A timeshare is an agreement in which many individuals share the costs of a property. People who buy a timeshare receive a set time they can spend at the property in exchange for covering part of the property’s expenses. Timeshares are most often associated with vacation homes, and typically include condominiums and houses.

Timeshares started in Europe in the early 1960s, when many Europeans couldn’t afford vacation homes. Through these programs, people could own otherwise-unachievable vacation property. They then came to the United States in 1969 — and now, the timeshare industry is worth $10.2 billion, according to the American Resort Development Association (ARDA). 

In 2018, 9.6 million households owned at least one timeshare.

There are two types of timeshare contracts: shared deeded and shared leased.

There are several types of timeshare ownership, but fixed week, floating week, and the points system are the most popular.

Timeshare buyers will encounter two common costs: the upfront purchase price and an annual maintenance fee.

First, you’ll pay the initial purchase price. This can be expensive: The average cost of a timeshare in 2018 was $21,455 — and it’s not easy to finance a timeshare purchase. Most banks won’t lend money for timeshare purchases because timeshare members are not technically buying property. While many timeshare companies offer financing, the interest rates are higher than average.

Expect to pay annual maintenance fees, too, because each individual member is responsible for their share of the property’s maintenance. According to ARDA, the average timeshare maintenance fee in 2018 was $1,000. But maintenance fees increase by 8 percent each year, on average. In other words, after 10 years, your $1,000 annual maintenance fee might turn into an $1,800 annual maintenance fee.

Do the math before buying. How much does a comparable hotel room cost? If you can vacation more affordably without buying into a timeshare, that’s likely the best option. Of course, some networks provide different location options, allowing you to visit Hawaii or Florida or Las Vegas, depending on your mood. Comparing the cost-effectiveness of these programs requires more calculations. 

Timeshares in the U.S. usually cost between $16,000 and $23,000. Even if a buyer can secure a loan, it will likely have a higher-than-average interest rate. Most developers of timeshare properties offer to finance the purchase of a timeshare, but their interest rates they charge are high — often between 12 and 20 percent. Many developers use high-pressure timeshare sales pitches to draw in buyers, which is important to keep in mind before meeting with them.  

Homeowners looking to buy a timeshare can use a home equity loan, which gives homeowners the difference between their property’s assessed value and the balance on their mortgage, up to a certain point. (Most loans won’t allow you to borrow more than 80 percent of your home’s equity.) For example, a homeowner with $60,000 remaining on the mortgage of a $100,000 home can receive a $20,000 home equity loan. Yet there’s risk inherent in home equity loans: the bank can foreclose on your home if you default on your timeshare agreement.

Borrowing from a 401(k) plan is another way to pay for a timeshare. Most people with 401(k) retirement plans can borrow up to 50 percent of their vested balance. If you have a $150,000 401(k), you can take a loan out against your plan for up to $75,000. But borrowing from your 401(k) means less money invested in your retirement savings. Plus, the IRS requires you to pay back the loan within five years.

Are timeshares ever worth it? Typically, no. Buying a timeshare means you’re buying time at a property, not a property itself — and the timeshare resale market is almost nonexistent. In other words, timeshares are not real estate investments. For this reason, timeshares are not suitable investments for real estate investors.

Indeed, owners can usually rent out their time at their property — but they’re often required to work with a rental agent, who charges for their services. The agent fee decreases the likelihood of an owner recouping the cost via timeshare rentals, let alone making a profit from it.

Also, most timeshares depreciate over time. The longer you own a timeshare, the less valuable it becomes. And it’s often difficult to resell a timeshare. In recent years, only about three percent of owners have resold their timeshares.
Real estate investors will earn better returns by pursuing other investment vehicles, such as owning a rental property, house flipping, or investing in a real estate investment trust (REIT). All of these methods will likely produce a higher return on investment than a timeshare.