15 Year Extension at OKW for $25 per point

[Doctor P]

The supposition is that the difference in resale value will be "more" than $15 per point. If not immediately (something we don't know), then within, say, 10 years time...as the 2042 contracts get closer to expiration.

That's what the "current" benefit would be: commanding a higher price at resale.

Exactly. Let's say I want to sell in 2037 to avoid having to continue paying the maintenance fees. With five years left, my contract will be worth only a small proportion of what the contract would be worth with 20 years left. For example, the contract for five years left might be worth $20 per point while, reasonably, the one with twenty years left would be worth near fully inflated value (my guess is that will be around $300 per point at that time). All I said was that the contracts would go up in the short term by $15 per point. I did not say that that would be the difference between the two types of contracts. The market will determine that, but I am guessing that the difference will be many times that amount of money as we get closer and closer to 2042.

 

[Mtnman44]

By the way, I was specifically responding to Diane who stated that they don't plan on outliving the original end date and are thus only interested in resale value.

Hypothetical. Let's say in 20 years the resell value of extended contracts is $120 per point.

Don't Extend
Original purchase: 200 pts @ $65 = (13,000)
Invest $3000 now @ 7% = $11,000 in 20 years
Sell contract in 20 years @ $60 per ponit = 12,000
Total Net = $10,000 or $23,000 cash in hand in 20 years


Extend
Original purchase: 200 pts @ $65 = (13,000)
Extend Contract @ $15 per point = (3,000)
Sell Contract in 20 years @ 120 per point = 24,000
Total Net = $8000 or $24,000 cash in hand in 20 years

It's just to illustrate my point. I know that there is no real way to know exactly what the resale values will be in 20 years. I'm just saying there are a lot of risks and unknowns with very little potential benefit to the extention. The one exception as I mentioned earlier is if you PLAN on going to OKW after 35 years from now. Then it will have a lot of benefit to you as those extra 15 years will likely provide you some huge hotel savings. I was just giving my opinion. I don't see the need to make this investment with the goal of getting maximum resale value later. Unless you need/want OKW beyond 35 years, I stick by my OPINION that this is a loser deal.

 

[pilferk]

By the way, I was specifically responding to Diane who stated that they don't plan on outliving the original end date and are thus only interested in resale value.

Hypothetical. Let's say in 20 years the resell value of extended contracts is $120 per point.

Don't Extend
Original purchase: 200 pts @ $65 = (13,000)
Invest $3000 now @ 7% = $11,000 in 20 years
Sell contract in 20 years @ $60 per ponit = 12,000
Total Net = $10,000 or $23,000 cash in hand in 20 years


Extend
Original purchase: 200 pts @ $65 = (13,000)
Extend Contract @ $15 per point = (3,000)
Sell Contract in 20 years @ 120 per point = 24,000
Total Net = $8000 or $24,000 cash in hand in 20 years

It's a good example. Again, all based on speculation. Ultimately, no matter what example we use, that's what it's going to be based on. Let me add something:

Original purchase: 200 pts @ $65 = (13,000)
Extend Contract @ $15 per point = (3,000)
Sell Contract in 20 years @ 130 per point = 26,000
Total Net = $10000 or $26,000 cash in hand in 20 years

So, ultimately, if you think your OKW contract with only 15 years remaining on it will sell for LESS than 60 per point, or if you think you can get MORE than $130 per point (that's actually the "break even" with $60 per point on the "extension" example) for an OKW contract with 30 years remaining (or only 5 years less than is left now), extension could be a winner.

Given historical inflation rates, I'd say it's a bit better than even money that OKW contracts would fetch more than $130 per point in 2027. Now, none of that takes into account the "risks" of Orlando (ie: hurricanes), the shape of the facility (OKW) and the viability of WDW, itself, or even the "loss of liquidity" in tying up the capital. Strictly looking at inflation, and today's "avg" resale price of $75 per point vs inflation, I come up with an inflation adjusted number of $136.50.

So far, DVC prices HAVE outpaced inflation (by almost 100% from OKW prices in 1996), but I'm not sure we can count on that, or want to use it as a predictor, going forward.

