Resort Home Ownership Questions To Ask

29.02.16

Resort home ownership is different from typical home ownership. Be sure to ask the following questions before signing on the dotted line.

Pricing

Is the price negotiable and do you need to purchase through a certain company or representative? Who gets a commission off the sale? Some properties have a small percentage of flexibility in price while others are basically set in stone. This will usually be determined by demand, as well as overall policy of the developer or management company. Also, if you know who stands to profit from the sale and how much, it could help you in your negotiations.

Is the property already completed or is it in pre-construction?

This question is important because the answer will likely affect the price of the unit. Many properties in the beginning stages of development will be sold at a discount to attract buyers, but as it becomes a more certain investment or units increase in demand, the price will go up.

If the property is in pre-construction, when will it be completed and what will the overall property look like?

You may be anxious to get into your unit or have a certain occasion in mind. If completion is two years out, you may not want to wait. Also, a property in the early stages may look great to someone who wants a small facility with a low-key, less populated atmosphere. But there may be plans for hundreds or even thousands of additional units and large clubhouses, retail areas or other features that will draw many people. If you plan to keep your property for many years, you want to be sure it will fit your needs when it is finished.

Management

Who are the developers? Who will manage the property?

The first question will be important in determining the quality and reputation of the property. The second question will help determine if the management organisation is well-known, professional, and likely to increase your rental income or resale value. These two questions are critical from an investment perspective.

Associated Costs 

What are the ongoing costs and who pays for them? Is there an annual membership fee?

There will typically be costs for insurance, real estate taxes, and improvement of the facilities. Although owners generally pay for these items, it’s still important to ask. Other expenses to verify include housekeeping, marketing, and general maintenance of the property. These are usually paid by the facility but one shouldn’t assume this is the case.

Rental Plan & Income Generated

Is there a rental programme and is it voluntary?

You will want to know if you can choose whether or not to participate in a rental programme. This is true for all properties as some hotel residences and fractionals also offer this option as a means of generating income.

How is the property marketed and does it have a history of success or features that will make it competitive in the holiday rental market? If you plan on receiving rental income from your property when you are not there, it is important to find out what the management’s experience and approach is. Due to the unknowns involved in marketing and renting holiday properties, you should not count on rental income to cover the costs of ownership. Instead, experts recommend that you view this income as a bonus, if and when it is paid to you. The main consideration should be finding a property that you enjoy and will use.

Amenities and Services

What amenities and services are available for residents and what do they cost?

It’s important to have a full understanding of the services and amenities offered and the charge, if any. Some properties seem less expensive at first, but if you find that you will have to pay for things such as laundry, maid service, and furniture, appliance and decorating upgrades, the price doesn’t seem so great anymore.

Be sure you know the actual price it will cost you to get the unit with the furnishing you want and the services you use on a regular basis. These expenses are all part of the overall cost of a property.

Can I sell or transfer ownership of my property, and if so, are there restrictions or penalties?

There may come a time when you want to sell your property or give it to your children. Some properties may say that you can only transfer ownership to family members. Others may require you to list the unit through the management company. You may also be required to own the property for a certain amount of time before you can sell.

What is the resale value of the property?

In general, the types of ownership we have described have good resale value and are typically much better than that of standard timeshares. Of the three, fractionals are the most questionable when it comes to resale, but the risk can be greatly minimized if you pick an exclusive property with a well-known management company.

The resale value of your particular property will depend on several factors, including the reputation of the management company, the number of other similar properties available in your area, the condition of the property at the time of sale, the overall real estate market, and the popularity of your location. Some of these things can’t be predicted, but if you do your research it will help you to select a property with high resale value.

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