Many people have a question when thinking of buying a timeshare. Does it financially make sense or does it make sense at all to buy a timeshare? Well the answer can be both yes or no depending on who is buying and for what purpose it is being bought. In this article we will discuss why it makes sense to buy a timeshare.
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?
This is not an easy question no matter what type of real estate you are thinking of purchasing. For example: If you move every year, does it make sense to buy or rent? The timeshare industry grew because many people starting realizing that they vacation in the same spot in the same year very often and the demand came up to own rather than rent. That is why this is not a small business anymore. Big hotels, resorts, and even cruises are now in this business with approximately two or three million Americans already owning units.
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:
An added benefit with owning is that most of the time you will also get a nicer room plus amenities for your money than a hotel.
An additional benefit is that after you own, you only pay the small maintenance fees every year, much smaller than the cost of a full week rental in a nice hotel. So if you can think of the full rent on a hotel for thirty years being similar to a loan payment for thirty years, then after thirty years you continue to pay the full rent on a hotel where with your ownership after thirty years you only need pay the small maintenance fee.
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.
Still the bottom line is that if you don’t vacation often, it is probably not worth it. If you really enjoy takings vacations, it is definitely worth looking into. If you take vacations in the same spot quite often, then it really is worth looking into. And finally, some timeshare developments now offer an every other year proposal instead of every year, so if you think you may travel to Hawaii every other year, it almost doesn’t make sense not to own a timeshare in Hawaii. I use this last bit from personal experience as that was the logic we used when we purchased our Hawaii timeshare.
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!