What Is A Timeshare and How Does It Work?

Article Summary:

Timeshares are a type of fractional property ownership that you visit at specified times of the year, every year, for the foreseeable future. It should not be confused with buying an investment property that you can also use as a vacation home, and rent out as you choose. Timeshares are best for people who want to vacation in the same spot every year without dealing with the headaches of homeownership and property maintenance.

Timeshares are a unique form of real estate. You may have been offered a free trip or complimentary hotel stay by timeshare companies just to learn about the joys of timeshare ownership. And there are a lot of perks, like staying in a beautiful condominium in an exquisite location.

However, there are some drawbacks as well. It’s not a cheap vacation, for one thing. Being a timeshare owner is a fairly serious financial commitment and, depending upon your situation, it may limit your ability to enjoy other types of vacations. Read on to learn the ins, outs, pluses, and minuses of timeshare vacation ownership.

What is a timeshare?

A timeshare is a type of vacation property where you purchase (or lease) a fractional piece of real estate in return for use of the property for a specified period of time each year—typically a week, but that can vary. You will pay a lump sum of money upfront and then annual maintenance fees, or dues, as they’re sometimes called.

Traditional timeshares were characterized by ownership of the same vacation property, within the same unit, at the same time period every year, but they’ve grown more flexible since then. They are often ideal for people who love a particular destination and want to visit every year without the hassle of booking a new place each time.

  • Popular vacation locations. The properties are usually located in popular vacation destinations such as Las Vegas, Hawaii, Florida, Mexico, and the like.
  • Full range of amenities. They are often part of resort communities on or near beaches and come with a variety of amenities. These include pools, clubhouses, spacious rooms, laundry facilities, and full kitchens.
  • Company maintained. In addition to the amenities and travel destinations, timeshares are managed and maintained by the developer or timeshare company.
  • Multiple options. Timeshares can come in the form of condos, apartments, vacation resorts, or even campgrounds.

Types of timeshare contracts

There are two basic kinds of contracts when it comes to timeshare vacation ownership. In one contract, the signer actually buys a portion of the property. The other contract outlines the signer’s rental of the property.

Deeded ownership

Deeded timeshare ownership is also considered fractional ownership. With this contract, you actually own, say, 1/52 of a property in the case of each buyer purchasing one week per year.

When you have a deeded ownership interest, it’s considered “real property” and you can sell it, rent it, gift it, or leave it to someone in your will.

Non-deeded ownership

Also known as a shared leased ownership interest or right-to-use, non-deeded timeshare ownership means you are just renting the use of a place for a certain number of years—often decades.

However, because you’re not a timeshare “owner,” you usually aren’t allowed to rent it or sell it. Not only that, but it can be difficult to get yourself out of the contract. However, it can be a more affordable option since you only rent the property.

What are the main timeshare booking models?

In addition to the types of contracts associated with timeshare properties, there are variations on when you can use the place.

Fixed-week timeshare

The nice thing about having fixed-week timeshare ownership interest is that you can plan your schedule around your annual vacation since it will always be at the same time and location. You also won’t have to compete with other timeshare owners for desirable times because you already have that week built into your contract. That being said, it severely limits any flexibility if for any reason you want to change your week.

Floating-week timeshare

This option gives you more flexibility if you don’t always want to take your vacation at the same time every year. With a floating-week timeshare, you have the choice of taking your week (or weeks) during a specific season (Aspen for skiing in January, anyone?) or possibly the whole year.

Though you’re not pinned down to any specific week, it does mean there is more competition for the most desirable times. For instance, Aspen vacation properties fill up pretty fast in January, so you may not be able to book that specific timeshare property during that month. With the increased competition, you’ll also need to plan your trip far in advance if you want to travel in high-peak seasons.

Point system timeshares

This option gives you the most flexibility of vacation options. A point-system timeshare company allows you to buy points to be used at a variety of vacation destinations. It’s similar to the frequent flyer program, although you actually purchase the points first.

