Timeshare Ownership vs Vacation Rentals: What’s The Difference?

Timeshares and vacation rentals can both be good investments while also providing you with a private home to go on vacation to. But they have some major differences, which are worth looking into if you are considering pursuing either one as an investment. Below are the differences between timeshares and vacation rentals outlined.

What is timeshare ownership?

A timeshare involves joint owning a vacation home with lots of other owners. You pay for a share of the property upfront and then can go on vacation there for free each year.

Well, technically it isn’t ‘free’ – there are still annual maintenance fees, plus potentially other additional fees depending on the contract. You have to schedule your stay each year in advance – and some timeshares may require you to pay a small fee to reserve certain dates. That said, there are fewer costs than owning a vacation home. 

Timeshares are often sold via resort owners and travel companies. While a lot of people do seek out timeshares, many people who do agree to timeshares are pressured into them by salespeople at resorts. This can sometimes lead to buyer’s remorse. Selling a timeshare can also be tricky and you’re unlikely to make a return on your investment. 

Can you turn a property you fully own into a time-share? Yes, but this does come with its complications like managing co-owners and looking into timeshare payment processing. For other people to time-share your property, it also typically needs to be fairly luxurious and you need to take care of all maintenance. 

What is a vacation rental?

A vacation rental is a vacation home owned solely by one person that is rented out to guests for short-stays. Some people are able to buy vacation rentals outright and then make a profit on any money they make from guests. However, most people buy a vacation home with a mortgage and then have to use the fees from guests to pay off the mortgage.

Because you fully own a vacation rental, you typically have more flexibility as to when you want to stay there, plus you have the freedom to modify the building as you see fit. However, owning a vacation rental comes with quite a lot of costs. On top of any mortgage costs, you need to pay utility bills for the property and maintenance costs, as well as investing in marketing to attract guests (platforms like AirBnb and Facebook are popular for marketing these properties). Some vacation home owners will pay a property manager to take over maintenance for them.

You do have the freedom to sell your vacation home at any point, and may be able to make a return if the value of the property has gone up. Alternatively, you can pay off the mortgage and hand it down to family members. 

Which is right for you? 

A timeshare is ideal for those that are happy with shared ownership, whereas a vacation rental is for those that want full ownership. 

With a timeshare, you can make back your money in annual free vacations, but there are still maintenance fees and other hidden fees to be wary of, plus you only have select slots you can schedule. Generally speaking, most people do make their money back.

A vacation rental can offer more freedom as to when you visit for personal use, however the costs are higher, and you need to be constantly marketing your property in order to attract guests to cover these costs. A lot of people are able to make a return on a vacation rental, but you need to keep it well maintained and make sure there is a steady flow of guests paying to stay there.