How Long To Recoup Your Initial DVC Cost?

[lodge]

You are buying the opportunity to stay at a Disney resort for X amount of time per year. If you decide to sell later on and you 'make' money, consider yourself lucky but you better add up all the money you spent on vacations while using your points. If you 'lose' money, well, weren't you going on vacation anyway so did you lose anything? If you rent your points, you will get your maintenance fees paid for that year and some more but I know for a fact that my house rental is bringing more money in a year than any DVC contract can. So again, probably not a 'good' investment and I use that word loosely.

We bought our contract knowing we wanted to go back year after year to Disney. We bought it knowing that because we had it we would spend more money at Disney (tickets, food, traveling costs, etc....). All we assumed was that it would guarantee us a vacation at a place we love at a level of resort we wouldn't normally splurge on.

I don't intend to sell and I don't intend to rent (if I ever do this it will be solely that we have fallen on 'bad times' and need to cover the maintenance fees and can't afford a vacation and its additional costs.) If we fall on 'good times' again, we will definitely buy more points; probably resale. I love my contract and appreciate the vacations we have been on because we have it.

It's not a 'deal'; it's a vacation. If you figure out a way to 'feel good about the money you spent'; good for you but please don't twist it to be an investment.

Exactly our view of our DVC timeshare.

 

[k3chantal]

I've heard this before and don't understand it. It's not like you can't stay at Disney anytime you want. Buying DVC doesn't give you any better chance to stay at Disney. What it DOES do is make it less expensive

I say 'opportunity' because its not guaranteed that I will stay exactly when I want, where I want. As long as I book within the 7 to 11 month window, I have the 'opportunity' to get what I want. Sometimes, I may 'luck out' and get what and when I want under that time period. And sometimes, even if I am in that 7 to 11 month window I won't get what I want when I want it.

Of course, I can stay at Disney anytime I want, if I pay cash. But being a DVC member certainly doesn't make it cheaper. I have just paid in advance for my vacations. I go more often because I am a DVC member than if I was just someone off the street therefore I spend more there. Perhaps, years out I will save money because I will have been a member long enough and hotel prices will rise enough that it will become a 'good deal'. But meanwhile, I have spent a ton of money (happily) with no guarantee that resort prices will rise to the point that DVC is a 'good deal'.

 

[theguda]

I say 'opportunity' because its not guaranteed that I will stay exactly when I want, where I want. As long as I book within the 7 to 11 month window, I have the 'opportunity' to get what I want. Sometimes, I may 'luck out' and get what and when I want under that time period. And sometimes, even if I am in that 7 to 11 month window I won't get what I want when I want it.

Of course, I can stay at Disney anytime I want, if I pay cash. But being a DVC member certainly doesn't make it cheaper. I have just paid in advance for my vacations. I go more often because I am a DVC member than if I was just someone off the street therefore I spend more there. Perhaps, years out I will save money because I will have been a member long enough and hotel prices will rise enough that it will become a 'good deal'. But meanwhile, I have spent a ton of money (happily) with no guarantee that resort prices will rise to the point that DVC is a 'good deal'.

Of course owning DVC makes taking trips less expensive. There are probably thousands of threads on disboards detailing how dvc saves money long term. The question is...are you gonna go enough the make the upfront cost worth it? Because once you recoup the initial cost the maintenance fees are SO much cheaper than any other way to stay at WDW. You can stay in a studio at AKL for 2 weeks in October for $700. That's ridiculously cheap. You may not view the DVC as a money saver but I bet most do.

 

[sndral]

I call any outlay of $ an investment. Certainly not in the same terms as a mutual fund...more like a down payment on a house. And although I won't sell all my points, I do think the best way to compare costs is looking at the maintenance fees as a DVC member vs renting points. It doesn't matter if i sell my points or use them....I'm going to net the same dollar benefit either way compared to renting the points.

So strictly from a numbers perspective the difference between what you could rent points for - how much the points cost as a dvc member = profit. Profit per point x Number of points = annual profit. Total upfront cost / annual profit = how long it takes to recoup the upfront cost. That seems to be a very logical and smart way to determine, financially, if its worth it to a person.

So if I wanted to...I could buy a 200 point contract for $12,000, sell those 200 points every year and realize a profit of about $1400 and use that to pay off the $12,000. In approx 8.5 years I'll have all my upfront cost paid for by people who rented my points. Isn't that an "investment"...just like your rental property? Someone else lives in a house you own. If they pay long enough you own something someone else paid for.

