You have worked hard for your money, and now you are considering either investing in a vacation home or getting a timeshare. This is an important decision since it will involve moving a lot of cash from one place to another or it may be a situation that involves taking out a bank loan. It is imperative to be aware that this is much more than an “either/or” decision because these types of”ownership” are very different from one another. Simply said, when you buy a vacation home, you are “investing” in what could become a potentially lucrative rental property.
When you spend money on a timeshare, you are “getting” part of a property you may use for personal recreation. It can be likened to the purchase of a durable or a consumable good. A “durable” good lasts over time while a “consumable” good is enjoyed for only a little while.The “feel good” period with a timeshare usually lasts a fairly short period without paying a higher cost for diminishing returns. Margot Schmorak, the CEO of a San Francisco based company called Hostfully,succinctly stated the difference between the two types saying “A Time Share is more of a luxury than an investment.”
How are Timeshares and Vacation Homes alike?
As different as these properties are in relation to one another they do share one common root. They are always located in places where people want to congregate for leisure, recreation, vacation, or all of the above. This could be along a beautiful beach, in the mountains at a ski resort or on a big lake somewhere.
How different can a Vacation Home be compared to a Timeshare?
They are very different from one another. This is not like a comparison of apples to oranges but more like land and water. Let’s just say that they are both located in the same great place for use on vacation, but that’s where the similarity ends.
You need to know what you are buying.
When you buy a Time Share you are purchasing a place that you share during a certain finite period with others who have use of it all other times of the year. The length of these periods of residence are generally fixed with higher costs being paid for prime time seasonal stays. They may also be on a revolving basis that regularly moves forward so that all timeshare owners experience having the use of the property at different times of the year. With vacation homes you own the whole thing and may use it anytime you want to do so.
Advantages to having a Timeshare instead of a Vacation Home.
Timeshare ownership does offer a few advantages. Since you are only purchasing a “piece of the action” the cost is substantially less money than buying a vacation home. These time periods are usually for a week or two but can be longer.
Timeshares are almost always at highly sought after destinations that are filled with excellent amenities. Depending upon where they are located amenities could include swimming pools, hot tubs, spas, golf courses, tennis courts, private beaches, recreational craft, ski lifts, fitness centers and restaurants or bars on site. Purchasing properties at such prestigious places can be quite expensive so Timeshares allow you to enjoy the good life with favored others for far less money. The caveat, of course, is that it that you are able to spend far less time there.
When you have a Timeshare you also do not have to think about paying property taxes, insurance, maintenance costs, possible repairs, remodeling and refurbishment for a property. The caveat here is that Timeshares do charge annual fees after your initial “buy-in” which can be substantial. Additional costs may also prevail.
Advantages of having a Vacation Home instead of a Timeshare.
There are quite a few advantages to owning a vacation home when you place it on a lucrative vacation rental program for the times you are not using it. Sources report that over 25% of people who own vacation homes rent them out for extra income. This income can offset or even eliminate holding costs for maintenance, upkeep, and other expenses.
If you need a loan to purchase a vacation home, you may take out a mortgage on the property which is not the case with a Timeshare because you do not actually own it. There is no equity available with timeshares.
Mortgage payments, maintenance, and other costs may be deducted over time from your taxes if carried as a rental investment property. Your accountant can advise you as to how this is done.
Since vacation homes are a piece of real estate, they usually appreciate in value from year to year with ever-increasing equity. Over time you may decide to sell your property at some point to either buy another home or retrieve the money for other needs. Vacation homes like any other residential property may provide you with an accumulation of savings for when you want to cash in.
It should be noted that Timeshares have nothing to really appreciate for savings and are difficult to sell. The main reason for this is that there is a huge glut of Timeshares available on the market, so those who are trying to sell them are taking a loss. They have decreased in popularity in recent years with the advent of available vacation rental properties offered by professional property management firms or those owners who want to be responsible for renting out their homes personally.
Plan on spending some time before you make any purchasing decisions and do some research to get detailed information for each type of property, but know this – Timeshares are not an investment, but a recreational luxury. A vacation rental home can be both.