Have some questions regarding buying DVC

[Casemily]

Im looking to buy into DVC too, but my preference, VGC is hard to find or more than I have cash in hand for. So without having even been to DW yet I had to come up with a way to decide which property would be best for my family. So I started breaking down contracts to see what each would cost per point over the entire contract time left by property.
Basically I divided the $ per point by the years left at that property to get a $ per point per year. Then added the MF for 2012. So to compare SSR to BLT:

SSR $50pt/41 years left= 1.22 + 4.73MF= $5.95
BLT $90pt/47 years left= 1.92 + 4.22MF= $6.14
OKW $50pt/29 year left= 1.73 + 5.20MF= $6.93 (not extended)
OKW $70pt/44 years left= 1.59 + 5.20MF= $6.79 (extended)

It helped me to decided on an offer I could live with cash out of pocket now and where to offer at. If I could have afforded $9000 plus closing and MF for BLT I would have, but I only have $8500 max so I went elsewhere.

And yes, the MF's adjust yearly, but I'm assuming that they'll all adjust fairly equally thru the years. For instance, I don't see why BLT would adjust 8% per year and SSR at 3%.

So in the example above, for a 100 pt contract, BLT is only $19 a year more.
Obviously the longer contract means more out of pocket and for me, I don't feel financing is worth it, but maybe you have access to a Heloc at a low rate and are disciplined to pay it back quickly.

Just my thoughts, hope it helps!

[CRobin]

[QUOTE=

And yes, the MF's adjust yearly, but I'm assuming that they'll all adjust fairly equally thru the years. For instance, I don't see why BLT would adjust 8% per year and SSR at 3%.

[/QUOTE]

Actually, they can go up at different rates, based upon the true cost of maintenance and the capital improvements. I don't have it handy, but somewhere there is a historical chart of MFs by resort.

[chalee94]

Originally Posted by CRobin

I don't have it handy, but somewhere there is a historical chart of MFs by resort.

it's a thread stickied at the top of the DVC forums: "DVC resource center."

(and, of course, it shows that last year BLT increased by 8.5% while SSR increased less than 5%.)

if you want VGC, buy there and book at 11 months out. it's a very tiny resort and if you think it's hard to find a contract for sale, wait till you try to book there at 6-7 months out...

[bighoo93]

Originally Posted by Casemily

Im looking to buy into DVC too, but my preference, VGC is hard to find or more than I have cash in hand for. So without having even been to DW yet I had to come up with a way to decide which property would be best for my family. So I started breaking down contracts to see what each would cost per point over the entire contract time left by property.
Basically I divided the $ per point by the years left at that property to get a $ per point per year. Then added the MF for 2012. So to compare SSR to BLT:

SSR $50pt/41 years left= 1.22 + 4.73MF= $5.95
BLT $90pt/47 years left= 1.92 + 4.22MF= $6.14
OKW $50pt/29 year left= 1.73 + 5.20MF= $6.93 (not extended)
OKW $70pt/44 years left= 1.59 + 5.20MF= $6.79 (extended)

It helped me to decided on an offer I could live with cash out of pocket now and where to offer at. If I could have afforded $9000 plus closing and MF for BLT I would have, but I only have $8500 max so I went elsewhere.

And yes, the MF's adjust yearly, but I'm assuming that they'll all adjust fairly equally thru the years. For instance, I don't see why BLT would adjust 8% per year and SSR at 3%.

So in the example above, for a 100 pt contract, BLT is only $19 a year more.
Obviously the longer contract means more out of pocket and for me, I don't feel financing is worth it, but maybe you have access to a Heloc at a low rate and are disciplined to pay it back quickly.

Just my thoughts, hope it helps!

Nice post. That is the metric that they sort of pushed at the DVC open house presentation. It makes some sense and I like some things about it. For example, it helps you to take into account the fact that the annual fees over the life of the contract make up a bigger portion of your cost than the point purchase. And it factors in the length of the contract, which is important. But I thought it was mostly used by DVC to push the idea that BLT would cost me the same as an extended OKW because of the difference in management fees (they offered me the ability to buy direct into any resort, any point amount, BTW). As with just about anything your are valuing (or even measuring), one metric usually can't tell the whole story. And it is important to use a metric that includes the information and variables that are most relevant to your own situation. For example, if you don't think you will own the contract for its full lifetime, then that time to expiration isn't relevant. And if you have to finance your purchase (or have limited savings), then a larger up-front cost per point is a big deal.

