Online Class: Timeshare Basics

In the US, timesharing was first introduced in 1969 on the island of Kauai in Hawaii. A short while later, Florida became the first state in the continental United States to offer time share rights. Most of the first timeshare agreements were leasehold arrangements, whereby the lessee obtained occupying rights for several decades (typically 40-year increments). The industry has expanded to include other assets like boats or planes.

            Condos – Individually owned units within a single residential building

            Houses – Single family homes, cottages, or townhouses

            Condotels – Hotels (typically high-rise buildings) that offer individual units for sale. Each unit looks identical, and owners receive the benefits of a full-service hotel.

            Private Residence Clubs – High-end residences typically in luxury developments offering extended stay rights through fractional ownership. Fractional ownership requires a buyer to purchase longer intervals (a few weeks to several months) and involves more personalized amenities. 

            Boats, Planes, and Other Assets – Though rarer, luxury items can be shared through similar agreements as real estate properties. 

Timeshare property developers (operators) will sometimes sell weekly increments before construction has been completed. This assists their financing efforts. You should investigate potential properties before committing to an agreement. Though the comparable living spaces will be typically identical, make sure you have a good idea of what you are buying if you cannot visit the site. Depositing down payment funds into an escrow account can help protect you from disreputable developers in case of default.

As we'll discuss in detail in Module V, the purchase price is not the only cost associated with a timeshare purchase. Maintenance fees, transfer fees, recording fees, and assessment fees are additional costs you will need to pay, and most maintenance fees are adjusted according to inflation. Check with individual properties for exact rates. You will need to pay for the privilege of exchanging your timeshare with others as well.

Point systems are set up by developers to determine values when owners swap units for different locations or intervals. Points can cost extra if you are "trading up" for a more popular week, larger accommodations, or a more popular location.

If used over a long period, timeshares have been shown to drastically cut vacation costs. Four- and Five-Star accommodations can be bought at a fraction of comparable overnight rates. You will not see those savings however, until the principal amount is paid off. Some experts advise buyers to pay for the entire purchase up front. Others recommend defraying costs over time. Keep in mind that you will be occupying this property for only a week (or a few) out of the entire year. When you finance the purchase, you'll be paying each month. For some, that is a difficult pill to swallow.