My calculations show a breakeven of 16 years, 30 years if financed...Am I incorrect?

[joeytdog]

Assuming 100 points at $80 resale a point or $8,000

Assuming $5 in MF and $10pp rental

$5 pp difference on 100 points is $500 saved per year

$8,000/$500 is 16 years

financed at 14.75% over 10 years and you add $7,000 in interest and the breakeven is now 30 years

Is this correct

Assuming rental prices and MF's rise at same rate?

I know rentals are not a sure thing and are not rack rate pricing, but still I have rented the last three years and it is not that difficult to do. I am sure I woudlnt want to rent for 30 years

But is this math correct?

[jlewisinsyr]

Although it is possible to "make money" renting your points to others, the benefit just isn't there.

I would think conservatively, MFs will increase by about 3.5% a year and you'd be lucky, unless its peak times to see your possible rental rates increase more then 3% a year.

[DebbieB]

I think he meant being the one to stay on rented points, not rent them out. One problem with that is you can't guarantee points will always rent for $10 per point. Plus you are not taking into consideration possible "perks" that members get that renters don't (for example, the $100 discount on AP's). Plus there is a risk in renting.

[Mickey'sApprentice]

Assuming 100 points at $80 resale a point or $8,000

Assuming $5 in MF and $10pp rental

$5 pp difference on 100 points is $500 saved per year

$8,000/$500 is 16 years

financed at 14.75% over 10 years and you add $7,000 in interest and the breakeven is now 30 years

Is this correct

Assuming rental prices and MF's rise at same rate?

I know rentals are not a sure thing and are not rack rate pricing, but still I have rented the last three years and it is not that difficult to do. I am sure I woudlnt want to rent for 30 years

But is this math correct?

You get to break-even a lot sooner, and it makes you feel a whole lot smarter when you use the rack rate!

[DougandBeth]

For me I may have already broken even and I bought in 2007. Watch this:

Trip Rates if I paid cash for trip
1st trip to SSR $1,425
2nd trip to OKW $2,850
3rd trip to BCV $855
4th trip to BCV $3,124
5th trip to AKV $3,978
6th trip scheduled to SSR $3,978

Total is slightly over $16,000 and I paid $14,500 and we have taken family and friends multiple times. 16 month break even for us.

[toesmom]

Assuming 100 points at $80 resale a point or $8,000

Assuming $5 in MF and $10pp rental

$5 pp difference on 100 points is $500 saved per year

$8,000/$500 is 16 years

financed at 14.75% over 10 years and you add $7,000 in interest and the breakeven is now 30 years

Is this correct

Assuming rental prices and MF's rise at same rate?

I know rentals are not a sure thing and are not rack rate pricing, but still I have rented the last three years and it is not that difficult to do. I am sure I woudlnt want to rent for 30 years

But is this math correct?


We did the math a few years ago and comparing to staying at Values every year, our breakeven was about 9 years.

[mom2rb]

I financed from Disney. I didn't pay 14.75% and I was able to write every bit of the interest off of my taxes.

[dianeschlicht]

We purchased in 1997...didn't finance...bought two add-ons without financing, and we figured we broke even after 3 years. Of course, our method of planning was a bit different. Before DVC, we used to go to WDW once every 2-3 years. After DVC, we started going 2-3 times a year!!!:lmao:

[eliza61]

I financed from Disney. I didn't pay 14.75% and I was able to write every bit of the interest off of my taxes.

That's the first thing I thought. My interest was way lower. also through disney.

[spiceycat]

my interest is lower and you are able to write it off your taxes.

also use rack rates (with discount of 30% to 40% depending upon season plus taxes)

since Disney has not published what the rack rates will be for BLT - it is only guess work.

AKV you have.

[kimberh]

Assuming 100 points at $80 resale a point or $8,000

Assuming $5 in MF and $10pp rental

$5 pp difference on 100 points is $500 saved per year

$8,000/$500 is 16 years

financed at 14.75% over 10 years and you add $7,000 in interest and the breakeven is now 30 years

Is this correct

Assuming rental prices and MF's rise at same rate?

I know rentals are not a sure thing and are not rack rate pricing, but still I have rented the last three years and it is not that difficult to do. I am sure I woudlnt want to rent for 30 years

But is this math correct?

You didn't say where you own, but If I were you, I would charge more for the rentals. Dues go up every year.