Being a spreadsheet nerd, I spent half the night on our train ride home from Disney building spreadsheets to do valuation analyses all sorts of different ways (the other half the night, I just lay there awake. Sleeping on trains is not my thing, apparently). One way that I liked was to look at "payback". In other words, look at the initial expenditure, then factor in annual fees, plus "savings" for my reservations, and see how long until my savings caught up to the initial investment. In other words, how many years would it be before it was a financial wash for me to either buy into DVC or keep renting points instead. The formula for savings is (Rental Point Cost - Annual Fees)*Points. It is a little more complicated than that, but not much. Anyway, even though BLT has the lowest annual fees, it still had a relatively high payback period because the up front investment was so much higher (BTW, I estimated my own up front investment based on the ROFR data from these boards). I also looked at return on investment, with the return being the savings, divided by the upfront cost.

I know I am not breaking new ground here in the world of valuation analysis. Just sharing some other ways to look at it. I'm not sure that I will hold my contract to the end. And as the contract is a wasting asset (i.e., the value constantly depreciates and goes to 0 at the end), I want to know how quickly I make back the upfront cost with savings. Averaging that out over 50 years just doesn't make that much sense to me.

[wendow]

Originally Posted by chalee94

if you want VGC, buy there and book at 11 months out. it's a very tiny resort and if you think it's hard to find a contract for sale, wait till you try to book there at 6-7 months out...

I agree. We were told on our DVC presentation that VGC has a waitlist to buy. I can't imagine there will be many resale contracts out there floating around especially at an affordable rate. The guy who did our presentation also said we'd have a very hard time booking there 7 months out.

[wendow]

Originally Posted by Casemily

Im looking to buy into DVC too, but my preference, VGC is hard to find or more than I have cash in hand for. So without having even been to DW yet I had to come up with a way to decide which property would be best for my family. So I started breaking down contracts to see what each would cost per point over the entire contract time left by property.
Basically I divided the $ per point by the years left at that property to get a $ per point per year. Then added the MF for 2012. So to compare SSR to BLT:

SSR $50pt/41 years left= 1.22 + 4.73MF= $5.95
BLT $90pt/47 years left= 1.92 + 4.22MF= $6.14
OKW $50pt/29 year left= 1.73 + 5.20MF= $6.93 (not extended)
OKW $70pt/44 years left= 1.59 + 5.20MF= $6.79 (extended)

It helped me to decided on an offer I could live with cash out of pocket now and where to offer at. If I could have afforded $9000 plus closing and MF for BLT I would have, but I only have $8500 max so I went elsewhere.

And yes, the MF's adjust yearly, but I'm assuming that they'll all adjust fairly equally thru the years. For instance, I don't see why BLT would adjust 8% per year and SSR at 3%.

So in the example above, for a 100 pt contract, BLT is only $19 a year more.
Obviously the longer contract means more out of pocket and for me, I don't feel financing is worth it, but maybe you have access to a Heloc at a low rate and are disciplined to pay it back quickly.

Just my thoughts, hope it helps!

Thanks for the post and these numbers. We won't be financing either so every dollar counts here and it's helpful to see it laid out this way.

[wendow]

Originally Posted by bighoo93

One way that I liked was to look at "payback". In other words, look at the initial expenditure, then factor in annual fees, plus "savings" for my reservations, and see how long until my savings caught up to the initial investment. In other words, how many years would it be before it was a financial wash for me to either buy into DVC or keep renting points instead. The formula for savings is (Rental Point Cost - Annual Fees)*Points. It is a little more complicated than that, but not much. Anyway, even though BLT has the lowest annual fees, it still had a relatively high payback period because the up front investment was so much higher (BTW, I estimated my own up front investment based on the ROFR data from these boards). I also looked at return on investment, with the return being the savings, divided by the upfront cost.

Ok, this is what I have been trying to figure out. Renting points vs buying in. DVC likes to give you the comparison of buying DVC or paying rack rate (which will never happen for *us*). So, help me here...how do I use your formula to figure this out??

[sechelt]

Originally Posted by chalee94

if you want VGC, buy there and book at 11 months out. it's a very tiny resort and if you think it's hard to find a contract for sale, wait till you try to book there at 6-7 months out...

I'll echo this. We own at VGC and have always booked at 11 months, without a problem. My DS decided last minute he wanted to go to DL next year and when I say last minute, I mean he was about 7 1/2 months out. I was still able to book a studio at that point but they opened up to the 7 month window this week and 4 of the 5 nights are already gone. We're talking early May so I'm guessing summer will be even harder to get at the 7 month mark.

