A timeshare is a type of shared property ownership common to vacation and resort properties. As the word suggests, a timeshare means each property owner invests in a fractional ownership based on a specific amount of time to use the property each year. A 52-week timeshare, for instance, typically involves one week ownership shares. Timeshares have advantages and disadvantages that you should consider before investment.
Advantage 1: Lower Long-Term Vacation Costs
Buying a timeshare is essentially a way to buy your vacations and invest in them long-term versus renting vacations by paying expensive hotel rates every year you go on vacation. RedWeek.com points out that over the course of a 30 year time comparison, the typical costs of one week's vacation a year is much lower with a timeshare purchase versus paying typical rates to a hotel for one week a year.
Advantage 2: Ownership Privileges
Timeshares generally offer a more hassle-free vacation experience. They come with ownership privileges that may include access to fitness facilities, pools, restaurants and other on-site amenities in the resort complex. Additionally, you do not have to worry about maintaining the property like you would with another type of investment or vacation property. Owners pay fees to the facility each year to help with upkeep and maintenance. You have a guaranteed vacation destination with a timeshare, which is not necessarily true when trying to get a hotel.
Disadvantage 1: Up-Front Investment
The trade-off for guaranteed vacation destinations and affordable year-to-year vacations is the up-front investment in timeshare ownership. Timeshare costs vary by location and the specific week you buy. However, a typical timeshare purchase is around $8,000 to $12,000, plus the annual maintenance fees, which are usually several hundred dollars. Cristina Rouvalis of the "Pittsburgh Post Gazette" points out in her June 2006 article, "Weighing the pros and cons of the booming time share trend," that timeshares are not always good real estate investments. In fact, some timeshares decrease in value over time in less-popular areas during down markets.
Because of uncertainty of future demand for the property, timeshare resales are often challenging. To make a sell quickly, you might have to seriously discount your timeshare. Additionally, timeshares have a reputation as a high pressure sales industry. Sales representatives for properties are often aggressive in selling you the property at a good price for them, notes Rouvalis. However, your ability to recoup your investment in the future is dependent on supply and demand at the time you look to resell.