[permavac]

Well, to answer your question, your math is correct only in the sense of your calculations. Unfortunately, it is a little too simplistic since there are two major variables that will affect the base figures. MFs increase nearly every year (but they could also decrease occasionally) and the rental rate may increase (or decrease) year to year so it is difficult to accurately extrapolate when the exact break even point would occur. That said - you could certainly use what you have come up with to make your particular decision (that's what I did for making my decision using my own calculations - voodoo economics at its best ;) ). I don't think you need to use "rack rates" in your calculations if you never pay them and are only interested in renting from members. So (as you indicated) if you finance at 14.75%, your break even is 30 years. If you buy in at say OKW ($80 per point), that means you will be saving money for the 3 years left of the contract (i.e. 33 years total). Now you just have to figure out if you would rather pay the money to buy into DVC or if it is worth it to you to deal with the "hassle" (my opinion only) of renting every year. If you work with the same member every year and expect to do so forever, maybe you don't see it as a problem. If you do feel renting is a hassle, you just have to determine if the savings you are realizing are worth the risks. They very well may be. Once that's determined, then you have to be prepared for the possible risks that may evolve in the future such as sky-rocketing rental rates, your "regular" renter selling his/her membership or just not having points for you at times, getting "burned" by a scammer and paying for a rental you never get, DVC banning rentals entirely - things that may never come to pass but might. We all go through our own processes to figure out if DVC is right for us - I don't really think there is a standard "formula" that will work for everyone because emotion is also a factor :lovestruc Hope that helps!

Terri

[LisaS]

You didn't say where you own, but If I were you, I would charge more for the rentals. Dues go up every year.I believe the OP is not an owner and is trying to decide if he would be better off continuing to rent rather than buy.

OP: When I did my "break even" analysis, I used AP discounted rates at the places we liked to stay (AKL, YC) and came up with 7-10 years. Renting from a DVC owner will be cheaper than AP rates at a Disney deluxe hotel so I'm not surprised your break even point would be further out than mine. If you are OK with not being in control of your reservation and OK with the risks involved with renting it will save you money and not burden you years down the road with high annual dues at a time when you might no longer enjoy going to WDW or can't use it to trade out for other travel options for some reason.

One other thing to consider is that at that break even point, if you own DVC it still might be worth something on the resale market. It might be worth far less than you paid for it, but if it was a resort with a longer contract (AKV, BLT, GCV, Hawaii) it would still have some value. After 16 years of renting, you wouldn't have anything.

[kimberh]

I believe the OP is not an owner and is trying to decide if he would be better off continuing to rent rather than buy.

OP: When I did my "break even" analysis, I used AP discounted rates at the places we liked to stay (AKL, YC) and came up with 7-10 years. Renting from a DVC owner will be cheaper than AP rates at a Disney deluxe hotel so I'm not surprised your break even point would be further out than mine. If you are OK with not being in control of your reservation and OK with the risks involved with renting it will save you money and not burden you years down the road with high annual dues at a time when you might no longer enjoy going to WDW or can't use it to trade out for other travel options for some reason.

One other thing to consider is that at that break even point, if you own DVC it still might be worth something on the resale market. It might be worth far less than you paid for it, but if it was a resort with a longer contract (AKV, BLT, GCV, Hawaii) it would still have some value. After 16 years of renting, you wouldn't have anything.

I totally misread his post, sorry. I wouldn't pay that high of Interest to start with. Good points.

[spiceycat]

my break even point was using rack rates with 40 to 30% discount -just did it for BLT

assuming studio will rent for the same as CR - deluxe wing room (standard), tower bl (bl) and tower mk (mk) views.

it was offseason - 44 days so 8 years (only doing 60 points) with financing, 28 days (so 5 years without financing) for the wing (standard)

while spring break - 34 days - but 11 years (17 points vs 12 - so only 3 days not 5) for studio standard - without financing 21 days - so 7 years

while the bay lake and towers were much higher


now when we get rack rates for blt - can do much better.

the room rates have a tendency to go up 3 to 8% each year - but so do the maintence fees - that say the room rates are much, much higher.

since you are renting from a DVC member now - and it looks like you will continue to do this. then your costs are much lower.

[Kmango]

Assuming 100 points at $80 resale a point or $8,000

Assuming $5 in MF and $10pp rental

$5 pp difference on 100 points is $500 saved per year

$8,000/$500 is 16 years

financed at 14.75% over 10 years and you add $7,000 in interest and the breakeven is now 30 years

Is this correct

Assuming rental prices and MF's rise at same rate?

