Find four questions you should ask yourself before deciding the best way to buy at the beach.

By Allen Bunting
March 06, 2006
Quiz yourself before deciding on a second-home.
Courtesy of The Homestead

Time-shares, fractional residences, and destination clubs offer the chance to spend time in a coastal home without the responsibility of maintenance. But do they make sense financially?

Before making a decision, answering the following questions can help you choose the best second-home option.

Do you want to make a real estate investment, or an investment in your lifestyle? If you want a real estate investment, individually purchasing a second home is probably your best bet.

How much time do you spend in your coastal home each year? It depends on what you're willing to pay, but you generally get one to two weeks with a time-share, four to 13 weeks with a fractional residence, and four to eight weeks with a club membership. (Some clubs do offer unlimited stays.)

Do you like returning to the same place, or would you rather join a destination club and try different locales each year? If you decide on a fractional or time-share, make sure you really love the area because―unless you can swap weeks at a different time-share through an exchange company―it's where you'll be vacationing forever. When choosing a destination club, look for one that offers amenities you'll use. If you're an avid golfer, research clubs that specialize in locations with the best courses.

How much money do you want to spend? Time-shares typically cost the least, and club memberships, the most. All three most likely require annual dues, property upkeep fees, and other charges.

As with any property, resale prices for fractionals and time-shares depend on market conditions. However, real estate values are not comparable to those of a second home. Historically, time-share resale values have been low. Many time-share contracts require owners to offer the unit to the resort company before trying to sell it on the open market. This helps developers protect property values for all units, new and old. Fractional residences, which have fewer owners, can often compete more directly with the second-home market. Destination club memberships cannot be resold, though most are refundable at about 80 percent of the purchase price.

The bottom line:
Average time-share: $12,000-$14,000 per week
Fractional: $300,000-$500,000 for four to 13 weeks
Destination club: $75,000-$500,000 or more; some offer unlimited stays

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