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How Do Timeshares Work? Is It Time to List and Rent Out a Timeshare on Airbnb?
For hosts that want to invest in a vacation property but don’t like the idea of having to be on call for emergencies, timeshare ownership can be a good alternative to explore. It offers some of the advantages of “owning” a property and can present a different way to get a feel for the real estate industry. It also offers current hosts the chance to scale their business, compete with vacation resorts and diversify their listing portfolio.
That being said, there are a number of unique drawbacks to consider. It’s definitely not suitable for everyone. Continue reading to find out if it will fit in with your lifestyle and budget.
What Is a Timeshare Property?
A timeshare property is a type of vacation property typically located within a timeshare resort in a popular vacation spot. Instead of being the sole owner, a shared ownership model will be applied. In other words, the property will be owned by more than one individual and each will be given a time during the year that they may use the property.
How Do Timeshares Work?
Timeshare owners will get the opportunity to spend a set period of time at the vacation property per year. For example, with the fixed week timeshare model that’s commonly used, each timeshare owner will get one week. If the timeshare owners can’t use their specific week, they can rent it out.
There are also other ways that the time can be divided. For example, with the floating option, there is more flexibility and owners can use the property at any given time, depending on availability. A drawback of this system, though, is that you’ll need to book well in advance to ensure it’s available. As such, it’s not really as flexible.
Recently, the timeshare industry has also started to introduce a point system. With this model, you can buy a certain number of points which you can then use in various timeshare locations.
Your points will represent your ownership. The attraction of this system is that it gives you more flexibility as you can cash in these points at different times during the year. Plus, you might also be able to use these points at other resorts for a change of scenery. However, it uses factors like the location of the resort, time period requested, and size of the property, which means that one resort can “cost” many more points than your usual resort.
As for costs involved, the cost relating to timeshare ownership will usually be split among the different timeshare owners. The timeshare contract will stipulate the finer details.
Types of Timeshares
If you’re looking into timeshares, it’s important to understand the different types out there, as they can impact everything from how you make money to how you manage the property. When it comes to ownership, there are two main options: fractional ownership and right-to-use contracts.
Fractional ownership means buyers actually own a piece of the property, which is pretty common for luxury units. This can make the property more appealing to travelers who want something exclusive and reliable, and it often includes perks like internal exchange programs, where owners can trade time at one property for another within the same brand.
On the flip side, a non-deeded timeshare (or right-to-use contract) doesn’t come with ownership. Instead, buyers lease the property for a set number of years. While this model isn’t about owning real estate, it still offers value through timeshare exchange programs that let guests swap their time for vacations at other locations. This can help keep occupancy rates steady and broaden the property’s appeal to travelers who want variety.
Timeshares also differ in how vacation time is allocated. A fixed week timeshare locks in the same week every year, making it easy to plan and guaranteeing income during peak seasons. A floating week is more flexible, letting guests pick from available dates within certain timeshare seasons. Then there’s the points-based timeshare model, which works like a currency system. This acts as a timeshare exchange program. Guests can use points to book stays at different properties, during different times, or even upgrade their experience. Many of these are tied to vacation clubs, which can attract guests looking for variety and added value.
Whether it’s the predictability of fixed weeks, the flexibility of floating weeks, or the versatility of points-based systems, the type of timeshare you choose can shape how the property performs. Each option has its own pros and cons, so it’s worth considering what fits best with your goals.
How Much Can You Expect to Pay?
According to the American Resort Development Association (ARDA), based on 2023’s data, the average price of a timeshare transaction in the US was about $24,000. Depending on the size of the timeshare property, the timeshare maintenance fees will be in the region of about $1,000.
If you plan on renting out your timeshare, the average price per night is about $235, according to the same source.
Main Advantages of Investing in the Timeshare Industry
Similarly to vacation homes, being a timeshare owner can give you the chance to enjoy the same destination for years to come, making it a great option if your vacation plans tend to stay the same. However, unlike a vacation home or property, timeshare ownership can offer unique benefits like these:
Affordability
Owning timeshare properties can be more cost-effective in two ways. Firstly, the initial cost is much lower as you essentially only pay for the time or a fraction of the property. Secondly, timeshare resorts are usually well-maintained and property maintenance won’t be your responsibility. You simply pay your linked annual maintenance fees and that’s the end of your financial worries. That being said, these ongoing fees can add up. So, keep that in mind and do your math beforehand.
Additional Amenities
Aside from guaranteeing that you will find accommodation in the destination of your choosing, you can also look forward to a touch of luxury. Convenience is one of the core features of a timeshare property.
As the unit will be located in a timeshare resort, there is a good chance that you’ll also be able to access a number of extra amenities such as a concierge service, 24/7 security, and a swimming pool.
This means that you won’t need to book a hotel room, which is typically smaller than a time-share unit, just to be able to access these types of luxuries. It’s this unique benefit that makes it particularly popular for renting out on online marketplaces like Airbnb.
Most of the time, Airbnb properties are located in residential areas that lack these types of services. Yet, by renting out a timeshare property, guests can be treated to a bigger property than your typical hotel room without having to give up the element of luxury and convenience.
