Advantages of Owning a Vacation Home Instead of a Timeshare

One of the questions we get asked frequently, is whether a timeshare is a “good investment” for consumers.  Our clients are promised many things when they were initially sold their timeshare, and one of the most misleading statements they hear, is that the timeshare is an investment.   How can it be an investment, if it is something you can never own outright like a vacation home?

It is not until someone tries to cash-in on the ‘investment’ of their timeshare property, that they realize how little the marketplace values timeshares.  They are not an asset that accumulates in value over time, they are a financial liability, the same as leasing an SUV.   So why do so many timeshare owners think that it is more affordable than owning a vacation home?   It’s not, but finding an affordable vacation investment takes some strategic planning.

Why Timeshares Are So Appealing

If you are paying for something, chances are you will use it, because you want to get value from the money you are spending.  For people who want to travel, and enjoy leisure time with their friends or family, owning a timeshare conceptually works; they hope to maximize the use of the timeshare to guarantee that they have a place to go for their vacation.

The problem with this line of reasoning is that human nature steps in.  Many people also pay for gym memberships monthly, that they never use.  The intention is a good one, but many surveys demonstrate that with timeshare owners, after several years of sporadic use, the timeshare becomes a monthly expense that offers no value or appeal.  They either become bored with the resort, or they become frustrated with the red tape and restrictions involved in trading their weeks for other vacation locations.   It’s never quite as easy as timeshare sales teams make it sound, when you buy your timeshare.

When you think objectively about a timeshare opportunity, you can position it as a long-term lease with no options.  Many of our clients have told us that when they attempted to trade weeks, they were told that they couldn’t, unless they bought more points.  What timeshare owners are promised versus what they realize as a benefit from their timeshare are night and day; over time, it becomes apparent that in most cases, remaining in a timeshare agreement is a one-sided deal that costs more money over time.

Unlike other countries, American’s are less likely to book their vacation time and use it, on an annual basis.  According to one study reported by MarketWatch,  55% of Americans do not take 100% of their allowed vacation time every year. The number of Americans who are bypassing their vacation time is also increasing; 43% of Americans surveyed in 2013 were leaving vacation days unused.   The survey was conducted by Google Consumer Services for, and polled 15,725 residents over the age of 21 in the United States.

Just because you own a timeshare, does not guarantee that you will use it.  And when you consider the fact that after paying into a timeshare for ten or twenty years, you figuratively own nothing but a binding lease and the use of a few weeks of resort accommodation, you can see why many Americans are rethinking the opportunity.

Tiny Homes Are Trending as Vacation Home Alternatives

One of the reasons that consumers look at timeshare ownership, versus the opportunity to own their own vacation home is naturally cost.  The best destinations (the ones that you want to spend by the beach) are naturally the most expensive places to buy a home.   Buying and paying for a principal residence is hard enough, but doubling your bills for two homes? That’s beyond the budget of most American households.

If you have every watched the show “Tiny Home Living” you know that opting for an affordable vacation home can mean going smaller.  A unit of under 500 square feet defines a tiny home, and some couples and millennials without children have made the move to invest in a vacation home that they can affordably own.  After all, when you are on vacation, you aren’t prioritizing inside time, when you can be exploring and having fun outside.

Breaking down the cost comparison between owning a full-size vacation home or other mobile dwelling versus a tiny home:

  • The average cost of a home in the United States is $188,900
  • The average cost of a full-sized fifth-wheel RV is $122,715 (including truck)
  • The average cost of a tiny home is $30,000 to $80,000

Source: Web 2017 Tiny House Giant Journey

It’s one affordable option for families or young couples who want to have a place to escape to.  Many tiny homes are also off the grid, which means they do not chalk up extensive utility bills, and since they are moveable and small dwellings, property and municipal taxes also tend to stay small.

Split Ownership of a Vacation Home

Millennial consumers may be the most financially savvy Americans, when it comes to balancing the lifestyle they want, with the budget they can afford.  The sharing economy has been adopted by many millennials who believe it is smarter to share, or borrow something you need, than get locked into a long-term contract that is high on cost and low on options.

If you have family members or friends who are responsible, and willing to share the expense and investment of buying a small vacation home, it can be a fun and affordable opportunity.  This practice is gaining momentum, and offers all the same opportunities that a timeshare does, but with the advantage of owning (and paying off) an asset.    If one or more co-owners want to sell, naturally the profit from the property will be split two, or four ways, but in general it is like setting up your own personal timeshare (with people you trust), without the added red-tape, administrative costs and restrictions.

If you are adventurous, you don’t even have to buy a vacation home in the United States.  Many tropical and foreign countries offer great deals starting from $50,000 on vacation condominiums at resorts.  Check with an accountant first about tax implications for foreign owned properties, but for most people, it is an affordable opportunity to own a vacation home you will use, and invest your payments in an asset that should appreciate over time.

If you are saving to buy a house, remember that a property that is owned can be used as collateral also, to increase your down payment on a principal residence, without appearing like a debt or financial obligation (timeshare payments) that can reduce the amount of mortgage you may be eligible for.  And if you are a senior, consider that a small vacation home can also be deeded to children or grandchildren to inherit a lifetime of memories, instead of years of maintenance and membership fees for a timeshare.