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invalid_char
02-12-2004, 11:13 AM
I know a lot of number crunching has been done which shows the cost savings of owning DVC vs. staying in the deluxes. I'm wondering if anyone has done a comparison between owning points and renting points on a regular basis.

Here is a very simplistic example:

We own 500 points. I think we paid on average $74 per point or $37000. Say our dues are 4.25 per point or $2125 annually.

Now let's say we can rent 500 points per year at $9.50 per point. for an annual cost of $4750. This means that, this year, we save $2625 by owning as opposed to renting. Even assuming that dues will never go up, which they will, it would take us 37000/2625 or over 14 years to make back our initial investment. And, as I've come to realize, dues continue to go up but the cost of renting seems to remain static at between $9 and $10 per point. So really, the cost savings should decrease every year. I haven't done the calculation, but I have to imagine that if you factored in the inevitable increase in dues, it would take quite a lot longer than 14 years to make back your money.

Also, if you are renting, you already have your money. There is no risk or worries that Disney will deteriorate in the future and you will not be able to sell and get your money back.

It seems that any anxiety over renting could be mitigated by keeping a small account open to which you can have points transferred from other members.

Anyway, has anyone ever pursued this line of thinking and what made you buy instead of rent or vice versa.

Thanks!

WebmasterDoc
02-12-2004, 11:31 AM
Some corrections to your thinking may be needed here.

Within the last 3 years- points could be readily rented in the $6-7 range. To assume that $9-10 is a static number may not have much basis.

The assumption that points can always be rented (at any price) may not have much basis either. The rental of DVC reservations is governed by supply and demand. If there is an increase in the number of people wanting to rent points, the cost of that rental may well increase - and if the number of members wanting to rent increases faster than the number of potential renters- then the cost could even decrease.

While you may have been able to rent 500 points at $9.50 each this year, there is no guarantee that many points (at that price) will be available next year or any time in the future. With your DVC membership- you are guaranteed a fixed number of points each year- currently costing $3.69- $4.37 each.

Many members feel they have already reached a break even point with their DVC expenses- so the annual fee is their only cost. Thus renting- even at $9.50- is far more costly than what they now enjoy.

WDWorld2003
02-12-2004, 11:39 AM
Also, you can always sell your points at the market value and make back some or all of your initial investment (at least at this point in time).

nomad
02-12-2004, 11:42 AM
Iwas reading your reply and for me the simple answer would be to divde your point plan into the cost to give you costs plus the anual fees so i would have to say they are around 6-8 dollars. My other thoughs would be you have something to sell that will apprecaite slowly . Dont know what others factors there might be. I would be interested.

Jimbo
02-12-2004, 11:46 AM
Another thing to consider is that renting is kind of easy because of the Rent/Trade Board on this site. But if Pete decided to shut that board down for any reason - perhaps under pressure from Disney - then what would you do? If your source for points turns into eBay auctions, you can expect the price to go up.

nomad
02-12-2004, 11:46 AM
Well i didnt read the entire 1st post but if you bought an plan with 220 and 220 bank like i did sold off 400 points reciceced 4k reducing my cost to 10k,I have visted 4 times. Its not to bad.
I guess if you sold off your points for 5-7 years it would cost you nothing for the plan but dues at 600 a year whinch is half a week at a hotel.

???

invalid_char
02-12-2004, 12:11 PM
Here are my thoughts:
Originally posted by WebmasterDoc
Within the last 3 years- points could be readily rented in the $6-7 range. To assume that $9-10 is a static number may not have much basis.

The fact that points are readily available at $6-$7 makes renting even more compelling doesn't it?

500* $6 = 3000 (rental cost)
500* $4.25 = 2125 (dues)

owning then only saves me a negligible $875, a savings that could easily be erased if dues go up.

While I agree that there is no guarantee that points will be available, there does seem to me to be a very active market.


Originally posted by WebmasterDoc
Many members feel they have already reached a break even point with their DVC expenses- so the annual fee is their only cost. Thus renting- even at $9.50- is far more costly than what they now enjoy.
While I respect this sentiment, and believe me I love my DVC too, I'm trying to make the wisest decision with my money going forward.


