Any thoughts on "flipping" contracts?

[jennybdis]

Perhaps that's not the best term, but what I mean essentially is buying a cheap contract now at a place we don't really want as our home resort just so we can get a feel for DVC; seeing what resort availability is like during desired travel times; as well as determining for sure how many points we want, if our kids are still interested in going to Disney frequently as they head into their tweens/teens, etc., and then either choosing to keep it, or choosing to sell it off in a few years and using the money from that sale + some additional funds to buy a more-desired contract into another resort.

I realize that this might mean a loss of potentially $1,000 on the resale (assuming we buy 200 points and it loses $5 per point between time we buy and the time we sell) and approximately the same or a little more (?) for closing/resale costs, but I'd be OK with that because that's essentially the same cost as us buying one cash trip to Disney, which is exactly what we'd be gaining by buying a year earlier (as opposed to waiting two years to get the home resort we'd prefer).

Hope that this makes sense! Thoughts appreciated!

 

[Missyrose]

Perhaps that's not the best term, but what I mean essentially is buying a cheap contract now at a place we don't really want as our home resort just so we can get a feel for DVC; seeing what resort availability is like during desired travel times; as well as determining for sure how many points we want, if our kids are still interested in going to Disney frequently as they head into their tweens/teens, etc., and then either choosing to keep it, or choosing to sell it off in a few years and using the money from that sale + some additional funds to buy a more-desired contract into another resort.

I realize that this might mean a loss of potentially $1,000 on the resale (assuming we buy 200 points and it loses $5 per point between time we buy and the time we sell) and approximately the same or a little more (?) for closing/resale costs, but I'd be OK with that because that's essentially the same cost as us buying one cash trip to Disney, which is exactly what we'd be gaining by buying a year earlier (as opposed to waiting two years to get the home resort we'd prefer).

Hope that this makes sense! Thoughts appreciated!

Also, don't forget to factor in the broker fees when you sell (typically between 10 and 12 percent).

 

[zavandor]

...and the closing costs too.
Maybe it's better to rent out points from a member, maybe for a split stay to see two resorts in a trip. And spend one day to visit all other resorts.

 

[robinb]

Perhaps that's not the best term, but what I mean essentially is buying a cheap contract now at a place we don't really want as our home resort just so we can get a feel for DVC; seeing what resort availability is like during desired travel times; as well as determining for sure how many points we want, if our kids are still interested in going to Disney frequently as they head into their tweens/teens, etc., and then either choosing to keep it, or choosing to sell it off in a few years and using the money from that sale + some additional funds to buy a more-desired contract into another resort.

I realize that this might mean a loss of potentially $1,000 on the resale (assuming we buy 200 points and it loses $5 per point between time we buy and the time we sell) and approximately the same or a little more (?) for closing/resale costs, but I'd be OK with that because that's essentially the same cost as us buying one cash trip to Disney, which is exactly what we'd be gaining by buying a year earlier (as opposed to waiting two years to get the home resort we'd prefer).

Hope that this makes sense! Thoughts appreciated!

Hmmm ... I'm not sure it's worth buying at a random DVC resort for just a couple of years. When you make your resale purchase you would have to pay for the points, closing costs and maintenance fees for the current use year. Let's say you buy at BWV for $66 per point. You pay $13,600 for the points plus $1123 for dues, plus about $500 in closing costs = approx $15,200. Let's say you keep it for 2 years and pay another $1123 for fees so the cost of BWV for 2 years would be $16,300. When you sell the contract you will have to pay $70 in fees plus a 10-12% commission. Let's assume that you sell your contact for the same price that you purchased it for. You would pay $1360 in commission + $70 in other fees and you would receive $12,170. So ... your cost of DVC for 2 years would be $16,300 - 12,170 = $4130 or $2065 per year.

One other consideration is if you pick up a contract at Vero Beach (the cheapest resort) and you end up keeping it longer than a couple of years you will spend more on additional maintenance fees over those at WDW resorts (about $1.50 - $200 per point difference) than you saved in the contact price. Plus, you will not be guaranteed a WDW resort if you plan on going to WDW during busy times like Christmas/Spring Break.

 

[disneynutz]

You need to do the numbers to see it the idea makes sense.

