The Patio Expert Pages

Buying a beach front property or a vacation villa may be easy for the rich and wealthy, but not for common middle class people. The introduction of the timeshare concept gave hope to those people who could not afford to buy a brand new vacation home. That is one of the reasons why the timeshare industry has grown by leaps and bounds ever since its inception in the United States.

Many people love timesharing properties because it is like being on vacation and at the same time being at home, without worrying about keeping it clean and tidy; but, on the other hand, people have many prejudices about timeshares.

One of the biggest misconceptions is that they compare timeshares to regular real estate property and consider it as an investment option. But in fact, it should be thought as an investment in your dreams (i.e., vacationing at a place where you want to go every year). Investing in real estate could reap profitable returns, but if you invest in a timeshare, a profit may not be guaranteed. In fact, you may end up losing money.

But what if you still want to buy timeshares, expect no profit from them, but neither loss at the same time? There is always one question in the minds of those people who are planning to buy timeshares. Is it really worth buying a timeshare? To answer this question you have to go through an analysis of various factors. An analysis should consider factors like comparable rent of alternative accommodation, appreciation of the timeshare property and your finance rate. How do you do it? Here is a simple calculation...

Consider the worth of your investment as profitability. The profitability should be a measure of the comparable rental rate, rate of appreciation and your finance rate. If the sum of all these is a negative number then, assume that you are losing money in your investment. The rental rate is the ratio of the rent of that vacation property to the buying price of that timeshare. Suppose if corresponding rent of that vacation timeshare is $1,000 and the buying price is $10,000 then the rental rate is 10%. Now if we include the annual maintenance cost, membership and all other miscellaneous expenses, if it comes around $500. So the actual saving in rent will be $500 now and the rental rate will be the ratio of $500 to $10,000 which gives us 5%.

Now let's assume the annual appreciation of that property is 10% and the rate of our finances is 16%. If we add rental rate and appreciation and subtract the finance rate, you will end up with a negative percentage which means you are losing 1% every year compared to rent. But this formula is only a rough calculation of the profitability of your investment and may not be completely accurate. This is just to give you a starting place. The depreciation rate may vary and as may the finance rates.

Different resorts will have different fees for maintenance and other items. You'll find the fees reasonable at some places and terribly high at others. Therefore, when deciding on a resort, it's wise to look into the fees you will incur there. If you haven't been guaranteed use of the property for a number of years, you shouldn't consent to paying exorbitant fees. You also have to consider the feasibility of renting out the unit at times you may not want to use it. High fees will deter renters and deflate profits.

Before committing to purchasing a timeshare property you should consider all the costs involved. You may be putting more money into the timeshare then it is actually worth as a real estate sale. This money is distributed among the real estate developers selling the time share. You need to decide if spending such a large amount of money for something you do not use all the time is worth it to you.