Originally posted by Jimbo

Another thing to consider is that renting is kind of easy because of the Rent/Trade Board on this site. But if Pete decided to shut that board down for any reason - perhaps under pressure from Disney - then what would you do?

Actually, if this ever happened, it would hurt owners just as much as renters. Heck, I'd open up my own site and die a very rich woman!

Anyway, I hope people can see that I'm playing devil's advocate here. The whole Comcast thing is making my mind wander!

Thanks everyone for your feedback. I hope more people respond!

WDWorld2003
02-12-2004, 12:57 PM
I'm just speculating and I would never want to rent out all of our points, but there are those that do make a business of it (when I talked to resellers they stated there were several people who buy points just to sell)

If you bought 300 points at $74/pt. = $22,200

Current dues would be approx. = $1,245.

Without taking inflation into account (and I know you have to but I'm just using current prices as an example) in 10 years you would have paid $12,450 in dues + $22,200 for your initial investment = $34,650.

You could rent your points for 10 years at $10/pt. (fairly easy to get) - 3000 pts. X $10.00 = $30,000. A difference of $3,650.......

Now, hopefully, at that point in time you could sell your DVC for at least $50.00 point (possibly more) = $15,000 minus $2,000 (for brokerage fees) and you would be $9,350 ahead - much better than my 401K the last few years! If there was no longer a viable market for DVC then the above would not be true and you would be better off renting.

I do see your point.... ... the above is how how we justified our purchase. We're hoping we made the right decision instead of just renting points.... only time will tell.

riggins
02-12-2004, 01:01 PM
I rented twice before we bought . . . once for $10/point and once for $9/point. At first, I thought renting was the way to go. Then as the frequency of our trips increased, I started doing some basic math. We had taken 3 trips in 19 months and spent $2322 renting points and $2130 on a CRO reservation- $4452 total. So, with what I spent on those three trips, I could have paid for 1/3 of my initial 200 point purchase. I felt like I was going to sink $15K into Disney trips whether I bought DVC or not. So, like Doc said, I view our initial investment as money spent in order to get to a point where we stay at the price of dues only.

However, for me, the more compelling reasons not to "just rent" is that it can really be a hassle. Here's some thoughts:

If you want to get reservations at a busy time, you need the 11 month window just like a DVC member. If you are booking that far in advance, you're going to pay $10/point. While the $6-7 dollar deals exist, you don't get them when you need them.
While both of my renting situations worked wonderfully, you always risk someone not making the reservation or cancelling it or stealing your money or whatever. Personally, I want to save a lot if I'm going to have to deal with this concern.
If you're not a member, you can't check availability. So, you have to have your renter check for you. If you are considering multiple dates and/or different accomadations, this can be a pain.
Also, when you are renting, you need to play the CRO vs. Renting game everytime to make sure you're getting a good deal. The time I rented at $10/point, it was peak season and CRO had no discounts. In this case, $10 was a bargain. However, the time I rented for $9, it was value season and there were discount codes. So, I wouldn't have paid more than $9 because I could have done better direct through Disney. So, if you want to be a renter, you also need to be a CRO code watcher.
If you rent, you cannot change your plans. If I book a trip 6 months out and something comes up 3 months before the trip and I want to cancel, the renter is probably not going to be very accomodating. While owning certainly has limitations on changes and cancellations, you are at least in control. When you rent points and send the money, you're locked in. You could certainly try to work with your renter or re-rent the reservation, but who wants that hassle. Now, I know the rules, make a decision, and call MS.


So, to sum it up, being a renter can be a hassle. Personally, it would have to cost much less than owning for it be worthwhile.

Leslie

JJ721
02-12-2004, 01:03 PM
As the cost of accomodations at comparable disney resorts increase, wouldn't it be logical to assume that the cost per rental pont would increase also? For example, if five years from now the cost to stay at GF increases, say 20%, wouldn't $10/point look like an even better deal? Accordingly, the demand for points at $10 would go up, supply (at $10) drops, and price increases.

