How Long To Recoup Your Initial DVC Cost?

[Dean]

Actually, none of what you said is true. Go back to the original post and read it again. It was just about making back the cost of the initial purchase.

Here's the original thread that is applicable. The structure is based simply on buying and renting as the model. Regardless of the reasons, that's what's said and that's what's used to attempt to justify the purchase. Seems pretty clear to me that this is a buy and rent out the points discussion based on the OP. That info has essentially no meaning for a buy and use discussion.

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.

I don't understand why you would assume such negative and condescending things about people you don't know. The OP actually asked for feedback and suggestions. I think most people who post this sort of thing would like to know if they are on the right track or not. Whether they get good advice or not is an entirely different matter.

I stand by my general statement, I think in general that those who post such thread's and truly want a full range of info and feedback are in the minority. Certainly there are those that truly want feedback. Often they qualify the type of feedback they want in the OP. You're free to disagree and free to characterize how you will.

I don't know, if you're willing to put up with the hassle of renting the points, $12 off your per point cost is pretty nice. Or $24 depending on how loaded it is. Even subtracting MFs for the current year, you're reducing your out of pocket by a bunch.

Then it should make sense to buy a few thousand points and rent them out. I do believe there are situations such as where one needs more points later but less now or when there are more points than the buyer will use but this is not the discussion here. One is not going to consistently get $12 pp in today's dollars after expenses at a property you can get for the lower costs likely at all and certainly not without booking high demand times first then offering them for rent. To me the reward vs risk is simply not there and I do not think it a viable long term model.

 

[DougEMG]

And I don't think that $12 per point will last much longer. People will realize how soon 2042 is and resale prices for the older resorts should drop pretty fast. I'm only 30, and buying anything older than SSR was right out the window due to that. Gonna be hard to get $12 to rent when $30 will buy. Assuming people come to their senses on resale pricing.

I disagree with you, I fully expect that as long as Disney keeps raising hotel rates and there continues to be a strong demand for onsite accomodations then rental demand and rental rates will stay strong. Take a look at what is happening with the two large DVC rental brokers, both can't meet the demand of their clients and are having to increase what they pay owners to $11/point from $10/point.

Rental rates are only going to come down if there is a glute of people wanting to rent or if Disney suddenly drops their hotel prices significantly.

As for purchase prices, I also do not believe that they drop in a linear fashion that is related to contract length. The same thing that effects rental rates is what effects resale prices, supply and demand where supply is the number of people looking to rent/sell and demand is based on what Disney is charging.

 

[DougEMG]

IMO and looking at this strictly from an investment standpoint, if it makes sense for 10 years, it makes sense for 40 and if it makes sense for 200 points, it makes sense for 2000. It gets more complicated and variable once you start using it for personal use part of full time. I realize that extra points may reduce the up front cost but I don't believe that has enough effect to alter the long term option. Plus I think most people over value current and banked points in a loaded contract.

Actually loaded contracts were you rent out the points have a big impact on your up front costs. It's taken my upfront costs from $58.54/point down to $33.13/point and that is on 2480 points.

Now I certainly don't look at owning my DVC as an investment (I want to spend my winter retirement months at WDW) and would never recommend someone else to buy DVC as an investment, but it seems clear to me that if one bought at a low enough price that DVC could be treated as an investment. It just comes down to what that low price is.

Buying at $20/point I think it is possible to treat DVC as an investment (an annuity would be a better comparison), buying at $60/point I don't think so (see earlier posting for numbers showing it not working) and at $160/point it would be impossible to make any kind of arguement that owning DVC was an investment.

Wasn't there a bunch of commercial renters here a few years ago? I assume that they were making money otherwise why were they doing it. So for them, their purchase of DVC was definitely an investment.

 

[Dean]

Actually loaded contracts were you rent out the points have a big impact on your up front costs. It's taken my upfront costs from $58.54/point down to $33.13/point and that is on 2480 points.

