Are timeshares ever a good investment?

Most of us have read or even heard first-hand about timeshare disasters, yet the industry remains a lucrative one; in Australia alone, it’s valued at around $600 million. So, is it ever a good investment? The short answer is ‘no.’

On the surface, it can seem like an affordable way to achieve a dream lifestyle – a holiday home in an exotic location that may not otherwise be within reach. But the reality of timeshares is that they are a poor investment for a number of reasons.

Based on dreams not reality

If you’ve ever been on holidays and dreamt of what it might be like to buy a holiday home in that location, you’re not alone. This is such a common feeling that timeshare operators count on it.

Most of us have been approached on holidays and offered rewards in return for attending a timeshare presentation. This is because operators know you’ll be more likely to get caught up in the hype and make a rash decision while you are in vacation mode. You’re enjoying the destination, the break from work, the time with family and all of these things can combine to create a sense that the timeshare will only extend your happiness.

Many mistakenly believe they are buying cheap holidays for life, however, the dream can quickly turn into a nightmare.

Hidden costs abound

Timeshare programs typically work on a ‘weeks’ or ‘points’ system, whereby you purchase either a certain amount of time or number of points, that allow you to use a holiday property for an allotted period.

As you are essentially a partial owner of the property, there is also usually a set annual maintenance fee that is payable regardless of how much (or how little!) time you spend at the property.

Even when you do book a stay in your allotted time, the operator will often still require you to pay costs, such as housekeeping fees, for the duration, meaning you’re still putting your hand in your pocket, regardless of your status as an ‘owner’.

You’ll be locked-in to a destination

We’ve had clients get caught up in timeshare arrangements before, and they all tell a similar story; often, they enjoyed it at first. But quickly, they began to tire of visiting the same location – they wanted different types of holidays in different locations but felt locked into the same one year in, year out, because they were paying for it regardless.

It can also be difficult to secure time at ‘your’ property at peak times, such as school holidays and Christmas. These are the times when you are more likely to be able to get the family together to make the most of it, but you may find you need to book years in advance.

It’s hard to leave

As a partial owner of the property, it is usually up to you to sell your ‘share’.  And with many people finding the reality quite different from the dream, there are typically far more sellers than buyers. It can be hard to move your share, and even when you don’t use any time, you’ll still be required to pay fees. Some of these fees can be exorbitant, equalling thousands of dollars each year, often locked in by long contracts that legally bind you to continue to pay regardless of your circumstances.

It’s also not uncommon for operators to build in clauses that allow them to make changes to terms and conditions without your approval, potentially impacting your experience, increasing your costs, and making it even harder to leave.

It’s not an investment

Timeshares are often referred to as ‘investments’, but in most cases, they are usually the opposite – money pits. If a timeshare investor had taken the money they spent on the initial investment and the ongoing maintenance costs and invested it in a diverse portfolio, the interest and returns would most likely have paid for an annual holiday – and potentially much more.

In fact, according to Choice, once you take into account all of these costs and limitations, it can take up to 62 years to break even when compared to booking the same accommodation online yourself as a tourist.

Timeshare presentations can often dazzle, selling a lifestyle you think you can’t afford. But the old adage ‘if it seems too good to be true, it probably is’, rings true when it comes to timeshares. It’s simply not an investment in any sense. Your money isn’t working for you, you won’t see a return, and it’s not likely you’ll end up with the lifestyle you were dreaming of either.

General Advice Disclaimer

The information in this blog is provided by Apt Wealth Partners (AFSL 436121 ABN 49 159 583 847) and is of a general nature only. It may not be relevant to your personal needs, objectives or financial circumstances. The circumstances of each investor are different and you should seek advice from a financial planner who can consider if the strategies and products are right for you.