If you attend a timeshare presentation, you will be pitched
on how great a value timeshare ownership is. You will be shown how you can
lock-in the cost of your vacations, and how you can use your ownership to
travel the world, and you can stay at exotic places. You will likely be offered
nice gifts such as tickets, free vacations, cash, or other valuables just to
listen to the opportunities that are available. You might even be told you are
not being sold to, but that you are getting access to a unique opportunity that
might save you countless dollars on your vacations!
Regardless of what is said to you, the question of whether a
timeshare is a good value is relatively easy to answer. Before buying you
should make sure you know the answer to this question
Attending a timeshare presentation can earn you cheaper vacations, money, tickets, and other items. In a separate article, I present tips that include questions to ask if you choose to attend a timeshare presentation. In this article, I’m going to focus on one area only – the value of a timeshare financially. Do the savings add up? With this focus, I hope to help you understand if the opportunity being offered truly is as good as what is being said.
Here are the important areas to consider regarding
financials for a timeshare:
- Upfront cost
- Maintenance and other fees
- Special Assessments fees
- Timeshare Exchange Fees
It is important to understand each of these costs as
ultimately if you buy a timeshare you could end up paying each of them.
Timeshare Upfront Costs
When you ‘buy a timeshare’ you are generally buying a
specific week in a specific location at a specific resort. You might be offered
to buy points, but roughly speaking, those points add up to what it takes to
obtain a week at a specific time within a specific location at a specific
resort. Whether you are pitched a week or points, both are generally sold with
the flexibility to be used at different times within the resort, the resort
chain, or even outside of the resort. In many cases, you are also told you can
use what you are buying for other products such as car rentals, cruises, hotels
stays, and more.
When you buy, you are often offered a specific unit size
that can range from a studio to numerous bedrooms. In the most recent presentation
that I attended at a Westgate resort, I was pitched a standard 2-bedroom unit
during the most popular time at the resort, the peak time. While I was told the
rates would be going up (“due to demand”), I could still get the current rate
(standard sales pitch is that rates are going up, units are about sold out, and
you don’t want to miss the deal). The rate was roughly $50,000 for a
two-bedroom unit for a week at the resort.
That $50,000 let me own that week, “just like” I own the
home I live in.
Of course, if you don’t jump on an initial offer, there is
generally a better deal that is available. When I didn’t jump on the $50,000
price at Westgate, I was informed they just had an owner upgrade to a high-end
unit, so there was a unit that had been partially paid for. I could have their
equity and get a similar 2-bedroom unit to what they had just offered, but for
just around $29,500! It was my lucky day!
Of course, this type of discount is standard. Just like
buying a car from most automotive dealers, the first price is not the price you
should accept or pay.
Financing will also be offered on this $29,500. I believe
the payments would be roughly $165 a month, spread over about 15 years. For the
sake of keeping numbers simple, that number doesn’t really take into account
interest, so the payment would actually be higher depending on the financing.
Buying this unit would allow me to lock in the ability to
take a week vacation each year. The pitch tells you that you are buying today,
so you are locking in your ownership at today’s price. Let’s assume that you
are 40 to 50, then this means you could be using the unit for over 30 years and
thus over 30 vacations. By buying the unit, you’d lock your vacation cost at
(roughly) $1,000 per year ($29,500/30). If you consider inflation and the
changing value of the dollar, then, overall, this sounds like a good deal since
it indicates you’ve locked in cost of your vacations!
Timeshare Maintenance Fees
In the presentation, they might tell you about other fees.
The big one is the maintenance fees. In addition to the up-front cost, you’ll
be charged an annual fee. These are often presented as a simple Homeowner’s (HOA)
fee. This charge will be to maintain and cover your week’s use of things
ranging from electricity, water, and cable, as well as cover the cost of house
cleaning and more. It will also be your share of the cost to maintain the
grounds and any amenities.
There will be other fees included in your annual assessment
as well. When buying a timeshare, it is critical to ask what fees are charged
and to get a clear understanding all the fees. For the unit above, I was told
the current maintenance fees were roughly $800 a year. When I asked if this
included property taxes, I was told that was “roughly $20 more”. That wasn’t
included in the maintenance fees. As a note, $20 property taxes on a 2-bedroom
timeshare seems unrealistically low to me. My timeshare property taxes are over
$100 a year for a unit in Orlando.