Now I certainly don't look at owning my DVC as an investment (I want to spend my winter retirement months at WDW) and would never recommend someone else to buy DVC as an investment, but it seems clear to me that if one bought at a low enough price that DVC could be treated as an investment. It just comes down to what that low price is.
Buying at $20/point I think it is dead easy to make money renting out points.

Wasn't there a bunch of commercial renters here a few years ago? I assume that they were making money otherwise why were they doing it. So for them, their purchase of DVC was definitely an investment.

I presume you're talking renting out the first 3 years of points at the prices quoted with little or no closing costs or maint fees. One of my issues is that I'm not willing to assume the spread between maint fees and rentals will remain constant on a % basis, actually I'm quite willing to bet it won't over the life of the contract and negative to the member. The question is going to be how late does it catch up with you. We'd have to look at specifics to have a good discussion on this exact issue but I personally would not value banked or current UY points a full rentals share even if all maint fees were covered by the seller which is rarely the case since most overpay on the maint fees on current and the next years points based on the calendar year model the maint fees follow. I realize there are many variables both financially and personally.

As for truly commercial renters, I only remember one maybe 2 that I think we could all agree that's what they were and I thought they were not very bright to take the risk, still do. See how it worked out for them.

 

[bighoo93]

I stand by my general statement, I think in general that those who post such thread's and truly want a full range of info and feedback are in the minority. Certainly there are those that truly want feedback. Often they qualify the type of feedback they want in the OP. You're free to disagree and free to characterize how you will.

No, I prefer to address arguments, not people. Attacking the person rather than their point is a bad habit and invalid argument.

 

[Dean]

Of course there is risk, but what about your investments that are currently earning 10%? That's guaranteed? If so, do you mind sharing, because I'd like to invest...everything I've got.

Nothing's guaranteed including the bank, mattress or anything else. However, there is a significant difference in risk between a good mutual fund and the situation being discussed. A dramatic enough difference to put DVC close to the day trading category comparatively.

 

[Dean]

No, I prefer to address arguments, not people. Attacking the person rather than their point is a bad habit and invalid argument.

Then you should likely put me on ignore as I will commonly generalize about such issues but attempt to do so without attacking a given person. I believe that's different than attacking an individual. You're welcome to stand opposed.

 

[MickeyFan612]

Is DVC self insured? I worry about a hurricane hitting central florida and causing a lot of havoc. I know it's inland, but it's also built on a swamp.

Looking at the VB and HHI MFs makes me worry about some sort of storm hitting property and jacking up MF.

And I don't think that $12 per point will last much longer. People will realize how soon 2042 is and resale prices for the older resorts should drop pretty fast. I'm only 30, and buying anything older than SSR was right out the window due to that. Gonna be hard to get $12 to rent when $30 will buy. Assuming people come to their senses on resale pricing.

30 years is quite a long time and I think you are forgetting how important your 11 month booking window is- your SSR points aren't as desirable to some as the classic resort BWV! Maybe Disney will start selling extended contracts at BWV? If not and you want to stay there you will need to find an owner or pay for that classic contract! BWV points rent super fast at $13/ point- of course great customer service is always provided! Most renters are now looking to take advantage of the 11th month window and are willing to pay for it! Great customer service is KEY to any price point!

Omg if BWV contracts ever drop to $30/ point- I'll take em all-). BTW I have 910 BWV points and luckily(without renting) I can still afford maint. fees on a few more-)

 

[a742246]

Actually loaded contracts were you rent out the points have a big impact on your up front costs. It's taken my upfront costs from $58.54/point down to $33.13/point and that is on 2480 points.

Now I certainly don't look at owning my DVC as an investment (I want to spend my winter retirement months at WDW) and would never recommend someone else to buy DVC as an investment, but it seems clear to me that if one bought at a low enough price that DVC could be treated as an investment. It just comes down to what that low price is.

Buying at $20/point I think it is possible to treat DVC as an investment (an annuity would be a better comparison), buying at $60/point I don't think so (see earlier posting for numbers showing it not working) and at $160/point it would be impossible to make any kind of arguement that owning DVC was an investment.