I agree with Doc. Assuming everything else is equal, this looks like a classic economics 101 case study :)

childsplay
02-12-2004, 01:22 PM
Originally posted by invalid_char
it would take us over 14 years to make back our initial investment.
Thanks!

Right, and you own the contract for another 38 (50 at SSR)......
That's 24 years on the plus side by my calculations:D

jarestel
02-12-2004, 01:23 PM
As many people have demonstrated in the above posts, you can use hypothetical numbers to prove anything you want. Since we don't know what dues or room rates will be in 10 or 20 years, it's easy to make up numbers to prove a point. ( and kind of fun too! ) I think we'll have to wait until we either sell DVC or the contract expires to definitively figure out if we got a "deal" or not.

invalid_char
02-12-2004, 01:40 PM
Originally posted by JJ721
As the cost of accomodations at comparable disney resorts increase, wouldn't it be logical to assume that the cost per rental pont would increase also?
No, I would not assume that this is the case and I believe that, historically, it has not been true. As far as supply and demand are concerned, it would seem that as they add more DVC resorts and supply increases, that the rental cost will go down, not up. As Doc indicated, over the last few years the cost of renting points has actually decreased.

Originally posted by riggins

If you want to get reservations at a busy time, you need the 11 month window just like a DVC member. If you are booking that far in advance, you're going to pay $10/point. While the $6-7 dollar deals exist, you don't get them when you need them.

I agree that you can't count on getting $6 to $7 per point. But I disagree that you will necessarily pay $10. In fact, if you are buying a large block, the seller will often give you a discount.


Originally posted by riggins

While both of my renting situations worked wonderfully, you always risk someone not making the reservation or cancelling it or stealing your money or whatever. Personally, I want to save a lot if I'm going to have to deal with this concern.

If you're not a member, you can't check availability. So, you have to have your renter check for you. If you are considering multiple dates and/or different accomadations, this can be a pain.

If you rent, you cannot change your plans. If I book a trip 6 months out and something comes up 3 months before the trip and I want to cancel, the renter is probably not going to be very accomodating. While owning certainly has limitations on changes and cancellations, you are at least in control. When you rent points and send the money, you're locked in. You could certainly try to work with your renter or re-rent the reservation, but who wants that hassle. Now, I know the rules, make a decision, and call MS.

As I said in my original post, I would maintain a very small account (maybe 25 or 50 points) just so points could be transferred into my name and so I could maintain control and check times, etc... I'm not sure what the rules are on transferred points but I believe I would have some cancellation flexibility, depending on the circumstances.

Originally posted by riggins

Also, when you are renting, you need to play the CRO vs. Renting game everytime to make sure you're getting a good deal. The time I rented at $10/point, it was peak season and CRO had no discounts. In this case, $10 was a bargain. However, the time I rented for $9, it was value season and there were discount codes. So, I wouldn't have paid more than $9 because I could have done better direct through Disney. So, if you want to be a renter, you also need to be a CRO code watcher.
I think being able to take advantage of any super deals Disney has is an advantage not a disadvantage. I mean, how hard is it to look on mousesavers.com and look at the current discount codes?Probably a lot less of a hassle than getting involved in banking and borrowing and trying to keep track of how many points you own, etc. etc.


Anyway, the hassle factor is the most compelling argument for owning, but owning can be a hassle too when you consider the time invested in tracking and manipulating points and worrying about dues increases and the future of Disney.

Well, I'm still playing devil's advocate, someone prove me wrong!

DrTomorrow
02-12-2004, 02:21 PM
I appreciate your investigation and research, invalid_char, but there are simply too many unknowns to yield a valid proof / disproof. Not only are there all the financial factors already mentioned, but some intangibles as well:

1. Demand. In 20 years, will Disney's "magic" begin to wane, or will there be a renewed interest in "pixie dust" and "Main Street USA"?

2. Supply. Disney continues to build new DVC resorts, keeping supply growing. What about when the last DVC resort is built - will DVC rental points become a more scarce commodity?

3. Aging of the DVC ownership. Currently, enough people want to experience other non-DVC vacations, and rent out their points to fund them. Might this change as the owners age and perhaps value DVC a bit more?

