Timeshare ownership follows some very predictable patterns, for the majority of Americans who purchase one (or more) properties. First, there is the novelty phase where owners will utilize as much time as they are given. It’s new, and fun, and vacation property owners who are able to, use the opportunity to explore a variety of different resorts, through exchange programs.
Over time however, the novelty tends to wear off for most owners. They either do not have the time, or their lifestyle and financial needs change. Essentially, most owners outgrow their timeshare, or get frustrated by the administrative difficulties involved in managing floating weeks, point allocations, and cash grabs like assessment fees and other service expenses.
If you have thought about canceling your contract, we recommend going through our list of factors and considerations, to help you make the right decision for your family. Will you keep your timeshare? Or is it time to take-action, and get out of your contract for good?
Evaluate the Cost Versus Utility Rate of Your Property
Where are you at, in terms of your phase of ownership? If you are still loving the experience, utilizing all the weeks available, and if you have done a cost accounting that demonstrates you are saving money with your timeshare, that is a good thing. It’s rare, but it is worth keeping if you feel the rates are fair, and you are enjoying use of the resort(s).
What very few people do however, is make a list of the total annual costs of timeshare. How much more are you spending to vacation, using a membership or timeshare contract as a way to subsidize costs?
Here are some factors to consider in your annual cost calculations:
Total cost of membership fees.
Cost of maintenance fees.
Ratio of increase to maintenance fees. How much are they increasing every year? Will your timeshare still be affordable if maintenance fees continue to climb upward?
Cost of flying or traveling to your timeshare, including departure taxes, shuttles and other transportation fees.
Is it actually more affordable to own a timeshare, than to schedule your own vacation, and bargain hunt online for great offers? Do the math and drill down to the actual value that your timeshare represents recreationally, versus cost.
Explore Other Cost Saving Vacation Options
Are there new and better opportunities for you, and your family to travel economically? If you have owned a timeshare for ten or more years, many of the services like Airbnb, or VRBO didn’t exist. It wasn’t easy to find a vacation condo, townhouse or home to rent in high-demand vacation areas, or internationally. Your options were a) own a timeshare or b) rent one or more hotel rooms, to accommodate your family.
A lot has changed, and today more than ever before, there are limitless ways to get a good quality vacation, well under the retail price that consumers pay, booking directly with a hotel or resort. In fact, the direct rental model is so popular, that many big brand timeshares have recently run into problems with their members, for renting suites or timeshares to the general public.
Much the same way as a new luxury vehicle loses approximately 20% of it’s value, the moment you drive it home, timeshares are notoriously famous for losing value quickly. While they are costly to maintain and own over the long-term, our professional opinion is that the only timeshare owners that come close to realizing the full value of a timeshare, are individuals who buy it for $1 on the resale market.
The most coveted and luxurious timeshare resorts, are often new construction or significantly refurbished properties, that have had millions of dollars in renovation. That high-quality resort experience, comes with a heavy price; buying into one can cost you anywhere from $5,000 to more than $50, 000 in an upfront balloon down payment.
The new resort buyers, are the ones who often get stuck in negative equity situations, with their property. The misconception is prevalent; if you had to pay $25,000 to get into the property, you should always be able to find a buyer willing to pay you at least that amount, to transfer the deed or contract. That’s how it works for other non-liquid assets, like cars, or real estate that you actually own, but it is definitely not true for the majority of owners.
Some members who experience financial adversities, are surprised to learn that they cannot sell, transfer or give away their timeshare, while the lease has payments for assessment or maintenance fees owing. If you are one of the lucky few who has a high demand timeshare, you should talk first with your resort about listing it for sale, with their assistance (fees apply). Your resort can also tell you about available inventory in your location and give you an idea about the demand (if any) by inquiring buyers.
Will Your Timeshare Make Other Financial Goals More Difficult?
Unless you are in arrears or behind on your timeshare payments, it is not likely that timeshare ownership will stop you from getting other major purchase owns. Regular payments to your timeshare can actually help you build a positive credit rating, while you are having fun vacationing.
However, where timeshare owners get in trouble (particularly individuals aged 25-40 years), is that the amount that you are spending monthly or annually to your timeshare, is calculated as a financial expense and liability. Whether you are approved for a mortgage, depends on your credit score, but also the gap between what you earn and what you have to pay, as part of your living expenses. And since you don’t actually own the title or property, it doesn’t count as a favorable expense, or one that builds equity. It counts as an expensive lease, in the eyes of most lenders, and an unpredictable expense (thanks to maintenance fees) that can compromise your cash flow, and make you a risky lender, or mortgage holder.
Does Your Timeshare Provide a Tax Benefit That Is ‘Worth It’ Annually?
The United States Internal Revenue Service (IRS) has strict rules about what you can, and cannot claim as an expense or write-off, as a timeshare owner. Frequently, we speak to clients that were unilaterally promised that all timeshare contracts, offered a tax saving advantage. This is a lie, but it is one that is systemically shared as part of the value proposition, in fraudulent high-pressure sales presentations.
Do some timeshares actually provide a tax benefit? Yes, but only under certain circumstances. For instance, in some states like California, property tax is payable by timeshare owners, and the state collects that amount directly. In Florida, timeshare weeks are assessed individually (for owners who have more than one lease), and it is identified separately on the statement from your timeshare. Those taxes are deductible, if they are itemized individually, but not if the timeshare builds those expenses into the maintenance fee.
In cases where the owner has multiple leased properties or weeks, there may be a tax benefit, but it is rarely equal to, or greater than the costs incurred for owning the contracts.
No matter what you are told by a sales representative, maintenance fees are not tax deductible. For tax purposes, they are considered to be improvement or repair expenses that are part of owners, the same way as you would spend to maintain or improve your home, or principal residence.
Only you can decide if you want to continue with your timeshare or seek other options that can be more affordable and convenient, over the long-term. Do your research carefully, and if you think its time to consider parting with your vacation lease, contact us for a free consultation. We’ll answer your questions, explain how timeshare cancellation works, and how we can help.