There are a number of other line items that might be added to
your maintenance bill beyond the base maintenance or HOA fee and property
taxes. This can include management services to pay for the people who are
booking your week and billing you for your annual fees. There can be resort
fees that are charged by the owning organization (often a hotel chain).
There can also be reserve fees, which are fees that are
charged to use for unexpected or planned updates. This can be for something
such as a new roof, painting, or replacement of furniture and items in the
resort unit. As a partial owner of the property, you are also responsible for such
things as new paint, furniture, dishes, pool maintenance, and more. You don’t
have to directly deal with these, but rather will pay fees to cover the costs. There
can be numerous other fees. The following is an example of fees charged at a
resort in Orlando. These don’t include the property taxes or standard reserve
fees, which would be in addition to these:
- Housekeeping & Rooms
- Administrative & General
- Financial Services
- Technology Services
- Annual Audit
- Security & Activities
- Reserve for Bad Debt
- Repairs & Maintenance
- Utilities (Electricity, Gas, Water, Sewer &
- Cable Television
- Internet Access
- Income Taxes
- Personal Property Taxes
- Fees to Division of Land Sales
- Management Fees
- Vacation Club Dues
- Maintenance Association
When fees are all added together, a 2-bedroom unit is likely
to average between $700 and $1200 a year. If you purchase in high-demand areas,
there are resorts that have fees as high as $3,000 a year. Note that these fees
are required to be paid each year you own, or you could lose your unit.
The following are examples of annual maintenance fees (based
on listings from Redweek.com):
- Grand Pacific Palisades Resort (Carlsbad, CA) –
2 bed / 2 bath – $1278
- Hilton Grand Vacation Club at Paradise (Las
Vegas, NV) – 2 bed / 2 bath – $969
- Discovery Beach Resort (Cocoa Beach, FL) – 2 bed
/ 2 bath – $$1849
- Grand Timber Lodge (Breckenridge, CO) – 2 bed /
2 bath – $1148
- Marriott’s Newport Coast Villas (Newport Coast,
CA) – 2 bed / 2 bath – $1300
- The Westin Kaanpali Ocean Resort Villas North
(Lahaina, Hawaii) – 2 bed / 2 bath – $2693
- Lake Condominiums at Big Sky (Big Sky, Montana)
– 2 bed / 2 bath – $744
- Marriott’s Ocean Watch Villas at Grande Dunes
(Myrtle Beach, SC) – 2 bed / 2 bath – $1400
- Harbor Ridge (Southwest Harbor, Maine) – 2 bed /
2.5 bath – $570
- Sheraton Vista Villages (Orlando, FL) – 2 bed /
2 bath – $1516
Timeshare Special Assessment Fees
A fee that most people are surprised by is the special
assessment fee. Most timeshare contracts will include the ability to charge
owners for special assessments. Just like with a home, there are big updates
that need to happen at times. This can be a simple modernization of what you
own to big-ticket items like a new roof. Timeshare salespeople are unlikely to
mention that after 10 or 15 years, that new unit you bought isn’t going to be
as new. To do an upgrade could require more money than was collected via the
reserve fees that were withheld each year. When this happens, a special
assessment can be charged. This is a fee you are required to pay within a given
period of time, or risk losing your time share.
As an example, I have a two-bedroom unit that after 15 years
was being modernized with new televisions, updated granite countertops, and other
improvements. A special assessment fee of roughly $3,000 was done with the
expectation of it being paid over 2 years ($1,500 a year).
If this were to happen every 15 years, that would add $6,000
to the cost of owning the unit for 30 years. This equates to another $200 a
Timeshare Exchange Fees
If you plan to go to the resort where you purchased your
timeshare every year, then you can ignore this section. Most timeshare
presentations; however, rave about how you can trade your week and go to exotic
places all over the world! If you do plan to exchange, then there are
additional costs involved.
