DVC RESALES
DVC RESALES

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Old 04-08-2013, 03:46 PM   #1
theguda
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How Long To Recoup Your Initial DVC Cost?

I just rented points for the first time and it got me thinking about buying a contract on resale. Here's how I ran the #'s and I'd love to hear comments or feedback.

Looks like the going rate to rent points is $11/$12 per point...so let's use $12 for this exercise.

Let's say I buy a Saratoga Springs 200 point contract for $11,000. This year the maintenance fees are $4.81 per point. So if someone paid $4.81 per point and sold them for $12...they'd realize a $7.19 profit per point. Selling all 200 points would net a profit of $1438 for the year.

Assuming a $11,000 cost to buy the contract....if I sold all 200 points each year and got a similar $7.19 per point profit...it would take me basically 7.6 years to recoup the contract cost. Am I looking at that correctly? Would anyone else like to share how long it took you to recoup the initial investment? I realize I didn't factor in what I'd lose by taking that $13,000 and investing it instead. I'm just curious to know if having that initital investment recouped in 7 years is a good deal...bad deal...or great deal.
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Old 04-08-2013, 04:03 PM   #2
kenspidey
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Originally Posted by theguda View Post
I just rented points for the first time and it got me thinking about buying a contract on resale. Here's how I ran the #'s and I'd love to hear comments or feedback.

Looks like the going rate to rent points is $11/$12 per point...so let's use $12 for this exercise.

Let's say I buy a Saratoga Springs 200 point contract for $11,000. This year the maintenance fees are $4.81 per point. So if someone paid $4.81 per point and sold them for $12...they'd realize a $7.19 profit per point. Selling all 200 points would net a profit of $1438 for the year.

Assuming a $11,000 cost to buy the contract....if I sold all 200 points each year and got a similar $7.19 per point profit...it would take me basically 7.6 years to recoup the contract cost. Am I looking at that correctly? Would anyone else like to share how long it took you to recoup the initial investment? I realize I didn't factor in what I'd lose by taking that $13,000 and investing it instead. I'm just curious to know if having that initital investment recouped in 7 years is a good deal...bad deal...or great deal.
Think about it with direct prices. it would take twice as long. I just can't justify it at current direct prices.
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Old 04-08-2013, 04:07 PM   #3
theguda
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Think about it with direct prices. it would take twice as long. I just can't justify it at current direct prices.
I assume by "direct prices" you mean buying DVC directly through Disney or just booking DVC resorts direct with Disney as a non-member? Either way, there is no way I'd do either considering you can rent points and pay far less.

So the only real options are to rent points or buy a resale contract. I'm just curious to know what others think about the #'s I proposed. Buying points is great...but buying a DVC resale seems to be FAR cheaper in the long run. If I can recoup my initial investment in 7 years...is that a good deal? I'd like to know how long it took others to recoup their inital cost.
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Old 04-08-2013, 04:23 PM   #4
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The other way to look at "recouping" your investment is to see how much you would spend if you just paid cash - weren't able to rent points and went once a year - my figures were such that I was able to "recoup" my purchase in about 4 - 5 trips - even including the annual dues i was paying.

Bottom line - you will save money over time if you go on an annual basis - probably even every two years - if less often than that it becomes much cloudier...
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Old 04-08-2013, 04:50 PM   #5
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The other way to look at "recouping" your investment is to see how much you would spend if you just paid cash - weren't able to rent points and went once a year - my figures were such that I was able to "recoup" my purchase in about 4 - 5 trips - even including the annual dues i was paying.

Bottom line - you will save money over time if you go on an annual basis - probably even every two years - if less often than that it becomes much cloudier...
But you can rent points which is far less than booking direct with Disney. If you compared the cost of buying into the DVC vs renting points...I assume you wouldn't have recouped your purchase in 4-5 trips. Wouldn't that be correct?

Last edited by theguda; 04-08-2013 at 04:56 PM.
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Old 04-08-2013, 05:00 PM   #6
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Originally Posted by theguda View Post
I just rented points for the first time and it got me thinking about buying a contract on resale. Here's how I ran the #'s and I'd love to hear comments or feedback.

Looks like the going rate to rent points is $11/$12 per point...so let's use $12 for this exercise.

Let's say I buy a Saratoga Springs 200 point contract for $11,000. This year the maintenance fees are $4.81 per point. So if someone paid $4.81 per point and sold them for $12...they'd realize a $7.19 profit per point. Selling all 200 points would net a profit of $1438 for the year.