We "ran the numbers" last fall ere we bought into SSR, but it was the "annual trip(s) at WDW Deluxe vs. buying into DVC" question. DW and I couldn't deal with the uncertainty and hassle of renting - it's just not 'us'; we are plan-ahead folks.

Good luck in your decision-making!

rocketriter
02-12-2004, 02:22 PM
Something I'm not finding in this discussion: are there any tax implications to renting a large number of points? If there are circumstances where the Fed and the State can take income tax, the other calculations change dramatically.
:eek:

WebmasterDoc
02-12-2004, 02:40 PM
Originally posted by invalid_char
Here are my thoughts:


The fact that points are readily available at $6-$7 makes renting even more compelling doesn't it?

500* $6 = 3000 (rental cost)
500* $4.25 = 2125 (dues)

owning then only saves me a negligible $875, a savings that could easily be erased if dues go up.



It would appear that my point was missed. Three years ago- you could easily rent points for $6-7 per point. Now the price is closer to $10 to rent those points. I would find the assumption that $9-10 is a static price incorrect just based on the past 3 years experience. Rentals for $6 per point are very rare at this time.

Rental costs have already outpaced dues increases during that same time period.

The premise proposed is based on a static rental price and rising fees for members- the both should be expected and only the rate of increase is the unknown.

Good luck making your decisions- just be sure to consider all of the variables to reach your decision.

invalid_char
02-12-2004, 03:03 PM
Originally posted by WebmasterDoc
It would appear that my point was missed. Three years ago- you could easily rent points for $6-7 per point. Now the price is closer to $10 to rent those points. I would find the assumption that $9-10 is a static price incorrect just based on the past 3 years experience. Rentals for $6 per point are very rare at this time.

Rental costs have already outpaced dues increases during that same time period.

The premise proposed is based on a static rental price and rising fees for members- the both should be expected and only the rate of increase is the unknown.

Good luck making your decisions- just be sure to consider all of the variables to reach your decision.

Doc, thank you and I apologize if I misinterpreted your original response.

I still feel; however, that rental points have historically remained pretty close to $10 per point. Yes, there are times when they are sold for more and yes there are times when they have sold for less. But I do not see an overall consistent trend for rental price appreciation so I do not expect it in the future. On the other hand, I have seen a consistent trend toward dues going up over time and, considering the very real possibility that Comcast will own Disney, and considering the way that Comcast treats customers who are 'locked in', I am not very encouraged that the overall cost of a DVC vacation will not increase somehow.

But, as an earlier poster said, the correct decision will only be known for certain in hindsight. This is just my view of the probabilities.

Desnik
02-12-2004, 03:13 PM
invalid_char
DH and I recently went through this same thought process. We rented last year and have been contimplating buying into DVC for a few years now. I don't want another monthly payment and don't have the cash to buy points right now. That is part of the reason we haven't bought.

I think the decision has to be based on the individual. Here are the reasons we feel it isn't worth it for us to buy and continue to rent.
-We have a person we trust to rent points from and we feel comfortable renting from someone on these boards using paypal.
-We usually vacation in Nov. Sun-Fri. and only need 45-60 points. We stay somewhere else on the weekends.
-the points for the weekend are too high and if we owned we would probably never use them for the weekend.
-Right now a studio suits as just fine.
-No monthly payments or dues
-When renting we receive the same DVC discounts and treatment as a member.
-We like to stay at Deluxe resorts sometimes. If we owned I wouldn't be able to justify the waste of points to stay at a deluxe vs. the villas.
-DH won't fly so the other vacation destinations DVC offers do us no good.

So for now for us we will continue to rent and not buy.

WebmasterDoc
02-12-2004, 03:39 PM
Originally posted by invalid_char
I still feel; however, that rental points have historically remained pretty close to $10 per point.

The $10 pricing has happened within the past year. As I've tried to make clear, apparently without ANY success, as recently as three years ago, $6-7 per point was the prevailing price on our Rent/Trade Board. Perhaps your $10 figure comes from a source of which I'm unaware. There has been no consistent "historical" price and to suggest a premise based on that imaginary price is inherently flawed.

