CFI Blog

Timeshare: A Fancy Term for Flushing Money Down the Toilet

“Oh, you signed up for one of them timeshares, eh?”
– Donkey


A hat tip to the wonderful folks at Control Your Cash for the inspiration.

I love travel. I also love cheap things. Sure, I’m more than willing to spend money on things which are important to me, but, hey, why spend more when I don’t have to?

That’s what I was thinking when I received the flowery marketing letter and brochure from Ramada. They were offering a 7 night vacation for 2, a car rental, and a cruise from Fort Lauderdale to Nassau (and back, even!) for $595. A week’s vacation for two for $595! I couldn’t believe it. I read on, being ever skeptical that I was seeing the vacation equivalent of chart porn.

Somewhere deep down in the sales brochure was a little itty bitty paragraph about having to sit through a 2 hour timeshare presentation (or, as they put it, “vacation ownership opportunity”) as well as sending in the check or credit card to pay for the trip.

At that point, I was getting out of the Army and about to start law school, so money was more important than time. Two hours of sales pitches and $595 for a week-long vacation for two? That was a reasonable price to pay!

A few months later, after I’d proposed to my girlfriend and cajoled her into accepting, we started talking about honeymoon plans.

I’m sure her honeymoon plans involved going to Bora Bora or Monaco or some other exotic location.

Mine involved taking advantage of a Ramada vacation.

Since we were living the lives of a college student (I the student, she the sufferer) and I was still fighting off the hangover of my more profligate credit card habits, we had to do a cheap honeymoon. I won the discussion.

As the University of Colorado’s Peter McGraw and Caleb Warren show, humor is derived when the situation is a benign violation. If the situation involves minor pain, then it must be recent to be funny (I stubbed my toe a few minutes ago). If the situation involves significant amounts of pain, then the pain must be in the distant past to be funny.

We got married twelve years ago.

In literature, they would call this foreshadowing.

When we flew into the Fort Lauderdale airport, picking up the car was a breeze. We followed the directions and got to the Ramada. It was straight out of 1968. Vintage old-school hotel with all of the doors facing the outside. It looked like the type of place that Jesse Pinkman from Breaking Bad would use to conduct a meth deal. We were a little skeptical. At least the car worked and was full of gas, so we used it to drive around Fort Lauderdale for a couple of days and only stayed in the hotel when we absolutely had to.

On the third day, we were required to attend the timeshare presentation. We drove out to the middle of nowhere. I was surprised, because Florida is only so wide from east to west, but we somehow found the most physically remote spot to drive to from Fort Lauderdale and still be in the state. There was a half-completed complex, a sales center, and a pool. We parked and went in.

The sales center was like a very fancy reception room. There were soda machines everywhere. We filled up on Cokes (this was back in the days when I actually sent those acid bombs down my gullet) and sat down and waited for our turn. Pretty soon, a guy came and picked us up and drove us to one of the buildings where the model was so that we could get our tour.

When I was a kid, we used to go down to Florida for family vacations about every other year. We always rented a condo and stuffed four generations of family into it. If you’ve ever been in your standard Florida condominium, then you know what they look like.

This one was no different, except that it had been built in 2001 instead of 19 fiftysomething. It was nothing special, and it was out in the Middle of Nowhere, Florida. I’m sure the zip code was a negative number.

The condo was part of RCI, which is, from what I gathered, the world’s largest timeshare owner. This condo was part of whatever the highest category RCI had, which meant that if we didn’t want to take our one week vacation in Middle of Nowhere, Florida (zip code: -39481.99), we could trade and let some other person stay there while we went to timeshares in all sorts of exotic places.

This had the feeling of a television infomercial where before they get you to dial the number to purchase your mop squeezer or whatever the ShamWow dude is selling, they say, “but wait! There’s more!” Hey, ShamWow dude – if what you’re selling is so great, why do you have to load it with a bunch of extras?

Before I get into what the sales pitch actually entailed, I should stop and explain what exactly is a timeshare.

A timeshare is a fractional lease on a piece of property. You buy the right to use that property for a certain amount of time every year – usually a week – at the same time every year, e.g. the 14th week of the year, the 28th week, etc. Random strangers with unknown cleanliness habits get to use the property the other 51 weeks out of the year. You pay a certain amount for that fractional right, and then you also pay a maintenance or upkeep fee for them to keep your property spic and span so that, if you bought week number 14, the denizens of week number 13 don’t infect you with their germs and bacteria. It also saves you from having to pay your fractional property taxes, fractional insurance, and the like.

For this particular property where we were located (and wondering if we could figure out, using published topographical maps, how to get back to our hotel without sinking into the Okefenokee swamp), we soon found out the price. The salesman showed us every possible high point of the condo, like flushing toilets, running water, and working electricity, and had us admire the view of a, what he assured us, soon to be completed golf course. Then, he took us back to the sales center, or the epicenter of every high pressure closing pitch known to mankind (related: what can salespeople learn from 419 scammers).

