Timeshare Investment – Not for the faint of heart!

Ever get those tempting “Let’s Go” invitations to free vacations? All you have to do is show up, listen to some hustler for 90 minutes and you’ve earned your vacation. So easy!

Most likely the sponsor of this event is a timeshare development company and they are betting that a lot of people will take them up on the offer and many who attend will end up buying a week or two or more of the timeshare property being sold. promotes. .

So let’s break down the puzzle.

What is timeshare?

Timeshare purchase is the fractional purchase of (usually) a condo or apartment at a specific location in a complex managed by the timeshare development company or its designee. Such a purchase is called a “deeded” or “simple installment” purchase. It can also mean the fractional purchase of simply a right to use a condominium or apartment or the right to use real estate. This is a “non-deed” purchase.

Fractional purchase refers to one, two or more weeks. So a condo or apartment will be “deeded” or sold to 50 or 52 other buyers (some timeshare companies only sell 50 weeks a year, keeping two for maintenance or rental). So I can pay $30,000 to use a 1-bedroom apartment in Honolulu, Hawaii every year from March 1-7. This is called my “home” unit.

Your rights as a timeshare owner

This depends on the timeshare company. Every purchase is different. Here are some common rights you get when you buy a timeshare.

1. Right to use a designated or available condominium. In the example above, I have the exclusive right to use my housing unit for the week (March 1-7) but I have to make that decision several months in advance, otherwise I lose exclusivity.

2. Right to exchange your deeded or right-to-use property for another, in a different place and at a different time. The exchange privilege is an excellent benefit as most timeshare developers have registered with clearinghouses such as Interval and RCI and as such have a large inventory to choose from around the world.

3. Correctly convert the right to “stay” into a predetermined number of points that can be used for different types of travel services, just like the loyalty points you accumulate with airlines or hotels.

4. Right to elect the board that oversees the management of the condominium complex where my housing unit is located.

What timeshare does not give you:

1. You cannot sell the condo: you can “sell” your week if it is titled, or the right to use if it is not titled to someone else.

2. Property Rights – You cannot make any changes to the property, even if it is deeded, as you are not the absolute owner.

3. Free right to convert or reserve. Most timeshare developers charge for any transaction.

4. Exclusivity. Again, since you only own a fractional part of an apartment, your exclusivity is very limited and only in respect of a pre-designated week in a year.

5. Guarantee that the property where the deed is held is 100% owned by the Timeshare developer. You may have it in partnership with another company, or you may just be running it for investors.

6. Unconditional right to sell your share: Many developers have “first claw” or right of refusal, so you are forced to offer it to them, at least initially.

My suggestion is to do a thorough research on the timeshare developer: history, affiliations, annual maintenance fee increases, and time span between remodels.

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