My first exposure to the concept of timeshares was in grade school.

I remember being envious of some classmates whose parents whisked them off to visit Cranberry Resort in Collingwood outside of Toronto.  I heard of all the free food and how they spent a free day and night playing by the pools while their parents were in a meeting.

"Free" was the operative word because when you’re a kid, it's the only currency you can work with.

As an adult, the concept of free still couldn’t be more enticing - and it's the pro-bono swag that convinces many to sit through - and potentially buy into - the timeshare sales pitch. Because of this infamous tactic, timeshares - the fractional ownership of a condo, apartment or resort suite - carries a negative connotation for many. But are they ever a good real estate deal?

What is a Timeshare?

Simply put, a timeshare is an agreement to share the costs and use of a cottage, condo or home, or vacation suite with other people.

However, it’s not just a room to sleep in; the idea is more on par with owning an apartment at a resort for the duration of your vacation.

Timeshare agreements can vary, but the main concepts are right-to-use, fee-simple, a point system, or vacation club timeshare. Each type has its own set of rules and costs.

Right-to-use timeshares are contracts to lease a property over a set period of time – often a week or two. Unlike a hotel, you will be responsible for maintenance and assessment fees. Of course, you also have the option of renting, giving away or selling your ownership fraction.

A fee-simple timeshare is similar to buying that property for a specific period. Like right-to-use, you’re responsible for the purchase price, as well as an assessment, maintenance and potentially property taxes.

Timeshare point systems or club memberships allow you to buy points within a resort/condo network, which you can redeem for a stay at any one of the network’s properties for a certain amount of time. This system might even include flights or cruises.

The Cost of Timeshares

Unfortunately, timeshares are not an investment. There’s a very slim chance you will make money from selling your timeshare. Buying a timeshare or into a point system is about spending disposable income, much like renting a vacation home.

Costs can range anywhere from $500 to $40,000 for one week – with the high end being something like Christmastime in Banff, or New Year's Eve in Vegas. It also depends on the time of year with the peak season obviously costing a bit more, much like hotels. Keep in mind that acquiring financing for a timeshare can be a complicated process. You'll likely need to pay upfront with cash, or with a personal loan, rather than taking out a mortgage on the property.

On average, the initial buy-in often falls around $10,000. Purchasing a used timeshare can be cheaper, with prices as low as $1,500.

There are other factors to consider, like annual fees for maintenance, utilities and taxes. Dependent on the season in which you purchase your share, the cost of the annual fee ranges from $300 to $1000. There are also transfer fees and recording fees when the timeshare is sold, not to mention membership fees for joining points plans and the initial cost of getting to your vacation destination.

Here's a breakdown of the average costs

  • One-time purchase price: $2,000 - $10,000
  • One-time transfer fees and closing costs: $575
  • Annual maintenance fees: $600
  • Annual exchange company membership: $100

Are Timeshares Worth It?

Suppose you use the timeshare for five years – provided you don’t mind going to the same location for the same week every year – it will cost you roughly $1,215 annually. Keep in mind that doesn’t include hidden fees specific to timeshare companies or the costs for trading weeks.

Though this may not be a perfect estimation of costs, the price of a timeshare is, for the most part, a case-by-case basis. If you do your research online and really pay attention to what you’re signing off on when you make the purchase – timeshares can be a relatively inexpensive vacation option.

Andrew Seale

Andrew Seale is a freelance writer with an absurdly hyperactive mind and predilection towards the obscure and eclectic. He frequently shares his personal finance experiences and mishaps with TheDot readers but has also been known to profile business leaders ranging from financial savants to bootstrapped entrepreneurs. His work has appeared in the Globe and Mail, Yahoo Canada Finance and News, Profit Magazine, The Toronto Star, Enroute Magazine, and on the back of napkins sometimes tucked into the pockets of strangers. He can be found at whenwedrift.contently.com.

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