Time-sharing is a type of fractional ownership where prospective buyers purchase the right to occupy a unit of real estate for a specific period annually.
Most of these properties are often used for vacations, and in most cases, buyers impulsively decide to purchase one. In this context, let’s assume we have a prospective buyer named Philip. Here are the pros and cons he must consider when mulling timeshare ownership.
Cost of Maintenance
Advantage: After being bought, most vacation homes tend to be vacant for part of the year. For purchased timeshares, Philip will only pay for the time he uses it. He does not need to worry about year-round maintenance.
Disadvantage: While Philip does not need to worry about maintenance, he will need to worry about the annual fees and lack of control over yearly price increases. In addition, the developer can foreclose on the timeshare if compulsory fees are not paid.
Getaway Availability Peace of Mind
Advantage: Timeshare ownership should be seen as a lifestyle. Buying one of this properties will guarantee him a vacation destination if Philip likes control and predictability.
Disadvantage: Timeshares should not be viewed as investments because they are tough to sell. Used timeshare units are sold at discounted prices because so many are on the market. Many victims have been done in by timeshare reselling schemes, so buying used units is risky.
Various Vacation Spots Around the Globe
Advantage: If Philip buys a timeshare unit, he can trade time slots and location with other owners, enabling him to travel to new places.
Disadvantage: Buying timeshares in foreign counties can be challenging. Some countries have lax consumer protection laws that won’t protect Philip. For example, in Mexico foreigners are not allowed a direct title to a property within 60 miles of international borders or 30 miles of the coast. Unfortunately, these locations are known as hotspots for vacationers.
Weighing Profits and Losses
Advantage: Philip can make a profit from renting out his block of time for periods when he can’t use it.
Disadvantage: However, some timeshare contracts do not permit renting a block out. What’s more, if Philip gets tired of the unit and sells it at a loss, the IRS would not let him claim a capital loss as he could with other investments and properties.
Fixed Week Timeshares
Timeshares are usually available for different vacation properties like apartments, beach houses, resorts, condominiums, and apartments for different periods. There are four different types of timeshares—fixed week, floating week, right-to-use, and points club.
With a fixed week timeshare, Philip can have the rights to a whole beach house for a specific week or weeks every year for as long as the contract states. If Philip has a highly desirable location, this type of timeshare allows his to rent out his block of time or exchange it with the owners of other properties.
Floating Week Timeshare
With this timeshare type, Philip can have the property for a week or weeks in a predefined period or yearly. This system is more flexible than the fixed week but has one significant disadvantage.
Although Philip can choose any week or weeks in a year, other buyers might have already booked his preferred week(s), and he only guarantee preventing that issue by reserving well in advance to ensure its availability.
Right-To-Use Timeshare
Philip can lease his timeshare property for a specific year with this type of timeshare. He can do this for a specified number of years as stated in the contract between Philip and the developer. The developer, however, will still maintain ownership of the property throughout the lease duration.
One downside to right-to-use timeshares is that website exchange services can charge Philip when helping him look for other prospective buyers.
Points Club Timeshares
A points club timeshare is similar to the floating type. In this scenario, Philip can stay at various locations, depending on the number of points he amassed from buying into specific properties.
He can also gain points by purchasing them from the club. The points are used like currency, and timeslots at the property are always reserved on a first-come first-serve basis.
How Are Timeshares Different From Airbnbs?
Although both home-sharing services are similar, they have a few differences. While Airbnb is more flexible, the quality of accommodation is sometimes not guaranteed.
Airbnb can be better for residential purposes, while timeshare properties are mostly bought for vacation and other pleasures. Finally, timeshares are generally more expensive than Airbnbs, which are common among those who prefer a private life.