[chalee94]

Originally Posted by wendow

Ok, this is what I have been trying to figure out. Renting points vs buying in. DVC likes to give you the comparison of buying DVC or paying rack rate (which will never happen for *us*). So, help me here...how do I use your formula to figure this out??

start by figuring how much it costs you to rent pts. $10 per pt? $13 per pt?

then you figure how much your buy-in cost really is per pt. Casemily's method is coming up with $6-7 per pt. some of that might be adjusted if you only intended to own for 15 years or so (how much of your upfront costs might you expect to get back?) - or depending on how you handle the time value of money (it's nice to assume that BLT is costing you $1.92 per pt in upfront costs but really, $1000 now is a lot more valuable than $1000 in 20 or 30 years).

then it's intangibles. how much is it worth it to you to control the reservation as an owner? to be able to talk to MS and check availability on the member website yourself?

OTOH, how much do you value the ability to avoid the commitment...to walk away if annual dues go up 10%? to skip wdw for a few years if tickets go up to $100 per day? DVC is a luxury - so you'd have to figure if you really have the resources to add that commitment without stretching...

you can run the numbers but there are a lot of personal considerations that the numbers can't really factor in.

[lovesdumbo]

Originally Posted by bighoo93

For example, if you don't think you will own the contract for its full lifetime, then that time to expiration isn't relevant.

If you don't think you'll hold the contract for its life you might want to consider resale value on a longer expiration contract.

[wendow]

Originally Posted by chalee94

start by figuring how much it costs you to rent pts. $10 per pt? $13 per pt?

then you figure how much your buy-in cost really is per pt. Casemily's method is coming up with $6-7 per pt. some of that might be adjusted if you only intended to own for 15 years or so (how much of your upfront costs might you expect to get back?) - or depending on how you handle the time value of money (it's nice to assume that BLT is costing you $1.92 per pt in upfront costs but really, $1000 now is a lot more valuable than $1000 in 20 or 30 years).

then it's intangibles. how much is it worth it to you to control the reservation as an owner? to be able to talk to MS and check availability on the member website yourself?

OTOH, how much do you value the ability to avoid the commitment...to walk away if annual dues go up 10%? to skip wdw for a few years if tickets go up to $100 per day? DVC is a luxury - so you'd have to figure if you really have the resources to add that commitment without stretching...

you can run the numbers but there are a lot of personal considerations that the numbers can't really factor in.

We paid $13 per point when we rented. I'd like to think we could rent points for less but I'm not sure we could especially if we want to stay at BLT again.

I get the intangibles you are talking of. When renting, I didn't like that we couldn't cancel or change our ressie. I felt 100% comfortable with the guy we rented from (a broker) but I would have much preferred to be in control. To be able to check different dates, ask questions of MS, etc.

OTOH, I worry about the commitment. What if our life changes in some way and we can no longer afford to go to WDW? Then we are stuck with something we cannot use. I know we could rent the points and that is a great option to have. And right now there is a phenomenal rental market but there is nothing saying there will always been a good market for renting. If we had to sell the contract after just a few years, could we get back even close to what we paid or are the price per points dropping fairly quickly? If we are going to buy a contract at SSR and stay there or OKW, we might would rent a car. At that point, why not just stay at Bonnet Creek for a fraction of the cost? I really loved staying onsite but I think maybe what I loved more than anything was the proximity to MK and all the hustle and bustle of BLT. We are normally pretty low-key people and we live a fairly slow-paced life (even with 4 kids) so it was fun to be right in the middle of everything. So, then I start to think, maybe we just rent points for a 2br at BLT and only go every 3 or 4 years

I know no one can answer all this for me but this is what I have buzzing around in my head.

[DougEMG]

Originally Posted by Casemily

Im looking to buy into DVC too, but my preference, VGC is hard to find or more than I have cash in hand for. So without having even been to DW yet I had to come up with a way to decide which property would be best for my family. So I started breaking down contracts to see what each would cost per point over the entire contract time left by property.
Basically I divided the $ per point by the years left at that property to get a $ per point per year. Then added the MF for 2012. So to compare SSR to BLT:

SSR $50pt/41 years left= 1.22 + 4.73MF= $5.95
BLT $90pt/47 years left= 1.92 + 4.22MF= $6.14
OKW $50pt/29 year left= 1.73 + 5.20MF= $6.93 (not extended)
OKW $70pt/44 years left= 1.59 + 5.20MF= $6.79 (extended)

It helped me to decided on an offer I could live with cash out of pocket now and where to offer at. If I could have afforded $9000 plus closing and MF for BLT I would have, but I only have $8500 max so I went elsewhere.