Perhaps I am too literal, but the people who rented your points would have had all the fun @ WDW and you wouldn't have had a vacation.
I took your $12000 and invested it w/ a 6% rate of return and at the end of 7years had $18,044 in my pocket.
I took your $12000 'invested' it in SSR and rented 200 points for $11 per point and paid $4.81 MF for 7 yrs. making $8666, thus still being $3334 in the red. BTW, I think even $11 is high for a private renter of SSR to expect.
In both cases no vacation to WDW was enjoyed by the owner.
I think most people look at what lodging would cost them w/out DVC v. w/ DVC and base the number of years to recoup based on that.
In my mind it's a luxury purchase and as I contemplate buying my logic is - I like visiting Disney, I like staying in deluxe resorts at Disney, I can afford it, so I'm buying it. The only return I'm hoping for is the fun of future vacations.

 

[Dean]

Of course owning DVC makes taking trips less expensive. There are probably thousands of threads on disboards detailing how dvc saves money long term. The question is...are you gonna go enough the make the upfront cost worth it? Because once you recoup the initial cost the maintenance fees are SO much cheaper than any other way to stay at WDW. You can stay in a studio at AKL for 2 weeks in October for $700. That's ridiculously cheap. You may not view the DVC as a money saver but I bet most do.

One of the issues with this approach is that you're comparing DVC to itself. DVC is generally an expensive way to go to Disney. There are so many more ways to visit Disney than staying at a DVC resort. Some are cheaper and some more expensive but generally DVC is on the higher end. There are a number of resorts in the area that are as nice or nicer than DVC that are off property, for some that's better and others are willing to pay dramatically more to stay of property. Just consider your options and realize what you are and are not getting.

My personal thought is that DVC is a good value for studios and 2 BR units for those that feel paying more to stay on property in a moderate or higher is a good value and comparing to 1 or 2 moderate or deluxe rooms. 1 BR and Grand Villas are less of a dollar value comparatively. Realize there is far more risk with a timeshare. There is the risk of a special assessment or that dues will go up more than expected. There is risk of loss of points for various reasons. If you use the points for non DVC options, you'll rob $$ value from your potential savings as well. I'd suggest you compare to how and when you normally vacation including the unit size, resort and time of year you'd likely be using.

Realize your projections are the best case scenarios, it's all down hill from there. Plus I'm not sure that you can rent SSR or OKW consistently for the overall going rate even currently. To me timeshares are as much about psychology as dollars and I believe most people spend any "savings" pretty quickly in other areas. Plus there are other ways to stay even at DVC that are potentially cheaper. I've had many 1 week stays at DVC 1 & 2 BR units for cheaper than that $700 a year cost. More risk and less cost but it's worked well for me.

 

[ELMC]

BTW, I think even $11 is high for a private renter of SSR to expect.

Given that two different point rental brokers are currently paying $11 per point, I don't think it's an unreasonable expectation.

 

[theguda]

Given that two different point rental brokers are currently paying $11 per point, I don't think it's an unreasonable expectation.

Exactly. Go look at the rent/trade DVC board. People are posting $12 sales and they're selling like hotcakes.

Again, to clarify...I'm looking at this as a vacation and investment. I'm not going to sell all the points...but i could and in 7-9 years the contract would be paid off by others and I'd enjoy WDW for the low cost of just the maintenance fees.

 

[ELMC]

Exactly. Go look at the rent/trade DVC board. People are posting $12 sales and they're selling like hotcakes.

Again, to clarify...I'm looking at this as a vacation and investment. I'm not going to sell all the points...but i could and in 7-9 years the contract would be paid off by others and I'd enjoy WDW for the low cost of just the maintenance fees.

I think you've been clear on this point. People are disagreeing with you on two points. First, they (myself included) disagree that this is an investment. It's a timeshare, which by definition almost precludes it from being an investment. For me, an investment has some expectation of preservation of principle along with annual increases. A timeshare (even DVC) does not meet these expectations. It is a depreciating asset and the first 7-9 years of "gains" are actually a return of principle. The only real "gain" would occur on the back end and then only if you were to actually sell and only if there was some residual value. Too many ifs. That being said, if you disagree with what I'm saying here, then you probably view DVC as an investment. Not my way of looking at it, but I can respect your opinion.

