Top 5 Reasons Timeshares Make Horrible Investments

Timeshares are a popular type of real estate investment. Many people believe that this can be a good form of investment to put your money into. In reality, timeshares make terrible investments. Here are a few reasons that you will want to avoid investing in a timeshare.

1. Time Value of Money

One reason that timeshares make horrible investments is because of the time value of money. With a timeshare, you are essentially paying for your vacation in advance. It is going to take several years of vacationing to equal the purchase price of your timeshare. Many people do not even take advantage of their timeshare once they purchase it. Because of this, you are losing out on the money that you are investing. You could better use the money that you are giving to the timeshare company in other ways. Then, when it is time to take a vacation, you can pay for the vacation out of your own pocket. In the time in between, you could potentially invest the money and make a nice return.

2. Maintenance Fees

Maintenance fees are another reason that timeshares make poor investments. You are going to have to pay regular maintenance fees anytime that you own a timeshare. These fees are going to be collected monthly or annually. Many times, when you are in a timeshare presentation, they downplay the maintenance fees. However, in many cases, these fees can be substantial and they will add up quickly.

3. Depreciating Asset

Another bad thing about timeshares is that they are a depreciating asset. Timeshares do not increase in value like other types of real estate does. Instead, you are actually putting your money into something that is going to be worth less in the future. Anytime that your assets depreciate, you are not making a good investment.

4. Low Rental Rates

Many times, timeshare sellers will tell you that you can rent out your timeshare for a fantastic price. If you could really do this, owning a timeshare might be much more desirable. However, when you get out there and start to try to rent your timeshare, you are going to find that the rental rates are lower than you thought. You might only be able to get a fraction of the money that you thought you were going to be able to get from a renter. 

5. High Interest Rates

When you purchase a timeshare, most of the time you are going to end up financing a portion of the purchase. When you finance the timeshare purchase with the timeshare company, you are going to be paying a very high rate of interest. In most cases, you will pay somewhere between 15 and 20 percent interest. It is going to be very difficult for you to make any money on this investment when you are paying interest rates that are nearly as high as credit card interest.

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