And yes, the MF's adjust yearly, but I'm assuming that they'll all adjust fairly equally thru the years. For instance, I don't see why BLT would adjust 8% per year and SSR at 3%.

So in the example above, for a 100 pt contract, BLT is only $19 a year more.
Obviously the longer contract means more out of pocket and for me, I don't feel financing is worth it, but maybe you have access to a Heloc at a low rate and are disciplined to pay it back quickly.

Just my thoughts, hope it helps!

This is certainly a valid way to look at it. For myself I was much more interested in what the up front costs were going to be and when looking at that BLT is too expensive for me as compared to SSR/OKW.

As SSR is the largest resort, that means more owners to spread those fixed costs out over so I expect that SSR will have the lowest MF increases over the long run.

[DougEMG]

Originally Posted by wendow

Ok, this is what I have been trying to figure out. Renting points vs buying in. DVC likes to give you the comparison of buying DVC or paying rack rate (which will never happen for *us*). So, help me here...how do I use your formula to figure this out??

You don't have to do anything to complicated to get a rough idea of the numbers. For example if we compare buying 200 points resale at BLT for $85 and then add in yearly MF (assume MF increase 3.5% per year) and compare that to renting 200 points starting at $13/point and then $14/point after 5 years, it takes about 9-10 years before owning starts saving you money. That is assuming you paid cash so have no interest payments and assumes you wouldn't of had your money invested and drawing down from it to pay your rentals.

The reason it looks so bad for owning is because of the large up front purchase price of BLT.

If you really want to make the best case of owning vrs renting, buy a loaded SSR contract with 2 years of points for about $55/point, rent out those two years of points for $11/point, then by year 4-5 you come out ahead owning as compared to renting.

If you don't mind where you stay SSR is a fantastic deal, for maximum flexibility renting is great, but if you want to go for 10+ years and always stay at BLT then you need to buy at BLT. So lots of options, you just have to decide what is most important to you.

I own lots of SSR points because they were such a good deal to buy (and I like the location as well), but I own BWV because I want to book there at the 11 month window.

[wendow]

Originally Posted by DougEMG

You don't have to do anything to complicated to get a rough idea of the numbers. For example if we compare buying 200 points resale at BLT for $85 and then add in yearly MF (assume MF increase 3.5% per year) and compare that to renting 200 points starting at $13/point and then $14/point after 5 years, it takes about 9-10 years before owning starts saving you money. That is assuming you paid cash so have no interest payments and assumes you wouldn't of had your money invested and drawing down from it to pay your rentals.

The reason it looks so bad for owning is because of the large up front purchase price of BLT.

If you really want to make the best case of owning vrs renting, buy a loaded SSR contract with 2 years of points for about $55/point, rent out those two years of points for $11/point, then by year 4-5 you come out ahead owning as compared to renting.

If you don't mind where you stay SSR is a fantastic deal, for maximum flexibility renting is great, but if you want to go for 10+ years and always stay at BLT then you need to buy at BLT. So lots of options, you just have to decide what is most important to you.

I own lots of SSR points because they were such a good deal to buy (and I like the location as well), but I own BWV because I want to book there at the 11 month window.

Thanks for the help I was figuring 9-10 years also before owning DVC would come out ahead of renting.

SO, since you have lots of SSR points, are you able to book out BLT at 7 mos...2 bedroom...have you ever tried? I guess I am thinking if we could get BLT a good amount of the time, I would be ok buying a SSR contract. I honestly would like to try all the DVC resorts...at least at WDW. But while my kids are young and rest time is important, I do want the convenience of BLT. Once we are no longer in the "nap/stroller/mad rush after Wishes to get back to the room" stage, I'm not sure I care so much about the closeness of the resort to the parks.

[maburke]

wendow, I see from your sig that this was your very first trip to WDW. Although I'm not one of the people that says you should stay at every sngle DVC resort before you choose your home resort, I do think you should not buy a resort you've never seen after only one trip. I agree with the suggestion that you should stay at OKW, and go over and look at SSR, before buying. I highly recommend OKW for a big family. That's where my BIL owned, and where we always stayed, until we bought BCV when it was first available. When we went "home" to BCV for the first time (my husband hadn't even seen the models), my DH was extremely disappointed by the size. I don't think he's ever got used to how much smaller they are than OKW. That is NOT the reaction I wanted after putting that kind of money into our new "home!"