The lure of a home away from home in a tropical location on the other side of the world is a great appeal for many, but there are a lot of controversies surrounding the sale of timeshares.
One of the claims which you might hear thrown around by timeshare salespeople is that timeshares will be a good investment.
But is this true? Firstly, it’s best to define exactly how timeshare agreements work?
How timeshares work
When you purchase a timeshare, you only own a portion or ‘share’ of that property and you are only able to access that property for a certain time slot each year.
However, it isn’t just a case of paying for your timeshare and kicking back. You’ll also be required to pay an annual maintenance fee.
While it is technically possible to swap your designated slot for another one, or for a different resort, it’s often not that straightforward, so you might find yourself locked into that same week at that resort every year.
Do they have a strong resale value?
The straightforward answer is no. There are far, far more people trying to sell timeshares than there are wanting to buy them.
This is because the market is flooded with timeshare properties and there are lots of owners who are trying to sell to cut their losses.
According to this article by the Telegraph, 250,000 of the 600,000 Britons who own timeshares want to get rid of theirs.
Much like when purchasing a car, your timeshare will instantly lose a large amount of its value once you purchase it.
This is why you should always be sceptical if you hear a timeshare sales presentation mention that you’ll be able to sell your timeshare on for a profit further down the line as this is simply highly unlikely to be the case.
Timeshare salespeople know this, which is why they’re so keen to sell to you while you’re on holiday and your guard is down.
When you add in the high maintenance fees we mentioned earlier, it becomes increasingly difficult to view a timeshare as a sound investment.
Do I own the property?
While technically you do own a share in the property, this doesn’t give you all the financial advantages that you would have when owning a property.
For example, if you owned your own holiday home abroad, you would be able to rent it out when you’re not using it to generate some more income (potentially quite a lot according to this article from This Is Money!), but because you share a timeshare with so many other people, this isn’t possible.
Essentially, a timeshare is never going to make you money. This doesn’t mean it might not be a good purchase, as you may have many great holidays at the property, but from a purely financial point of view, you won’t be seeing any return.
You’ll usually find that it actually works out a lot cheaper to stay in a hotel once you add up all of the costs of a timeshare.
However, if you do feel that one is right for you, it might be best to rent out one out to begin with.
This allows you to essentially ‘test drive’ the resort and get a feel for what it’s like to own a timeshare.
Once you’re in a timeshare, you could find it very difficult to exit, and even if you do you’ll very rarely recoup your costs, so it’s important to you think long and hard before agreeing to a timeshare.
For more information about the ins and outs of the timeshare market, there are specialist organisations and companies such as the TESS who can offer you expert advice.