mustinjourney
DIS Veteran
- Joined
- May 8, 2016
- Messages
- 3,074
I've seen it happen. I've considered doing it myself, but have been too lazy to do it.
It's just another form of arbitrage. The market doesn't correctly value resale contracts bc most people just look at the price per point without correctly valuing the amount of points in the contract.
For example, if you can get a large contract, say for 300 points or more at VGF that has 2015 banked and all points going forward for a DEC UY.
Buy it for $145 a point and $900 closing costs.
After closing, you rent out the 2015 points for $15 a piece and then transfer the rest to another one of your memeberships (or to other members) at $15+ a piece.
You've essentially extracted $45 a point from that contract, but you could easily sell it for $130 or more. Assume a 10% commission on selling it, and you'll likely have to rebate MFs for 2017 points, so you're down to net selling price of $111 (130-13-6).
You paid $100 for it ($145-$45). So your profit is $11 a point ($3300) on an investment of about $44,400.
My numbers might be slightly off, but that is the basic scenario.
And if you're a broker doing this, then your costs to buy and sell go way down.
Arguably though, there could be a conflict of interest if the broker is buying the contracts from their clients (they intentionally set the sales prices for the sellers low and buy it themselves thru a friendly third party without disclosing this to the original sellers).
It's just another form of arbitrage. The market doesn't correctly value resale contracts bc most people just look at the price per point without correctly valuing the amount of points in the contract.
For example, if you can get a large contract, say for 300 points or more at VGF that has 2015 banked and all points going forward for a DEC UY.
Buy it for $145 a point and $900 closing costs.
After closing, you rent out the 2015 points for $15 a piece and then transfer the rest to another one of your memeberships (or to other members) at $15+ a piece.
You've essentially extracted $45 a point from that contract, but you could easily sell it for $130 or more. Assume a 10% commission on selling it, and you'll likely have to rebate MFs for 2017 points, so you're down to net selling price of $111 (130-13-6).
You paid $100 for it ($145-$45). So your profit is $11 a point ($3300) on an investment of about $44,400.
My numbers might be slightly off, but that is the basic scenario.
And if you're a broker doing this, then your costs to buy and sell go way down.
Arguably though, there could be a conflict of interest if the broker is buying the contracts from their clients (they intentionally set the sales prices for the sellers low and buy it themselves thru a friendly third party without disclosing this to the original sellers).