Good luck with the plan.

DrTomorrow
02-12-2004, 03:49 PM
Originally posted by invalid_char
[...]I still feel; however, that rental points have historically remained pretty close to $10 per point. Yes, there are times when they are sold for more and yes there are times when they have sold for less. But I do not see an overall consistent trend for rental price appreciation so I do not expect it in the future. That does change things, if true; no offense, but I'd personally be very surprised to learn that one could rent OKW points for anywhere near $10 / point in 1991 or 1992. I though I'd read here that they were closer to $5 / point or so. And if they've doubled in the last 10 years, what might they do in the next 10?
Sincerely, I wish you luck in your decision; I'm just Devil's Advocating to make sure you don't end up in a "Garbage In, Garbage Out" situation re: your analysis.

crisi
02-12-2004, 03:50 PM
If your concern is Comcast, then you are throwing another variable into the mix.

Disney has never made rentals difficult. They haven't been helpful, but they've never put a lot of roadblocks up for people on either side of the rental equation.

No one knows how a new Disney parent company - or a sale of DVC to a different timeshare company if new Parent doesn't want DVC - could change this equation. Its possible that Parent Company might offer better discounts to DVC members - but restrict them completely from renters. Its possible that Parent Company could start charging DVC members for room damage - making it riskier for members to rent out their points. Parent Company could be even tougher in their trademark defense than Disney has been - making it near impossible to run a site like this. Parent Company could drive the parks into the ground, making our DVC investment worth a lot less - so renting may become really cheap and DVC very easy to trade into - or they could breathe new life into the parks - making people burned out by the past several years want to return and making points harder to rent. Parent company could lower the price of Disney hotels - so that renting is no longer attractive - Disney has always implied "if we want to compete with the point rental business, you won't have a point rental business." Which would be fine for the renter - they'd still get a great room at a great price, just from Disney (or Disney's parent company, or whomever Disney's parent company spins the hotel division off to).

No one has that crystal ball.

invalid_char
02-12-2004, 04:07 PM
Originally posted by WebmasterDoc
The $10 pricing has happened within the past year.

With all due respect Doc, I do not believe this statement to be true. We first started to look into DVC exactly 3 years ago when the VWL were for sale and the prevailing price then was in fact $10 per point, with some even being offered on the rent/trade board for up to $12 per point. I remember this very clearly because several people were up in arms about renters charging more than $10 per point.

As far as what the price was 10 years ago, I can't really comment beyond the fact that the rental option was probably less well known then.

Again, regarding the $10 per point figure, I am inclined to believe my own memory and everyone is free to believe their memory. As far as what that figure will be in the future, everyone is also free to make their own prediction. My prediction stands that it will not appreciate as much as dues will and no one can prove that right or wrong.

Thank you all for your input.

tjkraz
02-12-2004, 09:03 PM
Interesting thread.

Before buying into DVC we rented points twice at OKW. Having experienced how well the rental process went, we did actually ask ourselves whether we would be better of continuing to rent or if we should buy ourselves.

In doing some quick calculations similar to your own, we basically determined that our break-even point on buy vs. rent was about 12 years. I think that's pretty comparable to your numbers.

Basically, our indecision ended right then and there. Breaking-even at 12 years and then having another THIRTY-EIGHT years worth of vacations at a fraction of the cost was enough to convince us.

With the prevailing mantra here being "I wish we had bought sooner", I just couldn't justify waiting any longer. We spent $2000 to rent points at OKW at a point when DVC was selling for about $78 per point. While a portion of that $2k certainly would have gone toward annual dues if we had purchased instead, another big chunk would have gone toward reducing the initial investment.

Points are now apporaching $90 per point, and will only continue to go higher.

Deb & Bill
02-12-2004, 09:13 PM
Originally posted by Desnik
...I think the decision has to be based on the individual. Here are the reasons we feel it isn't worth it for us to buy and continue to rent.
...
-When renting we receive the same DVC discounts and treatment as a member.
...
-DH won't fly so the other vacation destinations DVC offers do us no good.

So for now for us we will continue to rent and not buy.

