Join DVC or invest buy-in cost

[fishermouse]

I would invest it. In the end you will still have something in your pocket.
With the protection wall street has in place the market will never crash. They will just clock out early that day.

In the end with DVC your pockets will be empty except for a little firestarter called a deed and lots of broken stuff made in China.

If I'm still alive "In the end" I doubt if I'll be able to strike a match to light my fire starter to burn the broken stuff from China. So worrying about where all the money I made ended up will not be an issue. But my memoriesof WDW will be priceless.. GOD WILLING

 

[3DisneyKids]

The classic "should I buy DVC" questions:

Do you plan to visit WDW at least every-other year (and more likely every year)?
Do you usually stay in deluxe on-property resorts?
Do you want/need to stay in larger accommodations? (such as 1 or 2 BR units)
Can you afford it without financing it to the hilt?

If you answered yes to these questions, then DVC is for you. Yeah, it's that simple. The numbers work out that way, and that is basically the only way they work out, if you are truly looking at it from a financial standpoint (note that I said financial standpoint, not investment standpoint...see below).

It is a pre-paid vacation, period. It is not an investment and comparing it to one is a mistake right off the bat.

If you would like to guarantee your accommodations at awesome resorts on-property for the next 50-ish years, then DVC is for you. If you have a family and need more space when you stay on-property, then DVC is for you.

Best of luck as you make your deicision. You are doing a great job of asking questions...it is so important to go into this purchase with your eyes open.

 

[erikthewise]

Yeah, what 3DisneyKids said.

But it's definitely a legitimate question whether you are getting a fair value for your money in buying DVC, and whether other alternatives might be better uses of your money.

Unless you're so wealthy that $15K-$30K is meaningless to you, it is not going to be a purely emotional decision whether to buy or not.

 

[casper]

Well, lets have some fun!

By not spending $2.00 a week for the lottery over the past 18 years
= $1,872.00

By not spending $40 a month on cable T.V. for the past 15 years
= $7,200.00 not including tax.

By not spending $36 a month on a cell phone for the past 15 years
= $6,480.00 not including tax.

Total= $15,552.

Imagine what I could have saved if I didn't drink pop/soda!

The bottom line: There are many ways we can invest money. But there are many more ways in which we can spend it for fun. For some, spending $15,000 for a couple weeks stay at a Theme park every year is not worth it. For those of us who like the Theme park experience, like Disney, and like the often "stress free" environemnt it offers, it makes the perfect investment in fun (whether we get money back or not).

No flames to anyone! We all know how to spend our hard-earned money on ways to enjoy ourselves. And sometimes I may think you're "wasting" your money because I would never spend it on what you did. And the other way around too. But as long as each of us are enjoying what we spend, are being responsible managers to meet our short term and long term needs, then hey! To each their own.

I personally feel I have spent my money well. I also invest a lot of my money. I'm on track to my future (as best as I can know) but I'm also on track to living a fun life right now. And the $15,000 I spent for DVC was A LOT OF MONEY for me!!! It took some serious thinking and praying before I took the leap.

 

[bcvillastwo]

...........fishermouse said,

DVC is "entertainment" and should be bought and maintained with the same disposable income one would use for vacationing every year.

A little later 3DisneyKids said,

It is a pre-paid vacation, period. It is not an investment and comparing it to one is a mistake right off the bat.

I agree with both of these comments. So if our premise is that we are using using disposable income to for our Disney vacations we then have the basis for comparing DVC to other options both Disney and otherwise. This was my view when I conducted my analysis. On the other hand, if I were going to use disposable income to make investments then my premise is different and I would need to consider other factors in my analysis.

I always thought, and continue to think, that what we spend on our Disney vacations is a sunk cost and that no part of that money was ever going to be used for anything but Disney vacations. That simplified my financial analysis and made it easy to compare different options.

 

[Mtnman44]

I believe that the historical average return of the stock market over any 30 year period is around 12%.

If that is true that would be the max discount rate I'd use when doing a Net Present Valuation of a DVC purchase. Realistically, you should probably only do it out to 10 or 15 years at the most.

The bottom line is, DVC is not an investment. It's a vacation expense. As far as saving money, every reasonable scenario I could think of shows DVC costing less OVER TIME vs. staying at Deluxe Disney resorts every year. The only was it doesn't is if the Cost of staying at the Deluxe resorts starts to go down over time. What do you think the chances of that are?

 

[CSUFSteve]

I always thought, and continue to think, that what we spend on our Disney vacations is a sunk cost and that no part of that money was ever going to be used for anything but Disney vacations. That simplified my financial analysis and made it easy to compare different options.

