Sandy beaches, warm waves and a cool sea breeze are (relatively) easy to come by during the summer, but they're the stuff of wind-blistered midwinter fantasies.
If you'd like to own a little bit of paradise to escape to during the worst of winter, you’re a perfect target for timeshare agents.
Timeshares and vacation clubs tout the opportunity to become a part-owner of a resort (often including access to benefits like scuba diving, horseback riding, wine tastings, etc). The ability to return yearly comes with a certain sense of security; your next vacation is always just around the corner.
Despite the security of a guaranteed vacation, timeshares can be expensive propositions with unforeseen restrictions. So, we ask: Does a timeshare or a vacation club membership ever make sense?
What Is a Timeshare?
Timeshare ownership entails payment of an upfront sum plus yearly maintenance fees. Depending on the timeshare arrangement, owners either own the rights to a specific, fixed week (say, January 1-7 every year) or the rights to a floating arrangement, where you can visit for a week within a period of time each year (say, one week between the months of June and August every year).
Fixed and floating timeshare arrangements can either be deeded or non-deeded (also known as right-to-use). Deeded timeshares are considered real property that can be sold or passed on to the next generation. Non-deeded or right-to-use timeshares function more like leases, where an owner can use the unit for a specified number of years.
What Is a Vacation Club?
Vacation clubs are a newer variation on the timeshare model. Instead of purchasing the rights to a specific unit, as with a timeshare, vacation club "members" pay an upfront sum to purchase a number of "points" which can be redeemed for different vacations each year. Yearly maintenance fees still apply.
The number of points can translate to very different vacations based on the desirability of the resort's location and the time of year. The Marriott Vacation Club, for example, has a three-tiered point system. At the cheapest level, one example of a vacation option is a seven-night stay in a studio in Palm Beach, Florida at any time except during the peak winter season. In contrast, the highest tier of points will give you the opportunity to stay for seven nights in a one-bedroom villa in Oahu, Hawaii at any time during the year.
A Cost-Effective Vacation?
Both timeshares and vacation club memberships limit you in terms of the types of vacation you take—and when you take them. If you are considering a fixed-week timeshare, you need to be willing to commit to the Bahamas the first week of February every year, for example. While vacation club memberships offer more flexibility, you are still restricted by your number of points and are still committed to paying yearly maintenance fees. A normal vacationer might be able to save up over two or three years to afford a particularly luxurious vacation; as a vacation club member, you are tied to the same type of vacation year after year.
Because of the high upfront cost, timeshares and vacation club memberships make the most financial sense in the long term. An example: Let's say you pay $200 a night for a week in a hotel. Over ten years, you would have shelled out $14,000 to take a one-week vacation each year. A timeshare at the same property might cost $8,000 upfront, with annual maintenance fees of $550. After ten years, you'd have paid $13,500—only $500 less than it would have cost you to pay for normal vacations. Over 30 years, however, the timeshare becomes a much better deal: At the end of that period, you'd have paid only $24,500 for your yearly vacations at a timeshare, as compared to $42,000 if staying at the hotel.
Are Timeshares and Vacation Clubs Good Investments?
The Federal Trade Commission warns against buying timeshares as financial investments. Why? The value generally decreases sharply after purchasing. Despite the real estate adage of "Location, location, location," ownership of a timeshare in Mexico or Aruba declines in value over time because of the sheer number of timeshares available as well as the ever-growing number of hotels around the world with timeshare options.
Additionally, hotels and resorts are more desirable when they're first built, and their facilities and amenities are brand-new; they become increasingly less desirable. Simply put, supply exceeds demand, making your investment less valuable over time. In this way, owning a timeshare at a hotel is a little bit like owning a car: You may get a lot of use out of it over the course of twenty years, but it won't be worth much once you try to sell it. Additionally, there's no cap on yearly maintenance fees, so the amount you pay every year will most likely increase.
Rent, Don't Buy
Still, timeshares can be appealing because they provide a home-away-from-home feeling. If you are interested in this sort of set-up, but don't want to commit to a timeshare, take our insider tip: Rent a timeshare.
Here's why: Because the resale value of timeshares is so low, many timeshare owners rent out their units. Renting instead of buying allows you to remain flexible (rather than being married to the same location) while reaping the desirable benefits of a timeshare unit.
Additionally, renting a timeshare property can garner incredible deals: A seven night stay at the luxurious Omni Hotel in Cancun, Mexico will cost you $515 per night for four adults. Renting a timeshare property at the same hotel for the same time period for eight adults only cost $200 per night when LearnVest checked. That's a steep difference!
To find a timeshare to rent, check out Ebay and RedWeek, a site devoted to timeshare rentals. Because you'll be dealing with an individual timeshare or vacation club owner rather than a hotel, be extra cautious to ensure that the deal is legitimate. Call up the hotel ahead of time to verify that the owner in question does, in fact, own a timeshare at the property. Additionally, ask the timeshare owner for references from previous satisfied renters.