Edit: I know you were responding to Diane. Again, it would depend largely on how and when they decided to get out. Situational decisions are going to have to be the rule of the day, I think.

 

[Eyore4Ever149]

1. I didnt plan to own past 2042, but I assumed at some point Disney would offer a continuation (although this is pretty far out)
2.Since I didnt plan to own, I dont care if I have deed the 15 yrs I wasnt planning on owning over to DVC, as long as I continue to have the power to resell on my timetable.
3. $25 pr point is too much for me to spend right now, we have other financial goals. I find the maintence fees to be spendy enough- why cant they use that money to do refurbs?

We will not be buying in at $25 or $15. Id rather sell my OKW contract and buy at AKV or elsewhere if it came to that. I bought in at OKW a year ago and paid about $78 I think on a 232pt contract, Im not ready to cough up more $$ just yet.

 

[Mtnman44]

Yep, it's all speculation. Even in a best case scenario where OKW is worth something like $130 or $140, the potential additonal resell value is pretty small compared to the overall long term risk. Also keep in mind that right now, OKW is the oldest DVC, and it has the lowest resale of all the 2042 WDW DVC locations. How is it going to compare 20 years from now against even newer DVC locations with even farther out expirations. This may also be a huge drag on the resale value (even extended contracts). So I think $120 is a good guess. But who really knows...

By the way, if that $3000 were invested at a comparable risk level, I think a more realistic return rate would be closer to 15% or more. But even at only 12%, thats already over $25k which blows the whole comparison out of the water, and that is only compounded annually. we can go round and round with the speculation!

It's a good example. Again, all based on speculation. Ultimately, no matter what example we use, that's what it's going to be based on. Let me add something:

Original purchase: 200 pts @ $65 = (13,000)
Extend Contract @ $15 per point = (3,000)
Sell Contract in 20 years @ 130 per point = 26,000
Total Net = $10000 or $26,000 cash in hand in 20 years

So, ultimately, if you think your OKW contract with only 15 years remaining on it will sell for LESS than 60 per point, or if you think you can get MORE than $130 per point (that's actually the "break even" with $60 per point on the "extension" example) for an OKW contract with 30 years remaining (or only 5 years less than is left now), extension could be a winner.

Given historical inflation rates, I'd say it's a bit better than even money that OKW contracts would fetch more than $130 per point in 2027. Now, none of that takes into account the "risks" of Orlando (ie: hurricanes), the shape of the facility (OKW) and the viability of WDW, itself, or even the "loss of liquidity" in tying up the capital. Strictly looking at inflation, and today's "avg" resale price of $75 per point vs inflation, I come up with an inflation adjusted number of $136.50.

So far, DVC prices HAVE outpaced inflation (by almost 100% from OKW prices in 1996), but I'm not sure we can count on that, or want to use it as a predictor, going forward.

Edit: I know you were responding to Diane. Again, it would depend largely on how and when they decided to get out. Situational decisions are going to have to be the rule of the day, I think.

 

[pilferk]

Yep, it's all speculation. Even in a best case scenario where OKW is worth something like $130 or $140, the potential additonal resell value is pretty small compared to the overall long term risk. Also keep in mind that right now, OKW is the oldest DVC, and it has the lowest resale of all the 2042 WDW DVC locations. How is it going to compare 20 years from now against even newer DVC locations with even farther out expirations. This may also be a huge drag on the resale value (even extended contracts). So I think $120 is a good guess. But who really knows...

By the way, if that $3000 were invested at a comparable risk level, I think a more realistic return rate would be closer to 15% or more. But even at only 12%, thats already over $25k which blows the whole comparison out of the water, and that is only compounded annually. we can go round and round with the speculation!

And that was exactly my point in entering into all this: It's just not a clear cut "this is a GREAT decision" or "this is a rip off". There's just too many factors to consider, and too much speculation to enter into. I get the luxury of simply analyzing, speculating, and discussing becuase I don't own at OKW.

Personally, I don't see it as a very risky investment because you're still getting value from the vacations you'll take, in the interim while owning the contract. In addition, BECAUSE of those vacations, you'll be much more able to notice declines and changes to the facility that might negatively impact resale value...and get out earlier. Certainly,it doesn't seem NEARLY as risky as investing in a stock that would get you 15%...which could drop literally overnight. Again, MHO. Other perceptions will be different, but just as subjective.

