The American Resort Development Association reports that the US timeshare market is worth more than $80 billion dollars. Timeshares generate approximately $10 billion in sales revenues annually.
There are more than 500,000 part and full-time jobs attached to this industry.
If you’re an investor looking for a timeshare for sale, you’ve come to the right place! Read further to find out what you need to know before you buy so that your next investment is a wise one.
9 Things to Know Before Purchasing a Timeshare for Sale
If you’re ready to pursue this investment potential, here’s what you need to know before you can officially “accept the keys.” Study these nine points ahead of time before you sign on the dotted line.
1. What is a Timeshare?
Timeshares aren’t like a normal real estate deal between multiple owners. A timeshare investment involves multiple investors who own a time interval of a single vacation property like a cabin or condo.
Timeshare investors cooperatively pay for specific property-related expenses, whether they are currently staying at the property or not. Property maintenance fees and other repair costs are routinely charged. Timeshare investors also pay for their share of utility fees and property taxes as well.
2. Timeshare Investment Models
Timeshare investment models come in three unique forms: right to use agreements, vacation club options or fee simple agreements. Here’s a breakdown of all three:
Right-to-Use
A right-to-use agreement allows you to purchase rights to occupy the property during specific days of the year. Right-to-use owners usually won’t own the physical structures themselves. A resort developer or management company holds the property titles themselves.
Vacation Club Point System
Timeshare investors can buy points through a vacation club system. You use your accumulated points to travel to timeshare locations within the club’s network. Some vacation club networks let you use points for other vacation-related costs like airline tickets or rental cars.
Fee Simple
A fee simple contract provides an investor with the title and ownership rights to a property along with other investors. Investors in fee simple timeshare arrangements can loan, rent, or sell their property share at their convenience.
3. How to Sell a Timeshare?
You can leverage two different methods to sell your timeshare. You can choose to hire a broker to negotiate your sale, or you can sell your share by yourself.
If you would rather sell your timeshare interest on your own, there are many websites available for you to advertise your timeshare. Some of these familiar websites include Redweek.com and eBay.
A timeshare usually isn’t a profitable, long-term investment. You might not see any profit from your timeshare sale because there are a lot of timeshares already on the real estate market.
4. How to Buy Timeshares
You’ll find plenty of “timeshares for sale” ads at most real estate offices. Trulia.com and Zillow.com are to online companies that also provide information on current price ranges.
The US Federal Trade Commission (FTC) has a buyer’s checklist to help buyers prepare for timeshare purchases. They also have tips on calculating total timeshare costs as well as how to compare these costs with similar properties.
One way to take the stress out of buying a timeshare is to visit multiple sales locations in person. Evaluate their building quality and speak with the neighbors to gather information on their personal experiences.
5. Be Familiar with Timeshare Contract Rights of Refusal
A right of refusal is a contract provision that allows interested parties the right to buy a timeshare before the seller considers other offers. You’ll see a right of refusal clause prepared before the seller places the property on the real estate sales market.
This provision gives the seller the flexibility to market their timeshare. If the seller receives other offers, they must contact the first interested buyer. That’s when the first interested buyer can decide if they want to rescind or change their first offer.
6. Understand Timeshare Maintenance fees
Timeshare maintenance fees cover the everyday costs of maintaining the timeshare community.
Timeshare companies regularly collect these fees to cover costs for property-related expenses like:
• Onsite gym or swimming pool maintenance
• Landscaping
• Security or front office staff
• Property liability insurance
Research the current and historic maintenance fee trends at your target properties. Make a note if fees rise sharply or remain consistent. This gives you an idea of what your ongoing expenses will be.
7. Timeshare Occupancy Rates
A timeshare’s occupancy refers to how full a timeshare community is compared to its maximum number of available units. Timeshares that maintain maximum occupancy could be a good sign. It might mean that owners are pleased with this site and actively using their property.
8. Learn the Timeshare Exchange Process
Timeshare exchange means that a timeshare owner can trade their previously scheduled week with another timeshare owner. These timeshare owners can also request to swap for a time at a comparable property somewhere else. You can’t do a timeshare exchange swap unless you’re a member of an exchange network.
Exchange networks collect a list of time slots and timeshare units available to trade in and out of. Timeshare owners pay a membership fee to join an exchange company. These companies also charge fees to both “owner” and “seller once the exchange is done.
9. Scams
Timeshare sellers sometimes receive a fake offer that prompts them to pay a broker sales fee. Once that fee is paid, the offer might “mysteriously” disappear. Brokerage fees are non-returnable so the seller can’t recoup their lost funds.
Sometimes a timeshare buyer might face aggressive sales maneuvers from brokers who flood them with unsolicited sales brochures and phone calls. These brokers will promise buyer discounts or other prizes that they never deliver on.
Next Steps
If you’re serious about buying a timeshare, the best thing you can do is do some research in advance.
Print out the FTC’s buyer’s checklist when you hit the field looking for promising properties to buy.
Visit the property or contact any investors currently connected to the site to ask them their opinions.
Don’t be afraid to ask them for their input on the site’s occupancy levels. Ask them if they’re happy with the improvements to the site that their maintenance fees paid for.
If you want to know more about how to find a timeshare for sale, be sure to visit our website. We at Frugal Finance know that protecting your investments is important. We hope you enjoy our growing number of articles from our financial experts located around the world.
