A timeshare is a piece of real estate where many individuals share ownership of property. You pay up front only for the time you will use it. It is a popular way to save on vacation expenses over the log run because you own the property. But is the practice right for you and your money? The pros and cons of buying a timeshare, as outlined in this article can help you make a better decision.
Buying a timeshare can often be an impulsive and emotional decision. On the plus side, it allows you to own a portion of a vacation property that you can reliably use during the same week once per year. That can vary depending on the type of co-op agreement you’ve entered into. Some examples of types include fixed week, floating week, and right-to-use based on availability. Before you take the plunge and possibly find yourself in financial distress with an investment that is difficult to get rid of, consider these pros and cons.
Five Pros to Making the Part Ownership Investment
1. Compared to a vacation home rental, which is probably vacant for large portions of the year, with joint ownership investments, you only pay for the time that you use. This is a huge benefit because it allows you to use an expensive property that you may not have the cash to afford otherwise. Also, you won’t have any concerns about maintaining the property year-round.
2. If you are someone who appreciates stability and predictability, timeshare could be your best option. Not only do you have a guaranteed destination for your vacation every year, but you also have an investment that is shared across multiple parties, effectively lessening your financial burden.
3. Another possible bonus is that you may be able to trade destinations and times with other owners, which gives you the freedom to travel to new places that you probably wouldn’t have considered before.
4. If you can’t use your specified week, you may be able to rent out your block of time and not take a financial hit for missing your vacation that year.
5. You may also be able to donate your week to a charitable cause like a school auction or even let your friends or family enjoy your property if you can’t go.
Four Cons to Making the Part Ownership Investment
1. Although maintenance will not be one of your issues, you will have to worry about the continual expense of annual fees and the possibility that they could increase every year outside of your control. You will be responsible for those fees every year whether you use the property or not.
2. You will likely have difficulty selling your interest and may be forced to sell at a large discount since many other used timeshares are usually already on the market. On that note, you may want to consider just buying used from the secondary market in the first place to save yourself money.
3. If you sell and it’s at a loss, the IRS won’t let you claim a capital loss like you generally would with most other real property losses.
4. If you’re buying in a foreign country, there can be unique challenges. It’s important to familiarize yourself with the restrictions in whichever country you’re considering before completing your purchase. Also, some countries have less stringent consumer protection laws that you should investigate.
Ultimately, if the pros outweigh the cons and you are thinking of timeshares as an investment, then you could proceed to investing in this sector and enjoy the benefits. Timeshares have worked for many investors and some even own more than one. Prior to buying a timeshare of any kind conduct a good research so that you are conversant with owning the property.