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Investment Property, Real Estate is the secret of wealth building by using leverage.
Buying a Timeshare: Pros, Cons, and Form of Ownership

You’ve probably heard about timeshare properties. In fact, you’ve probably heard something
negative about them. But is owning a timeshare really something to avoid?

----------------
Real Estate Timeshare:

Buying a Timeshare: Pros, Cons, and Form of Ownership

How does a timeshare work, exactly?
You’ve probably heard about timeshare properties. In fact, you’ve probably heard something
negative about them. But is owning a timeshare really something to avoid? That’s hard to say
until you know what one really is.

This article will review the basic concept of owning a timeshare, how your ownership might be
structured, and the benefits and drawbacks of owning one.

---------------

Is a Timeshare Best For You?

Whether or not a timeshare would work well for you is an individual decision. However, knowing
what they are, and how they work, should give you a good basis to make your decision

-----------
What Is a Timeshare?

A timeshare is a way for a number of people to share ownership of a property, usually a vacation
property such as a condominium unit within a resort area. Each buyer usually purchases a
certain period of time in a particular unit. Timeshares typically divide the property into one- to
two-week periods. If a buyer desires a longer time period, purchasing several consecutive
timeshares may be an option (if available).
-------------
Legal Structure of a Timeshare

What kind of property interest you’ll own if you buy a timeshare depends on the type of
timeshare purchased. Timeshares are typically structured either as shared deeded ownership or
shared leased ownership.
----------------
Shared Deeded Ownership - Timeshare

With shared deeded ownership, each owner is granted a percentage of the real property itself,
correlating to the amount of time purchased. The owner receives a deed for his or her percentage
of the unit, specifying when the owner can use the property.

This means that with deeded ownership, many deeds are issued for each property. For example, a
condominium unit sold in one-week timeshare increments will have 52 total deeds when fully sold,
one issued to each partial owner.
----------------------

Shared Leased Ownership Interest - Timeshare

If the timeshare is structured as a shared leased ownership, the developer retains deeded title to
the property, and each owner holds a leased interest in the property. Each lease agreement
entitles the owner to use a particular property each year for a set week, or a “floating” week during
a set of dates.

If you buy a leased ownership timeshare, your interest in the property typically expires after a
certain term of years, or at the latest, upon your death. A leased ownership also typically restricts
property transfers more than a deeded ownership interest.

This means as an owner, you might be restricted from selling or otherwise transferring your
timeshare to another. Due to these factors, a leased ownership interest might be purchased for a
lower purchase price than a similar deeded timeshare.
-------------------

Timeshare Exchange Programs

With either a leased or deeded type of timeshare structure, the owner buys the right to use one
particular property. This can be limiting to someone who prefers to vacation in a variety of places.

To offer greater flexibility, many resort developments participate in exchange programs. Exchange
programs enable timeshare owners to trade time in their own property for time in another
participating property.

For example, the owner of a week in January at a condominium unit in a beach resort might trade
the property for a week in a condo at a ski resort this year, and for a week in a New York City
accommodation the next.


Exchange clubs can involve some challenges however. Usually, owners are limited to choosing
another property classified similar to their own. Plus, additional fees are common, and popular
properties might be tricky to get.
----------------------

Expenses of Buying and Owning a Timeshare

Although owning a timeshare means you won’t need to throw your money at rental
accommodations each year, timeshares are by no means expense-free.

First, you will need a chunk of money for the purchase price. If you don’t have the full amount
upfront, expect to pay high rates for financing the balance. Since timeshares rarely maintain their
value, they won’t qualify for financing at most banks.

If you do find a bank that agrees to finance the timeshare purchase, the interest rate is sure to be
high. Alternative financing through the developer is typically available, but again, only at steep
interest rates.

A timeshare owner must also pay annual maintenance fees (which typically cover expenses for
the upkeep of the property). And these fees are due whether or not the owner uses the property.
Even worse, these fees commonly escalate continuously; sometimes well beyond an affordable
level.

You might recoup some of the expenses by renting your timeshare out during a year you don’t
use it (if the rules governing your particular property allow it). However, you might need to pay a
portion of the rent to the rental agent, or pay additional fees (such as cleaning or booking fees).
-----------------

Timeshares Make a Poor Investment

Purchasing a timeshare as an investment is rarely a good idea. Since there are so many
timeshares in the market, they rarely have good resale potential. Instead of appreciating, most
timeshare depreciate in value once purchased. Many can be difficult to resell at all. Instead, you
must consider the value in a timeshare as an investment in future vacations.

Benefits of Owning a Timeshare

There are a variety of reasons why timeshares can work well as a vacation option. If you vacation
at the same resort each year for the same one- to two-week period, a timeshare might be a great
way to own a property you love, without incurring the high costs of owning your own home. (For
details on the costs of resort home ownership see Budgeting to Buy a Resort Home? Expenses
Not to Overlook.)

Timeshares can also bring the comfort of knowing just what you’ll get each year, without the
hassle of reserving and renting accommodations, and without the fear that your favorite place to
stay won’t be available.

Additionally, some timeshares offer perks such as the right to use fitness rooms and hot tubs.
Some even offer on-site storage, allowing you to conveniently stash equipment such as your
surfboard or snowboard, avoiding the hassle and expense of carting them back and forth.

And just because you might not use the timeshare every year does not mean you can’t enjoy
owning it. Many owners enjoy periodically loaning out their weeks to friends or relatives. Some
owners might even donate the timeshare week(s), as an auction item at a charity benefit for
example.

If you don’t want to vacation at the same time each year, flexible or floating dates provide a nice
option. And if you’d like to branch out and explore, consider using the property’s exchange
program (make sure a good exchange program is offered before you buy).
------------------

Drawbacks of Owning a Timeshare

Timeshares are not the best solution for everyone. If you like a wide variety of vacations, a
timeshare might not be for you (unless you don’t mind dealing with the fees and hassles of
exchanging).

Also, timeshares are typically unavailable (or, if available, unaffordable) for more than a few weeks
at a time, so if you normally vacation for a two months in Arizona during the winter, and spend
another month in Hawaii during the spring, a timeshare is probably not the best option.

Additionally, if saving or making money is your number one concern, the lack of investment
potential and ongoing expenses involved with a timeshare (both discussed in more detail above)
are definite drawbacks.