Wow, that is a really good way to look at it too. I do meet all of the "classic" criteria for DVC membership. I average two trips a year to WDW, I have a PAP, I am at a point where I prefer Deluxe (or at least Moderate) accommodations, and I am looking toward the future with family trips now that my niece/nephew are at an age where they would enjoy WDW.

 

[salmoneous]

I believe that the historical average return of the stock market over any 30 year period is around 12%.

If that is true that would be the max discount rate I'd use when doing a Net Present Valuation of a DVC purchase.

Just to get geeky for a second, I think the max rate that should be used is the lowest available financing rate.

If you honestly think you are losing 12% by having your money in DVC instead of the market, you should finance rather than buy DVC. From a financial standpoint, you should only buy DVC is your anticipated market return is less than what the rate at which you can borrow.

Note that's from a financial standpoint. There are many other factors to consider. Because of personal circumstances, you may want to buy rather than finance DVC even if you think you'll get 10% from the market and can borrow at 6%. But when analyzing a deal from a financial standpoint, it doesn't make sense to "penalize" the calculation for those non-financial factors.

Note - as a side point, 12% seems way too high to me as an average market return. But that's another conversation for another day.

 

[Paging Tom Morrow]

Nor does it take into account the 3-4% rise in dues which will increase when major rehabs are needed. And the value of your DVC contract will be $0. DVD will not be making bids to buy the contract back from you in 2054 (assuming SSR ownership).

I suggest you go back and re-read my post.

First, I did mention that it didn't take into account dues increases, but it also mentioned it didn't take into account room price increases as well.

Second, the comparison was for the first 20 years only - that was the criteria established by the OP, not me. To do a fair assessment, the value of DVC @ 20 years should have been incorporated. If I were to take the analysis all the way to the end, then the value would have been zero for the DVC membership.

 

[dumbo71]

I suggest you go back and re-read my post.

First, I did mention that it didn't take into account dues increases, but it also mentioned it didn't take into account room price increases as well.

Second, the comparison was for the first 20 years only - that was the criteria established by the OP, not me. To do a fair assessment, the value of DVC @ 20 years should have been incorporated. If I were to take the analysis all the way to the end, then the value would have been zero for the DVC membership.

I'd like to say that agree with Tom Morrow's assessment. I also feel like anyone holding DVC until the end is making a huge mistake.

Let me give you a real life scenario. I recently held 1400 + points. I downsized to 350 points at SSR. I bought most of those points at OKW for an average of $68 dollars a point give or take. I used those points for 14 years. Lets call it 1000 points at $68 = $68,000 to buy in. I sold those points for $84 pp. $84 x 100 = $84,000. subtract commision of 10% and you have $75,600. That gave me a profit of $7600. Now you had dues. Lets call it $4 pp. 1000 x $4 = $4000 per year. $4000 x 14 = $56000. $56000 - my profit of $7600 = $48400 to use those points for the 14 years. Now I rented 24 times averaging $3000 per rental. 24 x $3000 =$ 72000. $72000 - $48400 cost of use = $23,600. That is right folks. DVC PAID me $23600 to vaction at WDW for the last 14 years. It isn't an investment but it sure can be done rather easy. I rounded numbers but this is real close, actually a little low.

Many snicker when they read those telling others DVC isn't an investment. There are many who are making money off of DVC. The key is to not hold your cards to long. You must sell before the value plummets. You then buy back in at a new property renewing the 50 years. It can be done over and over thanks to ROFR. You could kep it to the end simply profiting off of rentals. I chose to sell high and reinvest in the stock market while DVC had value.

 

[salmoneous]

Now I rented 24 times averaging $3000 per rental. 24 x $3000 =$ 72000. $72000 - $48400 cost of use = $23,600.

And people had the nerve to call you a commercial renter. Good thing you chewed them out for doing so.

 

[dumbo71]

And people had the nerve to call you a commercial renter. Good thing you chewed them out for doing so.

Hey, you have your opinion. Quite frankly your assessment makes no difference to me.

Fact is I was using 60% or more of those points for personal use. The rest was rented until I had the time to use them all. Commercial, professional, casual renter? Makes no difference what the label is.

This is type of attitude that we just discussed in another thread. I wish those bashing renters, commercial or otherwise, would start receiving warnings from the Dis.

If you choose not to rent, fine, don't. Please don't bash those that do something that has been encouraged by DVC guides and clearly allowed by the POS and FL law.