Wasn't there a bunch of commercial renters here a few years ago? I assume that they were making money otherwise why were they doing it. So for them, their purchase of DVC was definitely an investment.

Doug, you can make a nice profit if you sell now. Then wait until the next downturn and rebuy everything that you sold. Then you can look at Disney as an successful investment.

 

[JimMIA]

Is DVC self insured? I worry about a hurricane hitting central florida and causing a lot of havoc. I know it's inland, but it's also built on a swamp.

The WDW area is not built on a swamp. Some people think that because there are important protected wetlands within WDW, but there are also important protected wetlands in alpine areas of the Rocky Mountains.

The area around WDW (including almost all the Disney property) is actually the headwater area of what is called the "KOE Watershed." From the WDW area, water flows south through the Kissimmee River drainage into Lake Okeechobee. Historically, that flow continued south through the Everglades into the Atlantic Ocean, Florida Bay (between peninsular Florida and the Keys) and the Gulf of Mexico. The entire KOE watershed (with the exception of Everglades National Park) is protected and managed by the South Florida Water Management District.

The area around WDW is the highest area of the watershed, and the area the water flows away from...not into. That natural drainage, plus the fact that WDW is +/- 100 miles from the coast make it a very unlikely place for any significant hurricane damage. Sure you might have trees down and power outages, but nothing serious.

Looking at the VB and HHI MFs makes me worry about some sort of storm hitting property and jacking up MF.

That's a more realistic concern. Both resorts are susceptible to major hurricane damage, which could be a concern for owners of those resorts.

 

[sdolphin2284]

I've never had much use for "break even" analysis where DVC is concerned (or any other timeshare purchase). To me DVC is a way of pre-paying some vacation costs for those people who will only be happy staying in moderate or better accommodations onsite at WDW.

Whenever I see one of these threads, I always find a bunch of comments from people who bent assumptions and monkeyed with the costs/benefits to come up with a financial rationalization for what they wanted to do in the first place.

To me, a much more important analysis would be the following:

[*]How much is this going to cost?
[*]What are the benefits?
[*]Can I afford it?
[*]Do the benefits warrant the expenditure?
If the answers to those questions are positive, I'm in. If not, I'm out.

If I have to construct a financial rationalization to purchase, I'm out.

Thank god! Someone who finally makes sense! I've continued reading this thread just to see how long I can go before my head explodes....

 

[bighoo93]

Then you should likely put me on ignore as I will commonly generalize about such issues but attempt to do so without attacking a given person. I believe that's different than attacking an individual. You're welcome to stand opposed.

You frequently attack the poster rather than the argument. I think you can do better.

 

[JimMIA]

On a more general note, I don't think most people who post these issues really want a full picture. I think most have about made up their mind and are looking for confirmation. Generally they've ignored risk, made assumptions that may be somewhat reasonable but are the most optimistic scenario possible or close to it.

I don't understand why you would assume such negative and condescending things about people you don't know. The OP actually asked for feedback and suggestions. I think most people who post this sort of thing would like to know if they are on the right track or not. Whether they get good advice or not is an entirely different matter.

I did not interpret Dean's comment as being "...negative and condescending." I thought it was a simple statement of his opinion of a certain type of post/thread that we see often here.

Here's what I consider to be "...negative and condescending:"

Actually, none of what you said is true. Go back to the original post and read it again.

With all due respect, I think you're a little overly-sensitive to people who happen to have a different point of view from yours.

Discussion boards are about opinions, and especially about differences of opinion. Disagreement is a good thing -- a healthy thing. Relax...and enjoy!

 

[bighoo93]

Nothing's guaranteed including the bank, mattress or anything else. However, there is a significant difference in risk between a good mutual fund and the situation being discussed. A dramatic enough difference to put DVC close to the day trading category comparatively.

The situation being discussed is the amount of time to recoup the cost of the initial purchase by renting out the points. That's even in the title of the thread. If you think that is even remotely anything like the risk of day trading stocks, you could hardly be more wrong.

