Should I Invest in a Timeshare: Are They a Trap?

When you hear about some “opportunities”—reverse mortgages, car leases, quick profit, good debt—you should automatically run away as far and as fast as you can. Here’s another one to add to your flight reflex: timeshares. I know, all the commercials and presentations make timeshares sound like a great investment. But they’re not. They’re a horrible waste of your money.

What Are Timeshares, Exactly?

A timeshare is a vacation property (think really tiny apartment) that you share with other people who have also forked over the big bucks to participate. With the money you “invest,” you get to spend a week (or more) at that property each year. They’re usually found around popular resort spots (think Disney, Mexico, Virgin Islands, etc.). The average timeshare costs approximately $20,000 for about 20 years of use. On top of that, you’ll pay around $650 in maintenance fees every year—even years you don’t use the unit.

It Sounds Good . . .

If the deal sounds good, the sales rep has done a great job. You probably heard things like “investment” and “prime location” and “all the amenities” and a bunch of other jargon. And you probably saw amazing pictures of the property and of people having a delightful time. But that’s all part of the marketing. The timeshare industry is an $8 billion machine, so they know how to pull you in!

But It’s Not Good

You’ll hear lots of garbage about a timeshare being a real estate investment. And that’s what it is—garbage. If you pay $20,000 for a timeshare, it’s immediately worth about $10,000–12,000. That’s a bad investment in my book—and my checking account. An investment is supposed to make money for you.

With a timeshare, you are prepaying your hotel bill—for the next 20 years! And that’s assuming you take a vacation every year and that you want to go to the same place every year. Every stinking year. You’d better love that place. And you’d better hope your entire family loves that place as much as you do. Oh, and forget about selling it. They rank up there with crocheted toilet bowl covers.

After those 20 years, what can you do with that timeshare? Sell it? Nope. Rent it out? Nope. Your contract just expired. You have zero equity built up. Money gone with nothing to show for it but pictures and cheap souvenirs you unloaded at a white elephant Christmas party.

The Alternative

If you kept your money in a mutual fund that earned you 10% over 10 years, you’d have over $50,000. Keep it in there for 20 years and you’d top $130,000. If you stick to your retirement dream and leave that money alone for 40 years, you’d have over $900,000. That’s a lot of money! Now imagine adding that with all of the other money you’ve saved for retirement in those 40 years. You could go anywhere you wanted—no strings attached!

Now do you see why timeshares are just a terrible, horrible, no good, very bad idea?

If You’ve Already Been Caught

If a sales rep has already hooked you into a timeshare, my advice is to get out of your timeshare—as soon as possible. It’s better to cut your losses now and recoup some of the money. Don’t live with this mistake for the next 20 years.

Let me be clear: You’re going to lose money on this deal. Timeshares lose value quicker than cars. The goal isn’t a profit. The goal is freedom from the noose of the property itself, the annual fees and upkeep, and the blackout dates. And the list goes on.