Buying a resale contract to break even?

[Robbie Cottam]

This math is a bit too simple as it ignores time value of money. You wouldn't leave 5 figures sitting under a mattress and we're in an environment where savings accounts are paying a guaranteed 4.5% and CD's are paying 5%. That's a huge elephant in the room that has to be included in these type of calculations due to the large front loaded cost.

For simple numbers lets assume a 200 point contract that costs 27k (about what AKL would cost):
27,000 * .05 = 1350
200*(18-8.24) = 1952

I don't if you have keeping up on current evens but MONEY HAS ALMOST NO VALUE right now....

Ok, I exaggerate but, seriously, current inflation what 3.3 percent and your cd is paying 4.5 so you are make 1.2 percent.....

My SSR point have increased in value about 30 percent in 18 years, and I got to use them, rent them, borrow against them......

How did you wife an kids enjoy that stay at the bank visiting your cd's?

 

[Genie+]

It seems like limiting the number of reservations/times you can change a lead guest per year would be the best way to do it. Because to maximize profit, they pick up lots of highly desirable short rentals for confirmed bookings and charge by the night instead of by the point.

This is really tricky. They’d need to be very cautious to how enforcement applies to unintended areas.

Any move has to consider all the impacts and ramifications. Who might be affected and their rights as owners? The overall difference made to the club, how it affects owners’ experience and even the brand itself.

This is not a bad angle to investigate. It’s hard to figure out how not to penalize typical and legal usage. Say a FL resident with AP and loves using their DVC to pop in when they can time off and and a desired reservation align? Nothing in the contract said they couldn’t keep moving small reservations around.

Working from the other end - expectations for using the contract. Find the limit of that, where it starts bleeding into commercial usage. Approach it from there.

 

[Epcot Forever Forever]

If I were DVD/DVC my next move after normalizing resale restrictions would be tackling the commercial rental market. This would not be meant to affect members who are renting out the odd year they can’t use or a small portion of their points occasionally

100%! Commercial/quasi-commercial renting bad for their hotel business and it’s bad for owners because the commercial renters horde the hardest to get rooms. I don’t know if people appreciate how pervasive this is. I personally want them to crack down.

A good solution would be to ban renting confirmed reservations, if they could figure out how.

 

[Genie+]

100%! Commercial/quasi-commercial renting bad for their hotel business and it’s bad for owners because the commercial renters horde the hardest to get rooms. I don’t know if people appreciate how pervasive this is. I personally want them to crack down.

A good solution would be to ban renting confirmed reservations, if they could figure out how.

Continues getting worse. What people don’t realize when looking at confirmed reservations is they are only getting a snapshot of what is available right now. They are not seeing all the reservations listed that were already taken. Across dozens of brokers, facebook pages, forums, etc. So yeah, when you see one site with a specific room offered on a long string of the same dates, it’s the tip of the iceburg.

 

[Brian Noble]

It depends on how you feel both rental prices and dues will keep pace with the money market’s risk-free rate of return.

I took a look at this for SSR a week or so ago, using the Internet Archive's Wayback machine to look at (a) dvcrequest advertised point rental rates for non-premium rentals and (b) rack rates of a studio as reported by MouseSavers. I computed the annual rate of increase going from 2006 to this year for the time of year I normally visit. The rates of increase were:

Point rental: 3.2%/year
SSR dues: 5.2%/year
SSR rack: 4.8%/year

Rack was squishy, because Disney uses many more rates, changes them much more often, and has more view categories than they did in 2006, so that one is approximate. But that's probably the ballpark.

For comparison, the CPI over that same period was...3.2%/year.

 

[Genie+]

Seriously,
We had this conversion LAST WEEK.
Wyndham has no bearing on this conversation because they are not DVC...worthy though both very complexenough
Not the same contracts, not the same corporate image,
Disney can do what ever they want you are correct, but if they violate the HOA, and membership agreements they would be facing a class action lawsuit.......

DISNEY CAN NOT HANDLE THAT TYPE OF BAD PRESS RIGHT NOW!

The reason the conversation continues is because there is not a concensus of what can or should be done.

Wyndham matters. It’s a huge timeshare that took steps to tackle the issue, showing 2 things. With all the data at their disposal they felt it worthy enough to attempt correction despite the challenges. The contracts may be different yet both very complex and they were able to navigate solutions that are still standing on legal ground. Should and could be done. Might not matter to you but I’m sure DVC paid attention. It’s no longer some untraveled frontier.

The contract say renting IS ALLOWED!!! Also says “Accordingly, given these restrictions and other factors affecting resale or rental, purchase of an Ownership Interest should be based upon its value as a vacation experience and for spending leisure time, and not for the purpose of acquiring an appreciating investment or with an expectation that an Ownership Interest may be resold or that any reservation of use may be rented to a third party.”

