How Long To Recoup Your Initial DVC Cost?

[DougEMG]

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.

The numbers I quoted included all costs including any closing or MF and had all banked and current points rented out. Those are real numbers as I did rent them out.

Current rental rates are about twice what MF are, and I agree with you that over time I do not think that rental rates will maintain that 2 for 1 rate and will shrink.

We're actually only a little apart here. I think you don't think that DVC ever makes a good investment, while I think there a few extremely rare cases when it can make a good investment. In 99% of the time I think we'd be agreeing that DVC is a bad investment.

Didn't those commercial guys get out because Disney scared them out, not because they weren't making money.

 

[DougEMG]

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.

I was actually running some numbers today to see if selling my BWV points made since. If I got very lucky and got a high price ($80-85) then after commission, withholding tax and capital gains taxes I think I could get close to double what I paid. I'm not sure though that I want to do that as I like owning and staying at BWV. So technically I don't view my DVC as an investment cause if this was a stock that doubled on me in one year I'd be selling and taking my profits.

What to do

 

[Dean]

Current rental rates are about twice what MF are, and I agree with you that over time I do not think that rental rates will maintain that 2 for 1 rate and will shrink.

We're actually only a little apart here. I think you don't think that DVC ever makes a good investment, while I think there a few extremely rare cases when it can make a good investment. In 99% of the time I think we'd be agreeing.

Didn't those commercial guys get out because Disney scared them out, not because they weren't making money.

We're likely even closer than that but here's the issue, most people will not put the effort or planning into getting the most out of DVC as a rental option. I can't speak to the money those few were making but getting put out of business (so to speak) is one of the risks of the option.

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.

I've rented points over a 17-18 year period averaging maybe 1.5 to 2 every year so I've seen a fair amount over time. You've owned what, less than a year? As Doug noted some were driven out that had taken this very approach, it'd be interesting to hear what they might say now. The best measure of risk is long term return, as such DVC doesn't measure up. Over the past 18 years rental rates have gone up and down but I rented at $10.50 the first few years and we're up to what $13 a point before you pay taxes and other costs. Many were routinely renting around $8 a point at times IIRC though I never lowered my rates when I did rent.

 

[Dean]

I was actually running some numbers today to see if selling my BWV points made since. If I got very lucky and got a high price ($80-85) then after commission, withholding tax and capital gains taxes I think I could get close to double what I paid. I'm not sure though that I want to do that as I like owning and staying at BWV. So technically I don't view my DVC as an investment cause if this was a stock that doubled on me in one year I'd be selling and taking my profits.

What to do

This is likely the reason I haven't downsized, it's certainly not because I want to be in the rental business. My plan, and likely my best choice, was to buy AKV 4*25 and then resell the smaller contracts plus BWV and keep just the 25 for perk access. But I just never got around to it and in spite of the objective situation, I enjoy owning DVC.

 

[bighoo93]

I've rented points over a 17-18 year period averaging maybe 1.5 to 2 every year so I've seen a fair amount over time. You've owned what, less than a year? As Doug noted some were driven out that had taken this very approach, it'd be interesting to hear what they might say now. The best measure of risk is long term return, as such DVC doesn't measure up. Over the past 18 years rental rates have gone up and down but I rented at $10.50 the first few years and we're up to what $13 a point before you pay taxes and other costs. Many were routinely renting around $8 a point at times IIRC though I never lowered my rates when I did rent.

Yes, I've owned less than a year. That's why I was after the comment about proving you wrong. Saying that seriously would be almost as silly as suggesting someone prove your position wrong by buying a bunch of points and renting them out long term. Yeah, that's a reasonable way to settle an internet board discussion!

Anyway, I don't plan to rent my points out any more than necessary. But I expect I will be able to do so when I need to. I can't know for sure what the going rate will be, any more than I can predict what the S&P 500 will be each year. Might be higher, might be lower, so the best you can do is try a range of reasonable scenarios and see how it works out. Doesn't seem too smart to me to go into business buying and renting DVC points. Has the thread really gone that far off topic, or are we still discussing recouping initial DVC cost?

 

[DougEMG]

...most people will not put the effort or planning into getting the most out of DVC...

I kind of took your quote here out of context, but I think it applies to a large number of owners regardless of how they use their points.

While this is a interesting exercise in seeing if and how one could make money with renting DVC points, far too many people end up losing money buying DVC because they've extended themselves too far, don't really understand what it is they bought, don't realize that the room cost is only one small part of the overall cost of their vacation, etc.

 

[Dean]

I kind of took your quote here out of context, but I think it applies to a large number of owners regardless of how they use their points.

While this is a interesting exercise in seeing if and how one could make money with renting DVC points, far too many people end up losing money buying DVC because they've extended themselves too far, don't really understand what it is they bought, don't realize that the room cost is only one small part of the overall cost of their vacation, etc.