The price was $18,000. However, we could put down $2,500 on a credit card and put the rest on a 15 year mortgage at the low, low, low interest rate of 15.9% (which was, from what I recall, higher than what our credit card interest rate was).

Oh, and he mentioned in an aside, the maintenance fee was $900 a year, but we could put that on the credit card too. And if we wanted to use RCI for another property instead of the fine one where we were presently lost located, we’d have to pay another $350.

I quickly ran the numbers. $18,000 for the right to pay $900 a year to go to the same place every year (assuming I could actually navigate to it again) when a hotel would be cheaper.

Nope. No deal.

What about $15,000? the salesman countered.




At that point, he decided to go get his manager.

We went to an “exit briefing room” which is timeshare sales speak for “higher pressure room where they threaten to extract a kidney before letting you go.”

I don’t remember exactly how the bidding went, but at some point, the price got down to about $5,000.

That’s when Monkey Brain started listening.

Suddenly, the image in Monkey Brain’s mind had changed from being locked in a proverbial cage – the same vacation location at the same time every single year – to a get rich quick scheme.


YOU: “Hmm…not a bad idea!”


YOU: “Ooh! Even more opportunities for profit!”

WIFE: “What the (*&$#($#&($(&#&($(# are you two talking about?!?!”

By that point, the manager had dropped the price to $2,500 and told us that we could put everything on the credit card, disregarding the inconvenient fact that I was in business and law school and had no job aside from an internship.

My wife had enough. “No!” followed by “if you don’t let us out…”

I rarely see my wife angry for a good reason – self-preservation.

We drove back, got our stuff, and headed to the next destination, Orlando, where we spent two great days unharried by salespeople and staying in a surprisingly nice Ramada.

Then, we went on our cruise. We had never been on a cruise, and it was an altogether new experience for us.

Research shows that we’re happier having less money and being richer than our neighbors than if we have more money and have less money than our neighbors. The same goes with cruise ships. We had no idea how big cruise ships were supposed to be, and this ship was much bigger than the rowboats I’d previously been on, so it looked huge. We were happy. Until, that is, the next afternoon, when we were scheduled to leave Nassau. When we pulled into the dock, we were the only cruise ship there, so we maintained our illusion about how huge the ship was. When we left, all of the other, real cruise ships had pulled in, buffeting our little bathtub toy about in the wake.

But, I digress. Having been saved from my own Monkey Brain by my wife’s threats of an instant divorce and potential violence against either me or the manager at the timeshare sales center, I started feeling good about our her decision to say no. Buoyed by this confidence, I decided that a great icebreaker at the dinner table on the cruise ship would be this line.

“So, who got suckered into that timeshare deal?”

The conversation was like the one Donkey and Shrek had.

My question was met by utter silence and looks of horror. For the remainder of the cruise, our dinners were awkward.

Not only did half of the couples at the table purchase the timeshare, all of them purchased at full price.

Since we were at sea, it was going to cost a pretty penny to call and invoke the 3 day right of refusal which was in the contract.

This was a smart play on the part of the timeshare people. They waited until 2.5 days had elapsed before getting everyone together, and when they were all together, they were in international waters, where making phone calls was VERY difficult.

Even for the people who wanted a timeshare, it would have been worth a $50 phone call to the sales center to cancel the existing timeshare and then rebuy it at $2,500.

Nobody did.


Because Monkey Brain wanted to be right. If they didn’t cancel the timeshare, then their actions would imply that it was the right decision to make. Cognitive dissonance kicked in, and they started telling themselves a narrative that it must have been the right decision because they didn’t cancel the timeshare.

A $15,450 ($15,500 discount minus the $50 phone call) mistake just to make themselves feel better.

In the end, despite the hiccups, we had a great time, and now that it’s several years later, we can tell the story and laugh about it.

This wasn’t the end of our experiences with timeshare presentations, though.

A few years later, we were staying at Planet Hollywood in Las Vegas. We were approached by a salesperson who said that we could get $50 each of food vouchers if we sat through a timeshare presentation. Since, by then, we knew that I wasn’t going to get suckered into anything, we accepted. The woman took us into the sales center and showed us the model of the Planet Hollywood timeshare. We agreed to everything and didn’t ask questions. We looked enthusiastic, even as she took us outside in the 110 degree blistering heat to show us the outside of the building…despite the fact that we’d just driven up to the hotel from the airport a mere two hours ago. We oohed and aahed and acted as if we couldn’t wait to put pen to paper.

Then, she named the price and tried to close. She looked crestfallen, absolutely shattered when we said no and not at any price.

“But…but…” she stammered as she tried to figure out where the deal had gone wrong. We were such obvious marks, such easy money. Flustered, she didn’t even try the other tricks and went to get her manager.