What Are the Main Drawbacks?
Aside from the obvious con that you won’t be able to use the property as you please, here are a few other considerations to keep in mind before you make an investment:
Resale Value
Across the United States alone there are over 1,500 time resorts. Each resort typically has more than 100 units.
This means that the market for selling timeshares is quite big which could negatively impact the resale value should you decide to sell it at a later stage. Plus, timeshares also depreciate quickly.
That said, not all contracts allow reselling. Even if your contract does allow you to resell it, you might have a hard time getting a buyer because of oversupply.
Annual Maintenance Fees
One thing to keep in mind with timeshares is the yearly maintenance fees to the timeshare company, which can be a bit of a headache. These fees cover things like property upkeep, repairs, and amenities, but they can add up quickly—especially if you’re not using the property as often as you’d planned. Plus, they tend to go up over time, sometimes outpacing inflation, which can catch you off guard. Even during years when the property isn’t available due to renovations or other issues, you’re still on the hook for those fees. For investors or hosts, these ongoing costs can eat into your profits if they aren’t balanced by rental income or other revenue streams. It’s something to weigh carefully before committing to a timeshare.
Selling a Timeshare
If your contract allows you to sell your timeshare, you have a few options. Listing it on a website is probably the easiest route to take. There are a number of websites dedicated to the reselling of timeshares or you can work with a timeshare broker who can help you to find a new timeshare buyer.
However, as mentioned earlier, you’ll probably fetch a lower price. While you might experience a financial loss as timeshare buyers are a smaller market, the memories will hopefully be priceless.
A second option is to approach the timeshare company and negotiate with them directly. You’ll probably have to pay fees. However, if it’s become a financial burden and you’re struggling to afford your timeshare, this is a better route to take than running the risk that your credit score will go down.
Another option is to work out a deal with a family member. You could offer them your vacation time in exchange for them taking over the timeshare costs.
Special Considerations for Investing in Timeshare Rentals
Pros and cons aside, there are also a couple of other special considerations to keep in mind if you’re thinking about going ahead. These include:
Marketing Tactics
Timeshare companies are notorious for pushy marketing strategies. Marketers working in this niche are known for hiding the true costs involved.
As such, ensure that you read all the fine and that you clearly understand the terms of the timeshare contract. Also double-check that you know exactly where your responsibilities start and end.
Timeshare Scams
In addition to keeping an eye out for too-good-to-be-true sales pitches, also be vigilant for timeshare scams. Just like any other industry, the timeshare industry is not immune to scammers and tricksters.
Location
A timeshare property shouts vacation. It’s rare that a traveler will stay in a timeshare resort for a two-day business trip. As such, pay extra attention to choosing the right location. That said, be prepared that it can be more challenging as not all areas have timeshare resorts which will restrict your choices.
In the United States, Orlando, Myrtle Beach and Las Vegas are popular timeshare destinations. For those wanting to expand their search beyond the US, Los Cabos in Mexico can be an attractive vacation destination.
Furnishings
If you plan on renting out your timeshare, pay special attention to furnishings. Most timeshares are rented out for an entire week, but in some cases it can even be longer. This will impact how you furnish your property.
To make your timeshare rental more geared for longer stays, invest in creature comforts like a decent coffee machine, high-speed Wi-Fi, and streaming services. While the timeshare location will mostly appeal to families or couples, digital nomads might also take an interest. Thanks to remote working becoming more conventional, digital nomads might look for a place where they can mix business with pleasure. Though, that doesn’t mean that they want to work poolside and will need a dedicated workspace if they can consider using your timeshare as their office away from the office for the week.
The Final Verdict: Should You Buy a Timeshare?
The jury is still out on whether or not buying a timeshare is a good idea. From purely an investment perspective, many will advise you against taking the plunge.
As mentioned, they typically decrease in value. If you do manage to sell your timeshare (which is more challenging than selling other types of real estate and a whole other challenge), you’ll probably sell for less than the initial cost.
Also, credit agencies don’t typically award a loan for this kind of purchase. As such, to buy a timeshare, you’ll probably end up having to pay cash. This makes it unattainable for many.
However, there is still a reason why timeshares remain popular. It appeals to and fits a much smaller target market, but it can give some form of predictability.
Not only do you know that you’ll have accommodation in the same resort each year, but you also know what you can look forward to in terms of cleanliness, services, and amenities.
The lack of consistency among Airbnb rentals is one of its major cons. Airbnb rentals also typically lack the convenience offered by timeshare. With some clever marketing of your own, you can use this to your advantage and rent out your timeshare to travelers.
In fact, in addition to the mainstream vacation rental websites like Airbnb and TripAdvisor, there are online marketplaces dedicated for timeshare rentals specifically. You can, for example, check out a site like RedWeek. It’s viewed as the largest online marketplace for timeshare rentals and has over two million registered users.
Alternatively, you can create your very own website for your timeshare. This will give you more control over the nightly rate and you’ll be better equipped to treat your guests to a feeling of exclusivity, a trait that makes timeshares appealing.
