks of owning a timeshare. Here are the pros and cons to consider:
Pro: Save on travel expenses. Marilyn Belleghem, a marriage and family therapist from Ontario, Canada, appreciates that her timeshares come equipped with a full kitchen and laundry facilities. She says she saves by cutting out extra expenses, like paying for a coin-operated washer-dryer. Access to a full kitchen also enables timeshare owners to stay in more often to make home-cooked meals.
Moreover, most timeshares come fully furnished, which will save you a lot of money you'd otherwise spend on d?cor and furnishings if you were to purchase a vacation property.
Con: Timeshares can be difficult to unload. Jill Etesse, owner of a mobile app development firm outside of Washington, D.C., inherited her parents' Vail, Colo., timeshare in the 1980s. The timeshare seemed like a good idea at the time of purchase, but when the family moved to Washington, D.C., in 1986, they found it difficult to make the trek back to Vail each year. Etesse has tried to exchange the property online over the years, but she hasn't had much luck. She doesn't think she would get much for selling the timeshare, so for now, she's saddled with a $300 annual maintenance fee.
There are websites timeshare owners can use to try to sell their property, like Redweek.com, but they charge a listing fee and an annual membership fee to use the site (Redweek's is $24.99 and $14.99, respectively) and there's no guarantee that the property will sell.
There is also a substantial amount of fraud in the reselling industry. Scammers prey on timeshare owners, promising to sell the timeshare for an upfront fee. So you pay the several hundred dollars upfront and never hear from them again. "If they want to charge an upfront fee, watch out," says Alisa Stephens, an executive producer for RedWeek.com.
Donating one year of your timeshare to charity is another option, if you don't want to feel like your timeshare is a complete waste. Donateforacause.org lists charities throughout the country that are seeking timeshare donations, but you'll still have to pay the annual maintenance fee for the unit. And don't expect a tax deduction for your donation. "The IRS has ruled that there is no value for the time used," says Ilyce Glink, a real estate expert based in Chicago.
Pro/con: You can trade in your timeshare and travel. Belleghem used RCI.com for several years to trade her timeshare at Welk Resorts in Escondido, Calif., for units in places such as Montana, Portugal, Spain, and Paris, among others. The drawback is that the website charges $124 in annual network dues and subscription fees, as well as a fee for each transaction, ranging anywhere from $39 to $337, depending on the length of stay, unit size, and time of purchase.
Con: It's a long-term financial commitment. Most timeshares are perennial, meaning they don't have an expiration date. That means you're obligated to pay the annual maintenance fee indefinitely. "That's a pretty big financial obligation," says Ric Edelman, a financial adviser, author, and radio host based in Fairfax, Va., who cautions his clients against investing in timeshares.
There is also the possibility that your finances could take a hit. "If you lose your job, now you've got to make annual payments on the timeshare on top of being unemployed," Glink says.
Pro/con: You're guaranteed a vacation each year. Purchasing a timeshare locks in a vacationing lifestyle, says Ed Kinney of Marriott Vacations Worldwide. "Our industry accommodates people who like to plan ahead and look forward to a trip each year," he says. "People might want to go skiing over the holidays each year, and they can do that without worrying about whether they'll get in year to year."
However, your desire to return to the same location at the same time each year could wane. If that's a concern, ARDA's Nusbaum says purchasing a timeshare that operates on the points system would offer you more flexibility with how and when you decide to use the vacation.
So, is a timeshare right for you? There's no easy answer, given the range of offerings for timeshares today, but now you can make a well-informed decision.
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