Much like buying a plane ticket, where you decide to take a trip varies widely on how many points it costs. For example, a stay at a large Las Vegas suite will cost more than a campground in the Ozark Mountains. Each year (or every other year), you buy a certain number of points upfront based on where you think you want to go.

How much does a timeshare cost?

Unfortunately, they’re not cheap. According to the American Resort Development Association (ARDA), the trade association for the industry, a timeshare property will cost $22,942 on average. Which, on the other hand, is considerably less expensive than owning an entire piece of real estate.

But that’s not the end of it. On top of the property cost, you’ll pay close to $1,000 or more in annual maintenance fees. And, occasionally, you might get stuck with a “specialist assessment,” if certain repairs or other work needs to be done that’s not covered by your annual dues.

The maintenance fees pay for property taxes, insurance, and property management. They also cover things like the upkeep of the property, including landscaping, maintenance, and improvements made to common areas (similar to HOA fees).

Pro Tip

When deciding if a timeshare property is right for you, calculate the total cost of the transaction and divide it by the number of days you plan to use it. This will give you a clearer picture when weighing the pros and cons of purchasing a timeshare.

How do I buy a timeshare?

Typically, traditional lenders won’t issue mortgages to timeshare buyers, but you might consider getting a personal loan to finance the property. Alternatively, most timeshare companies will provide financing to purchase timeshare units, but the interest rates could be steep. If you can swing it, your best bet might be to use your savings for the upfront costs.

On the other hand, you can look to the secondary market and snap up a timeshare resale. There are plenty available and some people sell them for almost nothing just to get out of their obligation. There can be some restrictions on the use of the property, however, so check with the timeshare company before you commit. Still, this can be a more affordable option for a dedicated vacation spot with little to no upfront costs.

What if I don’t want my timeshare anymore?

This seems to be a common problem in the timeshare industry. People use a timeshare property for many years and then realize they want to try somewhere new. Others simply grow tired of the location or the annual maintenance fees (or both).

Fortunately, you have a few options to get rid of your timeshare property.

Sell it

You can sell it, but don’t expect to make a profit. Owning a timeshare is not an investment like purchasing a house—it’s more of a luxury, similar to buying fancy sheets. It will give you many years of enjoyment, but in the end it’s not worth much.

Plus, the timeshare resale market is glutted, with many owners selling their shares for only a dollar just to get out from under the annual fees. That is something to be aware of before you buy.

Rent it

If you have non-deeded ownership of the vacation property, the timeshare company may have restrictions on renting. You will want to check your contract before renting it out.

However, some timeshare owners may be allowed to rent out their share of the property, which will at least help mitigate some of the costs.

Hire someone to help

Since getting out of timeshare contracts can be tricky, it’s tempting to hire someone to do it for you. Much like selling a house is a complicated process, most of us leave the heavy lifting to a realtor. You will want to do your research carefully, as there are expensive fees for the service, and it could take years.

There are also a lot of scams surrounding third-party timeshare exit companies. The ARDA recently reported that Reed Hein and Associates (also known as the Timeshare Exit Team) is the latest in a long line of exit companies to close its doors after being found to use “deceptive practices.” (Essentially, they took people’s money while promising to sell their share, then didn’t deliver on that promise.)

Talk to your timeshare developer

The ARDA and its division, the Restaurant Owners Coalition (ROC), caution against third-party timeshare exit companies. Instead, they suggest that you consult with your developer or property management team to see about getting out from under your obligation.

Sometimes you can return your ownership stake or get out of your contract, but be aware that there are fees associated with these alternatives. Some companies in the timeshare industry might also assist you with selling your portion of the timeshare unit.

Get a family member to take it over

This can sometimes be the best option if you have a close family member who wants your timeshare unit. Deeded ownership can be transferred, for a cost, and the new owner must be willing to take over the timeshare maintenance fees.

Avoid timeshare scams

As touched on previously, there’s a lot of documented fraud associated with timeshares—most notably with third-party exit companies. The most important thing is to perform your due diligence. Don’t sign or commit to anything until you’ve done your research and know exactly what you’re getting into (or out of).

