Some clients never cease to amaze you. One day, a client lets you know that they had a great time on vacation and they are thinking of buying a timeshare in that resort community. They feel it would be a good investment. What do they need to know?
Timeshares developed a very bad reputation back in the 1970s and 1980s. They have been reborn as fractional ownership, interval ownership, or timeshares with deeded and vacation points structures. Large companies, such as Marriott Vacation Club, Hyatt Residence Club, Hilton Grand Vacations Club, and Westin Vacation Club, are in the business.
In many cases it has evolved from ownership of a week in a resort to the deeded/vacation point structure mentioned above. This gives purchasers significant flexibility. They still aren’t investments.
What is Your Client Considering Buying?
Timeshares come in many varieties. The plain vanilla model is ownership of a specific week at a specific resort. The investment rationale your client sees might be a 100-room resort where each room is owned by 50 different weekly owners, which means there are 5,000 shares. Owning one means they own two-hundredths of 1 percent of the operation. If the resort was ever sold, they would get their proportional share. In practice, this rarely happens.
They might be entering into a vacation points structure model where they own a certain amount of points available each year. This can be spent on vacations at their new favorite resort. The points can be spent at other properties managed by the company. The points can be banked. It’s still not an investment.
Pros and Cons of Timeshares
You might wonder what got into your client. Logically they could stay at hotels of their choosing, spending money as necessary. Why buy into a timeshare?
Here are some reasons why: