Investing in a timeshare can be a big commitment. On the plus side, you’re guaranteed a place to stay when you go on vacation every year and you might save some money in the process. On the other hand, maintenance fees can be high and in the end you might have a hard time selling the place. Before you make a purchase, it might be a good idea to ask yourself these four questions.
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1. Is a Timeshare Worth the Cost?
A timeshare is a long-term investment. On average, you can expect to shell out $19,000 for a week-long timeshare, plus $500 or more for a yearly maintenance fee that might eventually increase. But that’s not all you’ll have to chip in.
As with any home, you’ll have to factor in taxes and how much you’ll pay for closing costs, evaluations that determine whether you need to replace or repair part of the home and fees for joining an exchange program. As a member of an exchange, you can trade your timeshare for another in a different location within the U.S. or abroad.
It’s important to keep in mind that although you’ll be putting your money into the property, it’s not going to generate revenue like a real estate investment trust or another real estate investment would. In addition, unless you’re able to sell it, you’ll have to continue paying for the timeshare even if you’re fired or laid off. There’s no certainty that your financial situation will look the same or improve in the future.
Many buyers say they’ve felt pressured to quickly sign off on a deal to take advantage of the perks sellers offer. But if you have doubts or second thoughts you should trust your instincts rather than taking a big financial leap.
Related Article: How to Sell a Timeshare
2. Which Type of Timeshare is Best for Me?
Generally, there are two types of timeshares: deeded timeshares and right-to-use timeshares. With a deeded timeshare you (along with others who have purchased units in a property) have ownership over it. You’ll be able to stay in the timeshare for a certain length of time each year and you have the freedom to exchange it, rent it out, sell it or hand it over to your relatives.
Through a right-to-use timeshare, you’re renting out space from a real estate developer. Your rental period could be a set week each year (a fixed interval) or a general time of year, requiring you to choose specific dates before you go on vacation (a floating interval). If you want to, you could reserve time at several places based on the number of points you buy or get a biennial plan so you’re only using the timeshare every other year.
Before you buy one, it’s a good idea to think about who’s going to charge you the lowest price. It might be cheaper to purchase a timeshare directly from an owner than from a timeshare company. In the best-case scenario, you would be allowed to rent out a timeshare temporarily to decide whether you actually want to buy.
3. How Would I Pay for the Timeshare?
Unless you’re in a high income tax bracket or you have incredibly generous relatives, you might need a mortgage loan to cover the cost of a timeshare. If that’s the case, you’ll need to know how much mortgage you can afford.
If you can’t qualify for a second mortgage because your credit isn’t in tip-top shape or you already have too much debt, you could explore other options or wait for a better time to make your purchase.
Related Article: What to Know About Getting a Second Mortgage
4. How Easily Would I Be Able to Sell It?
A timeshare isn’t always easy to get rid of, especially in a buyer’s market. And if you don’t keep up with maintenance on your property, you could have a particularly tough time selling it.
Location matters as well. If you pick an unpopular place to vacation, you might be forced to hold onto your timeshare for a while. Some sites help owners sell their properties, but many of them charge fees for their help.
You’ll also need to look out for scams. Some thieves promise to connect timeshare owners with buyers for a fee. The scammers pocket the fee money but in reality, the potential buyers don’t exist.
A timeshare isn’t a purchase to make on a whim. It’s a property you’ll own for years, so it’s a good idea to ask plenty of questions before committing.
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