Don't try this at home, but...

Discussion in 'Purchasing DVC' started by jkersman01, Sep 9, 2013.

  1. jkersman01

    jkersman01 Earning My Ears

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    My wife and I bought a 200 pt contract about 18 months ago. We traveled twiced and borrowed from our 2014 UY pts. We thoroughly have enjoyed our membership and the opportunity to stay at the villas.

    Lately, with the decrease in supply of resales and increase in resale prices, we decided to list our contract for sale. We recently sold our points for a 70% ROI.

    We still love DVC but couldn't let this opportunity to flip pass up. We still plan on renting and, once resale prices go back down (be it 1 year or 5 years) we'll reevaluate and possibly purchase again.

    I'm not encouraging buying DVC with the intention to make a profit. I've always viewed DVC as prepaid vacation with no residual value. However, maybe our situation is similar to a few others and if you can still utilize a combo of renting points (for those 'nice' vacations) and staying during promo times (for those studio times), maybe it is at least worth a discussion with your significant other.
     
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  3. Msmithmd

    Msmithmd DIS Veteran

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    I wouldn't usually ask such specific financials of a stranger, but since you posted here to open this thread I'm curious.

    I have a hard time believing your asserted 70% ROI-could you please update with your total net purchase cost including all closing charges, your total net return after paying seller's costs on the sale, and the total dues money that you paid while owning the membership?

    Reason I'm asking, is that assuming about 5% costs when you bought, 10% costs when you sold, and between 5-15% of your purchase price spent on dues while you owned- you'd have to have had the price point double or more to make that kind of ROI.

    More power to you if you did, but I'm not aware that any resales have had that kind of value increase in the last year. So the math seems fuzzy, but congrats to you for using it and selling it with such apparent efficiency.
     
  4. DougEMG

    DougEMG DIS Veteran

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    This is just a made up example but is completely possible based on prices 2 years ago and prices today.

    18 months ago you could have bought a loaded BWV contract for $55/point paying no closing or MF. Renting your free points for $11/point brings your costs down to $33/point. Then you could have used 2 years of points and then sold now for $80/point less 10% commission brings it down to $72/point. Taxes of 15% on $17/point ($72-$55=$17) equals $2.55/point in taxes, so return of $69.45/point or a profit of $36.45/point which is 110%.

    Prices for some resorts have increased substantially in the last two years.
     
  5. DougEMG

    DougEMG DIS Veteran

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    Congrats on how things worked out for you.

    It will be interesting to see how long prices will remain high.
     
  6. jkersman01

    jkersman01 Earning My Ears

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    BWV bought for 48 pp. seller paid closing. Total pur price was 9600.

    Sold for 88 pp. I picked up 450 in 2014 dues, 6% commission and 75 fees. That's 1581 in fees. That's a net return of 6067. That's an ROI of 67%. I did some quick math earlier. Sorry- didn't realize I was being audited.

    I didnt factor in the 1 year of dues. We were going to go to dis anyways so that would have been spent regardless.
     
  7. jkersman01

    jkersman01 Earning My Ears

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    I should note that going rate is 10%. But i cut a deal based on certain relationships to reduce it to 6. Even if u do the math with 10% ROI is still good.
     
  8. Msmithmd

    Msmithmd DIS Veteran

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    Lol not being audited at all. And congrats on a great investment.

    We just all too often see people use math on this site that under closer inspection doesn't stand up. And when part of your math is "we would have used X anyway" that's fine- but the term ROI is used in analyzing investments objectively. There isn't a fudge factor for "I would have spent money for something else anyway, so I don't have to count this real cost in my ROI."

    But hey, you still made tangible money on a timeshare purchase. Very, very few folks out there can say they did that with a straight face. So good job timing the market. And if you see a future trough and time to buy, send me a pm...looks like you hit this market perfectly!
     
  9. disneynutz

    disneynutz DIS Veteran DIS Lifetime Sponsor

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    What effect will capital gains have on your transaction?

    :earsboy: Bill
     
  10. jkersman01

    jkersman01 Earning My Ears

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    20% fed and 3.07% state. Gain fully taxable
     
  11. jkersman01

    jkersman01 Earning My Ears

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    I appreciate you being polite and respectful. I agree ROI is used in analyzing investments objectively, but also know that if you ask 5 investment bankers how to calculate ROI in this context, you'd probably get 4 different answers. While the equation is simple (proceeds - initial investment / initial investment), the compents are, in my experience in the M&A industry, not always as consistently derived.

    For example, I think you could make the argument that I paid 1 year MFs of $1k and traveled twice [studio at SSR for 5 days and BWV 2 bedroom lockoff for a week]. These trips had been planned for a while (we generally go every other year as it is). So by paying $1k in MFs, assuming I would have paid a cheap $2k for the 2 trips for room rental, I think there's actually a benefit there I didn't include.

    Anyway, my point wasnt to try to show how 70% is easy to get, nor was it to boast about my deal. That's why I didn't put specifics in my initial post. My point was really to maybe spurn some thought with some DVCers in my situation so they can make an educated decision as to their membership because there is potentially some profit to turn which is almost unheard of in the timeshare industry. I'm certain a good portion of DVCers wouldn't care about turning a profit because they didn't view it that way at the beginning, but a wise man once said "everything is for sale at the right price." With resale prices where they are, maybe a discussion between the family decision makers yields in the conclusion that the price is there right now.
     
  12. Mickbee

    Mickbee First voyage of the Magic crossing from Kingdom to

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    Congrats on the outcome of your sale!! Over the years we have been quite successful at turning a gain with the sale of our DVC contracts.

