How the economics of timeshare vacation rentals work, and why they can be a great fit for some individuals.
Topics covered include:
- When were the first timeshares introduced
- What are the different timeshare ownership models
- Why timeshares don’t appreciate but fall in price after purchase
- What are maintenance fees and why do they keep increaseing
- Who is the target market for timeshares and how do timeshare companies market to them
- How timeshare companies make money
- How to sell your existing timeshare
- How to buy a new timeshare
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Welcome to Money For the Rest of Us. This is a personal finance show on money, how it works, how to invest it, and how to live without worrying about it. I’m your host, David Stein. Today is Episode 361. It’s titled How to Buy and Sell a Timeshare Vacation Property.
I recently got an email from a listener who said that he and his wife felt like their purchase of a Timeshare vacation property was one of the worst financial decisions they’ve ever made. He mentioned that he’s met other Timeshare owners that are embarrassed to admit that they bought a Timeshare. Yet, he knows others that have bought and manage and monitor their properties closely. They use them to travel around the Southwest during the wintertime. I’m sort of in the same situation. I can relate to this listener.
We purchased a Timeshare property in Park City, Utah through Marriott Vacation Club back in 2006. It’s been 15 years. There’s been times I thought, “That was a terrible decision.” And yet, there’s other times that we feel like, “Hey, that’s actually worked out really well for us.” I’ve mentioned this Timeshare I bought in earlier episodes, episode 24 and 57.
When I went on the mini vac—and that’s what it’s known as in the industry when you buy a discounted vacation and have to take a tour—I was certain I was not going to buy anything. But they convinced me. And then LaPriel left the room and not only did I buy one week, but they convinced me to buy three weeks.
In this episode, we’re going to look at buying and selling a Timeshare. Is it the worst possible financial decision, or is there economic value there for some individuals, that this fits their lifestyle?
Timeshare Ownership Models
The Timeshare model has been around since the 1960s. It started in the UK as an adaptation of families jointly owning a vacation property. The first Timeshares were developed in the US in the 1970s. This vacation ownership model has been around for over 50 years. Something that’s been around that long can’t be a scam. People have to be finding some value out of it, or they would stop buying them. Or if they were a true scam, regulators would have shut them down.
So let’s look at the economics of Timeshares and whether you should buy one, or sell the one that you already own. There are several models when it comes to Timeshare ownership. The original one, like one that LaPriel and I bought, is a deeded ownership for a specific period of time, in a specific unit. So we own the gold season, which I believe is weeks 24 to 36. We own three weeks within that season at their mountainside resort in Park City, right there on the mountain, Can’t ski in the summer, but one can visit there in the fall and look at the changing Aspens, and we’ve done that. But we own the deed. This is a real estate-like property that we own; there was a closing. Somewhere, I have a copy of the deed.
Marriott and other of the bigger Timeshare companies no longer sell deeds to specific properties. What you buy is beneficial ownership in a trust, and it’s like having a deeded ownership, but the trust owns a number of resort properties, or actually owns weeks at a number of resort properties. So it’s a point-based system; you buy a certain number of points. Now, in our case, we’re able to take the weeks that we own and convert them to points and use those points to stay at other properties around the world, that Marriott Vacation Club owns.
Another model that’s less common is a right-to-use plan. So there’s not deeded ownership. It’s just a contractual obligation. Because most Timeshare vacation rentals are deeded ownership, like any other real estate—if you own an apartment in a house, it passes to the owner’s estate when they die, which is one reason these are so difficult to exit. It’s not easy to exit a house when you buy a house, because you own the deed, and maybe there’s a mortgage, so there’s a lien against that deed.
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