What that says to me is while renting is allowed, there is no expectation that particular reservations will not fall outside of legal or unrestricted usage. In other words, any and every type of rental does not need to be allowed.

 

[Starport Seven-Five]

It depends on how you feel both rental prices and dues will keep pace with the money market’s risk-free rate of return.

If rental prices continue to inflate (because cash rates continue to inflate) and dues continue to inflate, it all works out closely. E.G.:
Year 1
Rent 20pp
Dues 8pp
Net 12pp

Year 2
Rent 21pp
Dues 8.4pp
Net 12.6pp

Year 3
Rent 22pp
Dues 8.8pp
Net 13.2pp

There’s always risk rent plateaus due to macroeconomic conditions, in which case your savings interest rate probably declines too (unless you, say, parked it in a CD, to be more comparable to locking funds into a DVC ownership).

I agree that there’s variables but over a long enough view the TVM aspect should equal out, unless you’re also spending interest on a loan for the points.

Yeah, this is a bit of a slippery slope when we get into modeling appreciation. Definitely something that has to be considered as part of a business plan but hard to predict.

The post pandemic boom in DVC seems to be cooling off a bit so I would personally expect rental increases to slow down or flatline in the next few years. That's just my own speculation though and my crystal ball has been known to be faulty at times (I sold TSLA at $70 like a decade ago )

I don't if you have keeping up on current evens but MONEY HAS ALMOST NO VALUE right now....

Ok, I exaggerate but, seriously, current inflation what 3.3 percent and your cd is paying 4.5 so you are make 1.2 percent.....

Inflation would also be eating away at the returns from renting so it's a moot point.

My SSR point have increased in value about 30 percent in 18 years, and I got to use them, rent them, borrow against them......

How did you wife an kids enjoy that stay at the bank visiting your cd's?

This was a discussion about buying to rent for a long time though so visiting the CD's would be the same as visiting your safe to show off your DVC deed. Neither is providing entertainment value to your wife and kids.

 

[Brian Noble]

The contracts may be different yet both very complex and they were able to navigate solutions that are still standing on legal ground.

While I think Wyndham is on firm legal footing, and I suspect DVC would be too if they did something similar, it is important to note that, so far, it does not matter if it is or isn't legal.

Wyndham (and DVC) have the advantage of being first-mover. They can declare something "commercial use" and therefore unacceptable by fiat. It will be up to the owner(s) to prove them wrong. That will be expensive and time-consuming to do, and Wyndham (and DVC) can make someone's life pretty miserable in the meantime. So, if some in-house Disney lawyer thinks there is a preponderance-of-the-evidence argument for disallowing any particular rentals, they might be willing to roll the dice and take their chances, knowing that they'll have a significant resource advantage in any suit.

It all depends on how grumpy they are about renting. They might be grumpy because DVC rentals under-cut their hotel business. They might be grumpy because DVC rentals make it harder to sell points because rentals are freely available and not that expensive. They might be grumpy because existing members start complaining in large numbers about all those spec rentals---and existing members are otherwise a good source of new point sales.

They might just be grumpy that someone else is profiting on their work. That's more or less why Disney bought up a ton of swamp land in Central Florida under cover of darkness; they wanted to make sure what happened in Anaheim, with a park surrounded by a bunch of hotels they didn't own, didn't happen again.

The law isn't only about what's legal. Sometimes it's just a cudgel. But I'm also an intolerable cynic, and just spitballing here. Just because I think it is possible doesn't mean that Disney agrees, let alone that they'd actually try it.

 

[Genie+]

While I think Wyndham is on firm legal footing, and I suspect DVC would be too if they did something similar, it is important to note that, so far, it does not matter if it is or isn't legal.

Wyndham (and DVC) have the advantage of being first-mover. They can declare something "commercial use" and therefore unacceptable by fiat. It will be up to the owner(s) to prove them wrong. That will be expensive and time-consuming to do, and Wyndham (and DVC) can make someone's life pretty miserable in the meantime. So, if some in-house Disney lawyer thinks there is a preponderance-of-the-evidence argument for disallowing any particular rentals, they might be willing to roll the dice and take their chances, knowing that they'll have a significant resource advantage in any suit.

It all depends on how grumpy they are about renting. They might be grumpy because DVC rentals under-cut their hotel business. They might be grumpy because DVC rentals make it harder to sell points because rentals are freely available and not that expensive. They might be grumpy because existing members start complaining in large numbers about all those spec rentals---and existing members are otherwise a good source of new point sales.

They might just be grumpy that someone else is profiting on their work. That's more or less why Disney bought up a ton of swamp land in Central Florida under cover of darkness; they wanted to make sure what happened in Anaheim, with a park surrounded by a bunch of hotels they didn't own, didn't happen again.