And that plays into a point I've made several times of late, that buying/owning DVC is as much about psychology as it is math, likely more so. There are ways to minimize the risks of owning & using DVC starting with UY and planning around a year out.

 

[nunzia]

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.

 

[Caren90]

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.

If you re-read my post, I said that the investments may/will change. Currently though, that is what they are earning.

Stephen

 

[Caren90]

I was actually running some numbers today to see if selling my BWV points made since. If I got very lucky and got a high price ($80-85) then after commission, withholding tax and capital gains taxes I think I could get close to double what I paid. I'm not sure though that I want to do that as I like owning and staying at BWV. So technically I don't view my DVC as an investment cause if this was a stock that doubled on me in one year I'd be selling and taking my profits.

What to do

This is my dilemma as well with my BWV points. Do I sell them now and make 30-40% more than what I paid and then jump back in a few years down the road? My solution to this problem seems to be that I keep booking trips to BWV.

I too am looking to spend at least a month of my retirement winter down in Disney.

Stephen

 

[DougEMG]

This is my dilemma as well with my BWV points. Do I sell them now and make 30-40% more than what I paid and then jump back in a few years down the road? My solution to this problem seems to be that I keep booking trips to BWV.

I too am looking to spend at least a month of my retirement winter down in Disney.

Stephen

I talked it over with my wife last night and we decided that we would only sell if we doubled our money, otherwise we would rather just hold on to the points and use them ourselves.

With the high transaction costs of selling (commisson, withholding tax for non-US owners and capital gains taxes) you end up having to get real lucky with your timing, buying low, selling high and then rebuying low. I'm not sure I'm that lucky

 

[theguda]

I decided to buy in and made an offer today for SSR, 160 points at $57 w/ 160 banked from 2012. Wondering if you DVC vets think that's a good deal. I know prices have gone up but it seems like anything in the $50's is good.

 

[Dean]

I decided to buy in and made an offer today for SSR, 160 points at $57 w/ 160 banked from 2012. Wondering if you DVC vets think that's a good deal. I know prices have gone up but it seems like anything in the $50's is good.

That sounds reasonable for that contract, good luck with ROFR and enjoy your membership.

 

[theguda]

I'm 99% sure I'm going to pass buying into DVC. I just don't see it as financially a good decision. The offer I have in hand is basically $10,500 for a 160 point contract with 160 banked points from 2012. Going back to my original post...I can rent points anytime I want for $12 without buying into DVC. So I need to compare the cost of buying into DVC vs the cost of just renting points whenever I want to go to WDW. I understand there are some ancillary benefits to being a DVC member...but we're flexible in our vacation times so I don't expect much of a problem finding the resort we want by renting points.

So...I pay $10,500 and get 320 points in 2013 and 160 every year afterward. Again, let's say for the sake of comparison that I rented those points each year with a average profit of $7 per point (I'm basing this # on the last few years of maintenance fee costs vs what people have been renting point for). So on aveage I'd "profit" $1120 per year. Divide my initial cost of $10,500 by $1120 and it will take me almost 8.5 years for my "profit" to match my upfront cost (remember, I started with 320 points instead of 160).

But this also doesn't take into consideration the interest I'd make on that $10,500 if I invested it instead (which I would). If I instead take that $10,500, invest it and get a moderate 5% rate of return...I'd have $15,600 at the end of 8 years. Now my recoup time extends to almost 14 years. I don't consider taking 14 years to recoup my initial cost as a good use of my money.

The beauty of this exercise is that it's easy to compare renting vs owning. Yes, I could use my points instead of renting them....BUT...the difference between renting and owning is still the same. I'm either "saving" by owning and paying a lower maintenance fees....but my upfront cost is huge....OR....I'm "saving" by renting for a larger amt per point with zero up front cost. Either way...the #'s end up similar.

I'm gonna pass on owning DVC and just rent points. For me, it just makes more sense although I'd LOVE for someone to prove my theory wrong because I would love to be a DVC owner...I just don't think it's financially worth it.

 

[Dean]

I'm 99% sure I'm going to pass buying into DVC. I just don't see it as financially a good decision. The offer I have in hand is basically $10,500 for a 160 point contract with 160 banked points from 2012. Going back to my original post...I can rent points anytime I want for $12 without buying into DVC. So I need to compare the cost of buying into DVC vs the cost of just renting points whenever I want to go to WDW. I understand there are some ancillary benefits to being a DVC member...but we're flexible in our vacation times so I don't expect much of a problem finding the resort we want by renting points.

So...I pay $10,500 and get 320 points in 2013 and 160 every year afterward. Again, let's say for the sake of comparison that I rented those points each year with a average profit of $7 per point (I'm basing this # on the last few years of maintenance fee costs vs what people have been renting point for). So on aveage I'd "profit" $1120 per year. Divide my initial cost of $10,500 by $1120 and it will take me almost 8.5 years for my "profit" to match my upfront cost (remember, I started with 320 points instead of 160).