Assuming a $11,000 cost to buy the contract....if I sold all 200 points each year and got a similar $7.19 per point profit...it would take me basically 7.6 years to recoup the contract cost. Am I looking at that correctly? Would anyone else like to share how long it took you to recoup the initial investment? I realize I didn't factor in what I'd lose by taking that $13,000 and investing it instead. I'm just curious to know if having that initital investment recouped in 7 years is a good deal...bad deal...or great deal.
This is an accurate basic analysis. It doesn't account for some other variables that could move the "break even" date in or out. Rising costs in maintenance fees or rental point prices are two of those, but those would be predictions anyway. Another factor would be if the contract came with an extra year's worth of banked points that you didn't have to pay maintenance fees on. But essentially, you have a pretty good understanding of what you are looking at with a DVC purchase.

As for whether or not it's a good deal, that is subjective. Many people think that it is, and that's why they own. Personally, I wanted that number to be around 5 years, so I shopped around until I found a contract that delivered those numbers. As far as taking the money and investing it, that's a shaky argument because very few people actually do that.

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Originally Posted by Smile&Nod View Post
The other way to look at "recouping" your investment is to see how much you would spend if you just paid cash - weren't able to rent points and went once a year - my figures were such that I was able to "recoup" my purchase in about 4 - 5 trips - even including the annual dues i was paying.

Bottom line - you will save money over time if you go on an annual basis - probably even every two years - if less often than that it becomes much cloudier...
With all due respect, I think that this is a weak analysis and one that is not even supported by DVC salespeople. The standard DVC presentation states that you can "break even" in 7-8 trips vs. paying rack rate. So your figures of 4-5 years seem very aggressive to me. Also, they only apply if you are actually paying rack rate. And if you are paying rack rate, my question for you is why? Between discount codes and renting points, there are many ways to stay at Disney for much less than rack rate. In my opinion, paying rack rate to stay at Disney is not a viable option. So to use that as a basis for comparison for another option is fallacious.

Many will most likely disagree, but my guess is that these are the same people who pay sticker price when buying a car.
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Old 04-08-2013, 05:11 PM   #7
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This is an accurate basic analysis. It doesn't account for some other variables that could move the "break even" date in or out. Rising costs in maintenance fees or rental point prices are two of those, but those would be predictions anyway. Another factor would be if the contract came with an extra year's worth of banked points that you didn't have to pay maintenance fees on. But essentially, you have a pretty good understanding of what you are looking at with a DVC purchase.

As for whether or not it's a good deal, that is subjective. Many people think that it is, and that's why they own. Personally, I wanted that number to be around 5 years, so I shopped around until I found a contract that delivered those numbers. As far as taking the money and investing it, that's a shaky argument because very few people actually do that.



With all due respect, I think that this is a weak analysis and one that is not even supported by DVC salespeople. The standard DVC presentation states that you can "break even" in 7-8 trips vs. paying rack rate. So your figures of 4-5 years seem very aggressive to me. Also, they only apply if you are actually paying rack rate. And if you are paying rack rate, my question for you is why? Between discount codes and renting points, there are many ways to stay at Disney for much less than rack rate. In my opinion, paying rack rate to stay at Disney is not a viable option. So to use that as a basis for comparison for another option is fallacious.

Many will most likely disagree, but my guess is that these are the same people who pay sticker price when buying a car.
Thanks for your comments. I didn't want to muddy the waters by throwing in other variables like returns on other investments that would, as you said, scale the recoup date forward or back. I write mortgage loans for a living and I equate buying into the DVC with buying points on a loan. I would never recommend someone waiting 7 years to recoup the cost of those points. Granted, the DVC is quite different than buying points on a loan...but the premise is somewhat similar.

Scanning the resale market I don't see anything that would recoup my costs in 5 years. If so, I'd buy it. For example, I do have an offer out on a SSR 200 point contract. All points have been used for 2013 so I'd start receiving 200 points in 2014. The seller wants $13,000..which if I sold them all and made a $7.19 profit on each point it would take me 9 years to recoup. If I wanted that number at 5 years the price would have to be $7190 ($35.95 per point which seems unheard of based on my limited research so far). Can you really find contracts for $35 per point?
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Old 04-08-2013, 07:42 PM   #8
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I like to also factor in the decay of the contact based on expiration date. Also if I use rack rate in my equation, I factor in a 30% discount as I would never stay at a dvc resort without some kind of promotion.
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Old 04-08-2013, 08:32 PM   #9
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Theguda


I added in the cost of money to my specific circumstances and came up with 9 years, not 7. I bought resale anyway, because that 9years did not factor in the residual value of the initial investment.

When considering the residual value, I assumed 10% for the realtor to sell, and 10% loss in value each year. The big question being how much would I lose if forced to sell before 9 years? Based on this, the break even is less than 3 years, which for me is good enough to pull the trigger.
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Old 04-08-2013, 09:15 PM   #10
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Theguda


I added in the cost of money to my specific circumstances and came up with 9 years, not 7. I bought resale anyway, because that 9years did not factor in the residual value of the initial investment.