The law isn't only about what's legal. Sometimes it's just a cudgel. But I'm also an intolerable cynic, and just spitballing here. Just because I think it is possible doesn't mean that Disney agrees, let alone that they'd actually try it.

Yeah they must consider how it affects the club experience and desirability of the brand among other things. There’s alot to weigh between what everybody gets out of it, the pros/cons to themselves and owners.

 

[Sandisw]

You are correct, Commercial renting is explicitly prohibited in the contract, but it is not defined. Disney can not rewrite those contract for resorts that have already been in existents..... Moving forward, say with the new poly tower account DISNEY COULD define commercial rental .... But in all the Current HOA personal rental IS ALLOWED.....

However, with out the contract defining what is spec rental, what is commercial rental, how often the own must use the point in any three years period.....

Furthermore, It would be almost impossible for Disney to restrict how an owner uses their property.....
Say grandma and grandpa bought 7000 points for their kids and grand kids, kids get married remarried names change, etc...

Disney cancel a Christmas reservation and ruins a vacation but someone though it was commercial ......

Yea, I don't see Disney taking that chance....

The contract does say that renting for "commercial purposes" is not allowed, and DVCMC/DVD gets to define what that means.

In that respect, they do get to define it. What we do know is that under "personal use", the contract is clear that renters count so they can not remove it completely.

But, they definitely can change the current definition that triggers the review...the more than 20 reservations rule...to something else and add things that they feel support the membership is being used for "commercial purposes". And, there is language that already exists that does say that reservations could be canceled....I posted it awhile ago.

Having said all that, we go around about this a lot and I personally think that whatever is happening is small enough to not be considered a large portion of memberships violating the rule they do have in place.

 

[Robbie Cottam]

Book a Resort | Disney Vacation Club
The contract does say that renting for "commercial purposes" is not allowed, and DVCMC/DVD gets to define what that means.

In that respect, they do get to define it. What we do know is that under "personal use", the contract is clear that renters count so they can not remove it completely.

But, they definitely can change the current definition that triggers the review...the more than 20 reservations rule...to something else and add things that they feel support the membership is being used for "commercial purposes". And, there is language that already exists that does say that reservations could be canceled....I posted it awhile ago.

Having said all that, we go around about this a lot and I personally think that whatever is happening is small enough to not be considered a large portion of memberships violating the rule they do have in place.

“Member’s friend” leave a lot to the imagination……. Remember, if you can dream it, you can do it…..

and I promise you that if it ever can to that, a savvy renter would included a friendship addendum with any rental contract…..

however, I do agree with you, that this subject gets played out,
and disney simple has bigger fish to fry

a final size note, 7000 point is the most any one person can control….. correct me if I’m wrong….

I think this sites list shows the top dogs in the 4000 to 5200 range….

if a someone want to insist on 200 point minimum rentals, they could control 4000 to 5000 points,
play with in the mouses rules, and take a couple really nice vacations each year…..

 

[Sandisw]

“Member’s friend” leave a lot to the imagination……. Remember, if you can dream it, you can do it…..

and I promise you that if it ever can to that, a savvy renter would included a friendship addendum with any rental contract…..

however, I do agree with you, that this subject gets played out,
and disney simple has bigger fish to fry

Which is exactly why I don't think DVCMC has updated things from what they are!!!

 

[kneely58]

“Member’s friend” leave a lot to the imagination……. Remember, if you can dream it, you can do it…..

and I promise you that if it ever can to that, a savvy renter would included a friendship addendum with any rental contract…..

however, I do agree with you, that this subject gets played out,
and disney simple has bigger fish to fry

a final size note, 7000 point is the most any one person can control….. correct me if I’m wrong….

I think this sites list shows the top dogs in the 4000 to 5200 range….

if a someone want to insist on 200 point minimum rentals, they could control 4000 to 5000 points,
play with in the mouses rules, and take a couple really nice vacations each year…..

The maximum amount of points that anyone can have is 8,000.

 

[Robbie Cottam]

The maximum amount of points that anyone can have is 8,000.

I stand corrected. Thank you.

 

[Epcot Forever Forever]

The maximum amount of points that anyone can have is 8,000.

This is true, but I don’t think it would be terribly difficult to game that if you were determined. How many relatives do you have? How many ambivalent friends?

Not saying anybody actually does that (I have literally no idea) but I’d imagine it could be accomplished with little difficulty.

 

[Sandisw]

This is true, but I don’t think it would be terribly difficult to game that if you were determined. How many relatives do you have? How many ambivalent friends?

Not saying anybody actually does that (I have literally no idea) but I’d imagine it could be accomplished with little difficulty.

The rules are 8000 across any and all memberships. So, to use other, they have to be owners without you.

Of course, as long as the other owners want to be part of a group set up, it can work.