Vacationing regularly in a place you love sounds appealing. But buying a time-share may not be the best way to do that. Before signing a time-share contract, you should explore cheaper alternatives that require less commitment.
Time-share basics
Buying a time-share means entering a legal contract that entitles you to use a condominium, apartment, or luxury hotel room for a set period, usually a week, per year in a vacation destination of your choice. There are two types of time-shares.
The first is an actual real estate contract. Depending on the type of contract, you may be purchasing an actual ownership interest in the property, which you can sell if you choose, or a right to use the space, which you cannot sell. Prices vary but typically are more than $25,000 plus annual dues and fees.
The second type of time-share is a vacation club, where you purchase points to lease spaces at different destinations the club owns. Think Disney, Marriott, and Westin.
Other choices: the secondary market
Neither of these is an investment per se. Vacation club memberships or contracts to use the time-share space don’t give you property ownership. Even if your time-share involves a property purchase, the space will decline sharply in value rather than appreciate as other real estate typically does. Why?
- New condos and similar time-share properties are constantly being built. This ongoing new supply devalues existing units.
- A steady supply of time-share owners choose to sell their place for less than the purchase price they paid. Some even give them away to new owners who pay only the annual dues and fees.
- Owners also simply lease out their weeks to vacationers looking for a nice, one-time place.
If you want to purchase a time-share, research the secondary market first. You can buy an existing unit at a deeply discounted price or lease from an existing owner.
Be aware of the pitfalls
Tme-share contracts are complex, and you must read them very carefully. The fees continue year after year, and owners often look for ways to escape these situations. This fact has spawned a related industry, the time-share exit business, which has a controversial reputation.
Related – Timeshares and Vacation Clubs: Do Your Homework
