My dumbest investment was a timeshare in Hawaii.
— Dan, online
The Fool Responds: Timeshares are shared ownerships of real estate, typically for vacation purposes, giving owners the right to use a property for a certain period. They’re controversial; along with the benefits they offer, they also present significant drawbacks.
On the plus side, they tend to cost much less than if you bought a vacation home, and they sometimes apply your share at properties in different locations. You don’t have to clean and maintain them, either.
On the other hand, you do pay for cleaning and maintenance, and you’ll typically be charged fees annually, which can increase over time. Arguably the biggest problem is that they can be very hard to get rid of. Many owners are trying to sell theirs at a discount, so you shouldn’t imagine that you can easily sell and get much of your investment back.
While lots of businesses offer to help timeshare owners sell many of these have been flagged as problematic schemes — or worse. The Federal Trade Commission has announced actions against scores of them, alleging fraud.
The timeshare industry is known for high-pressure sales tactics. Consumers shouldn’t fall for them, and it’s important to do a lot of research before buying a timeshare. Better still, consider avoiding this investment entirely.
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