So I'm sure we've all heard of timeshares at some point in our lives. They are talked about all the time but mostly in a negative light, like a scam. While I don't have an opinion on whether this type of property is good or bad -because I think that that really depends more on who is buying and their specific needs, I do think that I should at least take the time to clarify what time shares are.
As much as I had heard negative things about time shares, I had no idea what they were until I took my pre-licensing course and I had to learn what they are. So just in case you have found yourself in the same boat as me, lets just chat quickly about what a time share is, the different types there are available, and maybe we learn something beneficial.
When I first learned about these they were really giving air bnb vibes, but like pre-air bnb. Ok, so for those who remember a time before ride shares like uber or lyft, or home shares like air bnb or vrbo, or chore sharing even like taskrabbit and all the other cool sharing apps we have today, people did not really share anything. The closest anyone got to sharing their stuff was if you bought your own beach house and then rented it out for most the year except for the 1-2 weeks that you are your family used it each year. Now as easy as buying a second home would have been back then compared to now, it still was absolutely not feasible for everyone. In steps the very first shared housing situation which we called time sharing probably because compared to all other forms of co ownership this is that only one where what you own is dictated by timing. Let me explain.
There are 2 forms of time shares:
1. Right-to-use (leasehold)- a purchaser pays an up front fee to occupy a unit for one week per year for a specific number of years.
Do you remember a few blog back when I talked about leasehold estate. Leasehold estates are types of leases, meaning you don't own but lease. So for this type of timeshare you don't own any real estate. What you do own though is an interest in the real estate. That interest is the right to use and occupy the property for your selected time frame every year. Its basically like saying you want to stay at your favorite beach every year for your anniversary. You are young so you want to lock this in for say 40 years, so you can either try to set up a long term contract with a hotel, or Air bnb or VRBO that says every year for the next 40 years you get to come rent their place- maybe they go for it maybe they don't. Or, you can find a timeshare, where the contract is already in place. The same contract is already in place with 51 other people because that is the one thing that this property is for, multiple families each renting out for one special week each year.
Because you are leasing, you would treat this exactly like you would any other rental: plumbing issue, call the landlord; electrical issue, call the landlord; leaky roof, call the landlord. On the flip side because this is a rental, if part of the property becomes too expensive or difficult for the landlord to maintain, they own the property and can decide how to best maintain it.
2. Fee Simple (a.k.a.interval ownership)- a purchaser pays an up-front fee to co -own a condominium unit coupled with a right to use the unit for a specified time frame each year. A unit usually has 50 owners with each owner have the right to use for one week. 2 weeks are generally reserved for maintenance.
When talking about real estate, Fee simple means you own it. Like you fully own it- however in this situation we are talking about interval fee simple ownership. This means and all the other owners own you own all the property together all of the time, but they can only use/occupy the property during their specific time. Let's say you want to own some beach front property, but the price range of those properties is no where near what you can afford, you can either, scrimp and save and put yourself in insurmountable debit to own a property you may never use because in order to just maintain it you have to keep it rented all the time, and even then you still are running the risk of not affording the payments, or you look to buy a property with other people. I don't mix family and money because its too easy for it to get ugly quickly, and who's going to tell aunty Mae that she needs to stop getting experimental in the kitchen we all use, and who says if Uncle Joe wants to stay at the same beach. So, instead you find a time share, you and 50 other like-minded people all own the house and when you are done you can sell or will your ownership just as you would the beach house.
Now, while long term, this form of vacationing turned out not to be everybody's cup of tea I think it is important to understand it, because without this version of timesharing I am not sure that we would have evolved into the ride sharing, Chore sharing, home sharing society that we have today, which in many ways is the same idea as the timeshare, but with more freedom and flexibility. --And hey, if you are a creature of habit then maybe don't knock timesharing.
So now you know what timeshares are so if you are ever asked if you are interested in buying or renting one you have a very good idea of what these types of ownership are and you can make a more informed decision.
Comments