But this also doesn't take into consideration the interest I'd make on that $10,500 if I invested it instead (which I would). If I instead take that $10,500, invest it and get a moderate 5% rate of return...I'd have $15,600 at the end of 8 years. Now my recoup time extends to almost 14 years. I don't consider taking 14 years to recoup my initial cost as a good use of my money.

The beauty of this exercise is that it's easy to compare renting vs owning. Yes, I could use my points instead of renting them....BUT...the difference between renting and owning is still the same. I'm either "saving" by owning and paying a lower maintenance fees....but my upfront cost is huge....OR....I'm "saving" by renting for a larger amt per point with zero up front cost. Either way...the #'s end up similar.

I'm gonna pass on owning DVC and just rent points. For me, it just makes more sense although I'd LOVE for someone to prove my theory wrong because I would love to be a DVC owner...I just don't think it's financially worth it.

If you're comparing DVC to DVC renting vs owning, buying will be cheaper for SSR or similar but it will limit you to the home resort and the (currently) 7 month window. You'd have more control and less risk. I'd encourage you to reconsider if you have a long term plan of staying at DVC resorts even if you buy less and then rent for the higher demand and higher cost options. If you're only looking at a few years, the numbers aren't enough to justify owning no matter what.

 

[k3chantal]

If you're comparing DVC to DVC renting vs owning, buying will be cheaper for SSR or similar but it will limit you to the home resort and the (currently) 7 month window. You'd have more control and less risk. I'd encourage you to reconsider if you have a long term plan of staying at DVC resorts even if you buy less and then rent for the higher demand and higher cost options. If you're only looking at a few years, the numbers aren't enough to justify owning no matter what.

Dean, if a person buys their points doesn't that give them the right to book at any DVC resort and their home resort would have an 11 month window?

 

[icydog]

Dean, if a person buys their points doesn't that give them the right to book at any DVC resort and their home resort would have an 11 month window?

Owners can book their home resort at 11 months from check in and all the other resorts at 7 months from check in

 

[Dean]

Dean, if a person buys their points doesn't that give them the right to book at any DVC resort and their home resort would have an 11 month window?

That's correct, 11 month home and 7 months other, I didn't word it very clearly.

 

[k3chantal]

That's correct, 11 month home and 7 months other, I didn't word it very clearly.

Thanks, I knew the 'answer' but I was concerned that a newbie would find themselves confused.

 

[BrerNashville]

I'm gonna pass on owning DVC and just rent points. For me, it just makes more sense although I'd LOVE for someone to prove my theory wrong because I would love to be a DVC owner...I just don't think it's financially worth it.

If you are looking at it purely from a numbers perspective, then renting would likely make more sense, if for no other reason than you don't know what your travel habits will be five years from now, and if you (or, more likely, your kids) become sick of Disney by then, you almost certainly would have been better off just renting.

However, for me, it was more than *just* a numbers game. I figured that buying BLT points direct from Disney at $114 per point (a couple of years ago), I would "break even" from a vacation usage standpoint after 10-12 years, depending on the discounts I could get. I basically assumed a week at the Polynesian would go up by 5-7% per year, and that I would be able to get a 25% discount off rack rates.

Since I've bought into DVC though, two things have reinforced my decision to buy: first, one bedroom villas. We are a family of 5, and even now staying in a deluxe room utilizing the sofa as a fifth bed would seem to be a nightmare. And my oldest is only 10. Imagine that in 5 years. 1BRs are a Godsend. When we get to the point where we go less often, as the kids get older, we'll probably switch to a 2BR. There's no way we would have paid for a 2BR villa with cash, so this extra level of prepaid comfort will be very much appreciated down the road.

Secondly, while I am generally pretty flexible on my travel dates, with three children, our schedules are prone to change from time to time. If all I could do was sit around and wait for discounts off of rack rates, semi-last minute changes (e.g. 1-3 months in advance) would be difficult, and they are impossible if you go the points rental route. So, the flexibility to changes your vacation is a a big plus.

Lastly, if you ever wanted to use points over a hard-to-get time, rentals are not a very good option. I used to think I would *never* go to Disney over NYE. Well, this year, we have decided to try it out. I was able to get a Theme park view at BLT for a week around NYE, but I had to work to get it. I'm not sure I could have done that with a points rental. Sure, I could have stayed at another DVC place, perhaps, and gotten in, but by having my own points will allow us to do what we *want* to do, not what we would have to settle for.

So, in addition to the somewhat objective number analysis, the big part of our DVC decision was the subjective flexibility and upgradeability of our Disney vacations.

And buying direct from Disney, I was able to split my purchase into smaller contracts, which means that if we ever need to downgrade, we can sell off a portion of what we bought, and retain the rest.