Exchanging can happen at multiple levels. You can exchange
within the network for the resort you own, or you can exchange with one of the
world-wide exchange companies. There are basically two world-wide exchange
companies that most people use, Resort Condominiums International (RCI) and
Interval International (II).
If your timeshare resort has their own network, then those
fees are likely to be included in your annual maintenance fees. Many smaller
resorts will use RCI and II for exchanging. Additionally, if you want more
options, then you’ll also tend to use RCI or II.
While you could belong to both RCI and II, they each have an
annual subscription price. To exchange you must be a subscriber. For RCI, the
current price starts at $99 a year for weekly ownership ($124 a year for points
owners). The average annual price can go down if you subscribe to multiple
years at once. If you want added benefits including better trading, you can
subscribe to gold or platinum membership levels. Gold increases the price by
$49 a year and platinum increases it by $89 a year. For Interval International,
the prices are similar to RCI including the gold and platinum levels.
In short, to have the option to exchange, you need to add roughly
$99 a year to your timeshare ownership costs.
Once you’ve become a member of RCI or II, you then can
exchange. Assuming you find a unit to trade for, you will be assessed an additional
exchange fee. Note that finding a unit you want is not as easy as implied by
those selling timeshares.
Exchange fees can vary based on a couple of factors, and
over time they increase in the same way maintenance, property tax, and other
fees increase. Overall, the average is close to $200 to make an exchange. If
you use Interval International, then some exchanges are cheaper if you own at a
Sheraton or Marriott resort. Sheraton owns Interval International, and Sheraton
and Marriott recently combined some business.
There are additional fees that are optional when exchanging.
These can include trip insurance in case something goes wrong. You can also buy
the ability to change your exchange. Generally, 24 hours after you exchange,
you are stuck with the trade. The exchange companies will sell you the ability
to re-trade. This can add roughly $50 to $60 dollars to your costs.
If you have a unit that breaks can be broken into pieces
either by the bedrooms (called a lock-off) or by using only a few of your days
at a time, then you pay the exchange fee for each individual exchange. The
subscription fee is one time per year regardless of the number of weeks you
Pulling it all together: Is a Timeshare Worth the Cost?
If you pull all the numbers that have been mentioned in this
article together, then you you’ll see the following annual costs for a
2-bedroom unit if you consider a 30-year value:
- Upfront cost: $1000
- Maintenance fees: $1000
- Special Assessment Average: $200
Total cost to own: $2,200 a year. This equates to over $310
If you also subscribe to an exchange company and use the
exchange, then you need to add the following:
- Base subscription: $100
- Exchange fee:
Adding this to the other costs puts you at $2,500 a year, or
over $350 a night.
At $2500 a week or $350 a night, you can rent at most
resorts. If you know a person that has a timeshare and belongs to RCI or II,
they can rent resort units for a lot less than that for you. There are often
times when the rental prices through the exchange companies are lower than the
total annual maintenance fees for the units. Even checking on travel sites can
turn up units and specials that are substantially cheaper to rent than own.
While timeshare presentations will pitch the idea of locking
in the cost of your future vacations at today’s dollars, it is important to
realize that this is not completely true. The maintenance, property tax, exchange,
and other fees will continue to increase. The average increases many of these
fees can easily exceed inflation. Thus, you are only locking in your commitment
to pay for your vacation, not the cost of the vacation.
You can also get a good idea of the value of timeshare
ownership by reviewing the number of units available for resale and their price.
Many units are for sale online and through timeshare resell businesses. These
can often be purchased at a fraction of the cost of buying directly from the
resorts, with reports of units available for a penny not being uncommon. The
price paid at resorts for a timeshare are generally the highest prices, even
In short, don’t be fooled by the numbers the timeshare
people bombard you with. Ask your resort if they will buy back your unit or
what the resell value is. That also will help you understand the value. In the
meantime, enjoy the presentations if you think the tickets, cash, or other
offers are worth your time. Just remember that if you don’t say “no”, you
should make sure you know the real total cost.
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Note: Numbers are based on the time this article was written and are subject to change. There is variability in how timeshares are presented and sold; however, in general the information provided here applies. In some cases, timeshares are sold for a set number of years (such as 20) instead of for life. The math and numbers, however, would still be similar.