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Welcome to the “2-Minute Money Manager,” a short video feature answering money questions submitted by readers and viewers.
Today’s question is about time-shares; specifically, if it’s ever possible to get a good deal on one of these much-maligned vacation pads.
I’d bet time-shares are the source of more questions I’ve gotten over the years than any other. I can’t count the number of emails I’ve received from desperate owners looking to unload. That alone will provide a hint as to my opinion of these things.
Watch the following video, and you’ll pick up some valuable info. Or, if you prefer, scroll down to read the full transcript and find out what I said.
You also can learn how to send in a question of your own below.
For more information, check out “What You Need to Know About Buying or Selling a Time-Share Property” and “Ask Stacy: How Can I Get Out of My Time-Share Without Being Robbed?” You can also go to the search at the top of this page, put in the word “time-share” or “timeshare” and find plenty of information on just about everything relating to this topic.
Got a question of your own to ask? Scroll down past the transcript.
Don’t want to watch? Here’s what I said in the video
Hello, and welcome to your “2-Minute Money Manager.” I’m your host, Stacy Johnson, and this answer is brought to you by MoneyTalksNews.com, serving up the best in personal finance news and advice since 1991.
Today’s question comes to us from Sam:
“Regarding time-shares, is there ever a good deal on a time-share, making the purchase a wise decision?”
It seems Sam has been following my columns on time-shares over the years and knows I’m no fan. I’ve had many, many people contact me and say, “What do I do? I can’t get out of this thing!”
It’s no wonder. Time-shares are typically overpriced and sold in a high-pressure environment to people who can’t afford them. Then, when it’s time to get out, they can’t.
Back to Sam’s question. I’ve got three things for you, Sam.
Thing No. 1: The types of time-shares
Let’s understand the two basic types of time-shares. First, there’s a deeded time-share. It’s real estate; real property you can pass down to your heirs.
More common these days, though, are vacation interval plans, points that can be used at a variety of properties on a variety of dates. These aren’t technically real property; they’re personal property.
Thing No. 2: Not an investment
Whichever kind of time-share you choose, they are not — repeat, “not” — an investment.
Allow me to read to you from the Federal Trade Commission (FTC) website:
The value of [timeshares] is in their use as a vacation destination, not an investment. Because so many timeshares and vacation interval plans are available, the resale value of yours is likely to be a good deal lower than what you paid.
So let’s get this straight: Time-shares are not a way to make money. In fact, they’re not a way to break even. Sure, they’re a way for you to vacation with your family. But don’t ever consider this an investment, because it certainly is not one.
Thing No. 3: Never buy ‘new’
If you’re going to buy a time-share, buy it on the secondary market. You’ll be amazed at the number of people out there who will literally give you their time-share for nothing.
Why? Because they want to get out from under giant annual maintenance fees. After purchasing a time-share, you could easily be on the hook for a $1,000 a year in maintenance fees, whether you use your time-share or not. Some people can’t afford that anymore, or they simply don’t want to do it anymore. They just want out.
Another tip: If you do get a time-share, for God’s sake, don’t borrow money to do it. That’s likely to make it virtually impossible for you to sell it, unless you pay off the loan first.
Of course, as with anything in life, there are going to be exceptions. So don’t send me hate mail if you happen to own one. There’s probably a time-share somewhere that people are clamoring to buy on the secondary market, or one that’s gone up in value. But in my experience, it’s super, super rare. Therefore, always buy on the secondary market and don’t ever borrow to buy.
Bottom line: If you buy a time-share, plan on keeping it, and paying the maintenance fees on it, for many years to come. Because I can assure you, that’s exactly what you’ll be doing.
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The questions I’m likeliest to answer are those that will interest other readers. In other words, don’t ask for super-specific advice that applies only to you. And if I don’t get to your question, promise not to hate me. I do my best, but I get a lot more questions than I have time to answer.
I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.
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