Timeshare solicitations are commonplace these days. And if not, you can easily get on a call list by just inquiring about one online at a timeshare website. Many people attend these presentations to get the freebies and gift cards, but during these presentations people get some exposure to what a timeshare is and the financial considerations for timeshares. This inevitably results in a common question: does it make sense to buy a timeshare?
The main argument is that owning a timeshare means you now own your vacation property. This is a popular argument amongst many real estate investments which is: do you want to rent? Or do you want to 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.
Timeshare math is like real estate math. Consider this fact you pay rent to stay in a hotel. You pay the rent for staying in a hotel for a week. Just to use a round number, suppose it is $1000 for a week. If you do this for thirty years that would be $30,000. Optionally, you could pay the entire $30,000 up front and have the hotel reserved for you every week for the rest of your life. The difference is in one example you rent, in the other you own. The math of course will be slightly different and one will end up costing more than the other, but when you compare possible ownership you have possible interest in loans if you finance plus maintenance fees which most likely will raise with inflation. On the other hand with hotels, during the course of thirty years the full rent to stay at a hotel for a week will raise with inflation. Taking into account all the math, you may find the costs are fairly close.
And now to weigh some of the benefits:
A 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.
I need to caution that this makes a lot of financial sense if you also know the limitations. The limitation is that you are vacationing in the same spot for a week every year. If you do not take a vacation in the same destination every year for a week, then other factors will come up. You will need to spend time to either rent your unit or exchange your unit to vacation somewhere else.
If you can think of real estate in terms of homes or condos which is something usually more familiar, then this comparison may be quite helpful:
Can you imagine buying a house and not using it? That would be the same as buying a timeshare and not using it. If you buy it, you get value from your investment by using it. However, to contrast, buying a house without using it is common if you plan to rent it. Renting a house, however, is easier since you have ready prospects looking to settle in and you can sign a lease for multiple years. To contrast, buying a timeshare to rent it may prove more difficult as you may have a harder time finding prospects and you would have to repeat this every year. A contrast in favor of timeshares is the exchange program. Once you buy a house, it's hard to fathom the idea of exchanging that house for another for a few months just because you want to live somewhere else. With a timeshare, vacationing in different destinations is common so it may be relatively easy to find like minded vacationers who will exchange their vacation destination for yours for that year.
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.
I hope this has been helpful and given you some good logical thought to whether or not buying a timeshare makes sense to you.
The main argument is that owning a timeshare means you now own your vacation property. This is a popular argument amongst many real estate investments which is: do you want to rent? Or do you want to 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.
Timeshare math is like real estate math. Consider this fact you pay rent to stay in a hotel. You pay the rent for staying in a hotel for a week. Just to use a round number, suppose it is $1000 for a week. If you do this for thirty years that would be $30,000. Optionally, you could pay the entire $30,000 up front and have the hotel reserved for you every week for the rest of your life. The difference is in one example you rent, in the other you own. The math of course will be slightly different and one will end up costing more than the other, but when you compare possible ownership you have possible interest in loans if you finance plus maintenance fees which most likely will raise with inflation. On the other hand with hotels, during the course of thirty years the full rent to stay at a hotel for a week will raise with inflation. Taking into account all the math, you may find the costs are fairly close.
And now to weigh some of the benefits:
A 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.
I need to caution that this makes a lot of financial sense if you also know the limitations. The limitation is that you are vacationing in the same spot for a week every year. If you do not take a vacation in the same destination every year for a week, then other factors will come up. You will need to spend time to either rent your unit or exchange your unit to vacation somewhere else.
If you can think of real estate in terms of homes or condos which is something usually more familiar, then this comparison may be quite helpful:
Can you imagine buying a house and not using it? That would be the same as buying a timeshare and not using it. If you buy it, you get value from your investment by using it. However, to contrast, buying a house without using it is common if you plan to rent it. Renting a house, however, is easier since you have ready prospects looking to settle in and you can sign a lease for multiple years. To contrast, buying a timeshare to rent it may prove more difficult as you may have a harder time finding prospects and you would have to repeat this every year. A contrast in favor of timeshares is the exchange program. Once you buy a house, it's hard to fathom the idea of exchanging that house for another for a few months just because you want to live somewhere else. With a timeshare, vacationing in different destinations is common so it may be relatively easy to find like minded vacationers who will exchange their vacation destination for yours for that year.
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.
I hope this has been helpful and given you some good logical thought to whether or not buying a timeshare makes sense to you.
About the Author:
Looking to find hints on how to buy a timeshare, then visit Emil Yau's Hub Page, a site full of tips and advice related to all things buy a timeshare and more.
No comments:
Post a Comment