Bill

 

[chalee94]

Maybe it's better to rent out points from a member, maybe for a split stay to see two resorts in a trip. And spend one day to visit all other resorts.

+1

if you are renting and can't get into the resort you want, you've learned something without paying $10,000 or so upfront...

 

[ELMC]

One thing to add is that buying/selling DVC contracts is not as easy as going to the store to buy a loaf of bread or to return a shirt that you decide you don't like. It's a time consuming and expensive process that can be stressful for many people. All of the goals you wish to accomplish (getting a feel for the resorts, types of rooms you need/points you require, etc.) can be accomplished through renting points from an existing owner. You'd really have to run the numbers to see if it is less expensive than your proposed plan. I would suggest that your assumption that you would only lose $1,000 on a "flip" is a bit off, as it doesn't seem to account for closing costs, estoppel fees, cost of use of money and broker commissions in addition to the potential depreciation.

In addition, I really think that figuring out whether or not you are a "Disney family" when it comes to vacations is something you should figure out prior to purchasing DVC, as opposed to purchasing DVC in order to figure it out. My only caveat to this is if the amount of money we are talking about is totally insignificant to you. If that's the case, some of my points are moot. Good luck with your decision!

 

[crisi]

If the market crashes, you could loose a lot more than your target loss.

I'd recommend renting points for one trip and spending a day getting a feel for the resorts. Alternatively, you could just do a bunch of online research. Spend some time on the boards, you'll get a good feel for historical availability from the discussions. Then buy where you won't mind staying. If after researching, you made a bad decision, you can go back to your original plan, but you'd reduce your risk buy buying where you think you are likely to buy.

 

[jennybdis]

I am always appreciative of the feedback--thank you!

Renting points is really not something we want to do. My husband and I are 100% positive we want to be DVC owners, and any money spent traveling to Disney from here on forward, we want to put towards a contract. Our inexperience with being on property, coupled with the fact that we don't want to exceed much more than our normal yearly vacation budget for the contract, and the fact that we really don't know what our kids are going to want to do as they head into their teen years (e.g., will it be our whole family traveling, or will it just be me and my husband?) is what's making me reconsider getting the cheapest contract available (e.g., more than likely an OKW or SSR contract) and then switching it up to a more-desired location after a few years when we are more experienced, have some additional funds to throw towards a more expensive contract and have a better idea of how many points we'll need based upon our kids' interest or disinterst in traveling to Disney. The hope is also that we'll find that we don't have problems booking where we want at 7 months and maybe don't need to sell or change the contract anyway, or that we'd unexpectedly fall in love with the resort we picked based solely upon price and nothing else...

And if we did need to sell the contract, I am thinking that robinb's example would be an acceptable loss for us as if we timed it right, the loss may only be the equivalent of a cash trip.

Just thinking things through and trying to decide the right course of action...

 

[DougEMG]

If renting doesn't interest you and you really want to own a DVC resort at WDW, then the best option price wise is to purchase SSR or OKW resale.

OKW has larger rooms and a cheap room point cost, but has slightly higher MF and a shorter expiry date (unless you buy an extended contract) than SSR. Both are good deals from a cost perspective. When buying by price, one should by the cheapest resort one doesn't mind staying at if you can't switch at the 7 month mark.

I originally bought SSR, then OKW and then BWV. I bought SSR and OKW because of the price, but ended up liking both resorts anyway. While BWV I bought for the location and to make sure I could book it at the 11 month mark.

Unless you can book more than 7 months in advance, it doesn't matter which resort you own.

 

[disneynutz]

Does DVC/Disney fit into your budget? Many do not realize how expensive Disney is even as a DVC owner. You can expect to spend several thousands of dollars per year when you add the cost of the purchase, dues, travel, food, admission media, and Disney stuff. Everything but the purchase increases in cost each year.

Here are some numbers that my help.
We just sold a VWL contract of 150 points. Paid $10,950 in 2010, sold for $8,725 all fees included.

Bill

 

[jennybdis]

Does DVC/Disney fit into your budget? Many do not realize how expensive Disney is even as a DVC owner. You can expect to spend several thousands of dollars per year when you add the cost of the purchase, dues, travel, food, admission media, and Disney stuff. Everything but the purchase increases in cost each year.

