For hosts that want to invest in a vacation property but don’t like the idea of having to be on call for emergencies, timeshare ownership can be a good alternative to explore. It offers some of the advantages of “owning” a property and can present a different way to get a feel for the real estate industry. It also offers current hosts the chance to scale their business, compete with vacation resorts and diversify their listing portfolio.
That being said, there are a number of unique drawbacks to consider. It’s definitely not suitable for everyone. Continue reading to find out if it will fit in with your lifestyle and budget.
A timeshare property is a type of vacation property typically located within a timeshare resort in a popular vacation spot. Instead of being the sole owner, a shared ownership model will be applied. In other words, the property will be owned by more than one individual and each will be given a time during the year that they may use the property.
Each individual will get the opportunity to spend a set period of time at the property per year. For example, with the fixed week timeshare model that’s commonly used, each timeshare owner will get one week. If the timeshare owners can’t use their specific week, they can rent it out. This is what about 15% of owners have done in 2022.
There are also other ways that the time can be divided. For example, with the floating option, there is more flexibility and owners can use the property at any given time, depending on availability. A drawback of this system, though, is that you’ll need to book well in advance to ensure it’s available. As such, it’s not really as flexible.
Recently, the timeshare industry has also started to introduce a point system. With this model, you can buy a certain number of points which you can then use in various timeshare locations.
Your points will represent your ownership. The attraction of this system is that it gives you more flexibility as you can cash in these points at different times during the year. Plus, you might also be able to use these points at other resorts for a change of scenery. However, it uses factors like the location of the resort, time period requested, and size of the property, which means that one resort can “cost” many more points than your usual resort.
As for costs involved, the cost relating to timeshare ownership will usually be split among the different owners. The timeshare agreement will stipulate the finer details.
With regards to the actual ownership, there are two popular options. In some cases, each buyer will own a portion of the property. This model is called fractional ownership and is more common for luxury units.
In other cases, no timeshare buyer will actually own a fraction of the property (known as a non-deeded timeshare or right-to-use contract). Instead, they will lease it for a set period which is generally a couple of years.
According to the American Resort Development Association (ARDA), based on 2022’s data, the average price of a timeshare transaction in the US was about $24,000. Depending on the size of the timeshare property, the timeshare maintenance fees will be in the region of about $1,000.
If you plan on renting out your timeshare, the average price per night is about $235, according to the same source.
Similarly to vacation homes, timeshare ownership can give you the chance to enjoy the same destination for years to come, making it a great option if your vacation plans tend to stay the same. However, unlike a vacation property, timeshare ownership can offer unique benefits like these:
Owning a timeshare can be more cost-effective in two ways. Firstly, the initial cost is much lower as you essentially only pay for the time or a fraction of the property. Secondly, timeshare resorts are usually well-maintained and property maintenance won’t be your responsibility. You simply pay your linked annual maintenance fees and that’s the end of your financial worries. That being said, these ongoing fees can add up. So, keep that in mind and do your math beforehand.
Aside from guaranteeing that you will find accommodation in the destination of your choosing, you can also look forward to a touch of luxury. Convenience is one of the core features of a timeshare property.
As the unit will be located in a timeshare resort, there is a good chance that you’ll also be able to access a number of extra amenities such as a concierge service, 24/7 security, and a swimming pool.
This means that you won’t need to book a hotel room, which is typically smaller than a time-share unit, just to be able to access these types of luxuries. It’s this unique benefit that makes it particularly popular for renting out on online marketplaces like Airbnb.
Most of the time, Airbnb properties are located in residential areas that lack these types of services. Yet, by renting out a timeshare property, guests can be treated to a bigger property than your typical hotel room without having to give up the element of luxury and convenience.
Aside from the obvious con that you won’t be able to use the property as you please, here are a few other considerations to keep in mind before you make an investment:
Across the United States alone there are over 1,500 time resorts. Each resort typically has more than 100 units.
This means that the market is quite big which could negatively impact the resale value should you decide to sell it at a later stage. Plus, timeshares also depreciate quickly.
