Joining a destination club is nothing less than a major financial commitment. After all, it can mean shelling out several hundred thousand dollars for a deposit along with annual fees well north of $10,000. Our Decision Guide to Destination Clubs gives readers a comprehensive list of 50 due diligence questions that any potential member should review. For those new to the destination club hunt, here’s a cheat sheet with six key questions to help you navigate the club search process in the early stages.

Can the club provide audited financial statements to demonstrate that there is enough equity in the homes and cash to cover the refundable portion of the membership deposit?

This question gets to the heart of whether a club has the financial footing to cover the refundable membership deposits. The more financial transparency a destination club offers, the better. The ideal club will be willing to open up its financial books by providing third-party audited financial statements to potential members. Ask whether a club is willing to send you audited annual financial statements and unaudited quarterly statements at any time. A club’s net asset test, a measure of a club’s cash and real estate holdings versus its membership deposit obligations, is one measure of a club’s health, but financial statements can give you a deeper look at a club’s growth.

Is there a waiting list to resign?

A club with members jostling to resign will undoubtedly be a sign to look elsewhere. But even a club with no members on the waiting list should not be off the hook. Look at if a club requires two or three new members to join before one can resign. You may also ask a club how many members have resigned in the past; if the number is significant, ask why those members left. A larger exodus may be indicative that it went though a rough patch with how the club was managed. A club may admit to such a failing, but point to ways that it has improved the member experience since then.

How does the reservation system work?

Destination clubs typically have various levels of membership that allow for a set number of days of use. Diving into how the reservation system works, looking at both the number of days you’ll be able to book in advance, versus the number of days allotted for trips with a shorter outlook, will begin to spell out how the club will (or won’t ) be able to meet your vacation needs. This question should include discussion about holiday reservations. Destination clubs are always dealing with how to satisfy demand for reservations during peak holiday periods and not all clubs guarantee or even include holiday reservations on all plans.

How is the club financed?

If a new club is being supported purely by member deposits, expect the property portfolio to grow slowly. The destination club industry has evolved to a point where even the largest clubs can require an outside equity infusion to aid growth. For start-up clubs, the growth challenge is formidable. Clubs need new member deposits to finance real estate expansion, but members are awfully hard to attract without a decent real estate portfolio. A strong financial backer is a sign that the club has enough cash on hand to build its property portfolio in the early days.

How are homes financed?

The majority of destination clubs use financing to expand their portfolio of residences. One notable exception is Abercrombie & Kent Residence Club, which plans to own homes debt-free. Bigger clubs have lines of credit that allow them to finance expansion, but as the real estate market continues to falter in many resort areas, we think that potential members should take an even closer look at how homes are purchased. After all, these homes are essentially backing members’ deposits. In today’s real estate climate, it’s not unthinkable that a club financing the bulk of the cost of a residence could find itself owing more than the value of the home, if prices continue to sink. Another red flag: A club that leases most of its homes, but still promises membership deposit refunds. While leased properties can make up a portion of a portfolio, a club that is eschewing homeownership altogether lacks a strong business model that will allow it to meet its deposit obligations.

How many destinations are planned and what is the roll out schedule?

It can take years for a club to acquire a property and open its doors for stays, especially if a club is buying homes before they are built. Destination clubs are quick to promote their expansion plans (most club website’s have lists of destinations where homes are in development), but don’t be swayed by a road map. Grill club executives on how they plan to roll out new properties, and ask if the expansion is directly linked to acquiring a set number of new members.

For a complete list of due diligence questions, download our Decision Guide to Destination Clubs.