I also think it's reasonable to think the current resale on OKW will simply stick to inflation. More reasonable than to think it will not. But again, MHO. Other perceptions are going to be different but just as subjective.

The point being, so much is going to be based on your percpetions: Of the economy, of how "risky" the investment is, of the market for WDW vacations, etc....well, like I said, I just can't see the point of "absolute" assertions saying that it's a rip off or a loser for everyone. There's just no way to know that yet.

I think the best possible "favor" we can do for those wondering is simply present as much data as we can, engage in as much compariitive speculation as we can, and lay out as many opinions as we can (as you have!) so that there's a BROAD spectrum of consideration "out there". I'm glad I was able to draw you out into explaining your opinion more fully, because I think it's provided some VERY valuable "stuff" for those entering into this decision.

Thanks for making it such a productive discussion!

 

[salmoneous]

I would like to think so--DL made it this long--but one can never be sure.

I'd like to thing so to. But, keep in mind that 35 years ago people liked to stay at mom and pop motels down the road from Disneyland. If somebody had prepaid 50 years of stays in such a room, they might not be so happy about it now, especially if they were stuck paying maintenance. On the other hand, 35 years ago people were staying at the Poly and CR to visit DisneyWorld. Imagine how great it would have been to buy 50 years of that!

Things can and do change. There was a time when resorts in the Poconos (Beautiful Mount Airy Lodge) were at the top of folks vacation lists. Then they became kitschy. Then they were just sad and run down. Today, many are rotting eyesores.

I sure don't expect WDW to end up like that. But it's a risk.

 

[pilferk]

I'd like to thing so to. But, keep in mind that 35 years ago people liked to stay at mom and pop motels down the road from Disneyland. If somebody had prepaid 50 years of stays in such a room, they might not be so happy about it now, especially if they were stuck paying maintenance. On the other hand, 35 years ago people were staying at the Poly and CR to visit DisneyWorld. Imagine how great it would have been to buy 50 years of that!

Things can and do change. There was a time when resorts in the Poconos (Beautiful Mount Airy Lodge) were at the top of folks vacation lists. Then they became kitschy. Then they were just sad and run down. Today, many are rotting eyesores.

I sure don't expect WDW to end up like that. But it's a risk.

I agree, it's a risk. But....

The luxury we have in all this is: It's not like you don't have information, ongoing and relatively constant information, to help you make a decision to sell. With those mom and pops, and the pocono's resorts, it's not like they got that way overnight. If you see things you find worrisome, or if the place starts to take a turn for what you think to be "the worst", you can sell THEN, and not wait out the extra years. Some of the discussions (and I'm not pointing to you, specifically) have made it sound like declines would be over night and you'd be stuck with a turkey. That doesn't need to be (and in many Dis'ers cases, won't be, I'd suspect) the case.

Oh, and way to get the "Beautiful Mount Airy Lodge" commercial song stuck in my head!

 

[kmc33]

I didnt plan to own past 2042 ... We will not be buying in at $25 or $15. Id rather sell my OKW contract and buy at AKV or elsewhere if it came to that. I bought in at OKW a year ago and paid about $78 I think on a 232pt contract, Im not ready to cough up more $$ just yet.

I have to agree. We just bought a small 50 pt. OKW contract for $80 pp about a year ago. Knowing that I will be 77 yo in 2042, I don't know that I will still be doing Disney by then. To pay an additional $25 or $15 so soon after purchase, to me it's like I paid more like $105 or $95 per point for OKW.

When I was considering purchase into DVC, I read everything I could on these boards. One point that came up over and over is that a DVC purchase is not an investment, it's prepaid vacations. So that goes back to a point that someone else made that the only reason to extend is if you plan to vacation there beyond that (or perhaps your heirs?) My son will be 43 in 2042 and how do I know that he will want to Disney?

As far as selling OKW, I am concerned that if I don't extend that it will hurt my resale value say I want to sell it within 10 or 15 years. I would rather work toward buying additional points or selling my 50 pt contract and buying a bigger contract somewhere else.

