How do timeshares work?
Timeshares operate on a concept of fractional usage, where individuals secure the right to use a specific property for predetermined durations. Essentially, if you invest in a timeshare, you're acquiring the right to occupy a particular accommodation, like a hotel or resort unit, for a set period each year. For instance, if 52 parties invest in one unit, each party typically gets usage for one week annually. It's crucial to understand that with timeshares, you're primarily purchasing usage rights rather than actual property ownership. While this model is common for vacation spots, it's seldom applied to individual residential homes.The success of the timeshare model depends on each unit being owned by dozens of parties at any given time. And those people travel from far and wide to use the shared space — owners reported an average of 1,001 miles between their timeshare and their primary residence. Timeshares have been around since 1969, and since then have ballooned into a $10.5 billion industry, according to a 2020 study by the American Resort Development Association. What’s more, timeshare sales show no sign of slowing — sales volume has increased an average of 5% annually over the past five years. That’s great for the timeshare industry, but what exactly does it cost potential owners?How much do timeshares cost?
The first cost of a timeshare is time itself. Timeshares are usually sold to customers when they are already visiting a resort. Lulled by sunny skies and gentle breezes, would-be-buyers are often lured into extensive sales pitches with the promise of free goods or services. After all is said and sold, if someone decides to purchase a timeshare, the average upfront cost of a unit is about $22,000. Compared to purchasing a whole condo, this may seem like a relatively small price. But there’s more than just the upfront cost to consider when asking, “How much do timeshares cost?” Locked into a specific timeframe of use — often just one week a year — buyers are also locked into maintenance fees, which can exceed $1,000 annually and tend to increase year over year. When you do the math, it’s not uncommon for the total nightly cost at a timeshare to be higher than an equivalent area hotel.What is a timeshare worth?
Timeshares are a bit like boats: The second you decide to purchase one, it starts to decrease in value. Timeshare ownership also sidesteps most of the fiscal advantages that owning real estate normally brings, like equity, tax incentives or rental income.What’s more, if a buyer eventually decides to sell their timeshare, the likelihood of recouping the investment plus the yearly maintenance fees is incredibly low. Supply and demand are way out of balance, with 204,100 timeshare units on the market at 1,580 resorts in the U.S., and more on the way every year. The market is flooded with owners looking to pass their timeshare (and annual maintenance fees) onto a different buyer.What else do you need to know about how timeshares work?
- The industry is highly regulated — make sure you learn about industry rules and regulations before you agree to buy.
- Be very clear about exactly what type of product you are being offered. Ask for a concise, easily understood outline of terminology and purchase terms.
- Look for signs of good property management and well-maintained facilities. Review the resort’s annual budget, which is usually available through the property’s homeowners association.
- Ask yourself, “Is this a place I want to stay year after year?”
Why Pacaso is a better than a timeshare
One of the main reasons people choose a timeshare over another type of getaway — setting aside the heavy-handed sales pitch — is cost. The price seems like a bargain compared to a whole home purchase, which many buyers believe to be out of reach. 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.An alternative? Professionally managed LLC co-ownership with Pacaso. Owning a share of a Pacaso allows you to co-own an amazing home for ⅛ the cost. It’s the modern way to own a second home.What Pacaso offers
- True real estate property ownership that moves in value with the market, so any equity realized is yours.
- Ownership of a luxurious single-family second home, not the right to use a condo or hotel room. You and your co-owners own 100% of the home.
- A professionally designed, beautifully furnished and well-appointed home, complete with everything you need for a comfortable and relaxing stay.
- Between 2 to 8 vetted owners who have exclusive access to the home that is never rented. A timeshare unit may be sold to 52 owners or rented out when vacant.
- No hidden fees. Operating expenses are passed along equitably and at cost to owners.
- On average, owners stay at their homes 6-7 times per share per year, depending on their personal travel preferences. They can easily schedule their stays and use their home on an ongoing basis.
