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Read about timeshares and if they're a good investment.

Time shares are typically located in beach communities. [©Jupiter Images, 2010]
©Jupiter Images, 2010
Time shares are typically located in beach communities.

Timeshares offer vacationers an alternative to staying in hotels or rental properties, and are increasingly popular among Americans looking for a secure yearly vacation spot. Timeshares have been around since the 1970s, and ownership continues to grow. According to a survey by the American Resort Development Association International Fund, over four million American households owned time shares in 2006, equal to almost four percent of the population. In 2005, timeshare travelers spent approximately $10 billion in destinations around the country, an indicator of the size and power of the timeshare industry. Timeshare properties can be purchased at a wide variety of locations around the U.S. and world.

How Timeshares Work

Timeshare owners pay an annual fee for a property and get to use it for a certain time period each year, typically a week. Owners may choose to rent their time share to others or exchange a timeshare in one location for another owner's property somewhere else. Timeshares are typically resort condominiums with at least a bedroom area and a kitchen, but can also be hotel rooms, houseboats or motor homes. Most timeshares are fully decorated and equipped with towels, linens, TVs and other amenities.

Timeshares are located in a wide variety of vacation hot spots, from the beaches in the United States or Mexico to ski getaways in the Rocky Mountains or international locations around the world. According to The Timeshare Authority, the city with the most time share properties in the world is Orlando, Florida, which boasts 125 time share resorts and almost 30,000 individual timeshare units. There are more than 1,500 timeshare resorts across the United States, and nearly every state has at least one resort. Over half of all timeshare owners purchase a single week for their timeshare. Other options include purchasing two weeks per year, or purchasing a timeshare for biennial use.

Purchasing or Selling a Timeshare

Purchasing a timeshare typically involves a single initial charge and an annual maintenance fee to be paid for the duration of ownership. Maintenance fees are shared by all owners of a particular timeshare property. Timeshare properties may be leased for a certain number of years or owned forever, and can be passed on to heirs, depending on the purchase agreement.

Timeshares may be either fixed-week or floating-week properties. Fixed-week ownerships mean the owner is assigned a particular unit during a specific week during the year. A floating-week ownership gives owners the ability to request a week within a set range of weeks each year. This offers more flexibility, but doesn't mean that owners are guaranteed their first choice for week of use. The cost of a timeshare generally depends on the location, size and amenities of the property, as well as the season during which the week is scheduled. The average time share costs $14,800, according to RCI an industry leader in timeshare exchanges.

Once purchased, a timeshare may be sold, rented or exchanged for a timeshare at a different resort. Owners who originally purchased the time share from a resort developer will likely see large losses on resale. Most resale timeshares market for only 30 to 50 percent of the price for which they were originally bought. Unlike traditional real estate, timeshares generally do not appreciate in value. Resorts may be able to help owners advertise the sale or offer tips on reselling. There are also a number of Web sites that offer timeshare market listings for free or for small registration fees. Auction Web sites like eBay also allow sellers to post timeshares for sale.

Some scams to avoid when reselling a timeshare include offers to resell a property after the owner pays an up-front fee or offers to buy a timeshare for more than the asking price.

Timeshare Disadvantages

Although timeshares have a number of distinct benefits, there are certain drawbacks. Timeshares are an investment of significant amounts of time and money, and require a week of use each year in a specific resort to justify the expense. Travelers who prefer spontaneity should probably not choose to purchase timeshares. Advance planning is often necessary at least a year in advance, especially to obtain a certain week during peak season. Exchange companies are often expensive and difficult to work with.

Timeshares costs may be prohibitive to some potential owners. Because timeshare properties do not appreciate like other real estate, they are generally not good financial investments. In addition, the annual maintenance fee for a given resort may increase from year to year, regardless of use of the time share. Resorts can also impose additional fees for unexpected repair or maintenance costs.

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