 

[Dean]

You frequently attack the poster rather than the argument. I think you can do better.

I don't agree but you're welcome to that opinion. My guess is you're confusing being willing to label a particular activity honestly with attacking an individual. For example, if I say that secretly putting more than occupancy is dishonest, you'd likely call that an attack, if so, you'll simply need to stand opposed. Personally I think far too many people are worried about what others think rather than being honest. There are some right and wrong issues and principles that stand on their own.

 

[Dean]

The situation being discussed is the amount of time to recoup the cost of the initial purchase by renting out the points. That's even in the title of the thread. If you think that is even remotely anything like the risk of day trading stocks, you could hardly be more wrong.

I was merely responding to your smart alec comment to Caren90 about risk and pointing out that there is a GREAT deal of difference in the risk between traditional investments and DVC.

 

[bighoo93]

Here's what I consider to be "...negative and condescending:"With all due respect, I think you're a little overly-sensitive to people who happen to have a different point of view from yours.

Discussion boards are about opinions, and especially about differences of opinion. Disagreement is a good thing -- a healthy thing. Relax...and enjoy!

I don't start attacking people or their motives when they disagree with me, I counter their arguments. I said nothing about a person, only that his arguments were wrong. If you don't like criticism of an argument, that is pretty much the definition of overly-sensitive. I think your advice on handling over-sensitivity is very sound though. Give it a try!

I don't really care about whether someone has a different opinion, everyone has a right to his own opinion. But they don't have a right to make up their own facts. Sometimes that does seem to get confused. Someone says something that is factually incorrect, but then it is defended as "opinion". Often I just roll my eyes and ignore it, but sometimes I do feel that people might be misled by the bad information and make poor decisions based on that, and it seems worthwhile to correct some inaccuracies.

 

[bighoo93]

I was merely responding to your smart alec comment to Caren90 about risk and pointing out that there is a GREAT deal of difference in the risk between traditional investments and DVC.

I was making the point that all investments have risk. You agree. But also I would like to know what the 10% return investment is, so it can be properly compared to the risk of renting DVC points over a 7-8 year period. A 10% annualized investment doubles over that time period. You don't get that without significant risk.

 

[Dean]

I was making the point that all investments have risk. You agree. But also I would like to know what the 10% return investment is, so it can be properly compared to the risk of renting DVC points over a 7-8 year period. A 10% annualized investment doubles over that time period. You don't get that without significant risk.

Actually one can get a 10% return over a long term with low to moderate risk compared to DVC as ultra high risk from an investment standpoint. A quick look on Schwab gives me 4 funds in a single core area that have a 5 & 10 year average 10% or greater, are morning star 5 rated and no load, no fee. Of course there's no way to truly predict future results but comparatively speaking the difference in risk between buying DVC from an investment standpoint vs these type of options is daylight and dark AND the return potential for DVC is lower, really much lower. But you can prove me wrong, buy a bunch of points and rent them out.

 

[bighoo93]

Actually one can get a 10% return over a long term with low to moderate risk compared to DVC as ultra high risk from an investment standpoint. A quick look on Schwab gives me 4 funds in a single core area that have a 5 & 10 year average 10% or greater, are morning star 5 rated and no load, no fee. Of course there's no way to truly predict future results but comparatively speaking the difference in risk between buying DVC from an investment standpoint vs these type of options is daylight and dark AND the return potential for DVC is lower, really much lower. But you can prove me wrong, buy a bunch of points and rent them out.

I already have been renting my points. I will use my points when I can, and rent them when I can't use them. Do you consider yourself proven wrong?

Your assertion that renting DVC points is an "ultra high risk" proposition, akin to day trading, has not been supported with any facts, and I don't think it is true. It appears to me that you are overstating the risk of renting DVC points and/or understating the risk of investing in a mutual fund. But it also seems like we may have different understandings of risk. So be it. I don't see much hope of bridging this gap.