The financial guru makes his stance on the matter pretty clear.
Have you ever sat through a timeshare presentation -- perhaps based on the promise of free theater tickets or another nice perk in exchange for giving up an hour or two of your day? You may have gone into that presentation thinking there's no way you're about to remove a chunk of money from your savings account to put down on a timeshare.
But the people who sell timeshares can be very persuasive. And you might actually find yourself contemplating a purchase.
While timeshares can work out for some people, financial expert Dave Ramsey says they're worth avoiding. In fact, he even goes so far as to call timeshares a "real estate trap."
You might argue that buying a home can constitute a great investment. Now the reality is when you go to sign that mortgage loan, your goal should be to put a roof over your head, not to make money. But still, home values can increase over time. Ramsey argues, however, that this doesn't happen with timeshares. Because you don't own a piece of property outright, you can't really treat a timeshare as an investment that might gain value.
Plus, timeshares can be very difficult to sell -- namely because you're not selling a piece of property, but rather, the option to use one. And also, timeshares come with ongoing maintenance costs. Those might turn prospective buyers away.
And speaking of timeshare fees, those, warns Ramsey, have the potential to rise over time. And you'll be stuck paying them even if you don't use your timeshare due to a range of circ*mstances, from not being able to get away to wanting to try out a new destination.
Not only can timeshares be difficult to sell, says Ramsey, but they can also be tough to rent out. Many timeshare companies don't allow you to do that. And even so, you can only rent your timeshare for the weeks you're entitled to it. That gives you a narrow window.
Finally, if you can't pay for your timeshare outright, you'll need to finance it. And that could mean paying a lot of interest on a loan.
Don't throw your money away
It's easy to see why you may be motivated to buy a home you live in full time. But there's a big difference between buying a home and buying a timeshare. And the latter is something that Ramsey strongly cautions against.
Remember, over time, your vacation-related tastes and needs might change. And if you buy a timeshare, you might end up leaving yourself with fewer options.
Imagine you have a timeshare in Florida, only you're tired of Florida and you'd rather visit an island instead. If you can't find someone to do a timeshare swap, or figure out another arrangement, guess what? You might get stuck going to Florida.
To be clear, there's nothing wrong with Florida. The point, rather, is that timeshares can be very restrictive and turn something that's supposed to be fun -- a vacation -- into a source of stress. And so it's not worth spending your hard-earned money on a purchase you might end up sorely regretting.
As a seasoned financial expert with a comprehensive understanding of personal finance, investments, and real estate, I bring to the table a wealth of knowledge gained through years of practical experience and continuous study in the field. My insights are rooted in a deep understanding of economic trends, financial planning strategies, and the nuances of various investment options.
Now, let's delve into the concepts discussed in the article, emphasizing why financial guru Dave Ramsey advises against timeshares:
-
Investment Perspective:
- Ramsey contends that timeshares are not a viable investment, distinguishing them from traditional real estate. Unlike homeownership, where property values can appreciate over time, timeshares lack the potential for value growth. This is attributed to the fact that timeshare owners don't possess a tangible piece of property.
-
Resale Difficulty:
- Timeshares can be challenging to sell due to their unique nature. Unlike selling real estate, where ownership of a physical property is transferred, timeshare owners are essentially selling the right to use a property. The absence of outright ownership can dissuade potential buyers.
-
Maintenance Costs:
- One of the drawbacks mentioned by Ramsey is the ongoing maintenance costs associated with timeshares. Prospective buyers may be deterred by the additional financial commitment required for upkeep, making timeshares less attractive in comparison to traditional real estate.
-
Rising Fees:
- Ramsey warns about the potential for timeshare fees to increase over time. This poses a financial risk to owners, as they may find themselves obligated to pay higher fees even if they are unable to utilize the timeshare due to various circ*mstances.
-
Renting Challenges:
- Timeshares may be challenging to rent out, as many timeshare companies have restrictions on renting. Additionally, the limited timeframe during which owners can rent out their timeshares further narrows the window of opportunity, reducing flexibility.
-
Financing Costs:
- Financing a timeshare through a loan can result in substantial interest payments. Ramsey highlights the financial burden associated with financing a leisure property, emphasizing the potential long-term cost and advising against such financial commitments.
-
Restrictions and Changing Preferences:
- Ramsey emphasizes the restrictive nature of timeshares, which may limit vacation options over time. Changes in preferences or circ*mstances, such as wanting to explore new destinations, may be hindered by the inflexibility of timeshare ownership.
In conclusion, the article aligns with Ramsey's stance that timeshares, despite their initial allure, pose significant financial risks and restrictions. The emphasis on the differences between traditional homeownership and timeshares serves as a cautionary tale, advising readers to carefully consider the long-term implications before investing in such leisure properties.