As an aside, I don’t have anything against tattoos, but if you’re going to wear a business suit, try to wear one which covers up the tattoo on your breast.

Her manager looked us up and down, and in a lightning appraisal, asked the killer question:

You wouldn’t take this if I gave it to you, would you?

We walked out, having spent an hour in what was supposed to be a two hour timeshare presentation, each with $50 of food vouchers that, at Planet Hollywood, bought us one small order of fries.

Let’s look at the two timeshare usage scenarios and debunk the myths about why they’re a good deal.

You want to vacation in the same place and the same time every year.

vacation in the same place and the same time every year

The common argument for this one is that it’s great for a family. You can have the same, known place, and bring the entire family. That’s great, except:

  • You shouldn’t pay rack rate to buy a timeshare. A quick search on any timeshare reseller site will show you tons of listings for under $1,500. That’s less than 10% of the price that the salesperson initially quoted us 12 years ago. Real estate only goes up, right? Not in this case. It’s more like a horrible case of value depreciation when you drive the new car off the lot.
  • You can rent a condo for about the same price, and get flexibility in both location and time. Why go to the same place over and over again every year? Even if you want to go to the same place, are you going to go on the 24th week of the year every year? What if a kid gets sick or there’s a key deadline at work? If you own a timeshare, it’s sad trombone time. Buying a timeshare decimates your vacation real options.
  • The other RCI properties aren’t much better. I took some time to pore over a RCI catalog a couple of years back. Since I love international travel, I figured I might as well check out the RCI properties in international locations. It turns out that almost every property I looked at was something like 45 minutes outside of the city. That’s great if you want to get away from it all, but if you’re going to Cape Town to see the city, it’s pretty inconvenient to be stuck 45 minutes away from what you want to see, especially when you can get cheaper, equivalent accommodation (try de Waterkant) in a central location.
  • Better yet, rent the timeshare from some other poor sucker who owns it and can’t use it! Major kudos to Bryan Marsden from Fat Wallet for this idea. If some other poor soul can’t use their timeshare during the week that they own it, it’s wasted inventory. It’s like the personal version of an airplane flying with empty seats – foregone revenue. You, as someone who could use the space, have strong negotiating leverage against the timeshare owner. Take your lowball offer or take a complete loss altogether for that year’s maintenance fees.

You think a timeshare is a good investment.

timeshare is a good investment

This is the one that Monkey Brain was slapping me around with. It was back before the days of smart phones, so I couldn’t quickly find the Corporate Finance Institute (CFI) website and discover what a bad idea it was. Ah, pressure sales tactics.

  • No depreciation on the timeshare. One of the biggest tax advantages of owning rental property is depreciation. However, if you use a timeshare, chances are you can’t claim it. According to Fudim v Commissioner, the determination of whether or not a timeshare is a rental unit doesn’t depend on whether or not you rent it out, but whether or not all owners rent it out, and how many of them used it personally. Chances are that, in total, the unit’s owners (potentially all 52 of them) won’t clear the greater of the 14 day/10% of total day personal use threshold to make it a viable rental property. Therefore, any loss you accumulate will likely be lost forever.
  • You can’t rent it out for enough to cover your maintenance fees and (if applicable) carrying costs. Again, look on the internet for timeshare rentals for under $500 for a week, and you can find a ton of them. If you think that you can rent yours out in a flooded market for a higher price, you’d better have some blackmail on the potential renters.
  • You can’t resell it for a profit. Even if you can buy a timeshare on the cheap, the clock starts ticking, because you’ll be responsible for maintenance fees. The drain in the bathtub starts the moment you close. Basically, you’re depending on the next bigger fool theory to make a profit.

If you’re concerned about doing your taxes correctly, I’ve used

TurboTax Online (#aff) for several years, and, despite the complicated status of our taxes, have had no problems filing my taxes, saving us almost $1,000 compared to what we were paying our accountant when he prepared our taxes.

If you want to invest in rental properties, there’s a proper way to do it. A timeshare is not a rental property. There is no arbitrage opportunity in a timeshare. Once you’re in, you’re stuck. There are no tax advantages to owning a timeshare for an investment like there are other investments. I can’t say that you would never turn a profit on a timeshare. However, I think your chances of doing so are the same as being able to successfully perform open heart surgery on yourself using YouTube and a bottle of whiskey for guidance.

If you want to take a vacation, take a vacation. Scour the web for rentals. Use VRBO or rent a timeshare from some poor clown who’s stuck in one. Don’t lock yourself into the same bat time, same bat place year after year for an exorbitant, overpriced maintenance fee. It’s not worth it, and you could find much, much, much (did I mention much?) better travel deals out there. Even if you wind up paying the same price, there’s no shame in it, because you have the power to choose what you do the next time you take a vacation.

What’s your experience been with timeshares? Tell us your stories in the comments below!

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John Davis
John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.

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