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Owning a vacation home in your preferred holiday destination is a dream come true. However, owning a vacation home throws up its own set of complications – maintaining the property all-year round and other ongoing costs make it a much less lucrative option than it sounds at the onset.

vacation rental timeshare

But what about a owning a timeshare that allows you the right to own or use a property, such as a holiday villa or an apartment, for a specified period each year, as stipulated in your contract.

The concept of timeshares is rooted in fractional ownership. Instead of owning the complete property, if you purchase, say, a month of usage, you own one-twelfth of the property, and other buyers own the remaining asset.

Buying a timeshare is a long-term commitment. It makes sense if you like to vacation regularly, and predictably. It is possible to buy timeshares in Australia or other parts of the world, but experts suggest it is best to do some research and crunch the numbers before plunging, as timeshares quickly depreciate, and often quite difficult to resell.


Types of timeshare arrangements

Fixed-time schemes – Here, the buyer has the right to use the specified property during the same period, as stipulated, each year. The option offers no flexibility and could end up being quite monotonous. However, with a fixed timeshare arrangement, you could rent it out for the period or trade-off with another timeshare owner.

Flexible-time schemes – In this option, you have the flexibility to choose when you want to use the property, although it might be difficult to get the exact slot you want, considering most timeshare owners would vie for the same peak holiday periods.

Point-based schemes – In this scheme, you buy points that can be redeemed at various properties in different locations, owned by the same scheme operator. The duration of your stay, in this case, depends on the number of points you have accumulated or purchased.

One of the distinct advantages of owning a timeshare is that you only pay for what you use, unlike owning a vacation home that stays vacant most of the year. Additionally, you don’t have to bother about maintenance costs.

With a fixed timeshare, you have a guaranteed holiday in a place you love. Of course, if you crave a different destination or experience each time you holiday, timeshares may not be right for you. However, it might be possible to trade your timeshares with others, enabling you to travel to other destinations affordably. You could also rent your timeshare if you are not using it during your fixed period.


Cost of holding a timeshare

Apart from the upfront payment, an annual membership fee, as well as maintenance fee, is payable as long as you own a timeshare. These fees are subject to escalation, which means you’d be paying more and more to keep your timeshare each year. Also, timeshares are often hard to resell, considering the competition in the market.

Default in payments could lead to forfeiture of the timeshare.


Purchasing a timeshare

Before you decide to buy a timeshare, it is worth comparing the cost of renting similar accommodation in the area during the same period. It is also important to know that timeshare schemes are a type of managed fund. Thus, the operator of the scheme must be registered with Australian Securities and Investment Commission (ASIC) and hold an Australian Financial Services (AFS) license that you can check at the ASIC Connect’s Professional Registers. This also means that the operator must belong to an external dispute resolution system to settle any disputes arising out of the contract in the future.

Salespersons at timeshare seminars are often very persuasive, but you must remember that you are under no obligation to sign the contract on the same day. 

Even if you do, you are entitled to a 7-day cooling off period or a 14-day cooling off period if the operator is not a member of the Australian Timeshare and Holiday Ownership Council (ATHOC). If you change your mind within this period, you can simply inform the operator in writing to rescind the contract.

Further, you must be provided with a product disclosure statement and informed about the cooling off period by the operator.


Borrowing for a timeshare

Banks usually don’t lend to borrowers for investing in timeshares. Most often, the operator of the scheme will arrange finance for you, but the interest rate could be much higher than the market rate. In case you do decide to borrow money, ensure that the credit provider is licensed by searching ASIC Connect’s Professional Registers.

It is, indeed, quite lucrative to buy a fractional ownership in a swanky property in a scenic location by purchasing timeshares. However, buyers must understand that buying a timeshare is not an investment but a lifestyle choice. In fact, in a way, it is actually prepaying for a repetitive vacation.

If you intend to make an investment that generates returns and proves to be profitable in the long run, it might be better to consider other options such as investing in a rural farmland or commercial property. You could always get in touch with the brokers at HashChing to learn more about financing your purchase.

 
By Vidhu Bajaj
HashChing Content Writer
 

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