Second, what people are saying is that there are better ways to enjoy WDW for a low cost starting 7-9 years from now. Think about it this way...would you give me $13,000 now to get absolutely no benefit for the next 8 years only to have the possibility of saving money on your vacations starting in 2021? Too long of a horizon for me.

 

[theguda]

I think you've been clear on this point. People are disagreeing with you on two points. First, they (myself included) disagree that this is an investment. It's a timeshare, which by definition almost precludes it from being an investment. For me, an investment has some expectation of preservation of principle along with annual increases. A timeshare (even DVC) does not meet these expectations. It is a depreciating asset and the first 7-9 years of "gains" are actually a return of principle. The only real "gain" would occur on the back end and then only if you were to actually sell and only if there was some residual value. Too many ifs. That being said, if you disagree with what I'm saying here, then you probably view DVC as an investment. Not my way of looking at it, but I can respect your opinion.

Second, what people are saying is that there are better ways to enjoy WDW for a low cost starting 7-9 years from now. Think about it this way...would you give me $13,000 now to get absolutely no benefit for the next 8 years only to have the possibility of saving money on your vacations starting in 2021? Too long of a horizon for me.

My answer to that question is...probably. I would not be getting the "possibility" of saving money on my vacations in 7-9 years. Instead, the savings would be a certainty because there is no way maintenance fees will ever approach the cost of renting points. Also, I wouldn't be paying the $13,000...the people who rent my points would be paying it over the next 7-9 years (assuming i sold all my points).

I'm going to assume that over a long period of time the cost difference between maintenance fees and what you can get by renting your points will be about the same as today. So I expect that gap to average around $7 per point...which means maintenance fees are 60% cheaper than renting. So the real question is...is it worth to front $13,000 today...recoup that $13,000 via rental points over the next 7-9 years... to save 60% on my trips for the next 30 years? I think that's a smart financial move. My hesitation isn't the money...it's the time required to list and sell the points should I choose to do so. Thanks to everyone for all the comments. I really like to hear all te opinions.

Also, I view DVC as an investment because I see it as a vehicle to save money on my trips. To me, spending $500 on something that would otherwise cost me $1000 is the same as me buying a stock for $500 and selling it at $1000.

 

[Missyrose]

My answer to that question is...probably. I would not be getting the "possibility" of saving money on my vacations in 7-9 years. Instead, the savings would be a certainty because there is no way maintenance fees will ever approach the cost of renting points. Also, I wouldn't be paying the $13,000...the people who rent my points would be paying it over the next 7-9 years (assuming i sold all my points).

I'm going to assume that over a long period of time the cost difference between maintenance fees and what you can get by renting your points will be about the same as today. So I expect that gap to average around $7 per point...which means maintenance fees are 60% cheaper than renting. So the real question is...is it worth to front $13,000 today...recoup that $13,000 via rental points over the next 7-9 years... to save 60% on my trips for the next 30 years? I think that's a smart financial move. My hesitation isn't the money...it's the time required to list and sell the points should I choose to do so. Thanks to everyone for all the comments. I really like to hear all te opinions.

Also, I view DVC as an investment because I see it as a vehicle to save money on my trips. To me, spending $500 on something that would otherwise cost me $1000 is the same as me buying a stock for $500 and selling it at $1000.

Am I the only one who finds it crazy to spend thousands of dollars on DVC and not use it personally for almost a decade?

 

[ELMC]

My answer to that question is...probably. I would not be getting the "possibility" of saving money on my vacations in 7-9 years. Instead, the savings would be a certainty because there is no way maintenance fees will ever approach the cost of renting points. Also, I wouldn't be paying the $13,000...the people who rent my points would be paying it over the next 7-9 years (assuming i sold all my points).

I'm going to assume that over a long period of time the cost difference between maintenance fees and what you can get by renting your points will be about the same as today. So I expect that gap to average around $7 per point...which means maintenance fees are 60% cheaper than renting. So the real question is...is it worth to front $13,000 today...recoup that $13,000 via rental points over the next 7-9 years... to save 60% on my trips for the next 30 years? I think that's a smart financial move. My hesitation isn't the money...it's the time required to list and sell the points should I choose to do so. Thanks to everyone for all the comments. I really like to hear all te opinions.