I know rentals are not a sure thing and are not rack rate pricing, but still I have rented the last three years and it is not that difficult to do. I am sure I woudlnt want to rent for 30 years

But is this math correct?

Paying $7000 of interest on a $8000 non-essential luxury item is crazy.

[LisaS]

I totally misread his post, sorry. I wouldn't pay that high of Interest to start with. Good points.The way it's worded I think you could interpret it either way, either that he is wondering about the break even point if he buys a 100-pt contract just to rent it out, or the break even point if he buys in rather than continuing to rent from someone else. But I believe he is not currently an owner and has rented reservations from members in the past so I interpreted his post as a non-owner wondering if he would be better off just continuing to rent rather than buy his own contract.

[DebbieB]

When I figured it using rack rates, I figured the breakeven on the purchase price as 3 or 4 years. After that, you are just paying dues (I didn't finance). Paying $1,300 dues for 11 nights in a 1 bedroom, which rack rate is around $5,500.

[tjkraz]

Assuming 100 points at $80 resale a point or $8,000

Assuming $5 in MF and $10pp rental

$5 pp difference on 100 points is $500 saved per year

$8,000/$500 is 16 years

financed at 14.75% over 10 years and you add $7,000 in interest and the breakeven is now 30 years

Is this correct



All things considered I'd say it's a pretty fair analysis.

Still many of the cons to rentals are obvious and should not be discounted. For instance, if you are renting 11 months in advance to get certain resorts, include some calculation for interest lost on those up-front rental fees. If you are typically renting on shorter notice, consider that owning points would give you access to a wider variety of destinations. Clearly there will be more options available 11/7 months out than when renting 3-4 months out (or less!)

Many perks are off limits to non-members; we save $400+ every time we buy APs for the family. Then there are things like free Internet, valet parking, golf discount program, discount tickets for after-hours parties which are not all accessible by renters.

Control of the points is a big plus for owners. At will you can move from one resort to another, one set of dates to another. Easy access to member services to add (or remove) DME, Dining plan, change guest names on the reservation, etc.

And then there's the inherent risk involved with renting. Stories of fraud are few and far between. Still the chances of not having a room as a member are practically nil while as a renter it's somewhat north of that.

Oh, and let's not forget the free quarterly copy of Disney Files. :thumbsup2

[joeytdog]

Yes, I was wondering as to if I should buy in versues continue renting....

I just cant justify it with financing

Oh well, if I only had $20k lying around! (want 250 points)

Who knows maybe I will just take the plunge and do it anyways!:confused3

[Mtnman44]

Your calculations are nearly an apples to oranges comparison..You are comparing "best case" of always being able to rent for $10 to the "worst case" of financing a DVC at 14% for 10 years (ouch).

Even so, don't forget to include in the calculation the fact that after the loan is paid off, you now have a valuable asset to either liquidate or use on more vacations for only the MF costs.

With renting you will have nothing but memories, good ones no doubt, but they won't get you a financial return.

[tjkraz]

Your calculations are nearly an apples to oranges comparison..You are comparing "best case" of always being able to rent for $10 to the "worst case" of financing a DVC at 14% for 10 years (ouch).

I think his assumption was a rental rate of approximately $5 over cost of dues. For 2009 he's renting at $10 which is $5 toward dues plus $5 "profit" for the owner. In a few years it might be $11 rental ($6 dues / $5 to owner.)

Even so, don't forget to include in the calculation the fact that after the loan is paid off, you now have a valuable asset to either liquidate or use on more vacations for only the MF costs.

Another very good point. Regardless of the breakeven, there are still many years on the back end which would be net savings. If your breakeven on BLT is 18 years, that leaves 30+ years of deep savings.

Or if you have to sell in the interim there are dollars to be recouped.

[Brian Noble]

I think the broader question is an important one, though, and one that too few people think about when buying any timeshare---will I still want this ten years from now?

If the answer is "probably not", then many folks will be better off renting. Just ans renting carries risk, so does owning---including the risk that your vacation habits or discretionary resources change.

[crisi]

Yes, I was wondering as to if I should buy in versues continue renting....

I just cant justify it with financing

Oh well, if I only had $20k lying around! (want 250 points)

Who knows maybe I will just take the plunge and do it anyways!:confused3

You might want to consider trying to find a small (like 50 point) resale. That would allow you to rent points by having someone transfer points to you - you'd retain control over the points and reduce risks. Since DVC has gone to one transfer in or out per contract per year, its a little more difficult to do this than it used to be. Once you are in, you can continue to purchase points in smaller increments.