Here are some numbers that my help.
We just sold a VWL contract of 150 points. Paid $10,950 in 2010, sold for $8,725 all fees included.

Bill

Yes, Disney does fit into our budget. I have run the numbers several times on airfare, dues, tickets, meals, etc. and compared them to the two vacations we've taken to Disney where we stayed off property in deluxe accommodations and on property in deluxe accommodations, and DVC makes sense for us. The main reason I'm looking to go cheaply with the contract is that I really want to only spend our yearly vacation budget ($6k) + an additional $2-3k on the contract so that we don't need to stop or skimp on other necessities or luxuries that our family enjoys as a result of our purchase. IF we were to buy a contract we'd prefer, we would need to combine 2 years of our yearly vacation budget and probably skip vacation next year as a result...

Your example of your buy/sell experience really helps--thanks for that.

 

[cz4ever]

I am always appreciative of the feedback--thank you!

Renting points is really not something we want to do. My husband and I are 100% positive we want to be DVC owners, and any money spent traveling to Disney from here on forward, we want to put towards a contract. Our inexperience with being on property, coupled with the fact that we don't want to exceed much more than our normal yearly vacation budget for the contract, and the fact that we really don't know what our kids are going to want to do as they head into their teen years (e.g., will it be our whole family traveling, or will it just be me and my husband?) is what's making me reconsider getting the cheapest contract available (e.g., more than likely an OKW or SSR contract) and then switching it up to a more-desired location after a few years when we are more experienced, have some additional funds to throw towards a more expensive contract and have a better idea of how many points we'll need based upon our kids' interest or disinterst in traveling to Disney. The hope is also that we'll find that we don't have problems booking where we want at 7 months and maybe don't need to sell or change the contract anyway, or that we'd unexpectedly fall in love with the resort we picked based solely upon price and nothing else...

And if we did need to sell the contract, I am thinking that robinb's example would be an acceptable loss for us as if we timed it right, the loss may only be the equivalent of a cash trip.

Just thinking things through and trying to decide the right course of action...

Renting points to test the waters probably makes the most sense, but if you want to jump in now and minimize your net cost, here's what I suggest: buy a cheap loaded contract, use the included points, and resell it stripped. You can probably break or better when you consider the value of the points that you used. The key inefficiency that you're exploiting is that sellers of loaded contracts often under-value the included points, while buyers of stripped contracts often under-value the not-included points. Use your excess profits to buy a Lifetime Sponsorship badge for Disboards to thank them for making it all possible.

 

[Dean]

Perhaps that's not the best term, but what I mean essentially is buying a cheap contract now at a place we don't really want as our home resort just so we can get a feel for DVC; seeing what resort availability is like during desired travel times; as well as determining for sure how many points we want, if our kids are still interested in going to Disney frequently as they head into their tweens/teens, etc., and then either choosing to keep it, or choosing to sell it off in a few years and using the money from that sale + some additional funds to buy a more-desired contract into another resort.

I realize that this might mean a loss of potentially $1,000 on the resale (assuming we buy 200 points and it loses $5 per point between time we buy and the time we sell) and approximately the same or a little more (?) for closing/resale costs, but I'd be OK with that because that's essentially the same cost as us buying one cash trip to Disney, which is exactly what we'd be gaining by buying a year earlier (as opposed to waiting two years to get the home resort we'd prefer).

Hope that this makes sense! Thoughts appreciated!

That would only make sense if you find a contract cheaply enough to expect to make money on it. Otherwise, I'd wait until you have enough info to know where you stand and agree with a rental or cash stay to try it out. If you still wanted a trial run, make your best guess of the cheapest option you'd be happy with for on property assuming that's your goal. It's also a good idea to buy less points than you think you'll need long term but that to has a cost, roughly around $10 a point if 200 points total is your goal, less per point for larger total points.

 

[ELMC]

The main reason I'm looking to go cheaply with the contract is that I really want to only spend our yearly vacation budget ($6k) + an additional $2-3k on the contract so that we don't need to stop or skimp on other necessities or luxuries that our family enjoys as a result of our purchase.