    Side note: I am curious why folks believe the resale prices will decrease in the next couple years. The resale prices are trending along with the Direct pricing. The balance of resale will need to make it worthwhile for folks to go the direct direction (e.g. waiting vs instant gratification, loaded contracts, ease of financing through DVC, etc)

    If Disney continues to increase the prices, the resale should continue the upward trend. Disney is very good with controlling the available inventory and pricing. In order for them to pull in top dollar for the direct property, the spread of resale/direct can't be toooo far off.

    The higher the direct pricing, the more folks will look towards resales. The more folks buy resales, the smaller the supply... we all know the rest.

    It seems there is a lot of buzz of folks turning to direct purchase due to the low supply of resale. Around the holidays we should should see more availability and the frenzy would resume around March. But I don't see it tanking to a $55 for BWV unless there is a serious economic impact.

    It took a few years for the resale market to begin the upward climb after the dip in the economy, but the prices did recover. The real estate market has been making a very strong recovery in many markets over the past few months as well, some in the double digits. We just sold property for 5% over asking price on a one day listing in a pretty stale market... It's been a while since that had occurred in that area.


    Of course all of this is my $0.02...

    Again, congrats or your sale!!
     
  13. crisi

    crisi DIS Veteran

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    And accountants have five different ways that finance people don't use :)

    Congrats, I've toyed with the same idea - we've owned longer. But we have a few more trips to slip in and I don't want to bother with rentals.
     
  14. jkersman01

    jkersman01 Earning My Ears

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    Thanks you

    Anyway, I thought I'd take a stab at why I think resale prices will drop at some point in the future (maybe 5-10 years).

    Let's take a contract ending in 2042. Let's use 2017 as our base year. There's 25 years left on that contract. Let's further assume that for a week, 1 studio runs at BWV in Dream Season, preferred, runs 125 points. A 125 point contract at $130 a point from Dis (assuming no incentives) costs $16,250. At $5.84 pp annual dues, that's $730. Assuming that increases a modest 3% per year, that's about $26,615 over the 25 year remaining life. Per year, that comes to about $1,715 a year. (I realize there's an inflation adjustment I didn't account for completely)

    In 2022, with 20 years left, dues would be $22,739 and purchase price still $16,250. Per year, that costs $1,949.

    More drasticaly, in the year 2040, with 2 years left, dues would be $2,924 with a purchase price (assuming still $130 a point) at $16,250. That's $9,587 per year.

    At some point, price has to retreat. It is an asset with absolutely no residual value- unless the WDW hotels greatly outpace DVC in terms of appreciation, that is. For example, if it costs $12,000 per week for a hotel at WDW in 2042, maybe I buy that contract with 2 years left!! :thumbsup2

    I know there are plenty of other factors that can affect resale prices, such as Disney direct sale prices, Disney rack rates, member benefits, supply/demand in resale market, and Disney's ROFR activity. But I don't know enough about those conditions to be able to project into the future. I'm sure you know about it more than I do and you're probably more likely to be "correct" than me. In fact, there's plenty of other people on here much more knowledgeable than me who would have a better guess there. I think those wildcards can hurt or help equally, so maybe those net out in the longrun.
     
  15. jkersman01

    jkersman01 Earning My Ears

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    Thanks, I completely understand. Maybe after a rental or 2 I'll feel the same way and I'll be buying my contract for even more than I sold it for. :lmao:

    However, right now, the concept of renting doesn't cause my stomach to turn. I rented before I bought and it went smoothly, but maybe that's an outlier...
     
  16. kydisneyfans

    kydisneyfans <font color=blue>It may be because they are too em

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    That is why I believe buying into the 2054, 2057, and 2060 units are a better offer now. The price is relatively the same but the use is 12-18 years longer, at some point the 2042s will lose value where the later units will remain strong.
     
  17. MickeyFan612

    MickeyFan612 Mouseketeer DVC Gold

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    As the worlds population increases over the next 20+ years we may be looking at huge competition for these sold out resorts. You may not be able to find points to rent or buy at BWV and BCV! Who knows??
     
  18. bakerworld

    bakerworld DIS Veteran

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    As the population ages I think there is going to be a glut of resale. We bought at 51 and we anticipate our contracts on the resale market in another 20 years with 25 years remaining on them.

    I sincerely doubt that our 'middle-class' :rotfl: progeny - college grads or no - will be in a position to pay. The time of being able to retire early will be gone as revenue producing middle-management is re-imagined at a lower pay and delayed child rearing proves an expensive experience later in life - medically, socially and educationally. Life won't exist for my progeny as we experience it. I kinda feel sorry for them - which is why we let them share our points and :littleangel: sometimes our vacations.
     
  19. NorCalDVC

    NorCalDVC Earning My Ears

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    We did something similar - bought fully loaded resale contracts at VGC and VWL two years ago at a significant discount and sold both contracts recently (completely stripped I might add) at a nice profit. What did we do with this unexpected windfall? Buy at the Grand Floridian of course! :rotfl: The moral of our story is that the Mouse will always get you (and your wallet) in the end. :goodvibes
     
  20. disneynutz

    disneynutz DIS Veteran DIS Lifetime Sponsor

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    We sold 8 contracts in 2011/2012. Our combined loses on the sales were around $10,000.

    My technique is to buy high and sell low. :dance3:

    :earsboy: Bill
     
  21. NorCalDVC

    NorCalDVC Earning My Ears

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    :lmao: So funny!
     

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