What Is A Timeshare?
Timeshares are forms of ownership whereby a group of people share the use of a property by dividing rights into specific lengths of time (which can range from five to over 20 years). Although this type of program generally applies to holiday real estate such as condos, it can also apply to campgrounds, recreational vehicles, boats, and cruises.
In essence, there are several types of timeshares, including:
1. Fixed week timeshare
Buyers of timeshares usually own the rights to a property for a specific amount of time each year. There are many ways this can be organized, however. A fixed timeshare provides the owner with the same unit and the same week, year in year out, for as long as the contract stipulates.
2. Floating timeshare
A floating timeshare allows the owner to reserve his own time during a given period of the year. The drawback of this freedom is that eager shareholders snap up many of the prime periods very quickly, and the market thus becomes very competitive. One must act quickly in order to reserve the best vacation time.
3. Right-to-use timeshare
Buyers with right-to-use arrangements lease the property for a given amount of time each year, for a set amount of years. However, under such a plan, the developer maintains ownership of the property.
4. Points club (also referred to as Vacation Club)
In the same vein as floating timeshares, this latest form of ownership enables buyers to travel to various locales and various sized lodgings, depending on the amount of points they've accumulated (sort of like travel reward programs), which can then be used like currency. But again, it works on a first-come basis.
These choices leave consumers with a lot to ponder, so to outline it clearly, here are the pros and cons of timesharing.
The Pros
You get what you pay for
Timeshares are financially attractive for several reasons. Instead of owning a condominium and living in it for vacation purposes only two weeks out of the year, the program allows you to pay only for what you use.
Less hassle
At the same time, many believe you get your money's worth simply because you don't have to deal with upkeep (annual fees take care of that) or worry about a property's security amid the 50 weeks you're in the city working.
Guaranteed vacation destination
In the same vein, timeshares seem alluring because you can get your money's worth. Terms of the agreement usually stipulate that the property, whether a spacious condo or studio apartment, be occupied by you once a year. This guarantees you a vacation destination each year, making it easier to budget and save for the days off. If you enjoy visiting the same place each year, this is definitely a sound investment.
Economical for large families
Similarly, if you do have a large family, there will be significantly less financial and mental stress with a timeshare, since you do not have to worry about renting many rooms. Most timeshare units are very luxurious and fully equipped, so you can hold your brood in one location and take advantage of the kitchen to save on food.
Subletting offers revenue potential
Those less interested in the actual vacation benefits may see timeshares as golden investment opportunities. Several owners of timeshares profit by renting them out to others instead. There is little principle to make up before profiting, since you do not have to worry about monthly payments for repairs, taxes and other hang-ups.
Exchange programs
On a related note to subletting, timesharing is especially interesting when you consider that an owner can profit from trading to a different location every year. Programs have been set up that allow timeshare owners to trade units (and times) with other owners, allowing each one to experience a different place in the world every couple of years. Also, as someone who may want to lease his timeshare, you remain attractive on the market, always diversifying your product.
Make money from the market
You don't have to rent out your place to make a pretty penny. Many play the timeshare market: they buy time at a nice property for cheap and then get involved in an exchange program. They find someone to trade with, and end up having a new prime spot valued higher than the one they originally bought. This means a profit was made without even staying in the place or lifting a finger. Fluctuations in the market can play in your favor this way, especially if you keep your ear on the market's pulse and find out where the next hotspot is sprouting up.
Though there are a lot of positives listed, do not get blinded. Some consumers have found that the negatives of timesharing are too common to ignore.
The Cons
Maintenance fees
Of course, all the simplicities that timesharing presents do not hide the downfalls of this system. For instance, instead of worrying about maintenance, you must pay large fees to provide upkeep for your unit, and they are known to increase by up to 4% every year. So, although you do not physically have to write up taxes, fix leaks or get cable TV, you end up paying for these things anyway. The cost can range from $200 to over $500 US, depending on the location and type of property.
Volatile real estate market
In addition, an unpredictable real estate market can make timesharing seem like a nightmare as well. Units that you bought in the hopes of reselling at a profit may have dropped in value due to hundreds of variables, from the world's political situation and the weather to low tourism. It is not always easy to predict which place you or a potential buyer will be happy with for the years to come.
An unpredictable real estate market may lead to another problem: if you do purchase a place that loses its appeal one or two years later, you may be stuck with it. Contracts are known to lock you up for several years, which can cost you dearly, especially if no one in the exchange program is interested in your place.
Limited in vacation schedule possibility
I'm sure it's becoming evident that networking is key in timesharing, but it can catch up to you; another con appears when owners of floating timeshares have to battle it out over who gets the unit at a given time in the year. Usually, the majority of vacationers want the space at the same time, and compromises are hard to come by.
Your money is tied up
The whole concept of timesharing is based on prepayment of your vacation. For some, this is convenient, but for others, it is a pain to reserve substantial amounts of money for pleasures you will only experience later. Timesharing is a big commitment financially and this is not a strong selling point.
With all these warnings in mind, a consumer that still buys into the system must know how to properly handle his money in timesharing. There are signs to look for in order to get the most out of your money when buying, or selling, your timeshare.
How To Buy Timeshares
First, one must decide why buying a timeshare is right for them: if you're not sold on the idea of going on the same vacation each year, or profiting from the sale of the unit, perhaps timeshares aren't right for you.
That said, you can peruse the various locations and deals from a developer, management company or travel agent, as well as from the owners themselves and on the Internet. It is a good sign if the provider offers a grace period in which you can cancel without charge and he guarantees the financial stability of the unit.
Always check if the condominium belongs to an Owner's Club or Association -- if not, you may be dealing in risky business. You do not want to get ripped off, so contact the Better Business Bureau if you ever have any doubts.
Be warned, however; though companies like Hyatt and Disney have taken advantage of the influx of interest in timesharing by involving their real estate in it, the industry still remains a little suspect. For instance, consumers have been known to buy shares only to discover that their property is in bad shape, or, in the worst cases, does not exist at all.
Note: Never pay an upfront deposit without having first identified and approved the unit.
How To Sell A Timeshare
If you own a popular timeshare in a unit that is in prime shape and belongs to an Owner's Club, chances are you can sell easily.
Refer to the same organization(s) you bought from to find out its market value and attain the help of a professional reseller first. These workers are savvy about the industry, and if they belong to the Timeshare Consumers Association, they will surely give you an offer you may not want to refuse.
If that isn't satisfactory, advertise on the Internet and, as is commonly done, consult friends, co-workers and family to see if they are interested. When all else fails, you may want to sell it back to the management company, though you may acquire a financial loss.
The Results Are In... Or Are They?
Weighing the benefits and shortfalls of timesharing should give you a good idea of what to expect. There are obvious risks one must take, but then again, the returns may all be worth it if you have patience.
Some avid vacationers are attracted to timesharing because of the security and freedom it provides, while others stay away because they find it too constricting and expensive. Given your situation and the details provided, it's up to you to decide if timesharing is right for you.
|
