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Vacation ownership: Purchasing a piece of paradise

Gail Johnson
Photo by: © Shutterstock<br>Beach House<br>I want a beach house. Are there any differences between investing in a time-share condo and purchasing a property that's a "vacation interval"? Yes. In a timeshare estate, you actually own a deed to the property and get the benefits of ownership and equity. With a vacation interval or a right-to-use timeshare, you have a right to use the property but don't actually own it. Generally timeshares are sold in one-week increments for a onetime cost plus annual maintenance fees -- which may increase and often don't cover the costs of major repairs. So before you put any money down, find out what broker and closing-related costs you'll have to pay, if there's a cap on maintenance fees and your rights to resell if you decide this side of paradise isn't the place for you after all.
Photo by: © Shutterstock
Beach House
I want a beach house. Are there any differences between investing in a time-share condo and purchasing a property that's a "vacation interval"? Yes. In a timeshare estate, you actually own a deed to the property and get the benefits of ownership and equity. With a vacation interval or a right-to-use timeshare, you have a right to use the property but don't actually own it. Generally timeshares are sold in one-week increments for a onetime cost plus annual maintenance fees -- which may increase and often don't cover the costs of major repairs. So before you put any money down, find out what broker and closing-related costs you'll have to pay, if there's a cap on maintenance fees and your rights to resell if you decide this side of paradise isn't the place for you after all.

If you travel frequently, there’s a good chance you’ve been approached by a savvy sales rep about “vacation ownership”. What’s the deal with this approach to holidaying?

Vacation ownership — which is also known as “vacation membership”, “holiday ownership” and “interval ownership” —is essentially the same thing as a timeshare.

Traditionally, buying a timeshare has meant you get the same time slot in the same unit at the same property year after year. That’s evolved, with vacation ownership typically working like this: you buy a certain amount of “points” that can be redeemed year after year at various properties, and you can book different sized units for varying amounts of time.

Prices range vastly from one program to the next but generally start around $15,000 and can go as high as $100,000 or more.

There are pros and cons to this approach to paying for paradise.

Part of the appeal is that it offers both variety and flexibility. Unlike buying a quarter or even fractional share of a condo, you don’t feel compelled to go to the same place every time you want a break.

“Vacation ownership allows for possible access to some very nice facilities, typically condos, that might not be available for rental or might cost more as rentals,” says Ed Perkins, contributing editor at SmarterTravel.com. “And if you’re involved in an exchange system of some kind, as most [vacation ownership programs] are, you can enjoy the condo experience in places all over the world.”

Another advantage, according to Ed Kinney, vice president of corporate affairs and communications for Marriott Vacation Club, is that it forces you to go on vacation. That’s because points typically expire after a period of time if they sit unused.

“Once you own, you’re committed to going on vacation,” Kinney says. “It’s not ‘if’; it’s ‘when and where’. When left to their own devices, people always have a reason to put it off: work’s too busy or it’s just not a good time … You’re essentially buying a lifetime of vacations now.”

There are caveats, however.

“The downside, of course, is a lot of people think of it as an investment, and it isn’t,” Perkins says. “The biggest problem people have with timeshares is that when they decide they don’t want it anymore, it’s very hard for them to get out. Sometimes they can’t even give it away. You have signed up for an ongoing payment of maintenance fees and maybe some other fees and it just may be that nobody’s willing to take that off your hands.”

Those maintenance fees are calculated in proportion to the amount of points you have and can range from around $600 a year to over $1,200 a year. They cover things like the upkeep of the properties and utilities.

In most cases, the points can be passed down to offspring via a will, since they are part of a person’s estate.

Besides practicing due diligence when it comes to eyeing a vacation ownership, Perkins has this advice: go online and investigate the resale market. You have to do just as much research as buying a residential property, but doing so could save you a lot of money.

“When you buy from the developer, probably between 40 and 50 per cent of what you pay goes to the sales organization,” Perkins says. “You’re way better off buying on the resale market.

“If you get involved with a developer, it’s a very hard sell,” he adds. “These sales pitches are very well scripted, and they only script what works.”