 

[Doctor P]

I'm going to say it again, but perhaps in a more direct way: I think the assessment is coming regardless of whether this "add on" of years happens or not. Look at what happened to the dues at HH this year--that was a real awakening on a lot of levels. I think there is a possibility that they are seeing the same sort of need to generate money that they saw at HH, but not going to put themselves on the hook for the loan like they did at HH. I may be wrong, but if I am going to be paying a substantial assessment, I would prefer to get something of intrinsic value from it. Not sure if we will do the extension, but got to consider it. If not enough people do the extension, I will bet on a substantial member assessment within the next 3-5 years. We'll see.

 

[pilferk]

I have to agree. We just bought a small 50 pt. OKW contract for $80 pp about a year ago. Knowing that I will be 77 yo in 2042, I don't know that I will still be doing Disney by then. To pay an additional $25 or $15 so soon after purchase, to me it's like I paid more like $105 or $95 per point for OKW.

When I was considering purchase into DVC, I read everything I could on these boards. One point that came up over and over is that a DVC purchase is not an investment, it's prepaid vacations. So that goes back to a point that someone else made that the only reason to extend is if you plan to vacation there beyond that (or perhaps your heirs?) My son will be 43 in 2042 and how do I know that he will want to Disney?

For me, I would rather work toward buying additional points or selling my 50 pt contract and buying a bigger contract somewhere else.

As far as selling OKW, I am concerned that if I don't extend that it will hurt my resale value say I want to sell it within 10 or 15 years.

Again, a great perspective. I look at our DVC precisely as you describe: As prepaid vacations. But I'm young and my family is young. So for US, looking at things that way, the extra 15 years might have value.

They ALSO might have value for those looking at DVC as an investment (and there are plenty of people out there that do...witness some of the discussion in this thread). For those that do, there are also scenarios supporting BOTH sides of the coin.

I think that's what's so good about these threads: They're offering all the viewpoints, all the different ways to look at the situation, and letting people sort of "soak in" those that pertain to the way they use/view DVC. And that, IMHO, is a good thing.

 

[JimC]

.... The one exception as I mentioned earlier is if you PLAN on going to OKW after 35 years from now. Then it will have a lot of benefit to you as those extra 15 years will likely provide you some huge hotel savings. I was just giving my opinion. I don't see the need to make this investment with the goal of getting maximum resale value later. Unless you need/want OKW beyond 35 years, I stick by my OPINION that this is a loser deal.

It is not an easy call for that either -- at $25 I would not extend, but at $15 it might be worthwhile. This includes consideration of the opportunity cost using rather than investing the money, changes in dues, hotel rates and the like.

I still say, for us, that the affect on resale is important. There is a reasonable probability that we will sell our OKW in ten years. How will a 2042 OKW contract sell against a 2057 OKW contract -- all other variables the same. What will the price differential be? What will the days on market be? I have no idea what the answer is; but it is worth considering.

 

[rayelias]

I know most of the posts here are considering the extension from a financial standpoint, but let me interject a slightly different observation.

In 2042, OKW will be 50 years old.

Have you recently stayed in any hotel or resort that is 50 years old?

We just got back from one built in the early 80's and it was WAY out of date. No central a/c (had window units). Small bedroom. Small bed. No "built-in" microwave. Older appliances. Just tired.

That's a 25 year old resort. Now, imagine what a 50 year old resort might look like...

No a/c. REAL small rooms. Older electric. Out-of-date insulation (sound & weather). No room for newer, in-demand appliances (washer/dryer, dishwasher, microwave, etc). Out-of-date ammenities. Etc, etc, etc.

People's living habits change as technology changes. OKW is only 15 years old. How long have we been told we're getting DVD players? By they time they put them in, THEY'LL be out-of-date (for HD/Blue Ray players). How bad do the A/C units drip from the ceilings in every studio we've stayed in? How bad is the mildew in the bathrooms? What's it going to be like in 15 more years? How about 15 after that? Then, there will STILL be another 5 before the ORIGINAL contracts are up.

