Is a Timeshare a Smart Investment?

Depending on where you live, you’re either super familiar with timeshares or they’re some mythical concept, like Narnia-- but you’re sharing the Lion, the Witch and the Wardrobe with six other families.

A timeshare is essentially a particular type of agreement to pay for time in a house. On paper, if you’re signing onto a timeshare, you’re paying for access to the house for X amount of time every year, for Y number of years. And when your time in the house is up, another family moves in to start their X amount of vacation time.

The costs of timeshares are much, much lower than buying a vacation home: because you're sharing time in the house with other people, the costs are split up. Yes, sharing time.

But here’s the thing. A timeshare is not a good investment, because it’s not an investment at all. The whole point of an investment is that you’re planting seed money into an opportunity and hoping it grows. But with a timeshare, there is no chance that you are going to grow the money that you’re spending.

If you know me, you know that I caution against considering house ownership as an “investment” because the housing market is so volatile. But I do concede that if you’re a HGTV guru, you may be able to sell the house for more than your purchase price. Maybe.

In that scenario (unlikely as it is, I’m just saying), home ownership is a good investment because you were able to sledgehammer a wall to “open up the space,” work some feng shui magic, boost the value of the property, put a price tag on the house that’s bigger than what it was when you bought it, and pocket the profit. You planted your seed money, and it grew into a beautiful money garden. Hurray!

But a timeshare does not present that same opportunity because you do not own the house, and so obviously, you can’t sell it. You would have as much right to try and sell your timeshare as you would to try and sell my house… which, hello, I live here, what the hell? And “What the hell?” would be the exact response from the owner if you tried to sell the timeshare.

So even though as a timeshare-r you don’t have the same upsides as a homeowner, you are blessed with a whole lot of the downsides, including being on the hook for some of the property taxes, maintenance costs, and homeowners fees.

And here’s the kicker: timeshare contracts are notoriously difficult to get out of, and the terms are normally decades if not “lifetimes” long. You should be very cautious of contracts like these that feel like they were put together by a Disney witch, because if there’s, gosh I don’t know, say a pandemic-induced-lockdown, and you can’t physically travel to your timeshare for your allotted time? You’re shit out of luck.

Here’s my recommendation. If there is a little slice of heaven-on-earth where you know you’ll be headed every year, and you feel strongly about getting a place there, make your own little DIY timeshare with family or friends. Pool your money together and buy the house outright. You’ll still bear a lighter financial load, but you’ll have more of the benefits of homeownership and not just the sucky parts.

With this arrangement, you can still maybe follow your HGTV dreams, fix ‘er up and sell the property. But didn’t you say you wanted this to be a vacation home? Do you really want to have to be replacing rotten window panes and painting decks?

Last word of caution: in finance, just like sex, don’t get into bed with someone who is untrustworthy or, you know, an asshole. When you think about co-owning a house with your family are you… scared? Excited? All of the above? If living with your parents was tricky when you were a teenager, imagine how much worse it will be when you’re both on the lease. If you and your dad used to bicker about whose turn it was to take the trash out, imagine what it will be like arguing whose turn it is to pay the mortgage.

I know they say sharing is caring but in this case, sparing yourself the headache… is caring.

xo,