Investing in timeshares

Today's vacation clubs offer good value and accommodations for consumers looking to get away

year, and there may be other costs.

What makes the timeshare concept work are the exchanges. Though all the resort companies permit owners to exchange weeks or days within their own resort network, a major attraction is the ability to exchange quality lodgings anywhere in the world at the same, one-time fixed price.

These exchanges are made possible by two firms: Resort Condominiums International (RCI) and Interval International (II). Virtually all of the resort companies are affiliated with one of these firms. RCI is the dominant company with some 3,300 affiliated resorts and about 80% of the vacation exchanges, while II has about 1,600 resorts. The first year of membership with either RCI or II is usually included in the purchase price. After that, there is an annual fee, as well as fees for each exchange. Both companies have rating systems to ensure that travelers stay in condominiums of comparable quality to the one they purchased.

ARDA has the following advice for people considering timeshares:

  • Remember that timeshares are not financial investments. If you’re considering a purchase, you should think of it as an investment in future vacations, rather than an investment in property.
  • Learn as much as possible about the company. Not all firms offering timeshares are financially stable, national businesses. The BBB reported 18,570 inquiries into timeshare companies in 1996 and 574 complaints, says Chris Burgess, director of operations for the Dallas BBB. These reports can be accessed through the BBB Web site at www.bbb.org. In addition, many local BBBs have 24-hour automated information services that provide telephone summaries of the reports on a company if you provide the firm’s 10-digit phone number.
  • Seek legal advice. A timeshare purchase is a long-term investment, more akin to buying a home than buying a car. Buyers should seek legal advice before signing purchase agreements.
  • Don’t rush into a financial commitment. Reputable timeshare companies-particularly those affiliated with hotel chains-avoid high-pressure sales tactics.
  • Consider the resale potential. Owners need to consider the ease or difficulty in unloading the property in later years if circumstances should require it. Some companies, such as Marriott, have resale divisions and will buy back properties at the market rate. Others, such as Disney, require owners to offer the property first to the company, but they are not obligated to buy it back. Many companies, however, provide no help with resale. In addition, accumulated points may or may not be transferable to new owners, which will affect the desirability of the property.
  • Examine the types of ownership. Some timeshares have actual deeded properties in which the buyer legally “owns” real estate, usually a particular unit within a complex. About 10% of resorts offer “Right-to-Use” contracts, which do not confer ownership of anything to the buyer but rights that may be sold. Buyers need to determine which type of ownership and product they want. Furthermore, “deeds” in many European countries are essentially long-term leases-usually about 50 years-rather than complete ownership. Decide if a timeshare is something you want to use during your lifetime, or own and pass
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