Buying DVC solely to rent

[crisi]

The "20 reservation per year" is simply a metric that Disney uses to help identify "commercial" use. There are situations where someone makes more than 20 reservations for other people, but is not using the membership for commercial purposes. And, counter to that, they could change the metric or use some other method to identify people who are making commercial use of the deed. You should plan to pay within the bounds of the legal contract. Don't take a "we won't get caught" approach.

ESPECIALLY since Disney has been big on using technology to close loopholes. Software will tell them how each name on a reservation is connected to the owner of the contract (seriously - its used by eCommerce companies to spot fraud - if you are sending a big TV to a person and address that isn't yours, they can (and often do) run it to make sure you know the person you are sending it to) - and 'commercial' isn't defined. So its not too difficult for Disney to say "if you don't know people on the majority of your reservations (they aren't friends or neighbors or relatives), we flag you as commercial.

Loopholes closed or policies enforced that weren't previously for reference - refillable mugs, transferable tickets, gated pools, resort parking, Fastpass return times.......

 

[101Pongo]

Thank you for all the advice.

My biggest take aways are:
Don't buy more than I can use in case they block commercial renting.
Don't buy more than I can afford to lose.
Wait until forex is positive enough to mitigate losses.
Investigate other potential investments for greater return.

 

[keishashadow]

OP - I have never looked at 'my' DVC as an investment in anything other than guaranteed vacation time.

If i ever would sell, then the profit would be a nice bonus but likely would gift to my adult children instead (specifically purchased to have a separate contract in place for each of them to make that simpler process).

If your would be utilizing disposable income vs investment funds, that's a horse of a different color IMO

If looking at a retirement/investment home look at non TS options. explore real estate market/bank repos etc. and run the numbers as to maintenance fees/onsite rental management. I'd go for something close to beach vs MCO where there seems to be a glut on the market as rentals.

 

[Eastcoast02]

Currently $1.38 CAD = $1.00 US. How would you ever profit with an already huge disadvantage to buying in?

 

[101Pongo]

Currently $1.38 CAD = $1.00 US. How would you ever profit with an already huge disadvantage to buying in?

Read upthread. I've said I'd only buy in at CAD$1 = USD$1.10+

 

[Ryandb2]

If you want to maximize income, I can't see a 9 year break even, with lots of variables beating any normal diversified portfolio. You are concentrating risk, introducing currency exchange risk, and potentially increasing tax liability, but to be fair I'm not Canadian tax law expert Not to mention you are in violation of the contract. I guess the better question might be, what makes this the best investment option for you?

 

[Deb & Bill]

Read upthread. I've said I'd only buy in at CAD$1 = USD$1.10+

Then you have either a very long wait or it's not going to ever happen.

 

[101Pongo]

Happened in late 2007. Held above par for a good part of 2011 & 2012.

If it happens it happens, if it doesn't then it doesn't.

 

[ELMC]

The ROI seems favourable even after maintenance (ballpark 9 years to break even) at $13-$14/point rental and even better if the Canadian dollar dips after purchase.

This is what I don't understand. Assuming the value of the contract trends towards zero, what is the advantage to "investing" money in a vehicle where your best case scenario is to get your initial investment back 9 years later?

 

[101Pongo]

This is what I don't understand. Assuming the value of the contract trends towards zero, what is the advantage to "investing" money in a vehicle where your best case scenario is to get your initial investment back 9 years later?

45 years left on an Aulani contract, so another 36 years of income after breaking even?

 

[Dean]

45 years left on an Aulani contract, so another 36 years of income after breaking even?

It's a crap return looked at just from an investment standpoint. Maybe 8-9% return before taxes if you're lucky on a high risk depreciating asset. Now there certainly are other reasons to own DVC but in their absence and given the current realities of prices, that's not a good return. If you lived in Orlando, did your homework, made good choices up front and in management, you should be able to get 1.5 to 2X that on an appreciating asset long term.

 

[ELMC]

45 years left on an Aulani contract, so another 36 years of income after breaking even?

I suppose, but you have to look at the power of compounding interest. Traditional investments that start earning profit in year 1 will be so far ahead of DVC in year 9 that I'm not sure DVC could catch up. Also, at the prices it's selling for Aulani doesn't have a 9 year break even.

