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Larger Contract than you intended

Discussion in 'Purchasing DVC' started by rojen, Jan 29, 2013.

  1. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    While I agree with the basic idea, that approach has an added cost of around $2.5-3.5K additional ignoring other factors. IMO the option alone is not worth the cost. Of course there may be other benefits like waiting to buy for part of the points and/or different home resorts which could make the option more reasonable.
     
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  3. bom_noite

    bom_noite <font color=blue>DVC-Trivia Contest - April, 2006:

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    For the Original Poster, I think the point made above is a very Key Consideration! A friend of mine's mother has a 450 Pt contract and 3 kids. One of the Kid's is a problem child and never seems to agree with the other two.

    When the Mom passes: Two of the kid's are doing well financially, the problem child is not and may want to sell. Well, then the other two have to either buy out the 3rd's interest - or compensate in some other way.

    Three contracts: You each get one - do as you may. No problems, no disagreements, etc.
     
  4. DizBub

    DizBub Totally Addicted

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    I find this a good strategy (I have 3 DDs but they are all adults and they WANT our contracts) I think it's good because you can buy them 1 at a time. Spread the purchases out over several years and if your needs change or your kids don't want them they will be much easier to sell. If you could get several 50 pointers it would be even better.
     
  5. disbound09

    disbound09 Mouseketeer DVC Gold

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    Sound advice I would do three as well. We purchased 320 and never thought about dividing up for our 3 boys. If I had to do it again it would be a no brainer 3 contracts 3 resorts. Three times the choices for accommodations.
     
  6. rojen

    rojen Mouseketeer

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    We're only thirty, so we're planning on still being alive in 2054 when SSR expires. Hopefully. I suppose 3 100 point contracts would only be about $1000 in extra costs up front. I wonder if the utility of having smaller contracts makes that cost worth it. Also need to find contracts with the same use year to keep it simple.

    We originally planned on selling when the girls were too old to enjoy yearly trips. But I've thought about it, and if my parents owned DVC they'd definitely go down themselves at least semi annually, so we're gonna keep this til the bitter end. Do you think they'll extend past 2054 like they've done to OKW? Not sure I want an interest in 50+ year old property anyways.

    I just can't justify the extra per point cost to own at multiple resorts. I'd love to be able to book a value at BLT 11 months out, but the extra ~$40 per point, even spread out for 30+ years, doesn't seem like a smart buy to me. Like I said in my OP, SSR is beautiful, and I'd consider myself lucky to be 'stuck' there.

    Getting a little discouraged though, I've inquired on a few contracts that were posted, and they've already been sold. Wish they would update their listings more frequently.
     
  7. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    I think the part you're missing is that the smaller contracts also go for more per point. That's where my gestimate of $2.5-3.5K came in on 300 points. I assumed an extra $1000 or just under for the 2 extra contracts and an extra $5-10 pp more in the contract costs. IF you can find a single seller who is selling multiple contracts in this size range, you may be able to do better and save some of the closing costs as well. It's also more difficult to find that size contract than the 150-200 I mentioned before. I remain convinced that the extra costs, simply for the possible option of legacy, is unreasonable. IF I were going to do multiple contracts for future options, I wouldn't go for 300 needing 100 and I would definitely look at multiple home resorts to have additional options. I realize the extra cost for BLT are significant but $40 a point difference may be a little high, maybe $30 a point difference is more realistic but the same principles hold. You'd recoup some of the extra costs from the lower dues, not all but part. There are also other possible home resorts that might not be that much more than SSR, like AKV or BWV.
     
  8. rojen

    rojen Mouseketeer

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    How do you calculate the value in the extended time of the interest? If I buy SSR, I get it for 12 more years than BWV. Assuming I can buy them for the same price, which is a stretch. I know it's also 12 more years of MFs too.
     
  9. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    To a degree value is subjective. From a dollar standpoint the fact you can get the standard view at a cheaper cost adds value. Certainly if you don't value the resort enough to want to stay there periodically, SSR is a better option from strictly a long term cost standpoint. These are ultimately decisions you'll have to make and to decide what's best for you and your family. My personal opinion based on the info you've provided is you should start with a single contract in the 150 or just over range and see how it goes. You can always add more later resulting in a similar situation. You've said yourself you don't plan to leave it to anyone anyway because there's a good chance you'll live to the end of the RTU.
     
  10. rojen

    rojen Mouseketeer

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    Thanks everyone for your input. Thinking about offering on a contract today. There's about a half dozen between 150-200 points I'm looking at. Hopefully someone is able to make a deal
     
  11. Jasonkat

    Jasonkat Mouseketeer

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    You have $20,000 and you just feel like you HAVE to spend it? Who are you, Barack Obama?

    You "could" buy 100-200 DVC points now and put the rest of the money in a separate savings account for the express purpose of buying more DVC points in the future. There is no reason to go from owning 0 points to 300 pts overnight. Buy a smaller amount and then if it works for you buy more later.

    I have 2 kids age 3 and 1 and my family expects two trips per year in 1 bedrooms. We will need about 400-450 points to do this. However I just closed on a 200 point contract. I figure I'll buy half what I need now and then try out DVC for a little bit before committing so much money.

    The price difference of 300 pts vs 150 points will probably be $10,000 up front and $800 annually. That's a lot of money and you are better off buying half what you need and then expanding later.

    And if prices crash you will get a better deal in the future and feel happy you waited. And if prices rise you will feel like you got a good deal now and be happy you bought when you did. Either way you are a winner.
     
