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You’ve probably heard about timeshares from agents trying to sell you some. Before you get carried away and buy timeshare, read up to learn about the salient points that anyone considering timeshare investment should know about.
What is a timeshare?
Think of shares of stocks. Simply speaking, in a setup like this, a company’s assets are divided into shares and each share is sold individually. There are minimum stock volume requirements in most cases. Each share corresponds to a certain value that varies according to the net value of the company. A stockholder gets a share of the net profits according to the value of each share and the number of shares he owns.
In a timeshare setup, a real estate property developer like Marriott Vacation, for instance, builds a resort, a villa or a condominium building in leading or popular vacation destinations. A whole year’s vacation on a timeshare vacation property is divided into several shares (the industry standards is 52 shares) where one share corresponds to one week or seven days of stay.
The overall value of the property depends on the location of the property, the amenities provided (a pool, a spa, a beach, a pier, a tennis court, a golf course, a gym, etc are the sorts of amenities that will push up a timeshare property’s value) and, perhaps, even the reputation of the property operator (a Marriott timeshare, for instance, would understandably cost more than a timeshare from a relatively unknown developer).
The overall valuation of the property is the direct determinant of the basic cost of one timeshare. Unlike stocks, however, a share’s price varies from another. One share may be more expensive than another by virtue of the time of year the share falls under. For example, a week in summer is generally deemed to be more valuable than a week during the rainy season and/or winter.
Two Main Types
You should be aware of exactly what type of timeshare deal you’re embarking on. The first type is outright purchase of equity. This type of timeshare purchase is much more like traditional real estate deals – the only difference is that you share ownership with other people. You have a share of the ownership of the actual physical property (say a unit in a Florida timeshare resort) and you hold a deed to that effect. With this type of timeshare ownership, you may make an outright purchase or you can pay amortization – just like you would if you’re buying a house.
In this kind of timeshare deal, you have the usual responsibilities such as property taxes. You and the other owners also have to hire staff or a timeshare resort management outfit that will maintain the property for you. Timeshare holders share annual maintenance costs and each pays a cost that may vary through time and according to the time of year a share is consumable.
The other main type is the right-to-use timeshare. With this type, you gain the right to use the property according to the number of shares you bought. Technically, timeshare sales and property management is handled by a real estate developer who retains ultimate ownership of the property – your ownership of your share is limited to the number of years stated in your contract – but you still pay your share of the annual maintenance costs. Furthermore, the week or weeks you may spend at your property (say, your Disney time share) and the exact room or unit you will use may vary and you may have to call in for reservations beforehand.
The Pros of Timeshare Ownership
Savings. One of the main reasons for buying timeshares is the savings you get. If you regularly go off on vacation every year, then you’d find timeshare purchase a more economical alternative to staying at hotels, renting out condominiums or villas or paying for regular resort accommodations. The latter costs could pile up over time whereas the timeshare option will give you long-term use for a fixed, one-time cost and manageable annual maintenance costs.
Comfort. Timeshare properties usually have all the amenities you’d find at luxury hotels. However, you won’t need to compete with other vacationers for use of such amenities. They’re also usually spacious and thus ideal for family vacations. You can stay at your property and cook your meals. You can choose to be alone with your family, just like you would be if you were home – except you won’t have to go to work the next day.
Hassle-Free Vacation Planning. With a timeshare ownership, you know you have a week or weeks reserved for you at a particular vacation property. Thus, you won’t have to rush to make hotel reservations and other things associated with vacation trips. You can have a stand-in reservation with your travel agent for plane tickets every year. You also won’t have to constantly think of a good place to go for your vacations.
Hassle-Free Ownership: You don’t have to personally administer to your property so you can focus on relaxing and having a good time.
The Cons of Timeshare Ownership
Low Timeshare Resale Value and Difficulty of Timeshare Sales. These are the main disadvantages of timeshare ownership. The timeshare property typically depreciates and the value of timeshares goes down with it. It’s also difficult to find timeshare buyers. For both these reasons, you’re not advised to buy timeshares if you’re planning not to use but sell them.
Scams. There are unscrupulous players in the timeshare resale market. Beware of them if you don’t want to lose your money on a fraudulent timeshare deal.
Inflexibility: If you don’t want to waste your investment, you have to use your vacation week/weeks every year. This leaves little room for variety. Of course, you may trade your timeshare with other people’s timeshares – your contract permitting.
A final word: before you go off and search through timeshare auctions, be clear on your goals, needs, budget, and preferences so you could make the best deal possible.
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