Technically, renters are not entitled to DVC perqs according to the DVC literature, so you could lose that benefit in the future if they decided to enforce it. I have read on these boards about someone who did not get Member on their room key, but got Guest instead which did not entitle them to the DVC benefits.

We only use our points for DVC resorts since anything else to us is not cost effective.

Solo
04-13-2004, 07:40 AM
The annual return on the points you own is the rental value minus the dues. In this example it is ($10 – 4 = $6). So, the return on your “vacation bond” is ($6/$75 = 8%). This not precise, but it is a useful number that everyone can relate to.

Assumptions:

1 – Cost of points is $75. Financing costs are not considered.

2 – For this analysis, point value is $10.

3 – For this analysis, annual dues are $4.

4 – Inflation will have about the same effect on point value, dues etc.

5 – The portion of dues paid for taxes are not considered.

6 – Residual property value is not considered.

Yes, yes…I know…points may cost more, rent for more and dues vary.

Discussion:

Conceptually, DVC has aspects of a “vacation bond” for short- mid-term analysis, but is more like having a “reverse mortgage” for long-term consideration. Short-term ownership will almost certainly lead to a depreciated value and loss of principal when selling This is especially true when using a broker due to the relatively large commissions of 12%, closing costs, resort transfer fees, title insurance, etc. DVC is the best value when held and used for a long time.

If you hold your “vacation bond” until your DVC property expires, you will receive a predictable fixed, annual, after tax rate of return on your initial investment of about 8%.

Financially, if you are able to earn an 8% guaranteed rate of return on money for the next thirty-eight years, you might be better off to invest the principal and use the yield plus what you would spend on maintenance fees.

The real determination of “value” depends on what you want to get for your vacation dollar. If you have a better financial alternative, is there a better vacation alternative?

Each individual situation will have different considerations. The other “pros” and “cons” probably make the decision for most people. For example, reduction of the “hassle factor,” resort quality, security, etc. are “pros.” “Cons” are whatever you want them to be. For example, point management is a little more complex than money management. For many, the Disney concept may not always fit your vacation style.

I'll be interested in reading additional posts on this, but may not have time to respond.

Good luck with your decision.

Disney4ever4569
04-13-2004, 08:13 AM
I really don't think that there are too many people that bought DVC just to rent out the points. I'm sure there are a few. I think there are more people that bought DVC, and either couldn't use it or decided not to use it. As a result, they're renting out there points every year, maybe until they get there intital investment back, before they sell.

it just dosen't make sense that too many people that wanted to invest a lot of money would think "Let me buy a timeshare and then rent it" "Yeah that's a way to make a lot of money!".

Anyway, I do agree that a lot of people probably rent enough points to cover there dues. I'm considering doing that myself. My real motivation is to take Disney vacations!!!

vanstoj
04-13-2004, 09:20 AM
I think your assumption about rental points remaining at $10 lookks to be flawed as a recent post suggested (which generated a lot of discussion), it looks like it might be heading into the $12 range. Also, I think home resort might result in certain resorts generating more per point than others because they are smaller resorts and people need to 11 month booking window in order to book into these resorts. think HH during summer.

PamOKW
04-13-2004, 09:47 AM
Since 9/11, WDW has been in a slump. Resort prices came down and unbelievable discounts were made available. Since December, things are picking up (read recent trip reports) and we may soon see WDW resort prices stabilizing. Once that happens, rental prices may be freer to move up as well. Rentals need to be less than Disney prices. There also seems to be a growing awareness of the rental process. How supply and demand works out will, of course, also influence prices.

Rentals in the early 90's were negligible because it couldn't be done as easily as it can now on the Internet -- and especially right here on these boards. Awareness of what "DVC" was also created a problem that has been resolved as 75,000+ members are out there spreading the word.

Renting points always puts you at the mercy of someone else both to make the reservation and to come up with a fair price. I can see where it's a good idea for occasional trips or when the cash outlay to join is a problem. Otherwise, the cost of renting is inching up and the cost of purchasing DVC is also increasing. As people pay more for DVC in both initial cost and dues, the price has to go up for rentals or they are treating strangers to great Disney trips.