Sunday, July 13, 2008

All About Timeshares

Timeshare vacation rentals have been around for a long time (well, probably since the 1960's, so not THAT long). Made popular first by the Hale Kaanapali on Maui, these vacation rentals come in different flavors that give the owners varying rights, responsibilities, and clout in the timeshare world.

Timeshare Use
Owners of timeshare vacation rentals can use their "equity" in many different ways. Actually using their allowed usage is one possible outcome, others include renting it out, exchanging time for points, exchanging time for another timeshare unit, or a combination of each.

Exchanging, one of the advertised benefits of timeshare ownership, usually happens through a broker or exchange agency such as RCI or Interval International. These are large holding companies who arrange exchanges, for a fee, within their affiliate resorts. Yearly membership fees are common as well.

Location, Location, Location
This universal rule applies to exchanges in the timeshare community just like everywhere else. A timeshare unit in Hawaii is obviously worth more than one in Rockford, IL, and as such a one-for-one exchange would be very difficult to arrange. Think of it as supply and demand: given that the supply of timeshare vacation rentals in Hawaii is limited, and demand is very high, the units will both sell and trade at a premium.

Not surprisingly, timeshare arrangements come in many different varieties

Deeded Timeshare
This legal arrangement is where the property is sold as real property by fractional ownership. Use of the property is divided into 52 weeks per year, and investors purchase one week blocks that they are interested in. They are co-owners of the property just as if you and your spouse have your names on the deed to your house. It can be complicated, especially in foreign countries where real estate laws may vary greatly.

Right to Use
As stated above, some in some foreign countries there are strict laws on what non-citizens may own, and as such a deeded timeshare would not be a practical way to manage a vacation rental. Right to use contracts give the holder the use of the property for a predetermined number of years. Once that time has expired, use of the property reverts back to the local property owner.

Fixed, Floating, and Rotating Ownership
Under the two basic agreements discussed above, timeshare use generally falls under a fixed, floating, or rotating vacation rental agreement. With fixed, each owner has the use of the same week every year. In a situation where owners own multiple weeks, a floating arrangement may dictate that owners can pick one week from the prime season each year a one week from the low season. With rotating ownership, right to use weeks rotate through a predetermined list so everyone has a chance at prime time and holiday weekends.

Are timeshare vacation rentals right for you? It's hard to say, and it's something that you need to give serious thought to before jumping into ownership. Talk to other owners and get an idea of what their perceived value is. Find forums online and visit the main timeshare broken websites. Take some time and don't be pressured into ownership without being properly informed on all the options for vacation rentals.

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