Does timeshare constitute an investment?

I came across a very interesting article while doing my research on timeshares sometime ago, and I thought I’ll share it with you. The article is called- Time and Time Again: Buying and Selling Timeshares and Vacation Plans. This article is published on the Better Business Bureau website: http://www.bbb.org/us/article/4786, in cooperation with the Federal Trade Commission. This is an old article, but not much seems to have changed in the timeshare industry since. The second paragraph talks about “You should know that the value of these options (timeshares & vacation ownerships) is in their use as vacation destinations, not as investments.

As a real estate investor myself, I do not consider timeshares as an investment, and here are some of the reasons why:

• No increase in value overtime – Timeshares depreciate, just like any other real estate property (with the exception of land), but unlike real estate, they do not increase in value over time. Even if the property value itself increases, you don’t get a benefit- your resort developers will. And you can never really get the price you paid for it, when you sell it.
  
• Tax Benefit- When you own real estate, for example an investment home and rent it out, you are able to deduct certain expenses related to home improvement, repairs, etc. in your income taxes. Very few deductions are available for a timeshare, and are subject to different conditions, based on whether it is for personal use or business use. Also, deduction of property tax is usually determined based on who is billed for it, and other conditions. In short, you spend all this money, few tax deductions, and there is no equity building.

So, the idea of timeshares really is usage, and not investment. It is supposed to save you time and money in terms of giving you a luxury ‘home away from home’, where you don’t have to spend on maintenance or worry about furnishing it when you want to use it. But, you do pay a pretty big fee for this purpose, right? And you give a down payment to buy it!!

I consider a timeshare to be a contractual agreement and obligation where you agree to commit your money, time, and energy. The only ones making a profit on timeshares are the developers and resellers. Hey, my 2 cents- if you are in love with a destination and want to visit every year, think about buying a second home or an investment property there, and rent it out for the rest of the year!