Also, I view DVC as an investment because I see it as a vehicle to save money on my trips. To me, spending $500 on something that would otherwise cost me $1000 is the same as me buying a stock for $500 and selling it at $1000.

I get what you're saying and although I don't share your point of view, I do see it. One thing I would caution you on, however, is the assumptions you have made above that I have put in bold. First off, I completely disagree with your assertion that the savings are "a certainty" and that maintenance fees have no chance of eclipsing point rental prices. You have absolutely no way of knowing this and I think it's risky to make plans now based on this theory.

I would not be so sure that the gap between maintenance fees and point rental prices is as stable as you might think. Up until this year, point rental prices were fairly constant in the $10-11 range. Only recently have we seen renters able to get $12, and even that requires time and patience. However, that $10-11 price range was stable for a period of about five years; a period of time when maintenance fees were rising at an average rate of about 4%.

Remember, maintenance fee increases are exponential and increases in point rental prices are not. This means that the gap will close a lot faster than you think. What is happening with VB is a good predictor of what will likely happen with the other resorts, just further out in time.

As it was said earlier in the thread, we all talk about break even points and when we can vacation for just the maintenance fees, or whatever you want to call it, but that is not the goal. Instead it's a predicted benefit that might occur as we use our Disney Vacation Club for its intended purpose...taking vacations to Disney. Unless that is your main goal, I can think of many different ways to allocate your money that would have less risk, more liquidity and greater returns. The fact that we will "get our money back" is an ancillary benefit of ownership.

 

[theguda]

Am I the only one who finds it crazy to spend thousands of dollars on DVC and not use it personally for almost a decade?

Then you're not reading my posts. I've said multiple times that I would never just sell all my points. I would probably use them to go once a year then sell the others to help recoup the upfront cost of the contract. The only reason I brought up selling all the points each year is show how the DVC could be viewed as an investment to save money in the future.

Again, I'd never just sell my points. But let's say that was the only way you could buy into DVC. You had to sell your points until your upfront cost was recouped. You wouldn't pay $13,000 today....let someone else pay back that $13,000 over the next 7-9 years by renting points...then save 60% for the rest of your life?

 

[theguda]

I get what you're saying and although I don't share your point of view, I do see it. One thing I would caution you on, however, is the assumptions you have made above that I have put in bold. First off, I completely disagree with your assertion that the savings are "a certainty" and that maintenance fees have no chance of eclipsing point rental prices. You have absolutely no way of knowing this and I think it's risky to make plans now based on this theory.

I would not be so sure that the gap between maintenance fees and point rental prices is as stable as you might think. Up until this year, point rental prices were fairly constant in the $10-11 range. Only recently have we seen renters able to get $12, and even that requires time and patience. However, that $10-11 price range was stable for a period of about five years; a period of time when maintenance fees were rising at an average rate of about 4%.

Remember, maintenance fee increases are exponential and increases in point rental prices are not. This means that the gap will close a lot faster than you think. What is happening with VB is a good predictor of what will likely happen with the other resorts, just further out in time.

As it was said earlier in the thread, we all talk about break even points and when we can vacation for just the maintenance fees, or whatever you want to call it, but that is not the goal. Instead it's a predicted benefit that might occur as we use our Disney Vacation Club for its intended purpose...taking vacations to Disney. Unless that is your main goal, I can think of many different ways to allocate your money that would have less risk, more liquidity and greater returns. The fact that we will "get our money back" is an ancillary benefit of ownership.

I'm sure you're right about the gap between maintenance fees and rental fees fluctuating. But I don't agree that they would ever be close to the same amount and historical numbers bear that out. You just said rental fees held steady for a while at $10-$11. Now people are having no problem selling for $12 and I've even seen private sales at $13. The average maintenance fee at SSR for the last 8 years is $4.28. So historically, over he past 8 years the gap has been more than $6 +/-. I think it's safe to assume $7 is more likely going forward since $12 sales are common now on disboards.

 

[DougEMG]

Yes. Because someone who knows who he is spent a year on here talking about how loaded contracts were more valuable, so the demand for them is higher and any potential sellers who read that information then stripped their contracts before they sold.

I'm sure they were just trying to be helpful.

 

[Brian Noble]

I would probably use them to go once a year then sell the others to help recoup the upfront cost of the contract.

