Earn Passive Income By Renting Your Timeshare
Depending on who you ask, timeshares are a great way to save on vacation or a money trap that’ll end up costing you. Despite some of the negative connotations some of these arrangements carry, the popularity of timeshares continues. In fact some properties have evolved their models, making them more flexible and allowing owners to get the most use out of them. Still, what do you do if you still can’t use your annual timeshare stay? You may be able to rent it out instead, making a little extra cash in the process. Furthermore, if all goes well, you could continue with your timeshare rental plan as a means of generating passive income.
Whether you already own a timeshare deed or are considering purchasing, the rental potential of your property may be worth considering. From covering your maintenance fees to actually making a profit, there are a few things you can do to help ensure success with your vacation rental. But, before we talk tips, let’s take a quick look at how timeshares work and what you should know about them.
How Timeshares Work (And Why They May Not Be a Great Investment)
Before we jump into ways to make money renting timeshares, it should be noted that many financial experts don’t view timeshares as strong financial investments. Instead, oftentimes the best use of these properties is for future vacations. However, in between personal uses, you may find success (and profit) in allowing others to use your allotted stay.
Something else I should mention is that there are different kinds of timeshares these days. Under a classic timeshare model, your deed entitles you to a certain week of the year to use the property. However, in recent years, some larger brands such as Marriott, Wyndham, Disney Vacation Club, and others have moved to a point-based model where owners receive an allotment of points annually that can be used at a number of properties at various times. As you’d expect, there are pros and cons to each option, so you’ll want to know how a timeshare operates before buying.
Another big note about timeshares is that, in addition to the initial fees you’ll pay, you’ll likely be responsible for annual maintenance fees. Obviously these costs can depend on a variety of factors and can increase over time. As a result, these fees are often cited as a reason why timeshare resellers are looking to get out — and why renting weeks you won’t be able to use makes a lot of sense.
Before You Buy a Timeshare
For most people, the desire to rent out their timeshare likely starts sometime after they’ve purchased a deed for a property. That said, if you’re not already an owner, you may have a bit of an advantage as you can tailor your decision to meet the needs of the vacation rental market. Thus, if you’re considering buying a timeshare with the intention of renting it out, here are a few tips for choosing the right place.
Choose the right property
The first key to making money by renting your timeshare is picking a desirable property. Like other types of real estate, the cliche “location, location, location” certainly comes into play here as well. Whether your proposed property is near a major metro, a relaxing nature retreat, or a popular tourist attraction, you should make note of the big location selling points so that you can effectively note them in your listing.
Of course the quality of a property is also important. Not only do you not want to be paying maintenance fees for a resort that doesn’t seem to be spending them wisely but guests won’t want to pay top dollar for outdated or dingy digs. Then again, not everyone (potentially including you) can afford something super upscale. Therefore it’s worth considering who your likely guest would be and finding a property that will fit their needs.
Pick the best time
As mentioned earlier, some timeshare properties require owners to purchase a specific week they’ll use each year (or attempt to trade). Others will have floating weeks where you’ll need to book your stay when the year or season becomes available. Similarly points-based systems might also offer the flexibility to book stays of varying lengths and dates, although prime bookings may carry heftier point pricetags. In any case, if you intend on renting your timeshare, you’ll want to do your research and choose the optimal time. This could mean nabbing a booking for when an event will be going on, finding a good deal on a slightly off-peak week, etc.
Buy from a reseller
In most cases, buying directly from a timeshare property or company will mean paying the full retail price. You may be able to find a reseller (likely looking to escape their annual maintenance fees) willing to transfer their deed for a much smaller asking price. Clearly this could be a way to save money upfront, although the above two tips still apply. Additionally you’ll want to be aware of the property’s or company’s policies regarding resale buyers. For example, the Disney Vacation Club has started stripping certain perks from owners who purchased on the secondary market as opposed to buying directly from them. To avoid any big surprises, you’ll of course want to do your due diligence ahead of time.
Choose a property you’ll use yourself
Finally, finding someone to rent your timeshare each year might not always be so easy — even if you do your best to find an attractive listing. Plus, chances are you’ll eventually want a vacation of your own. That’s why it’s always a good idea to not only shop with rental potential in mind but to also find a timeshare you’d be willing to use yourself.
