Investing in a timeshare property has its pros and cons.
A timeshare property is a vacation multi-unit property where ownership is shared. Your part ownership entitles you to spend time at the unit(s) of the property that you purchase. For example, you can purchase a unit of the property (say a two-bedroom apartment) for a week of the year. Other owners may purchase one or more units for different periods of time, usually measured in weeks, until the full use of the property is sold for the entire year.
Timeshare properties are usually located in popular vacation resort areas and your part ownership guarantees you an annual vacation for the period purchased according to the specific rules of the property.
Unlike the outright ownership of a vacation home, timeshare ownership does not allow you to make any changes or improvements to the unit purchased. Instead, timeshare owners are locked into paying an annual maintenance fee towards the cost of maintenance, improvements, cleaning, property taxes and so on. The managers of the timeshare property apply the pooled funds from the owners’ maintenance fees to settle such costs.
Typically, when timeshare property ownership is offered to prospective purchasers, they are wowed by an initial free stay at the timeshare resort or hotel during which they are invited to attend an intense sales pitch emphasising wonderful annual vacations at an “attractive” cost.
Here are the pros: first it is attractive to have a vacation property always ready for your use and fully maintained with no special attention/responsibility on your part.
Modern facilities
Secondly, the unit is typically maintained in immaculate condition with a range of modern facilities. Then there is great value where there is flexibility in choosing different locations of timeshare properties, stays for different times of year and even of converting your year’s ownership into points that can be used to purchase other vacation services and properties. A real bonus is the ability to transfer ownership to your inheritors or other beneficiaries.
On the other hand, the cons are many. First, little discussion is made of the significant annual maintenance fees during the sales pitch. Purchasers are sometimes subsequently caught off guard by the additional unexpected cost.
Secondly, if each owner stopped to compute the eventual cost of the fully sold timeshare complex for the entire year, they will realise that it is an astronomical amount compared to what the outright sale of the entire complex would bring.
Then, the ultimate questions are – can you afford or would you wish to commit to an annual luxurious vacation every year? Will there not be a year where you may rather wish to renovate your own home, meet the cost of educating your children, save extra for retirement or cut back spending because of loss of employment or a downturn in the economy.
Indeed, it may be at those times when you would rather not take a vacation at all that you would consider selling your timeshare privileges. Then is when you will find out that the resale value of timeshares is what you can get for it – and there are so many other people trying to offload their ownership rights, that yours is worth a minimal percentage of what you paid. Making a profit on the resale of a timeshare ownership is virtually non-existent.
Ultimately, if you cannot commit to an annual luxurious vacation every year, it may be best to just get a hotel room. At least then you can choose a five-star propery when you feel like . . . and when the chips are down for whatever reason, you can pass on the vacation or just choose a bed and breakfast.
Louise Fairsave is a personal financial management adviser, providing practical advice on money and estate matters. Her advice is general in nature; readers should seek advice about their specific circumstances. This column is sponsored by the Barbados Workers’ Union Co-op Credit Union Ltd.
