Buy Value or Buy Home Resort

[1momof3boys3]

Another question for you all. Anyone consider buying double the points you nees and renting half each year to pay your dues? Jist wondering if anyone has thought of that or did the math to see if it works out. I would totally do that if its smart.

* Responding so I can follow. I'm interested in the responses.

 

[_auroraborealis_]

While you can pay your dues by renting, it also doubles your capital outlay. So, using a lower cost example...

Dues are 6.59/point for AKV.
I found a loaded 100 point contract (40/200/100) for $102/point, so $10,200, with annual dues of $659.
I found a not-totally-stripped 200 point contract (0/11/200) for $87/point, so $17,400, with annual dues of $1,318.

First, we have to assume you have the discipline to actually rent them. Keep in mind the rental income is taxable, which can impact things depending on your finances as a whole. We also will assume you are paying cash for either contract; financing to "pay dues!" is probably not going to work out when financed at 8-14%.

Renting 100 points at $12/13 is $1200/1300. This will not cover the whole of your annual dues after taxes. You will also be out an additional $7,200, which is about 8-10 years of dues right there. So the long-term ROI on the additional initial outlay is complicated, but even if you rent your points privately ($1500/year), after taxes you are only covering dues and never the initial expense.

 

[MattKreps]

Another question for you all. Anyone consider buying double the points you nees and renting half each year to pay your dues? Jist wondering if anyone has thought of that or did the math to see if it works out. I would totally do that if its smart.

So I'm new to this game, and others will have far more experience on this, but the idea strikes me as a poor return on capital.

If you were buying because you were going to use them every couple years (for say blowout family reunion vacations), and rent them other years, then it might - might - make sense. But I suspect a well thought out bank/borrow plan would be FAR more cost efficient and allow you to buy just half or less of the portion you think you will need in the "up" years (depending on whether is it every 2 or every 3 years). That also reduces your MF outlay each year.

Aurora's math is exactly what I was thinking in terms of your chance to get an actual return that isn't negative through the "buy more and rent to cover costs" approach.

If you have that extra capital laying around, put it into a market investment, and clip the returns each year toward your MFs. That way you keep the capital in an asset that might appreciate, but remains liquid even in a bad economy. You probably come out well ahead when you run a fully loaded cost of capital analysis.

Just my two cents, adjusted for inflation and annual MF increases.

 

[Justin Kirklin]

While you can pay your dues by renting, it also doubles your capital outlay. So, using a lower cost example...

Dues are 6.59/point for AKV.
I found a loaded 100 point contract (40/200/100) for $102/point, so $10,200, with annual dues of $659.
I found a not-totally-stripped 200 point contract (0/11/200) for $87/point, so $17,400, with annual dues of $1,318.

First, we have to assume you have the discipline to actually rent them. Keep in mind the rental income is taxable, which can impact things depending on your finances as a whole. We also will assume you are paying cash for either contract; financing to "pay dues!" is probably not going to work out when financed at 8-14%.

Renting 100 points at $12/13 is $1200/1300. This will not cover the whole of your annual dues after taxes. You will also be out an additional $7,200, which is about 8-10 years of dues right there. So the long-term ROI on the additional initial outlay is complicated, but even if you rent your points privately ($1500/year), after taxes you are only covering dues and never the initial expense.

Do rental rates differ by season/resort. per point. Meaning, if you were renting points for on the monerail at Christmas, would you earn more per point?

Taxes arent a big deal for me, I dont pay any income tax, so this would be my only taxable amount because I assume they are capital gains.

 

[_auroraborealis_]

Do rental rates differ by season/resort. per point. Meaning, if you were renting points for on the monerail at Christmas, would you earn more per point?

You can try, via private rental, but there really is an upper limit based on prevailing rental rates via brokers. You're unlikely to be able to get more than about $16/point for an 11-month booking at a premium resort regularly. You'd also have to really be managing the points to be able to book holidays, as they tend to be higher points.

 

[Dean]

Another question for you all. Anyone consider buying double the points you nees and renting half each year to pay your dues? Jist wondering if anyone has thought of that or did the math to see if it works out. I would totally do that if its smart.

It's come up quite a bit and is often a good approach but for a different reason. Simply as an investment it's a poor choice, plain and simple, but there often are other factors that might make it a reasonable option. This occurs when one needs less points now and more later, when it allows them to get a better non small contract and for multiple home resort access. The latter is not a good up front option but the other 2 can be good choices going in for some.

 

[kboo]

I think the point here is also that you have to be disciplined enough to rent your points instead of (ahem) using them. Between 2017 points on our resale and direct contracts that we needed to bank, we had 310 points to use in 2018 (and our total contract amount is 185/yr). So we could have rented out some points, we could have banked extra, but instead we are taking another 2018 trip to WDW that wasn't originally planned... for Thanksgiving. So clearly you should not be talking to me, as I have zero self control.