  12. rojen

    rojen Mouseketeer

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    The idea was to rent the excess points until I need them. Money sitting in an account drawing .25% interest does me no good. Renting out points at least puts the money to use. I'll recoup that excess cost for a few years, pay for MF and such.

    And I've stayed at three DVC properties. We'll be going 1-2 times a year. Definitely don't want to spend the money to stay at a deluxe, and the values are too small. Mods are ok, but even with a discount, paying $150 a night at POR adds up to the value of a DVC contract real fast.
     
  13. kellykaiko

    kellykaiko Earning My Ears

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    I am considering buying DVC resale as well. Does anyone have a spreadsheet or something that would help me lay out all the costs over several years? I really want to be able to see all the numbers and I just can't grasp the full picture of costs in the long run. I really want to know if it's worth it for me to buy or should I just keep renting points? We would like to go every other year... can anyone help?
     
  14. ELMC

    ELMC DIS Veteran

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    I'm pretty sure that if I held off and prices went up when I went to buy my second contract I would not feel like a winner. I'd be annoyed.
     
  15. ELMC

    ELMC DIS Veteran

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    I can help you set up a spreadsheet if you'd like. For simplicity's sake we are going to ignore the cost of use of money (the potential investment of return if you were to invest your purchase price instead of spend it on DVC). I choose to do this for several reasons. First, I don't think that people account for this with other major purchases in their lives, so it's unfair to do so with a DVC purchase. Second, there is no way to accurately predict what a reasonable rate of return could be, and any year that turns in a loss would render the projections completely useless.

    Anyway, column A is your total purchase price including closing costs. Column B is your maintenance fees. Column C is the total of those two components. That is your true cost of owning DVC on a year by year basis. Column D is the cost of renting a similar number of points at $X per point (you decide what that is depending on what you pay to rent). Create a spreadsheet that has a running total for columns C and D (be sure to include increases in maintenance fees at about 3%) and increases in rental prices after about 5 years (just an estimate).

    Find the point where the number in column D is higher than the number in column C. That is the point where renting has become more expensive than owning. Based on this you can make inferences and decisions tailored to your specific preferences, risk tolerance, etc.

    Hope this helps.
     
  16. kellykaiko

    kellykaiko Earning My Ears

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    Very helpful!! Thanks!
     
  17. Dean

    Dean DIS Veteran<br><a href="http://www.wdwinfo.com/dis

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    I personally would include the time value of money but then I would for any large purchase that I look at over more than a 5 year period including a car. I'd assume an increase of 8% per year on the amount that is more than 5 years out, which is about half of the upfront amount in my way of looking at it. I would assume the withdrawal for yearly trips at the cost of the trip for each year. This scenario without the time value of money will give you the best or worse case scenario depending on which side you look at assuming other reasonable variables. I personally would assume higher than a 3% maint fees, likely 4% and hope for 3.5%. I know it's more complicated but I feel it gives one a better picture of the true cost and risk of owning DVC. Obviously this assumes paying cash but I wouldn't recommend buying if one didn't. I'd also look at a ROI of 10 years which is why I said to only look at half as long term investment, not the life of the contract. IF one does finance, you've got to add in those costs and interest as well.
     
  18. G'sMaman

    G'sMaman Mouseketeer

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    Here is a very basic calculator for estimating the long term costs:

    http://www.dvcproplan.com/buy.php
     
  19. DougEMG

    DougEMG DIS Veteran

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    So when I ran the following senario to see how long your $20,000 would last renting out points, it came to just over 12 years. By year 13, your money is all gone and it costs you an extra money to go.

    My assumptions were:
    (A) You start with $20,000 in savings (your purchase costs)
    (B) You save what would have been your MF each year. MF start at $4.8/point (SSR) and MF increase at 3.5% each year
    (C) You earn 3.5% (after tax) each year on (A) + (B)
    (D) You rent 300 points each year starting at $12/point and increasing a $1/point every 5 years.
    (4) Your year end balance is A + B + C - D which becomes your starting amount (A) for the next year.

    Run those same numbers with BWV MF starting at $5.80/point and by year 19 your money is all gone and you have to pay extra.

    Switch those number around however you like and you can see what happens. Try playing with those MF increases (Change 3.5% increase to 4.5% increase) and see what that does!

    Lots of way to play with numbers...:crazy2:
     
  20. ELMC

    ELMC DIS Veteran

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    While I agree with you in theory, human nature suggests that for many, the alternative is not saving/investing the money but instead spending it on something else. My insurance agent has told me the story before, how he's had dozens upon dozens of clients say that they would rather buy term insurance instead of whole life insurance and invest the difference. In 30 years he can count on one hand the number of clients who actually did invest the difference. But I do agree that I should have used 4% as my estimated maintenance fee increase as it includes more room for error.
     
  21. joelp

    joelp DIS Veteran

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    While the DVC MF may be "horrible" down the road a bit, just imagine what room rack rates will be!!

    Break out an Excel spreadsheet and do the math (using - say - a 3.5% inflation rate) ... it get's scary real fast ...

    As a personal example, I used 2012 AKL rack rates this past summer when trying to decide if buying into DVC was "worth" it ... The AKV MF went up about 4% in 2013, but the comparable AKL rack rate went up about 10% for the same trip!

    One of the main reasons we bought DVC is that it's one of the few ways (short of winning the lottery :laughing: ) I figure we'll be able to afford to visit WDW and stay in a Deluxe room - and to pass that ability onto the DD ...
     

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