What is a timeshare?
If you’ve ever daydreamed about owning a vacation home but been put off by the hefty price tag and maintenance responsibilities, then you might have stumbled upon the concept of vacation property timeshare.
A timeshare is a shared ownership model where multiple individuals or families purchase the right to use a vacation property for a fixed period of time each year.
How does a timeshare work?
Timeshare ownership operates on the principle of dividing the year into intervals. Owners buy these intervals at an initial purchase price and also pay annual maintenance fees to cover the upkeep of the property. In return, they have the right to use the vacation home during their designated time period, which is typically one fixed week each year.
What does a timeshare cost?
The cost of a timeshare can vary widely depending on factors such as location, resort amenities, and type of ownership.
On average, timeshare prices range from several thousand dollars to tens of thousands of dollars for upscale properties. For instance, a two-bedroom timeshare unit in a popular beachfront resort might cost around $15,000 to $25,000 upfront, with annual maintenance fees of $800 to $1,500.
Additionally, owners who wish to exchange their timeshare week(s) for stays at other resorts through exchange programs may incur exchange fees, ranging from $100 to $200 per exchange.
Types of timeshares
There are two main types of timeshares - right-to-use timeshares and deeded timeshares.
Right to use timeshares
- Owners of RTU timeshares are not legal owners of the property itself; they just have the right to use it for a defined period.
- With RTU timeshares, you essentially purchase the right to use the property for a specified period each year, typically a week.
- These contracts may have an expiration date, after which you may need to renew the contract or opt out of the property.
- The duration of the RTU timeshare can vary greatly, from just a few years to several decades.
Deeded timeshares
- In the case of deeded properties, the buyer owns a portion of the unit (potentially 1/52, giving them one week’s use a year, or 1/26 giving them 2 weeks’ use a year) and receives an actual deed and bill of sale.
- These properties are legally considered real estate, and the owner holds permanent ownership until they manage to sell the property or transfer the deed.
- While offering more tangible ownership, deeded properties can be more expensive to maintain over time due to annual costs and fees.
- Owners of deeded properties are responsible for all payments associated with the property, regardless of their ability to use it or afford its upkeep.
Why are timeshare and co-ownership so different?
Timeshare and co-ownership are both ways for people to share ownership of a property, typically for vacation purposes, but they have distinct differences:
Property type
Timeshare properties are usually hotel rooms or condo units in a resort property, while co-ownership properties are standalone vacation homes in prime locations, hand-picked for their physical beauty, cultural heritage, and access to multiple outdoor activities.
Ownership structure
In a timeshare arrangement, individuals purchase the right to use a property for a specific period each year. They don't own the property outright but rather own the right to use it during their designated time. With up to 52 owners, this can mean that each individual is entitled to one week of vacation use per year.
Co-ownership on the other hand involves far fewer people, with between 2- 8 co-owners jointly owning the property. Each co-owner has a percentage of ownership, and the right to use the property for a greater amount of time (usually around 6 weeks per annum if there are 8 co-owners.) The co-owners each own a share of the home’s equity and can benefit from any appreciation in the value of the underlying real estate over time.
Usage rights
Timeshare owners have the right to use the property during their designated time period. The schedule is usually fixed and allocated in advance. Some people like this, but others find it very limiting.
With co-ownership however, owners tend to have more flexibility in using the property. They may divide the time equally or based upon some other agreed arrangement. Co-owners may also have the option to rent out their share of time when they’re not using it.
Ongoing costs
Besides the initial purchase price, timeshare owners are responsible for paying annual maintenance fees, regardless of their property usage.
In co-ownership arrangements, financial responsibilities such as maintenance costs and property taxes are typically divided among co-owners based on their ownership percentage.
Transferability and resale
Timeshares can be challenging to resell and owners may struggle to recoup their initial investment due to an oversaturated resale market. Timeshare owners may also be faced with fees or restrictions when transferring ownership.
Conversely, co-ownership works just like any other real estate, giving owners the freedom to sell their share. In fact, modern co-ownership providers actively support co-owners in the selling process, as long as they have owned their property share for at least a year.
Management and decision-making
Timeshare properties are often run by a management company, which may make decisions about maintenance, upgrades, and other matters on behalf of the timeshare owners.
In a co-ownership agreement, co-owners typically have more direct involvement in the management and decision-making processes regarding the property. They work together with the co-ownership provider to make decisions about maintenance, repairs, renovations, and other matters, which the provider then organizes.
Shared property investment
Understanding the nuances of timeshare and co-ownership is crucial when you’re deciding whether to invest in a shared vacation property. And by weighing up the pros and cons of each option and considering your personal preferences and finances, you can make an informed decision that aligns with your lifestyle.
Co-ownership with Kocomo
At Kocomo, we see co-ownership as the modern way of owning your dream vacation home. Combining affordability and luxury, co-ownership is an innovative alternative to timeshare that brings your perfect property into reach.
Intrigued by co-ownership?
Dive into Kocomo's Learn and FAQ pages to find out why co-ownership is leading the way in shared vacation home ownership.
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