You may have heard of the term ‘timeshare’ before, and you may be wondering whether or not this is the right investment opportunity for you. A timeshare is a vacation property arrangement that enables you to share the cost of the property with other people in order to guarantee time spent at the property. In this blog post, we will delve a little bit deeper into how timeshares work, revealing four things that you need to know before you make this type of investment.
There are different types of contracts
The first thing that you need to realise about timeshares is that there are different contracts. Companies like BRIGHT can help you to understand the different investment options that are available to you. Generally speaking, there are shared lease contracts and shared deed contracts.
Firstly, we have shared deed contracts, which will divide the property’s ownership between everyone who is involved. Each ‘owner’ is going to be tied to a specific set of time that they can use the property. For example, let’s say that one unit is sold to 52 owners, then there will be one week per year for each of the owners. Although you own a piece of the property, you won’t be able to make any decisions or changes unless all of the other owners agree.
The other type of contract that is available for timeshares is the shared leased contract. This is similar to the former, however, the main difference is that the property deed remains with the resort where the property is situated. You are only going to be leasing the use of a property, so you do not get a deed. It is basically the same as renting the exact same hotel room at a resort for the same week for the rest of your life. With this option, there is a set time limit, so it could be 20 or 30 years, for instance.
The price is typically negotiable
Another thing that you need to realise when it comes to timeshares is that the price is usually going to be negotiable. This is the case for most real estate transactions. You will typically have leverage when it comes to price because there are many different options available to you when it comes to having vacations. Because of this, you will often find that free gifts are available with timeshares to sweeten the deal, for example, show tickets and dinners.
You need to understand what you are buying
As timeshare businesses know that you are probably going to be able to find cheaper options from existing buyers, they will tend to provide a number of perks, including closing incentives. It is important to be aware of what you are actually going to receive in return for your money. It is also pivotal to know what sort of real estate interest you are actually going to own when you buy a timeshare. In the vast majority of timeshare sales, you are going to get a deed. This means you can exchange the share, sell it, or rent it out. You can also pass it onto your heirs. It is just like any other deed. However, as mentioned earlier, there are also contracts whereby your only right is going to be to use the property. Therefore, it is important to make sure that you are aware of what sort of contract you are agreeing to before you sign on the dotted line.
If you are going to be purchasing a timeshare in a property that has not yet been finished, it has been advised by the Federal Trade Commission that the money is put inside of an escrow account that is registered to a local bank until the property has been finished. You are also advised to ensure that there is a non-performance clause put into the sales contract. By doing this, you will be able to get your money back should the timeshare developer default on the property before it is finished or goes bankrupt.
Beware of scams
The final thing that you need to know about timeshares is that there are a lot of scams! Unfortunately, with any sort of investment, there are always going to be scams that you need to watch out for. After all, when you’re looking to spend something on money, there are people who want to try and capitalise on this when their intentions are not authentic. This is why you need to be careful before investing. Partnering up with an experienced company is always a great step.
There have been a lot of experiences whereby timeshare owners have received a cold call, claiming to be a buyer for a timeshare, typically for a price that is more than what they have originally paid or an inflated price. If a person calls you up to purchase something from you that you have not advertised, then you need to hang up. Usually, the business that is on the other end of the phone is going to collect hundreds of pounds, if not thousands, in so-called marketing fees or deed transfer fees, yet the sale will never be complete.
Therefore, you do really need to be sure that any deal you make is the real thing. Be careful. Do your research and find a reputable company to partner up with. They will be able to enlighten you to the best opportunities and make sure that everything is handled above board so that you don’t end up getting stung by a scam. After all, there are way too many scams out there today across all industries, so we need to have our wits about us!
So there you have it: hopefully, you now have a better understanding about timeshares. There is no denying that there are pros and cons associated with timeshares, so it is all about working out whether or not this sort of investment is going to be right for you and your situation.