Pros and cons of timeshare ownership

Before committing to timeshare ownership, be sure you understand what you’re committing to. This means knowing all the risks and benefits a fractional ownership property.


Here is a list of the benefits and the drawbacks to consider.

  • Familiar location and people. The security of going to a favorite and familiar vacation destination every year. By going to the same resort property each year, you will get to know many of the same people. (This could also be a drawback.)
  • Less expensive than a vacation home. Buying a timeshare is less expensive than purchasing a private vacation property of your own.
  • Upkeep management. Timeshare resorts handle all of the maintenance and upkeep of the vacation property, so you don’t have to.
  • Amenities available. Timeshare owners benefit from a wide array of amenities available at the vacation property.
  • Various property options. Because of the newer timeshare exchange program, you can vacation at a variety of resort properties.
  • Hard to sell. They can be difficult to sell or get rid of, as the timeshare resale market is very crowded.
  • Numerous fees. Timeshare maintenance fees are often high and typically increase every year. You may also get stuck with other “special assessment” fees at times.
  • Scams. There are a ton of timeshare scams from pretty much every angle.
  • Repetitive. Going to the same resort year after year might get boring. Unless you prefer a vacation spot that feels like a second home, a fixed-week timeshare may not be for you.

Pro Tip

Before purchasing a timeshare property, consider if investing in your very own vacation home is the right decision for you.

Timeshare vs. vacation investment property

If you’re deciding between a timeshare contract or buying an entire property, you need to think about your overall goals. If what you’re looking for is a beautiful destination to go back to year after year without worrying about maintaining the place, a timeshare resort might be perfect for you.

However, if you’re more interested in a long-term investment (that can double as a vacation home), you should consider buying an entire piece of real estate. Renting it out for some of the year can help with the mortgage (or maybe even cover it entirely), and you can still enjoy it for your own annual vacation. Plus, if you decide to sell, you have a much better chance of turning a profit.


How long do you pay for a timeshare?

When you buy a timeshare property, you own it much like you own a house (albeit a small piece of a house). You own it for life unless you sell it. When you die, it becomes a part of your estate and is inherited by your next of kin or named beneficiary.

Leasing a timeshare, on the other hand, isn’t necessarily for life, but contracts can last for decades.

Can you live in timeshares?

The main distinction of a timeshare style of vacation ownership is that, by definition, it’s a fractional ownership interest. This means you’re not the sole owner and can’t live in it year-round.

Some timeshare companies, though, do allow for longer stays—sometimes up to three months. For example, this means that you could potentially live out most of the winter at a timeshare resort in Florida, and only head north for the warmer months.

Key Takeaways

  • Timeshare units allow you to have a permanent vacation property without the hassle of routine maintenance and upkeep.
  • Annual maintenance fees cover property taxes, insurance, and costs to maintain and improve timeshare resorts.
  • Beware of scams involved in buying or selling a timeshare property.
  • Timeshare properties should not be considered investments. You probably won’t make any money if you sell, and timeshare resales can be difficult.
  • If you’re interested in making a profit and enjoying your vacation, consider purchasing a property of your own—it’s a much better investment in the long run.
View Article Sources
  1. Timeshares, Vacation Clubs, and Related Scams — Federal Trade Commission: Consumer Advice
  2. Timeshare Exit Team Closes its Doors — American Resort Development Association
  3. Timeshares: Yes? No? Maybe? — Federal Trade Commission: Consumer Advice
  4. How to Invest in Real Estate: An Expert Guide for Beginners — SuperMoney
  5. What Does Pending Mean in Real Estate? — SuperMoney
  6. What is a Spec House in Real Estate? — SuperMoney
  7. What Does Curtailment Mean in Real Estate? — SuperMoney
  8. How to Finance a Vacation Home (Updated 2022) — SuperMoney
  9. Best Mortgage Lenders | April 2022 — SuperMoney