Timeshares are often thought of as very luxurious and accommodating vacations. Timeshare salespeople make the pitch the vacation can even end up costing you less than traditional hotel vacations. Let's take a look at the state of the timeshare industry.
Despite how wonderful these luxurious vacations are, the COVID-19-induced recession led many timeshare owners to try and find a way out of their timeshares. Fewer people were traveling.
Fortunately travel demand and volume have returned. And in 2023, flights and hotels are bustling and often at full capacity.
The Pandemic Was Crippling To The Timeshare Industry
During the pandemic, the huge demand from existing timeshare owners to sell their timeshares resulted in a few troubling problems. The main problem was with all of the supply of used timeshares there was little-to-no demand to purchase a used timeshare on the resale market.
This resulted in many timeshares being listed on popular e-commerce sites like eBay and Amazon for as little as $1. These listings were basically a last ditch effort to get out of the timeshare contract.
Overall, I don't think buying a timeshare is a good idea. The cost to own a timeshare will likely far outweigh your actual use of it.
The same goes for buying a vacation property. Most people will be better off just renting a place instead. The timeshare industry is not very strong.
Timeshare Industry: Almost Bought A Timeshare Due To Aggressive Sales
Back in 2006, I remember being *so* close to buying my own time share. I was vacationing on the North Shore of Kauai, when I got the hard sell of buying a Princeville timeshare. They threw in a free nights stay and a lovely buffet dinner for two. In exchange, we had to sit in a 2-hour timeshare session.
The pitch was simply that for $20,000, I would own 2.5 weeks of time at a luxurious 2bedroom, 2 bathroom condo. The condo is in one of the finest resorts in Hawaii. I was at the top of the “timeshare pyramid” they told me. If you're at the top, you can trade in your time in Kauai for any other timeshare in their portfolio. Not bad, I thought to myself, and oh how tempted I was.
One of the big reasons why it's so difficult to get out of a timeshare, aside from the oversupply of used timeshares, is because of the costs of ownership involved in timeshares and the length of contract. I had to pay a monthly maintenance fee for my timeshare in the hundreds of dollars, without being there. I thought that was slightly odd.
Read The Timeshare Contract Carefully
Timeshare contracts are written to be very iron-clad. They can be extremely difficult to get out of. It is often joked about that even death will not get rid of your timeshare as it will pass on to your heirs.
On top of very long term contracts, timeshares also involve something called maintenance fees and special assessments. Every timeshare has some sort of maintenance fee. It is basically the cost of ownership once the initial purchase price is paid off.
On top of the maintenance fees you may also be charged a special assessment for any unexpected damages.
All these fees can quickly add up. Be careful. Ask what these fees are if you must buy a timeshare.
Solutions To Getting Out Of A Timeshare Contract
When times are tough and there's a lot of difficulty involved in getting out of a timeshare contract, owners may resort to using timeshare relief services like those found at Transfer America.
Companies like these may provide a guaranteed exit solution. But while you will not receive payment for your timeshare, you will have the peace of mind knowing you will no longer be responsible for the financial timeshare obligations. It's all about cash flow when you get into financial difficulty.
Getting out with a timeshare relief company may help. It will also allow you to avoid being taken advantage of by unscrupulous listing or resale companies.
The charge for using such services is very dependent upon your specific timeshare situation. The list of accepted timeshares can change frequently during times of financial distress.
If you're thinking about buying a time share, there's more to consider than just finding a good deal. The ongoing expenses can often make owning a timeshare not worth it.
Instead of buying a timeshare, you’re likely better off renting or buying a vacation rental in a strong tourist market.
I’m bullish on the housing market for the next several years. However, to benefit from the investment upside, buying a timeshare is not the way.
Wealth Building Recommendations
Explore real estate crowdsourcing opportunities. Instead of buying a timeshare, invest in real estate passively to earn money. Take a look at Fundrise, one of the largest real estate crowdsourcing companies today. Fundrise invests in residential and industrial real estate in the Sunbelt, where valuations are lower and yields are higher.
Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments. You don't need leverage. Further, you can invest in different parts of the country.
For example, cap rates are around 3% in San Francisco and New York City. However, they over 10% in the Midwest if you're looking for strictly investing income returns.
I’ve personally invested $810,000 in real estate crowdfunding since 2016 to diversify and earn income possibly.
Invest In Private Growth Companies
Finally, instead of buying a timeshare, consider diversifying into private growth companies through an open venture capital fund. Companies are staying private for longer, as a result, more gains are accruing to private company investors. Finding the next Google or Apple before going public can be a life-changing investment.
Check out the Innovation Fund, which invests in the following five sectors:
- Artificial Intelligence & Machine Learning
- Modern Data Infrastructure
- Development Operations (DevOps)
- Financial Technology (FinTech)
- Real Estate & Property Technology (PropTech)
Roughly 35% of the Innovation Fund is invested in artificial intelligence, which I'm extremely bullish about. In 20 years, I don't want my kids wondering why I didn't invest in AI or work in AI!
The investment minimum is also only $10. Most venture capital funds have a $250,000+ minimum. In addition, you can see what the Innovation Fund is holding before deciding to invest and how much. Traditional venture capital funds require capital commitment first and then hope the general partners will find great investments.
The State Of The Timeshare Industry is a FinancialSamurai.com original post.
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