[hakepb]

You might want to consider trying to find a small (like 50 point) resale. That would allow you to rent points by having someone transfer points to you - you'd retain control over the points and reduce risks. Since DVC has gone to one transfer in or out per contract per year, its a little more difficult to do this than it used to be. Once you are in, you can continue to purchase points in smaller increments.

I believe there are transfer-in limitations (not more than the points you own?) and/or you cannot use more than 3 UY's worth of points within a single UY?

[tjkraz]

Admittedly I don't follow the rental market closely but right now it seems to be a rentee's market (the non-member.) We rented back in '02 and paid $10 per point. If that's still a price one can reasonably expect to find, then renting points is not a business for me. Some resort dues have increased more than 40% over that time!

My guess is that the supply and demand is out of whack. Too many members renting points and not enough buyers. Perhaps the rentee market is even shrinking as people buy into DVC. I know we did!

Aside from that there are too many casual renters that will never demand top dollar. Certainly they will want more than $10 per point at some time. But when and how aggressively will prices climb upward?

That said, ownership brings certainty. The amount I paid for my points will not change. The value I get for those points will not change. Dues will, but the margin for adjustment has been pretty well established.

I knew renting was an option when we bought but one thing I told my wife was that I didn't want to end up deciding to buy several years down the road when points cost 30% more and contract durations were lower. While DVC has continue to roll-out longer contracts, prices are certainly a lot higher than the $79 per point we paid!

Renting may be cheaper now but it brings a great deal of uncertainty. What could DVC / Disney do to limit rentals? Will they curtail benefits and services offered to those staying on rented points? What will happen to pricing as dues climb higher and the economy improves?

And again there's the issue of not owning a tangible asset as a renter. I am 100% certain that I could sell my points today and make back all of my initial investment. That means I have taken 6 years worth of trips for the cost of my dues...$3.80 - 4.34 per point--plus some allowance for lost interest on the initial investment. Still much cheaper than renting!

[Mtnman44]

Thanks. Can't believe I didn't think of that.... doh! :confused:


I think his assumption was a rental rate of approximately $5 over cost of dues. For 2009 he's renting at $10 which is $5 toward dues plus $5 "profit" for the owner. In a few years it might be $11 rental ($6 dues / $5 to owner.)

[Mtnman44]

I'll just also add some of my thoughts to the "owning brings certain non financial benefits" line of thinking. Some of these include independence and the ability to plan your trip when and how you want. Being dependant on someone else, a stranger no less, is a no go for me. Then there is the transaction risk that is discussed on the board constantly. Then there is the uncertainty IF there will even be points available to rent when and where you want.

To me, planning the next 10 to 20 years of WDW vacations around private rental transactions is...well, let's just say that is not the way I would do it. Nor would I plan on buying peoples' airline miles and hope they can score me some good reward seats to fly to FL every year.

[permavac]

I believe there are transfer-in limitations (not more than the points you own?) and/or you cannot use more than 3 UY's worth of points within a single UY?

Actually, the "not more than the points you own" transfer issue (actually I think the rumor was 3x your points - but not positive) was brought up during another thread a while back and scared me a fair bit! Thankfully, that was debunked at the time, however, I don't remember who debunked it or what the specifics were. Dang my terrible memory! :lmao: Anyway, at the time I was reasonably assured that this was not the case. If anyone else remembers feel free to refresh us...

Terri

[Brian Noble]

What could DVC / Disney do to limit rentals?
Wyndham has now done two things which, taken together, are going to lead to a pretty dramatic sea-change in how the commercial renters do business.

First, like DVC, they are limiting the transfer of points between owners. Unlike DVC, there will be no transfers at all. This has a larger impact on the Wyndham commercial renters than DVC's, because most Wyndham landlords have "status", and can obtain short-notice reservations at a discount. These landlords could buy up cheap transfer points and "wash" them through their VIP accounts. No longer.

Second, Wyndham now charges for guests on an owner's reservation. Each member gets some number of "free" guests---it varies based on how you acquired your points, and how many you own. After that, it is $100, minimum, per guest reservation---non-refundable.

DVC has clearly already taken some steps to make life less pleasant for the commercial renters---the limit to one transfer per year, and only speaking with the Member, never the guest. It will be interesting to see if they go any farther, and if so, what they come up with.