Timeshares have had a shaky reputation on occasion thanks to aggressive and, in some cases, barely legitimate sales practices used by some agencies in the past. Nonetheless, business is booming. Roughly $10 billion in timeshares are sold worldwide every year, with an estimated 8 million U.S. citizens investing in these vacation locations.
Know Your Motives
Real estate turns a profit most of the time when sold under the right market conditions. Timeshares, on the other hand, rarely appreciate. You're not buying into bricks and mortar as much as the right to hang out on the property. This makes them a sound choice for those wanting a vacation home, but not so much for those looking to make some money.
Timeshares are a long-term commitment and they're heavily dependent on the three Ls: Location, Location, Location. Once you buy into a property or timeshare company you're restricted to visiting that property or the group of properties owned by the company for the life span of your investment. If you don't like the area, you've wasted your money unless you can get someone to buy your share.
Choose the type of investment that best suits your lifestyle. Timeshares are typically of two types. There's fixed, which buys you access to the same property for a specified time each year. There's floating, which confers a certain number of days a year but lets you choose them to suit your schedule. Both have drawbacks. If you can't make it during your fixed days you lose the time allotted to you. Under the floating system you have more flexibility but you're usually competing with other owners for the most popular dates and locations.
Crunch the Numbers
The base price quoted for your timeshare may seem like very little to spend for a lifetime's worth of vacations, but make sure to consider the ongoing costs. Maintenance and utility fees typically amount to hundreds of dollars a year. What's more, they're due whether or not you use the property. Owners have little or no control over such fees, which may rise at inflation-busting rates as the property ages and requires more repairs.
Second Time Around
Consider the second-hand market to find a better deal. As a rough estimate, some 40 percent of the original sales price goes toward the timeshare agency's marketing and sales costs. Eliminate these costs and you have a much lower bottom line. The secondary market has been booming, with many sellers looking to offload old investments. Doing due diligence is critical, though, as it's easy for buyers to inherit the seller's unpaid taxes and maintenance fees if they're not careful. Find out whether the property is subject to any liens by going to the local county court and inspecting the records. The filing clerk will steer you in the right direction. Speak to any and all lien holders for details of the unpaid debt.
A former real estate lawyer, Jayne Thompson writes about law, business and corporate communications, drawing on 17 years’ experience in the legal sector. She holds a Bachelor of Laws from the University of Birmingham and a Masters in International Law from the University of East London.