 

[101Pongo]

It's a crap return looked at just from an investment standpoint. Maybe 8-9% return before taxes if you're lucky on a high risk depreciating asset. Now there certainly are other reasons to own DVC but in their absence and given the current realities of prices, that's not a good return. If you lived in Orlando, did your homework, made good choices up front and in management, you should be able to get 1.5 to 2X that on an appreciating asset long term.

Problem is that I don't live in Orlando.

Thanks for the great advice. I posed the question as a curiosity. If and when the Canadian dollar climbs to the point where I will invest in American assets, I will further research my options.

 

[Dean]

Problem is that I don't live in Orlando.

Thanks for the great advice. I posed the question as a curiosity. If and when the Canadian dollar climbs to the point where I will invest in American assets, I will further research my options.

Exactly. Thus you won't know the market, loacations or be able to look for a great deal. The money in rentals is made on the buy.

 

[Jbmia13]

I would say real estate over DVC for investment. Although if you want a contract to rent out.... look at one with longer years remaining on contract such as Saratoga springs, animal kingdom, etc. then down the road, after you break even....u can make little something. But something else to keep in mind is that each year our dues go up....so that would eat into your return a bit. Good luck!

 

[mort1331]

I posed this question when we were looking a few years back. I received all the same responses.
Now after buying 2 contracts both 200+points. I wish I purchased more.
I to am Canadian. Was lucky to buy at the right time. Dollar at par, and resale's at low cost. Both at $60/point.
Now if I were to sell I would be up at both ends. $80/point and dollar at 0.73. So that would be a great investment.
We went into it thinking about this scenario, but now have switched after recouping our investment with rentals. We now rent out half the points, and travel ourselves with the other half. I have never paid out of pocket for our MF.
We can see ourselves continuing like this for the foreseeable future. And if the dollar get back to par, maybe buying more.
Like all things timing is everything.
If your in the GTA, you know the real-estate market timing was 5-7 yrs ago compared to now.
Good luck and do your research.

 

[101Pongo]

I posed this question when we were looking a few years back. I received all the same responses.
Now after buying 2 contracts both 200+points. I wish I purchased more.
I to am Canadian. Was lucky to buy at the right time. Dollar at par, and resale's at low cost. Both at $60/point.
Now if I were to sell I would be up at both ends. $80/point and dollar at 0.73. So that would be a great investment.
We went into it thinking about this scenario, but now have switched after recouping our investment with rentals. We now rent out half the points, and travel ourselves with the other half. I have never paid out of pocket for our MF.
We can see ourselves continuing like this for the foreseeable future. And if the dollar get back to par, maybe buying more.
Like all things timing is everything.
If your in the GTA, you know the real-estate market timing was 5-7 yrs ago compared to now.
Good luck and do your research.

This is exactly the scenario I'd like to get into

 

[Minniesgal]

To me this fits the very definition of commercial renting so would be banned.

i think even though you are less than 20 per year, the fact you don't use it personally would make it commercial renting.

 

[dvcdream4fld]

I've looked into this. There are plenty of other investments and assets that will perform better and will be more stable than DVC ownership which will eventually end and lose all value. Also, you are playing with fire, if you break the commercial renting rules. I know this comes up all the time, but I would be pretty pissed off, if Disney quits allowing owners to rent their unused remaining points that they can't use at the end of the year. Disney will only do this in response to widespread commercial rental rule breaking. So, my request is, please don't ruin it for the rest of us.

 

[Dean]

To me this fits the very definition of commercial renting so would be banned.

i think even though you are less than 20 per year, the fact you don't use it personally would make it commercial renting.

In a sense I agree but here's the thing. If you take the stance no personal use is commercial, how would you handle someone who falls on bad times and decides to rent rather than selling. It's the same thing in the end, it is no different at all. I don't see how you can get away from volume as being a qualifying factor because volume lets you quickly get to where essentially no one will be affected that isn't truly commercial with reasonable limits. Certainly you can get to 20 a year with frequent trips, splits stays and the like but this is simply a starting point when they start looking and it's a pattern more than a given year anyway. And there are corporations (or at least used to be) that owned points to use as perks for customers and they would almost certainly cross over the line but never be renting.