That said, not all contracts allow reselling. Even if your contract does allow you to resell it, you might have a hard time getting a buyer because of oversupply.
If your contract allows you to sell your timeshare, you have a few options. Listing it on a website is probably the easiest route to take. There are a number of websites dedicated to the reselling of timeshares or you can work with a timeshare broker who can help you to find a new timeshare buyer.
However, as mentioned earlier, you’ll probably fetch a lower price. While you might experience a financial loss, the memories will hopefully be priceless.
A second option is to approach the timeshare company and negotiate with them directly. You’ll probably have to pay fees. However, if it’s become a financial burden and you’re struggling to afford your timeshare, this is a better route to take than running the risk that your credit score will go down.
Another option is to work out a deal with a family member. You could offer them your vacation time in exchange for them taking over the timeshare costs.
Pros and cons aside, there are also a couple of other special considerations to keep in mind if you’re thinking about going ahead. These include:
Timeshare companies are notorious for pushy marketing strategies. Marketers working in this niche are known for hiding the true costs involved.
As such, ensure that you read all the fine print and that you clearly understand the terms of the agreement. Also double-check that you know exactly where your responsibilities start and end.
In addition to keeping an eye out for too-good-to-be-true sales pitches, also be vigilant for timeshare scams. Just like any other industry, the timeshare industry is not immune to scammers and tricksters.
A timeshare property shouts vacation. It’s rare that a traveler will stay in a timeshare resort for a two-day business trip. As such, pay extra attention to choosing the right location. That said, be prepared that it can be more challenging as not all areas have timeshare resorts which will restrict your choices.
In the United States, Orlando, Myrtle Beach and Las Vegas are popular timeshare destinations. For those wanting to expand their search beyond the US, Los Cabos in Mexico can be an attractive vacation destination.
If you plan on renting out your timeshare, pay special attention to furnishings. Most timeshares are rented out for an entire week, but in some cases it can even be longer. This will impact how you furnish your property.
To make your timeshare rental more geared for longer stays, invest in creature comforts like a decent coffee machine, high-speed Wi-Fi, and streaming services. While the timeshare location will mostly appeal to families or couples, digital nomads might also take an interest. Thanks to remote working becoming more conventional, digital nomads might look for a place where they can mix business with pleasure. Though, that doesn’t mean that they want to work poolside and will need a dedicated workspace if they can consider using your timeshare as their office away from the office for the week.
The jury is still out on whether or not buying a timeshare is a good idea. From purely an investment perspective, many will advise you against taking the plunge.
As mentioned, they typically decrease in value. If you do manage to sell your timeshare (which is more challenging than selling other types of real estate and a whole other challenge), you’ll probably sell for less than the initial cost.
Also, credit agencies don’t typically award a loan for this kind of purchase. As such, to buy a timeshare, you’ll probably end up having to pay cash. This makes it unattainable for many.
However, there is still a reason why timeshares remain popular. It appeals to and fits a much smaller target market, but it can give some form of predictability.
Not only do you know that you’ll have accommodation in the same resort each year, but you also know what you can look forward to in terms of cleanliness, services, and amenities.
The lack of consistency among Airbnb rentals is one of its major cons. Airbnb rentals also typically lack the convenience offered by timeshare. With some clever marketing of your own, you can use this to your advantage and rent out your timeshare to travelers.
In fact, in addition to the mainstream vacation rental websites like Airbnb and TripAdvisor, there are online marketplaces dedicated for timeshare rentals specifically. You can, for example, check out a site like RedWeek. It’s viewed as the largest online marketplace for timeshare rentals and has over two million registered users.
Alternatively, you can create your very own website for your timeshare. This will give you more control over the nightly rate and you’ll be better equipped to treat your guests to a feeling of exclusivity, a trait that makes timeshares appealing.
With software such as iGMS, you can design your own website without any coding knowledge or prior web design experience. It offers an intuitive drag-and-drop website builder along with many other features to automate tasks such as:
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