Vacation habits are going to change, too. I wouldn't think of staying in a 50 year old resort. Even if they kept up the maintenance (which I'm sure DVC will do). It would have to be COMPLETELY gutted and remodled (which I doubt DVC will be willing or have the funds to do).

50 years ago, you would be lucky to have your own bathroom. 20-30 years ago, you felt like royalty if you had a coffeemaker, free daily paper, and microwave. Now, we wouldn't even think of staying somewhere without A/C or a telephone. Many of us wouldn't stay somewhere without internet access.

In 10-15 years, we vacationers might expect flat-screen HDTV's, TV's in the bathroom, granite countertops, king-size select comfort beds, bidets, computers w/(free) internet access, cappuccino makers, and who knows what technologies that haven't been invented yet.

At that point, we might not be looking at OKW the same way we do now. And, so will people looking to buy into DVC through resale, especially if there is a new DVC resort offering the expected ammenities.

So, I doubt I'll be plucking down $25 or even $15 a point to use a 50 year old resort 35 years from now. I'll invest the money and hope that the inflationary cost of getting into a new DVC resort in 30 years will be roughly the same as I can get investing.

 

[Mtnman44]

Jim,

In Ten years, HOW much more resale value will an extended contract have vs. your current one? That is the question and that is the bet you are making. Obviously it has to resale at least $15 more to break even. Keep in mind that's not a real accruate analysis because those $15 per point today are worth more than $15 per point in ten years. however, do you think the price difference will be MORE that $20 per point in 10 years. I do not believe so, but that is just my "guess". Anyway, let's just say that the resale value on extended contracts is $20 more per point in ten years vs. non-extended ones. On a 200 point contract that means you will be able to sell your extended OKW contract for $4,000 more than you would have otherwise. do you think it is a smart move to invest $3,000 today to get $4,000 in ten years?

I still say, for us, that the affect on resale is important. There is a reasonable probability that we will sell our OKW in ten years. How will a 2042 OKW contract sell against a 2057 OKW contract -- all other variables the same. What will the price differential be? What will the days on market be? I have no idea what the answer is; but it is worth considering.

 

[kmc33]

How will a 2042 OKW contract sell against a 2057 OKW contract -- all other variables the same. What will the price differential be? What will the days on market be? I have no idea what the answer is; but it is worth considering.

YES - this is my concern. I was thinking that since I have a $50 point contract at OKW it may still move if I were to sell within the next 10 - 15 years. Would the buyer have the option of adding on the 15 years??? It didn't sound like it to me based on the letter sent. It sounds like it's a one time option... although rules can change in time.

 

[kmc33]

In Ten years, HOW much more resale value will an extended contract have vs. your current one. That is the question and that is the bet you are making. Obviously it has to resale at least $15 more to break even. Keep in mind that's not a real accruate analysis because those $15 per point today are worth more than $15 per point in ten years. however, do you think the price difference will be MORE that $20 per point in 10 years. I do not believe so, but that is just my "guess". Anyway, let's just say that the resale value on extended contracts is $20 more per point in ten years vs. non-extended ones. On a 200 point contract that means you will be able to sell your extended OKW contract for $4,000 more than you would have otherwise. do you think it is a smart move to invest $3,000 today to get $4,000 in ten years?

Excellent point! As usually, the DVC board has helped me to see things more clearly.

 

[Mtnman44]

remember, my comments are only addressing the specific scenario of PLANNING to sell in about 20 years and wanting maximum resell value.

As such, i see the possible range to be somewhere from "Made a few thousand when I sold" to "this is a rip off". If one buys the contract extention in hopes of making a killing when they resell, I don't see that happening when you factor in the time value of money, etc....

In this scenario, YOU ARE NOT GETING THE VACATIONS by extending!!! You already have those. You are selling before the original contract date anyway. So the only potential benefit is the speculation on the additional resell value. People in this scenario who buy the extention are wagering that the extended contract will maintain a much higher resell value than they would have had originally in 20 years. No doubt that it will. The only problem is how much and whether that is worth spending your money 20 YEARS before you get the benefit.

That being said, I am not trying to talk people out of it. I would actually consider it also, but NOT for resale value. I would do it to ensure the ability to book at OKW and those lovely low point requirements as I enter my very senior years.