I can see how you would want to do this, but I'm not sure how likely it will be for you to buy a 30+ year DVC contract for the cost of one trip. You will be able to find a contract for that amount of money, but it most likely won't be enough points to equal the stay you would have taken if you paid cash. It sort of makes sense when you think about it. If everybody could just buy a resale contract instead of paying cash for a week, they would.

 

[BWV Dreamin]

We just sold our BWV contract. We're trying to downsize to just one contract (150 VWL). I have BLT points on the market. After owning up to 450 pts., we realized 150 pts. is plenty. Fortunately, having rented out points, we are taking a very small loss if any. It takes time, and family dynamics change, as did the economy.

Does DVC/Disney fit into your budget? Many do not realize how expensive Disney is even as a DVC owner. You can expect to spend several thousands of dollars per year when you add the cost of the purchase, dues, travel, food, admission media, and Disney stuff. Everything but the purchase increases in cost each year.

Here are some numbers that my help.
We just sold a VWL contract of 150 points. Paid $10,950 in 2010, sold for $8,725 all fees included.

Bill

 

[maburke]

IF we were to buy a contract we'd prefer, we would need to combine 2 years of our yearly vacation budget and probably skip vacation next year as a result...

Your first post talked about a resort you don't prefer, and here you mention a contract you'd prefer, so it sounds like you're not totally naive, and you have a sense of what you like and what you don't like. Given that, I think it's a mistake to buy where you already know you don't want to be. Maybe you'll change your mind about it, but it's really not a good feeling to have put in all that money and not be happy about where you are. I'd suggest thinking about buying a small loaded contract where you think you do want to be. You can use banked and borrowed points to take the first trip. Then if you decide you want a different location, you can go with your original plan to resell, or you might decide to add on at a different resort.

 

[jakers]

Your first post talked about a resort you don't prefer, and here you mention a contract you'd prefer, so it sounds like you're not totally naive, and you have a sense of what you like and what you don't like. Given that, I think it's a mistake to buy where you already know you don't want to be. Maybe you'll change your mind about it, but it's really not a good feeling to have put in all that money and not be happy about where you are. I'd suggest thinking about buying a small loaded contract where you think you do want to be. You can use banked and borrowed points to take the first trip. Then if you decide you want a different location, you can go with your original plan to resell, or you might decide to add on at a different resort.

Couldn't you also buy a small contract and purchase transfer points from a different resort that you would like to try for a couple of years to get a feel? Then purchase at the resort that you really want the 11 month advantage? (I am new to this and have not transferred, but as I understand it transferred points keep their home resort priority.) Rather than flipping the contract if you buy a decent one you could keep it to have additional points and possibly add additional nights at 7 months with the points from your small contract. It would also let you experience the process and get an insider's feel for the program and whether or not the home resort will be a huge consideration for you and when you plan to travel.

Just a thought, but would that work?

 

[LRHOH]

Watch the DVC resale realtors. They have their postings on line and there are 3 to 4 major ones. If you do your homework and keep checking these listings daily, I think you can find a property or a combo of two that fits your needed. I stress that you must check daily because these properties are not lasting very long. Be wary of the maintenence fees as that is an annually fee which can mount up quickly. My wife and I bought a couple of lower point properties which had low maint fees. We figured that the difference in price over the long haul would be made up in about 4 to 5 years.

 

[Sandisw]

Buying 200 points with the chance that you might want to sell in just a few years may be more of a gamble than you think.

In two years, I watched the price of BWV go down about $20/ppt. When I started looking to buy DVC in 2009, it was averaging around $78/pt. When I bought in 2011, I paid $55/pt.

What we ended up doing was buying small--50 points--to see whether or not we would like it--plus it would allow us to add on points at BLT, still in the beginning stages of sales, with less points then we would need to as new members.

We realized that VWL, where we bought, was not what I wanted to own and put it up for sale only 2 months later. Because it was a small contract, I took about a $500 hit, but worth it so I could just own BLT like I wanted.

IMO, I would search for a contract at a resort that I would be okay owning at and okay staying at so that having to sell becomes less of an issue. And, if you don't know where that might be at all, then renting may be a much better option before you take the plunge.

Good luck!