Still Time to Share?

BY ERIK J. MARTIN ON SEPTEMBER 14TH, 2017

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Netflix brought an end to video rental stores. Uber is threatening to make taxi cabs obsolete. And Airbnb is doing more than preventing hotel managers from sleeping peacefully – it’s also got those who own and sell timeshares in a tizzy.

After all, who would want to commit to a timeshare – a lease or joint ownership of vacation property by multiple parties who take turns residing in the property for brief periods – when they can turn to a simpler short-term vacation rental option like VRBO, FlipKey, HomeAway and other services that allow everyday folks to rent out their owned properties?

Actually, more than you’d think. Based on fresh data from the American Resort Development Association (ARDA) International Foundation, the American timeshare industry marked its seventh consecutive year of growth in 2016, with sales volume increasing by almost 7 percent to $9.2 billion, up from $8.6 billion; around 6.9 percent of U.S. households own at least one type of a shared vacation ownership product, including timeshare weeks, points or fractional.

Yet property rentals through home sharing services are on the rise, too. Consider there are approximately 640,000 Airbnb hosts, and home sharing rentals increased by 51 percent (57 percent among Millennials) between the summer of 2015 and 2016 – with total spending growing 41 percent and total transactions rising 55 percent year over year, according to consumer spending aggregated from Bank of America’s more than 40 million credit and debit accounts.

Which is the more financially prudent way to vacation and potentially profit? That depends on your goals and budget, the experts say.

“In many cases, timeshares can still be the most affordable way to take a vacation if you want to return to the same place every year, or if you find the timeshare network you’re buying into has enough selection to keep you happy,” says John Banczak, co-founder/chair of TurnKey Vacation Rentals in Austin, Texas.

Short-term rentals, on the other hand, “give vacationers the freedom to travel to new locations and provide more options in property types, sizes, geographic locations and amenities,” says Rob Stephens, general manager for Avalara MyLodgeTax, Centennial, Colo., a provider of tax compliance solutions for the vacation rental industry. He says this option offers more flexibility without being contractually committed to a timeshare.

That’s an apples-to-apples comparison when you’re deciding between renting a vacation home vs. buying a timeshare. But what about purchasing a vacation home vs. buying a timeshare?

“Buying a vacation home is usually a larger financial endeavor, but it is truly a long-term investment. You can earn income from renting it out, and potentially enjoy price appreciation,” Banczak says. “Buying a timeshare is simply paying in advance for future vacations.”

To determine which option is best for you, research units you can book on sites like Airbnb and VRBO that are comparable to the timeshare you’re considering. If you think it’ll be less expensive over a 10-year period to rent each year instead of purchase, short-term rentals are probably the way to go.

“If you think a timeshare will be less expensive, be absolutely sure you’re comfortable with the property and the timeshare network, because you will be stuck with it for better or worse,” Banczak says.

Sabrina Robinson, real estate investor/consultant at Property-Maven.com, San Francisco, insists the money you’d spend on a timeshare can be put to better use as a down payment on a second home – one that can build equity and pay for itself by being rented out via a home sharing service.

“But first you’ll have to figure out what the demand is in the area you’re interested in, if rental prices will cover your expenses, who will manage the home and the rental bookings, and if the municipality will allow you to rent out your home without charging exorbitant fees for a vacation rental permit,” Robinson says.

Michael Joseph, CEO/co-founder of Boulder, Colo.-headquartered InvitedHome, also believes this is a better investment than opting for a timeshare.

“I expect vacation home ownership to eclipse timeshares as the favored type of vacation ownership within 10 years,” he says. “Millennials, who make up the majority of today’s homebuyers, love the sharing economy, and most vacation home buyers are factoring intent-to-rent into their purchase decisions.”

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