I am often asked if there are other types of partial ownership available and whether they’re a good way to invest in real estate. Certainly, there is no shortage of partial ownership offerings. Based on what I’ve seen lately, there seems to be an ownership opportunity to fit the needs of all who seek access to luxury real estate for a fraction of the actual cost.

In addition to fractional ownership, purchasing possibilities are available through condo-hotels, private residence clubs and interval ownership (or timeshare) resorts.

While each appeals to different buyers for different reasons, make no mistake about it: These are not real estate investments. Rather, they provide a way to invest in future vacations. Of all of them, none has enjoyed timesharing’s popularity.

Since the concept made its U.S. debut in the early 1970s, the timeshare industry has had its ups and downs. By the early 1980s, its reputation was so sullied by unscrupulous developers, deceitful salespeople and fraudulent operators, that “timeshare” became synonymous with “rip-off.” Apparently, those days are past.

According to a 2006 report on the vacation timeshare industry in the U.S., vacation ownership – led by interval owners – totals more than $9 billion in annual sales. But whether or not the timeshare experience is right for you really depends on the property, the operator, the terms of your sales agreement and your expectations for ROI. So even though a timeshare is not a real estate investment, it’s still an investment. Therefore, it should be approached with eyes wide open.

That said, I know people who have them and love them. In fact, my friend Mark has had a timeshare for more than 20 years. Back in timeshare’s heyday, he, along with his brother and father, bought a one-week share of an efficiency on Sanibel Island for $3,000. Although he and his dad lived in Cape Coral, they used it to entertain friends or get away from it all without traveling far.

At the same time, their contract gives them the flexibility to use their week at hundreds of other resorts around the world. During the last decade, he and his brother have taken resort vacations at affiliated timeshare resorts in Hawaii, Park City and Aspen, as well as Mexico, Spain and Italy. This year, his niece used it to take a ski trip to Washington State.

Mark has also used his timeshare credits closer to home in Key West, where his timeshare company owns several properties. Because the destination is in high demand, timeshare visits are limited to once during a three-year period. However, Mark says that hasn’t posed a problem yet.

Timeshare Types

There are three basic types of timeshare programs.

n Right-to-Use (RTU). Mark bought this type, which allows him to use a particular unit or unit size each year. Based on the large number of points or credits assigned to his highly desirable Sanibel efficiency, he can usually book much larger units at affiliated timeshares in other locations.

RTUS bestow no ownership interest in the subject property and most specify that the right to use said property will expire after a stated number of years. At that time, the property either reverts to the developer or the RTU agreement is renewed by the owner. Mark, for example, exercised his option to renew after 20 years of ownership.

n Fee Simple. The owner purchases an actual deeded interest in property, which is recorded by law and for which the owner receives a title in perpetuity.

n Leasehold. This provides the same basic ownership rights, obligations, etc., as fee simple ownership with an important exception. It is not in perpetuity and has a specified expiration date (which may include a first right to renew the ownership interest prior to the expiration of the leasehold).

The Downside

n Rules. Some timeshares come with extensive regulations and restrictions. Although Mark’s visits on Sanibel are restricted to six months a year (three in the fall and three in the spring), he can visit almost any other company-owned timeshare whenever he chooses.

n Additional Costs. Maintenance is another item of primary importance and subject to annual increases. In that regard, Mark’s case is fairly typical. His maintenance fees have gone up steadily over the years, from just over $100 per year to $700 or more.

But is that such a great savings over what you’d pay for one week in a hotel room? Probably not, particularly as ownership costs continue to escalate. In fact, compared to hotels, timeshares may cost more and offer less, since most are short on amenities including room service and housekeeping.

n Transferability. Unlike real estate, timeshares may not be inheritable. If the timeshare is fully deeded in perpetuity, you can pass it on to your heirs. RTUs don’t provide this option.

n Liquidity. Be aware that it’s not easy to sell or otherwise get out of most timeshares, because the secondary market is slim to non-existent.

Other Considerations

Timeshares tend to work best for people who are either locked into a certain vacation time frame (families with children, for instance, who can only travel when school is out) or are extremely flexible as to when they can travel because they are unencumbered by jobs or other obligations. However, if you’re certain that you want to vacation at a timeshare resort every year for the foreseeable future (say, the next 20 years), then timesharing may be just the ticket.

Gary Tasman is executive director of Cushman & Wakefield’s Southwest Florida office. For more information, please contact him at (239) 489-3600 or gary.tasman@cushwake.com