When you hear the word timeshare, you probably think: bad investment, can’t sell them, high fees, low flexibility, outdated. And many more, I’m sure. They’ve made a few people very rich (the guy behind Westgate Resorts) and also infamous (same Westgate guy, who tried to build the greatest mansion in the world in Orlando and it went so bad Hollywood made a documentary out of it).

Is a Timeshare a Good Investment?

We recently took advantage of a timeshare offer from SPG’s Vistana Vacations to spend 4 nights in Los Cabos, Mexico at their Westin Los Cabos resort, and attended the obligatory 2-hour presentation by a friendly and charming salesperson. Dare I say that it was actually a very pleasant 2 hours, as shocking as that might sound, but maybe we were just lucky to talk to such a vibrant individual who clearly enjoyed conversing about the world. After hearing the proposal, we said it wasn’t for us, but I was inspired to examine the issue from the financial side of things in an objective and detailed way, and this post is the result. Please note that all the numbers you will see here are real and not imagined. I want to make this as transparent and accurate as possible, so I will not fudge any of the numbers we saw on the offer sheet.

I will present the offer we received and discuss the following:

1. Buying the timeshare with cash
2. Buying the timeshare with financing and 10% down
3. Downsides of Timeshares
4. Who exactly are timeshares for?

The Timeshare Offer

Besides the numbers of the offer, which I will go over later, what else did Vistana pitch us on regarding the purchase of the timeshare?

• We receive a “deed” similar to one that is received when purchasing a house.
• We can choose another property in the Vistana portfolio, provided we pay a fee ($300-400).
• Traveling the “traditional” way will cost us over $300K over 10 years (more on this below).

The sales guy tried very hard to make it appear that buying a timeshare is just like buying a house or townhouse or any other typical real estate transaction. Once the word deed is used, you get a picture in your mind that what you are doing isn’t really anything out of the ordinary. However, be very careful when “deed” gets dropped into a conversation. Some timeshare developers have very different definitions to that word than its actual legal meaning.

Timeshare Travel Cost Comparison

Toward the end of the presentation, our sales guy did a quick travel cost comparison between the “traditional” way and the “timeshare” way. To the traditional way, he would put car rental costs, tours, airfare, food, etc. Basically, all the costs associated with travel. Which was fine.

But when he did the timeshare column as a comparison, the figure was much lower. So as I watched him add up car rental costs and airfare and tours only for the traditional way column, I thought, “Why are those costs being included to the traditional column, but not to the timeshare column? People still do tours from resorts, they still rent cars, they still pay airfare, so I just thought it was a little strange to do a comparison, and essentially make it one-sided. The impressive part was that it was done very smoothly, never stopping to explain any qualitative differences, just putting in simple numbers and making it look like the “timeshare” way was a steal.

The Timeshare Proposal

Here is the complete proposal that we were offered:

Purchase Price: $16,200

Down Payment: $1,620

Interest Rate: 14.9%

Term: 10 years

Annual Maintenance Fee: $695

Points Every 2 Years: 81.5K

SPG Bonus Points: 440,000

If we accepted the offer, how much would this really cost us over 10 years and is it worth it compared to paying for travel yourself?

Scenario #1 – Buying the timeshare with cash

How much would owning a timeshare cost over 10 years if I paid for it in cash and didn’t get skinned alive by the 14.9% interest?

Total Purchase Price: $16,200

Total Interest: $0

Total Maintenance Fees: $7,000

Total Cost: $23,000

Since we are given 40K points every year, let’s assume we use that to get 2 weeks at resorts every year, because the cheapest 1-week cost in terms of points is 20K. That means 14 hotel nights a year.

Total Nights: 140 (14 nights a year x 10 years)

Average cost per night: $164 (Total Cost / Total Nights)

In short, if we bought the timeshare with cash, we’d be paying for roughly an average of $165 a night at resorts that typically cost $200-300/night.

In addition, that sweetener of 440,000 SPG points is very tempting. A category 1 SPG hotel is 3K points/night, so in theory, you could get 146 free Category 1 nights with this bonus (440/3). This translates to about $18K of free hotels, if we assume a market value per night of $125. That is saucy! Of course, you could also use those points for flights. If you transferred 440K points to American Airlines, you’d get 25% extra miles, so that would work out to 550,000 miles. You could certainly fly to Europe and Asia roundtrip multiple times with that amount. Is that worth doing the deal?

Scenario #2 – Buying the timeshare with financing

Now let’s see how much the timeshare would cost if I paid it with 10% down and the rest financed.

Total Principal Paid: $16,200

Total Interest: $13,540

Total Maintenance Fees: $7,000

Total Cost: $36,740

Average cost per night: $262

Predictably, we see that the average cost per night shoots up to $262, a whopping increase of $100/night!

What about normal travel?

Can you do better than $162/night? Most likely, though you probably aren’t spending that time at 4-star resorts. The big difference between traveling “normally” and utilizing hotel sales, Airbnbs, hotel points, etc. is the flexibility that you have as opposed to being forced to spend a week at a resort.

Now, if you buy a timeshare at Los Cabos, you can of course utilize your points at other timeshare resorts in the company’s portfolio, all around the world, but there will be a fee when you do this.

Related Post: How we fund and afford our travels

Who are timeshares for?

In that sense, I believe timeshares are best for 3 groups of people:

• Retirees – lot of time on their hands and money saved up
• Families with more than 1 child – resort pools are a god-send for frazzled parents
• Young couples who don’t want to fuss with travel plans – resort takes care of all travel plans for you.

This was our third timeshare presentation (2 from the Westin, one from Diamond in Las Vegas), and this was by far the most tempting offer we have received. However, despite the tremendous SPG points bonus, we decided against buying the timeshare because our travel hacking lifestyle saves us thousands every year, because the timeshare resale market is nonexistent, and because we don’t want to be tied to one company for our travel plans every single year.

Read the Fine Print

There is a fine print that we saw through a few hotel documentation that these Vistana-earned SPG points are not transferrable to Marriott points (now that they are merged), and are also not associated with Marriott.

With Marriott buying SPG, and as Marriott tries to consolidated both hotel portfolios and perks into one large umbrella, it is still unknown what will happen to SPG points. Will SPG points become Marriott eventually? What about these timeshare earned points? This is another reason why we’ll say buyer beware– you just don’t know what the future holds, and if those points will have any value in the future.

These programs tend to change over time – think devaluation. Your 81,500 points now may not be enough to stay a few weeks at the same resort 15 years from now. And also, what if that resort becomes ugly and would need to close for further renovations? Think twice (or maybe a lot of times) before buying into a lifetime investment where your kids and your grandkids and any other future generations after you may end up paying for. Would they like continuously paying for something they never bought in the first place?

What are your thoughts on timeshares and do you jump on these deals to get cheaper hotel nights?