When considering the residual value, I assumed 10% for the realtor to sell, and 10% loss in value each year. The big question being how much would I lose if forced to sell before 9 years? Based on this, the break even is less than 3 years, which for me is good enough to pull the trigger.
While theoretically the points in bold make sense, I don't put a lot of stock in them. I don't buy into placing a value on the cost of use of money because typically money that is going to be used to purchase DVC is going to be spent, not saved. If not DVC, most people will buy something else. It's discretionary income and is typically treated as such.

It's good that you are anticipating a decrease in the value of your contract, but I think that 10% might be a bit steep. It really depends on the timing. Most people who bought DVC in 2012 are seeing a 10-20% gain in the value of their contract. Of course the commission would wipe that out, but my point is that for any given time period resale values fluctuate so wildly that it is difficult to assume anything.

Your point in italics is excellent because it talks about an exit strategy. Unfortunately, most people do not think about this when purchasing DVC, which is why a lot of people get into the trouble that they do. In fact, it was this very thinking that turned me away from buying DVC direct.
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Old 04-08-2013, 09:54 PM   #11
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I just rented points for the first time and it got me thinking about buying a contract on resale. Here's how I ran the #'s and I'd love to hear comments or feedback.

Looks like the going rate to rent points is $11/$12 per point...so let's use $12 for this exercise.

Let's say I buy a Saratoga Springs 200 point contract for $11,000. This year the maintenance fees are $4.81 per point. So if someone paid $4.81 per point and sold them for $12...they'd realize a $7.19 profit per point. Selling all 200 points would net a profit of $1438 for the year.

Assuming a $11,000 cost to buy the contract....if I sold all 200 points each year and got a similar $7.19 per point profit...it would take me basically 7.6 years to recoup the contract cost. Am I looking at that correctly? Would anyone else like to share how long it took you to recoup the initial investment? I realize I didn't factor in what I'd lose by taking that $13,000 and investing it instead. I'm just curious to know if having that initital investment recouped in 7 years is a good deal...bad deal...or great deal.
In spite of the positive comments you've gotten, I'm not thrilled with your approach. It seems to me you've combining the ideas of using DVC and savings with the approach one would take looking at DVC simply as a true investment.

Since your main idea was related more to buying and renting, Lets look a little deeper. There are other costs and risks and they must be factored in. Historically dues and up front costs have gone up more than rental rates. IMO if you want to look at it as an investment you've got to consider what you could make on that money otherwise. As a long term investment, good mutual funds have a strong track record. DVC is a high risk investment and should be looked at accordingly. From an investment standpoint I'd want return of principle and around 20% before taxes given the risks involved. You've got to account for advertising, lost points, non payment, damages you have to pay for and the like.

Looked at from a personal use standpoint I think the best option is to look at what you're paying without owning vs what you pay with DVC. Personally I think you're historical usage without DVC is the better comparison than a single rental but that's a variable you must make a decision on. In that situation you still need to look at the lost income on the up front money, dues increases and risk including your personal situation. I think the quickest one is likely to break even is 7-8 years now that the points are pretty even throughout the week and most are going to be more in the 10-12 year or longer range, even longer for a 1 BR as the comparison. Of course there's more to the story than just dollars, there's also extra value. Don't make 2 mistakes I sometimes see. One is attributing savings to the kitchen and the other using DVC rack rates (even discount) as the comparison.
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Old 04-08-2013, 10:04 PM   #12
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Originally Posted by theguda View Post
I just rented points for the first time and it got me thinking about buying a contract on resale. Here's how I ran the #'s and I'd love to hear comments or feedback.

Looks like the going rate to rent points is $11/$12 per point...so let's use $12 for this exercise.

Let's say I buy a Saratoga Springs 200 point contract for $11,000. This year the maintenance fees are $4.81 per point. So if someone paid $4.81 per point and sold them for $12...they'd realize a $7.19 profit per point. Selling all 200 points would net a profit of $1438 for the year.

Assuming a $11,000 cost to buy the contract....if I sold all 200 points each year and got a similar $7.19 per point profit...it would take me basically 7.6 years to recoup the contract cost. Am I looking at that correctly? Would anyone else like to share how long it took you to recoup the initial investment? I realize I didn't factor in what I'd lose by taking that $13,000 and investing it instead. I'm just curious to know if having that initital investment recouped in 7 years is a good deal...bad deal...or great deal.
Whenever I see the words 'investment' and DVC in the same paragraph, I cringe. This is not an investment; no matter whether you buy direct or resale.

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.
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Old 04-08-2013, 10:50 PM   #13
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You are buying the opportunity to stay at a Disney resort for X amount of time per year.
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
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Old 04-08-2013, 11:47 PM   #14
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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'.
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Old 04-09-2013, 12:00 AM   #15
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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.
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