| Timeshare definitionA timeshare is when multiple individuals collectively invest in and share the use of a vacation property, often in hotels or resorts. |
How do timeshares work?
In a timeshare, multiple individuals collectively invest in and share the use of a vacation property, often situated within hotels or resorts. Each timeshare owner is allocated a specific number of days or weeks to use the property each year. Unlike a vacation club, co-owners of a timeshare are typically limited to a single property.Timeshares operate on fractional ownership, where individuals secure the right to use a specific property for predetermined durations. Essentially, if you invest in a timeshare, you acquire the right to occupy the same accommodation, like a hotel or resort unit, for a set period each year. It's crucial to understand that with timeshares, you will purchase usage rights rather than actual property ownership. For instance, if 52 parties invest in one unit, each party typically gets usage for one week annually.Real-world timeshare example
Let’s say your family buys a timeshare in Los Cabos, Mexico, for an initial cost of $23,000 and an annual maintenance fee of $800. In this example, you’ll have two individual weeks to enjoy the timeshare throughout the year. If you vacation there for 10 years straight, you’ll have spent $31,000 plus any additional maintenance fees. Divided across 120 nights (12 per year), that adds up to $258 per night, which may be cheaper than the cost of the room if you book on the resort’s website. The potential savings via a long-term contract is why some people find timeshares so appealing.Types of timeshares
There are a lot of timeshares out there, and not all timeshares or timeshare alternatives are structured the same.
Shared deed timeshares
Transferable co-ownership for lifeShared deeds divide ownership into smaller parts that reflect how long you can stay. A timeshare that’s divided into two-week stays would have 26 simultaneous owners, and it’s not uncommon for deeds to have a 52-part split, one for each week of the year. Shared deeds lock you in for life and can be passed on to family or sold. The majority of timeshares are deeded.Shared lease timeshares
Limited-time right to use contractShared leases are like an apartment you’re paying to stay in a few weeks out of the year, but you commit to a certain period. The kicker here is that you don’t get a deed because you’re only leasing a specific time at a property. You’ll still share it with many other people — typically 52 families, including yourself.How timeshares are split
Now that you understand how the two types of contracts work, let’s look at the three main ways to divide time for timeshare properties.
- Learn about industry rules and regulations before buying.
- Be very clear about exactly what type of product you are being offered.
- Ask for a concise, easily understood outline of purchase terms.
- Look for signs of good property management and well-maintained facilities.
- Review the resort’s annual budget.
Fixed weeks
Fixed weeks mean you’re locked into the same week every year (say, the third week in April). Changing your fixed week usually comes with a hefty price tag in the form of an upgrade fee.Floating weeks
Floating weeks let you choose your week seasonally. Floating week systems are very competitive among timeshare owners, and the best slots during high season get snapped up quickly. If keeping your average vacation cost low is the priority, consider choosing a slot during the low season.Points system
Some timeshares operate with a points system, similar to an airline. You “pay” for your stay with points, giving you greater flexibility in how you travel. Choosing an off-season, weekday stay or downgrading to a smaller room may cost fewer points overall. By contrast, you can also use points to upgrade components of your vacation, such as getting a bigger room or a better view — or even enjoy another second home destination via a timeshare exchange program.Timeshare costs
Buying a timeshare means purchasing time at a property shared by many other people, most often a room at a resort, hotel or condotel. Timeshares vary in format, ranging from fixed-week to floating-week systems, so the costs associated with them can differ significantly based on the contract terms and the nature of ownership.Your initial cost will likely be more than $22,000. In addition, you’ll pay annual maintenance costs and any other fees stipulated in your contract throughout your timeshare’s lifetime.For example, you will pay annual fees that cover maintenance, utilities and taxes. These fees can range from $300 to over $1,000 per year and are due whether or not you use your allocated days on the property each year. Be sure to check the terms of your timeshare contract before signing. This document should outline all of the one-time and ongoing costs, including:- Initial purchase price
- Closing costs
- Maintenance fees
- Transfer fees
- Property taxes
Financing a timeshare
Banks usually don’t loan money for timeshares, so buyers have few financing options other than the timeshare company itself. Little competition means some timeshare companies use high-pressure sales tactics on potential buyers, plus 14-20% interest rates — way higher than most second home loans on the open market.Pros and cons of timeshares
You may fall in love with timeshares because they’re in destinations with lots to do. Some timeshares allow you to trade locations with other owners, use some of your nights to explore somewhere new or let your friends and family members use your nights. Unfortunately, timeshares also have quite a few detractors. Annual fees and special assessments can be expensive, and if you decide it’s no longer the right choice for you, timeshares can be hard to sell on the secondary market. The timeshare industry also gets a bad rap for pushy sales tactics. Timeshare ownership also sidesteps most of the fiscal advantages that owning real estate normally brings, like equity, tax deductions or rental income.| Pros | Cons |
| Access properties in great destinations | Expensive annual fees |
| Only pay for the time you use | Pushy sales tactics |
| Point systems with unique perks | Difficult to sell |
Exiting a timeshare
If a buyer eventually decides to sell their timeshare, the likelihood of recouping the investment and yearly maintenance fees is incredibly low. Supply and demand are way out of balance, with 201,600 timeshare units on the market at 1,541 resorts in the United States, with more added each year. The market is flooded with owners looking to pass their timeshare (and annual maintenance fees) on to someone else.The second home difference
One of the main reasons people choose a timeshare over another type of getaway — like buying a second home — is cost. The price seems like a bargain compared to a home purchase. When you add in a resort timeshare’s ever-increasing fees and limited access, many owners find it’s not such a bargain after all.Although owning multiple homes can be costly, true real estate property ownership moves in value with the market, so any equity realized is yours. If the cost of second home ownership is out of reach, consider co-owning a second home.With Pacaso co-ownership, you enjoy the benefits of second home ownership without the hassles. Unlike timeshares, a Pacaso is a fully managed vacation home with a property-specific LLC controlled by the two to eight co-owners of the home. Costs flow through the LLC, too, so you’re not subject to hidden fees.Here’s one last major difference: You’re guaranteed far more than a week’s stay — on average, owners of a 1/8 share in a Pacaso stay at their homes six or seven times a year for about a week at a time. And should you decide to sell, you can sell at any time, at the price you set. Learn more about how co-ownership of a second home works with Pacaso and how it differs from a timeshare, then find your dream second home in your favorite vacation destination.Timeshares FAQ
What is the difference between deeded and leased timeshares?
Owners of a timeshare without a deed cannot pass down the property to loved ones.
Do you own anything when you have a timeshare?
A timeshare owner is different from owning residential real estate because you’re really owning the right to use a room within a larger hotel or resort.
Do you ever pay off a timeshare?
Yes, you can pay off a timeshare. However, the payment terms for each timeshare differ by contract type.
