Timeshares have been memed on many times in popular culture.
South Park did a whole episode based on timeshares and how complicated and silly they can be. Still, for some, they represent the best way of affording a holiday home. When you look at what a timeshare company tries to sell you, it feels like a great deal. You’re gaining effective shared ownership of a vacation property but at a fraction of the cost of buying it yourself.
Does this make it a worthy investment, or are timeshares one of the biggest scams alive?
The truth is rather confusing. Timeshares are indeed terrible investments. If you want to invest in property or wish to purchase a holiday home with the intent to make a profit, this couldn’t be a worse idea. At the same time, they aren’t technically classified as scams. We’ll explain more as you read on, so let’s start with a simple question:
What is a timeshare?
A timeshare is one of many ways to get your hands on a vacation property. You pool your funds with other people and each of you buys a share of time in the property each year. For instance, your money gains the right to use the vacation home for two weeks in July.
You do not own the property – you merely own the right to use the property for a specific period.
Despite not technically being a property owner, you still have countless maintenance fees and expenses to worry about. This can include cleaning fees, appliance maintenance, and so on. You’ll be locked into a lifetime contract, and the only way out is by selling your part of the timeshare.
Why timeshares are terrible investments
If you’re a keen property investor, you can already see why timeshares are awful investments just by looking at the description above. Effectively, you’re not gaining anything from this purchase. There’s a misconception that you’re acquiring an asset for a very cheap price, and then you can sell your shares for a profit.
This won’t happen.
If you buy a timeshare, you’re pretty much committing to a lifetime of vacations to the holiday property. This isn’t necessarily a bad thing, but you’re not going to make any money at all. It’s the exact same as paying to go on a family vacation to the same country or resort every year.
Remember, you are not buying a house, nor are you buying a condo. You are pretty much just buying time. The value of your timeshare will almost always decrease, so if you try to sell your shares it will usually be for a loss. In other words, it does everything you don’t want an investment to do!
Timeshare scams explained
You’ll recall we said that timeshares aren’t technically scams. The big problem is how people perceive timeshares when they approach them. If you’re going into it with the idea of making money from this purchase, then you’ll feel scammed when you start losing money and paying loads every year.
Still, a timeshare isn’t a scam in the same way that a vacation is not a scam. It’s all about knowing what you are getting for your money.
But what about all those reports of people who have been scammed by timeshares?
Nine times out of ten, these scams come from people posing as exit companies. An exit company is a company that will claim to help you get out of your timeshare agreement. They’ll offer a price for your timeshare, so you can sever your ties and be done with this financial commitment. The scam comes when they ask for upfront fees and then bail, never to be seen again.
Also, if you’re ever sold a timeshare with the promise of making money, it’s a clear scam. Most timeshare companies don’t do this and are very clear on exactly what you get from this “investment”.
The right way to invest in vacation properties
It’s ironic that people seek timeshares as investments when there are so many better ways to invest in vacation properties.
The best approach is to find homes for sale in popular vacation destinations. This could be near big lakes, beaches, or close to common holiday resorts. Purchase the property – either alone or as part of an investment group – and then rent it out. You’ll command high rental prices during the most popular vacation seasons and can earn plenty of money from people coming or going.
If you can purchase the property alone, you get the benefit of being able to do whatever you want with it. This means you could stay there for vacations if you like, so it basically functions like a timeshare but with the added benefit of growing in value. Keep up with proper maintenance and make improvements to boost its value further. Adding more amenities or just making it a nice place to be will drive the rental price and help you generate a profit when you sell it later on.
That’s the key with this approach; you can actually sell the whole property at some point and get a huge profit, plus earn a regular source of income through vacation rentals.
The most ironic thing about all of this is that you could use your vacation home as a timeshare! Get other people to buy a share of time in this property and charge the necessary maintenance fees.
Summary: Timeshares are bad vacation property investments
We’ll wrap things up with a few key points. Do not purchase a timeshare if you want a vacation property investment. You will gain nothing from this. Instead, find suitable properties and invest in them, renting them out to vacationers.
The only time a timeshare makes sense to buy is when you or your family visit the same holiday destination every year. If it works out cheaper to buy the timeshare instead of paying for hotels or renting holiday homes, then go for it. Just remember, you’re doing this for fun – it’s a lifelong vacation, not an investment!