By all accounts, timeshares sound like a fantastic idea: they allow you to pay a small monthly fee in return for a partial lease for a vacation home. In reality, however, timeshares are not always what they seem, and can end up being one of the poorer financial investments you could make. Here's why.
1. It's More Than Just a Simple Payment
Timeshare salespeople are big on the idea of you just paying a small, monthly payment in order to use the timeshare, but if you read the fine print of the mortgage contract, you'll notice that you're liable for several other things as well, including property taxes, utilities, maintenance, and more. Failure to pay these other duties can result in your timeshare being foreclosed on, so make sure you read the entire contract before you sign on the dotted line.
2. They're Almost Impossible to Sell
In principle, timeshares act like any other kind of real estate agreement: once you buy in, it's yours until you would like to sell. The problem is, selling a timeshare is incredibly difficult, thanks to a very weak aftermarket for timeshare sales. In some cases, resale brokers will be able to find you a client, but those can sometimes be nothing more than a scam. Even if you are able to find a buyer, it's almost guaranteed that you'll lose money on the deal. But it’s better than nothing.
3. You Won't Always Be Able to Use It
It sounds great, doesn't it? You have a slice of a vacation home that is yours whenever you want to use it - just call ahead and make arrangements to ensure it's available. The problem is, they're usually not. Specifically, around holiday times and summer months, your timeshare can be booked solid up to a year in advance, which means you may only be able to use it a couple of times.
4. Local Resorts are Sometimes Cheaper
Timeshares are sold after a large, up-front investment, usually several thousand dollars, with yearly maintenance fees stacked on top. In return, you're allotted 5-8 weeks of use every year. Do the math, and that can end up being significantly more per night than if you had just rented a hotel or even splurged for a resort as well.
5. Timeshares Don't Generate Money
Timeshares are horrible investments, not only because selling a timeshare is nearly impossible and the secondary market is saturated, but also because they don't return any money on your investment. Even though you're allowed to rent it out, it can be hard to find interested renters and even harder to do it consistently enough to recoup your investment. If you want to use it as a vacation home, great, but never look at a timeshare as an investment.
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