Considerations to Make When Renting Your Timeshare
Options for How to Rent Your Timeshare
The first step to take when deciding how to rent your timeshare is to explore what the best platform for doing so is. While you may be able to use Facebook, Craigslist, or other such sites to find renters, there are also platforms built for the job that will not only help connect you with potential renters but will also help manage payments and more. Let’s take a look at a few possible options.
Named after the term for peak-season listing, Red Week is both a timeshare rental and timeshares resales platform. One nice feature of the site is that you can search for the same type of listing as your property and see a range of how much rentals go for on a per-night basis. Of course you can also view the resale value of your deed if that’s an option you’re considering.
There are three different options you have for listing a rental on Red Week: Do it Yourself (Basic), Do it Yourself (Verified + Protected), and Full-Service. The first option starts at $29.99 per listing (for up to six months) while the second comes at a cost of $44.98. As for the Full-Service route, you’ll pay $59.99 upfront as well as a $99 commission when your property is rented. Additionally, each of these options requires an active Red Week membership, which is $18.99 for 12 months.
One advantage of Red Week is that it’s built especially for timeshare rentals — including traditional arrangements, floating weeks, and point-based bookings (although you won’t be able to rent out your points themselves and will need to make a booking). At the same time, it may take a bit of research to determine which listing option is right for you. Meanwhile, another potential advantage is that, should you decide you’d rather sell your timeshare instead of continuing to rent it, the same platform could assist you in that endeavor as well.
While the odd name Vrbo might lead you to believe it’s just some strange Silicon Valley spelling, it actually stands for something: vacation rentals by owner. As that implies, this site allows you to list your property for rental. This is very much akin to another platform that we’ll talk about in just a moment.
One big difference between Red Week and Vrbo is that the latter allows you to list your rental for free but will take a percentage of what your booking yields. This includes a 5% commission on the rental amount and any additional fees plus a 3% payment processing fee. Alternatively there is a $499 subscription option — although that’s likely not a great deal for timeshare owners with a single property to rent.
Last but not least, Airbnb is another rental option — and perhaps the most well-known. Like Vrbo, the platform also works on a commission model. However their fees amount to 3% for hosts (with a few exceptions, including Airbnb Plus hosts, hosts with listings in Italy, and hosts who have “Super Strict cancellation policies” — all of which may pay higher fees).
Given the popularity of the platform, this may be a good option as your listing will be seen by plenty of people. On the other hand, it may be hard to communicate to guests that they’re renting a timeshare — which could result in some confusion when they arrive at a property and might even be asked to attend a “free breakfast.” So while this may be easy on the frontend, it may require some extra work after the booking is complete.
Other Things to Do Before Trying to Rent Your Timeshare
Make sure you’re allowed to rent
Just as some timeshare companies have started cracking down on the perks secondary buyers earn, different properties may have varying rules and policies about renting. Therefore you’ll want to ensure you fully understand these rules ahead of time so you don’t leave yourself or your would-be renter in a lurch. Also be aware that these policies are subject to change, so be sure to keep abreast of any updates.
Look at sample rates and listings
When it comes to listing your timeshare as a vacation rental, it will be up to you to set your rates. While you may have an idea of much you’d like to make per rental, it’s important to be aware of the market and what you can realistically expect. Therefore, it’s recommended that you research other listings in the area and make note of any trends (what time of year sees the highest rates, average availability, etc.). By the way, in doing this research, you may realize that one of the above platforms performs better than others for rentals in your areas. Obviously such information can further help you decide the best path for you.
Be ready for changes
Finally, it’s important to realize that policies and practices can change over time — even with little warning. Between various cities cracking down on short-term rentals and the potential for companies to dissuade owners from renting out their units second hand, it’s imperative that rental owners not only stay up to date with the latest rules but also prepare for such changes.
Once again, this is why it’s advised that you purchase a timeshare that you can use personally if need be. That said, it may also be helpful to look into how the resale process would work should you eventually choose to go that route. In any case, it’s always a good idea to have a backup plan and diversify your income so that a shift in policy — whether on a governmental, property owner, or rental platform level — doesn’t put you in financial jeopardy.
Ultimately timeshares may not be the best option for generating passive income. Regardless, there may be an opportunity for you to make some money by renting out your property when you’re not using it to vacation yourself. By choosing the right timeshare in the first place and picking the right listing platform, you can not only help cover the expenses of owning a timeshare but maybe even make a little extra for your next big getaway.
Also published on Medium.