What is 'Timeshare'

A timeshare is an ownership model in which many customers own allotments of usage in the same property. The timeshare model can apply to many different types of properties, such as condominiums, homes, campgrounds, vacation resorts, recreational vehicles, and private jets.

BREAKING DOWN 'Timeshare'

With opportunities to rent allotted time each year and sell timeshare interests in the future, many owners of vacation timeshares look at purchasing as an investment. However, this view is frequently misguided.

The advantages of a timeshare vacation property often include larger accommodations and a feel of being at home, but timeshares are not a good idea for everyone. In fact, the timeshare market is rife with gray areas and questionable business practices; so, it is vital that prospective customers practice due diligence before buying. The best timeshare investment opportunities tend to be in the resale market rather than in the market created by property developers.

Disadvantages of Timeshares

Many timeshare acquisitions are impulsive and emotional purchases. For example, Las Vegas is filled with timeshare marketers who entice customers to listen to an off-site timeshare presentation. In exchange for listening to their pitch, they offer incentives, such as free event tickets and complimentary hotel accommodations. The salespeople work for property developers and frequently employ high-pressure sales approaches designed to turn "nays" into "yeas." The prices developers charge are significantly more than what a buyer could realize in the secondary market, with the developer surplus paying commissions and marketing costs. Also, timeshare marketers may conceal the actual cost of timeshare ownership and exaggerate its potential benefits.

Even if a timeshare owner knows the full costs and true nature of timeshare benefits, a few disadvantages remain. For instance, timeshares depreciate quickly. Maintenance fees can rise every year, to the point that timeshare owners decide to sell their allotments rather than continue paying fees. The American Resort Development Association advised that the average annual maintenance fee for a timeshare is $700, which does not include the timeshare purchase price.  The association also estimates that fees will increase 8% on average annually. 

Advantages of Timeshares

Despite the disadvantages, some people enjoy owning a timeshare property. They are especially beneficial for people who like vacationing in the same place every year and who are patient enough to wait a year or more, if necessary, to make a timeshare exchange to vacation elsewhere. Such a wait is typical when there is a mismatch between supply and demand. For example, someone with a timeshare in Myrtle Beach, South Carolina, would encounter difficulty making an exchange for a week's stay at a Paris timeshare. The owner of the Paris timeshare would have to agree to an exchange for a stay in Myrtle Beach. The unbalance of demand makes it difficult to execute a trade.

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