Debunking Timeshare Myths: Are timeshares an investment?

One common question that gets asked over and over are whether timeshares should be considered an investment. 

Deeded weeks are actual real property interests that are recorded in the real property records of the county of the resort.  When you purchase a deeded week, you do received an actual deed just as when you buy your house or other real property.

Due to this fact, many timeshare sales have indicated that real property appreciates over time so your "investment" in the timeshare can be worth more in future.  Most real property interests do appreciate over time but we now know, as what happened during the great recession, that not all real property appreciates over time.  Just with any other asset class, real property is not immune from significant price fluctuations. 

Timeshares, (technically deeded weeks are real property), are fundamentally different that other real property.  While you are an owner, you own 1 week of 1 unit in a large resort than can have hundred of units.  For example, if we are talking about a relatively small resort with 200 units, the timeshare developer can have 10,400 deeded weeks to sell.  The math is as follows: 200 units multiplied by 52 weeks equals 10,400 deeded weeks to sell.  In the event that the timeshare developer elected to sell bi-annual weeks, (the right to use every other year), there would be 20,800 available weeks.  If you purchased one week and the developer sold 10,400 weeks, your ownership interest in the resort would be .0096%. 

As a minuscule minority owner, you have no input on operational expenses, control, overall direction of resort, or any other input.  Additionally, you have absolutely no right to the furniture, equipment or other assets of the resort.  Since you own only one week instead of actually owning the specific unit as you would in a condo, you cannot decorate the unit or do any modifications to the resort at all.  You are simply granted the right to use the one week.

Additionally, all operational expenses, property taxes, liabilities and other recurring expenses are passed down to the owners as maintenance fees.  Even though you won a week, you have no ability to adjust these fees. 

As you can see, a timeshare is fundamentally different that owning your house or other real property.  Due to this difference, most and arguably all timeshares WILL NOT appreciate in value.  If you are interested in purchasing a timeshare and someone indicates that the timeshare will increase in value, stop talking and walk away.  This is simply not the truth and clearly false.  Knowing that a timeshare is not an investment can help you re-think the purchase decision.  I would personally view the initial purchase price as a sort of membership fee and not as a real estate purchase.  

As I set forth in this post, my argument is that the initial purchase price of the timeshare should be a sunk cost meaning that once purchased, the initial value is gone.  However, my view is that timeshare ownership does have many redeeming qualities and does allow an owner to travel around the world at discounted rates which generally far surpass the retail price.  

TIMESHARES ARE NOT MONETARY INVESTMENTS.  

Anyone telling you differently has a different agenda.  If you are interested in obtaining timeshare ownership, view the initial purchase price, whatever it may be, as a initiation fee or vacation club membership fee. As with those types of fees, you know that they are non-refundable and that you will not get those fees back.  If you view timeshare ownership in this capacity, you can do the calculations and see if the potential savings over time do make sense for the initial fee.  I believe that it does but the initial cost could impact that decision.  If you found this website, then you should continue to research the purchase of timeshares and make sure you understand this concept. 

I believe that you can maximize the ownership through the different available programs and exchange opportunities  in order to save you a tremendous amount of money as compared to renting hotel rooms or other accommodations.  I also believe that there is some significant value associated with being able to choose destinations around the world based on your desire to travel to that location rather than based on cost.  This is difficult to quantify but I do enjoy picking vacation destinations based on other items irregardless of cost.  This always depends on availability and cost of airfare but there are additional ways to minimize these expenses that we can cover in other posts. 

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