And that was exactly my point in entering into all this: It's just not a clear cut "this is a GREAT decision" or "this is a rip off". There's just too many factors to consider, and too much speculation to enter into. I get the luxury of simply analyzing, speculating, and discussing becuase I don't own at OKW.

Personally, I don't see it as a very risky investment because you're still getting value from the vacations you'll take, in the interim while owning the contract. In addition, BECAUSE of those vacations, you'll be much more able to notice declines and changes to the facility that might negatively impact resale value...and get out earlier. Certainly,it doesn't seem NEARLY as risky as investing in a stock that would get you 15%...which could drop literally overnight. Again, MHO. Other perceptions will be different, but just as subjective.

I also think it's reasonable to think the current resale on OKW will simply stick to inflation. More reasonable than to think it will not. But again, MHO. Other perceptions are going to be different but just as subjective.

The point being, so much is going to be based on your percpetions: Of the economy, of how "risky" the investment is, of the market for WDW vacations, etc....well, like I said, I just can't see the point of "absolute" assertions saying that it's a rip off or a loser for everyone. There's just no way to know that yet.

I think the best possible "favor" we can do for those wondering is simply present as much data as we can, engage in as much compariitive speculation as we can, and lay out as many opinions as we can (as you have!) so that there's a BROAD spectrum of consideration "out there". I'm glad I was able to draw you out into explaining your opinion more fully, because I think it's provided some VERY valuable "stuff" for those entering into this decision.

Thanks for making it such a productive discussion!

 

[johde]

Jim,

In Ten years, HOW much more resale value will an extended contract have vs. your current one. That is the question and that is the bet you are making. Obviously it has to resale at least $15 more to break even. Keep in mind that's not a real accruate analysis because those $15 per point today are worth more than $15 per point in ten years. however, do you think the price difference will be MORE that $20 per point in 10 years. I do not believe so, but that is just my "guess". Anyway, let's just say that the resale value on extended contracts is $20 more per point in ten years vs. non-extended ones. On a 200 point contract that means you will be able to sell your extended OKW contract for $4,000 more than you would have otherwise. do you think it is a smart move to invest $3,000 today to get $4,000 in ten years?

By my calculations, investing $3,000 today to get $4,000 in 10 years is about a 5.3% return on your money. Extending that 5.3% return for 35 years you get about $18,300 or $91 per point. So, even if you were considering using OKW until 2057 you will be able to buy a resale in 2042 and start all over. In addition if the resort is not holding up, (looks outdated, is in need of major rehab, etc.) you can walk away and stay somewhere else.

 

[Anthony1971]

I think betting on time share is a poor investment choice. It could go either way.... But being we do have something to compare OKW to now which is SSR and the difference is not 15 much less 25 a point on the resale market I highly doubt OKW will command 15-25 more than it does now.
I do see a market for the 2042's as not everyone wants a time share for 50 years for reasons or price, age, commitment......saying 15 or 25 a point means nothing saying the 2057 costs 90 a point for a 200 point contract that is 18,000 and a 2042 cost 75 a point or 15,000 that is 3,000....
People justify buying HH with no intention of ever staying there to save money I think people will justify 2042 over 2057 as they do today... There is still a large number of people buying OKW, VWL, BW and BC when they have 2 options now with comparable amounts of time left now.

 

[LIFERBABE]

The only way I would consider it is if they front loaded those points and allowed me to borrow from them NOW!

I will not be around that long to use them, and even if I were, I would like to make that decision later in life not right now. DVC was a big enough decision, but at least we get immediate use out of our existing purchase and we see where our money is going.

DVC is basically selling air and if we decide to sell and the resale market is in the tank, we will rent. If we cant rent by then I will allow homeless people to stay there and write it off on my taxes.

Also, there is nothing to stop DVC from excercising this assessment on a more frequent basis. Do you think this is the last contract extension for OKW? What about 5 years from now when they've added all these resorts and now they need to shore up the value again by making another assessment? Members could be in an everlasting cycle of chasing the market to protect their resale value because Disney keeps pushing the expiration date out. OKW is only 15 years into a 50 year contract and they are already assessing it.