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It's Your Money  

Don't buy a timeshare

While away on vacation this winter, you might be approached by a salesperson offering to sell you a little piece of the paradise that you’re currently enjoying. The vacation is probably going great and you are instantly excited about the idea of making this an annual tradition.  

The offer sounds simply too good to pass up right? Let me guess, the “special offer” is good for today only, too?  

No matter what the salesperson calls this wonderful investment opportunity, the real name of what they’re trying to sell you is a timeshare and for 99 out of 100 times, the answer should be no. Yes there are certain people who can make a timeshare work but understand that they are very few and far between and I’d like to tell you why you shouldn’t get sucked into one of these disasters.  

The single biggest risk most timeshare purchasers face is their lack of liquidity. There are hundreds of thousands of people trying to get rid of timeshares and prospective buyers are limited. The timeshare salesperson may tell you that you can sell your “investment” easily and likely for a profit but this is simply not true. Go on eBay and see how many timeshares are for sale for $1 or even how many people are willing to pay you to take the financial burden off their hands for good.  

The second biggest risk is the cost of ownership – something that you are potentially locked into for life. Your timeshare could cost you $1,000+ per year in maintenance fees in addition to the annual fees for your week. These costs have no future cap so they can keep going up each year and you are obligated to pay them, even if you don’t use your week at all.  

These annual fees are a big part of why many timeshare owners are so eager to get out of their unit and are willing to take a loss to do so. People realize that they would rather pay someone $10,000 now to take the disaster off their hands instead of being on the hook for $3,500 per year for the next couple of decades.     

With such a large number of desperate sellers out there, there is an equally large group of scam artists or semi-legit companies willing to extort more money from you with false promises of selling the timeshare on your behalf. These scams only add to most sellers financial woes and make the resale market that much harder to navigate.  

Timeshare salespeople may try to convince you that it will be very easy to rent out weeks that you don’t use and that you can turn a profit doing so. Most likely, this will again not be the case. Finding willing renters may be much harder than expected and there could be rental restrictions buried in the fine print. Any damages caused by the renters will be coming out of your pocket, which could put you even further behind.

Even if things all work out, are you really farther ahead financially? Let’s assume you buy a timeshare week for $10,000 and somehow manage to sell it down the road for $5,000. You still have to pay the fees each year and could be hit with a special assessment at any time. 

You may pay $1,500 a year to book a week in “your” resort that general public can book online for $1,299. In addition, your lost opportunity costs of investing that $10,000 elsewhere and earning interest will further compound your balance sheet. When you run the numbers, the whole ordeal ends up costing you a whole lot more.  

If all of the above is not enough to dissuade you, take some time to visit a few online timeshare owner forums and talk to some people who got caught up in the timeshare world. There is a never-ending supply of sad stories of people’s finances that have been severely damaged by timeshare “investments.”

If you have far more money than you can ever spend and you still like the idea of a timeshare, I guess go ahead and buy one. For everyone else that wants to live a happy retirement with low stress, skip the timeshares and book vacations on your own terms.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

Brett Millard is vice-president and a member of the executive leadership team at FP Canada, the national professional body for the financial planning industry. A not-for-profit organization, FP Canada works in the public interest to foster better financial health for all Canadians by leading the advancement of professional financial planning in Canada. 

He has worked in the financial advice industry for more than 15 years and is designated as a chartered investment manager (CIM) and is a certified financial planner (CFP).

He has written a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges they face in every stage of life. Enhancing the financial literacy of Canadian consumers is a top priority for Brett and his ongoing efforts as a finance writer focus on that initiative. 

Please let Brett know if you have any topics you’d like him to cover in future columns ,or if you’d like a referral to a qualified CFP professional in your area, by emailing him at [email protected].

 



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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