The ROI on DVC points is relatively low---even on resale purchases---and the payoff window is correspondingly long. That long window subjects you to too many downside risks, IMO, because it means you are depending on market conditions not changing. That's not just prevailing rental rates, etc., but all kinds of other factors as well. For example, if we see another spike in oil prices, and therefore jet fuel prices, leisure destinations like Orlando that depend heavily on folks outside driving distance get squeezed. A large recession or even a 9/11-style "black swan" event could also pop up.

Indeed, if you look at Disney's own behavior, they have very consciously moved away from building rental stock and towards fractional ownership---and that started right around the travel crash following 9/11. They mothballed the second half of POP for a full decade before finally completing it, while rapidly building DVC units and even converting some rental stock to fractional ownership (two floors at AKL-Jambo, the North Wing of CR). In effect, Disney has decided to give up a little long-term revenue in exchange for a short-term payoff and sharply reduced risk.

True, there are upside possibilities as well---travel demand could continue its upward slope, oil prices could remain low, etc. But, if you want to be a timeshare landlord, there are many better options out there. Usually, this is because the acquisition cost of the other option is near-zero, not because rental rates are so high. This has the added benefit of hedging risk---the payoff window can be as short as one year, or at worst two, per week owned. In other words, rather than spend 2x what you need for personal use, and rent out half, buy only the DVC points you think you want for personal use, and develop a lower-risk/lower-cost rental business on the side, for a total cost very close to your DVC points only.

Finally, do not discount the amount of work it takes to run even a modest timeshare rental business. The time you spend dealing with tire-kickers and looky-loos, educating potential clients on how timeshares differ from hotels, etc. is non-trivial. If you have a big enough market presence, you can charge a deposit just to check availability, as David does, but you need to be a real player to pull that off rather than have potential customers just go elsewhere.

 

[DougEMG]

Given that two different point rental brokers are currently paying $11 per point, I don't think it's an unreasonable expectation.

I agree. If someone is wanting to rent their points (for whatever reason) as long as they are not distressed points about to expire they can easily get $11/point right now.

 

[Brian Noble]

PS: I'm not sure if it has come up in this thread yet---I haven't read all of it---but you also need to account for the opportunity cost on the purchase cost for the "rental half" of your points purchase vs. just parking that amount in some investment vehicle that you judge to have comparable risk to the rental business. Your original post doesn't factor this in, and it makes the DVC payoff window even longer.

 

[ELMC]

I'm sure you're right about the gap between maintenance fees and rental fees fluctuating. But I don't agree that they would ever be close to the same amount and historical numbers bear that out. You just said rental fees held steady for a while at $10-$11. Now people are having no problem selling for $12 and I've even seen private sales at $13. The average maintenance fee at SSR for the last 8 years is $4.28. So historically, over he past 8 years the gap has been more than $6 +/-. I think it's safe to assume $7 is more likely going forward since $12 sales are common now on disboards.

True, but you do understand that point rental prices increase on a straight line basis whereas maintenance fee increases go up on a curve, right? So the gap between the two will be less and less each year until one point where they eventually intersect.

 

[ELMC]

PS: I'm not sure if it has come up in this thread yet---I haven't read all of it---but you also need to account for the opportunity cost on the purchase cost for the "rental half" of your points purchase vs. just parking that amount in some investment vehicle that you judge to have comparable risk to the rental business. Your original post doesn't factor this in, and it makes the DVC payoff window even longer.

Great point. I've always said that the "opportunity cost" argument does not apply to DVC purchases because if one doesn't buy DVC they will most likely spend that money on something else. However, if you are treating it as a pure investment, you do need to consider this in order to have a viable comparison.

 

[DougEMG]

I bought my DVC (resale) not as an investment but as a means of vacationing onsite at WDW. I looked at multiple senarios to see if within each senario it still made sense to buy DVC. One of the senarios I used is exactly what the OP is talking about, how long to get my money back/ breakeven if I 'have to, need to or want to' rent out the points every year. I wanted that time period to be short enough that I would be reasonably confident about the relationship between rental rates and MF.

Once I was confident that under each of my different senarios it made sense to own DVC, I bought in.

And yes, when I vacation using my DVC points, I mentally (really I store it all in a multi page excel spreadsheet) charge myself the going rental rate just to make sure my senarios are working as I expected them to.

Just remember that the long term value of your DVC contract is $0.