Buying DVC vs Renting points

[havoc315]

Hi. I’ve been recently researching DVC for my family of 4. We have 2 young boys, 6 & 3. We lived in the Orlando area for a few years and absolutely loved it, so I can easily see a trip to Florida yearly. I’m trying to figure out if buying into DVC is worth it vs renting points. I guess my question is “What have been the biggest issues with renting DVC points that people have experienced?”

Financially, renting can sometimes be cheaper than buying, often on par with buying. Buying really only becomes cheaper than renting when you use your points efficiently over a long period of time.
Why is renting often cheaper?
- Time value of money -- You're not putting up a big up-front cost. It's actually far more economical (for example) to spend $2,000 per year for 20 years than to spend $30,000 up front. While paying per year costs more in unadjusted dollars, you actually save money when you adjust for time value.
- You're only renting the points you need: Never wasting any points. If you need 127 points, you're renting 127 points. Not buying 150, then banking 23, and maybe ultimately letting a few points expire. If you skip some years, you don't risk any loss... don't have to find someone to rent your points to.

That said --- Renting has non-financial downsides -- You don't have full control over your reservation. You don't get the other perks of membership. And there is more uncertainty about the future cost and availability of rental points.
And renting has 1 big non-financial upside -- You can book virtually ANY resort at 11 months -- Not stuck with your home resort. Subject to finding someone who has the points to rent out, you can rent "home resort" privileges at a different resort every year.

 

[RoseGold]

And renting has 1 big non-financial upside -- You can book virtually ANY resort at 11 months -- Not stuck with your home resort. Subject to finding someone who has the points to rent out, you can rent "home resort" privileges at a different resort every year.

I think this is a big one. With this flexibility, you have additional choices that can be much cheaper than DVC, or much more expensive. Maybe you want to stay Wyndham this year, or maybe you want to go Waldorf. Maybe you want to do half the trip at one of these choices.

With the way Disney has been playing with tickets and with on-site perks, I am much less tied to staying on Disney property and see value in more flexibility. If you're going to have to pay for hard ticket events anyway, maybe the Wyndham is a better choice.

 

[DVC Doctor]

SSR at $130/pt
34 years left on its contract
Rental at $17
Dues at $8
Cost delta is $9
That puts your $130 resale contract break even at 13.5 years

correct, assuming you use every point without waste for 14 years and lets not forget the ssr will have some value in 14 years greater than $0

 

[davidl81]

Financially, renting can sometimes be cheaper than buying, often on par with buying. Buying really only becomes cheaper than renting when you use your points efficiently over a long period of time.
Why is renting often cheaper?
- Time value of money -- You're not putting up a big up-front cost. It's actually far more economical (for example) to spend $2,000 per year for 20 years than to spend $30,000 up front. While paying per year costs more in unadjusted dollars, you actually save money when you adjust for time value.
- You're only renting the points you need: Never wasting any points. If you need 127 points, you're renting 127 points. Not buying 150, then banking 23, and maybe ultimately letting a few points expire. If you skip some years, you don't risk any loss... don't have to find someone to rent your points to.

That said --- Renting has non-financial downsides -- You don't have full control over your reservation. You don't get the other perks of membership. And there is more uncertainty about the future cost and availability of rental points.
And renting has 1 big non-financial upside -- You can book virtually ANY resort at 11 months -- Not stuck with your home resort. Subject to finding someone who has the points to rent out, you can rent "home resort" privileges at a different resort every year.

when comparing renting to buying you have to factor two other things though. First rental rates are also increasing, they have grown about 4-5% per year, and that will somewhat offset the time value of money equations depending on what return rate you are factoring on your investment. Secondly of course with buying you own an asset you can sell in the future. DVC has historically appreciated in value, but of course at some point it will decrease as we get closer to the end date. That being said buy RIV today there is a 80%+ chance that those points will be worth more in 10 years than they are now, or at worse same value. If you rent points ten years from now it was al sunk cost. If purchased ten years from now you still have at worse the value of your point contract.

 

[perchy]

I've never rented because even tho it's cheaper than the cash price, it's still more than owning the points over 20 or more years.

 

[davidl81]

correct, assuming you use every point without waste for 14 years and lets not forget the ssr will have some value in 14 years greater than $0

In 14 years SSR will have 20 years left on its contract. We can look at the 2042 resorts as a benchmark and feel pretty confrontable that SSR will very likely at a minimum be valued at least what it is today, and possibly significantly more. At some point that value will start to drop, but your point is correct. You can buy, use for a certain amount of years, then sell and historically be no worse off than just being out of your annual dues and whatever time value of money you decide to use for your capital investment.

 

[havoc315]

when comparing renting to buying you have to factor two other things though. First rental rates are also increasing, they have grown about 4-5% per year, and that will somewhat offset the time value of money equations depending on what return rate you are factoring on your investment.

Also off-set by the increase in dues. Dues are also increasing about 4% per year. So the DVC owner pays a portion of that increase too. Furthermore, rental rates are very supply/demand sensitive. With more and more DVC being sold, and more owners aging out of their prime Disney years, wouldn't be surprising to see supply of rental points increasing -- potentially decreasing the price. For some resorts, especially at the 7 month mark, you can find people renting out points as low as $14-$16 per point -- Which isn't that different than a few years ago.

Secondly of course with buying you own an asset you can sell in the future. DVC has historically appreciated in value, but of course at some point it will decrease as we get closer to the end date.

Yes -- While I wasn't explicit, that factors into efficient long-term use of points. It's why renting will usually be better than buying with any of the 2042 resorts --- It's hard to imagine getting great re-sale appreciation on a 2042 resort if you buy now and sell in 10-15 years.

That being said buy RIV today there is a 80%+ chance that those points will be worth more in 10 years than they are now, or at worse same value. If you rent points ten years from now it was al sunk cost. If purchased ten years from now you still have at worse the value of your point contract.

For Riviera -- yes. I bought 2 years ago at 170 per point. Re-sale is already in the $150-$160 range. Another year or 2, it could easily be more than I paid. But for any of the 2042 resorts, I would say it is unlikely that the points will be worth more in 10 years. Very unlikely.

 

[havoc315]

I think this is a big one. With this flexibility, you have additional choices that can be much cheaper than DVC, or much more expensive. Maybe you want to stay Wyndham this year, or maybe you want to go Waldorf. Maybe you want to do half the trip at one of these choices.

With the way Disney has been playing with tickets and with on-site perks, I am much less tied to staying on Disney property and see value in more flexibility. If you're going to have to pay for hard ticket events anyway, maybe the Wyndham is a better choice.

This is a huge point that I really didn't address directly. One reason Disney loves selling DVC is because it LOCKS you into Disney. Locks you into Disney trips. Locks you into spending at Disney restaurants, buying Disney theme park tickets, prevents you from staying off property.
Renting gives you the flexibility to use different DVC home resorts, if you really want DVC. It gives you the flexibility to book free dining in a regular WDW resort, if that suddenly becomes the best deal for you. Gives you the freedom to go off-site. And most critically -- removes the bias towards a WDW vacation. Come 2028, when you have the conversation, "where should we go on vacation this year..... " -- It's no longer, "well, we already have the DVC points.. so we should probably go to WDW" -- Instead it's, "we can go anywhere."

 

[davidl81]

Also off-set by the increase in dues. Dues are also increasing about 4% per year. So the DVC owner pays a portion of that increase too. Furthermore, rental rates are very supply/demand sensitive. With more and more DVC being sold, and more owners aging out of their prime Disney years, wouldn't be surprising to see supply of rental points increasing -- potentially decreasing the price. For some resorts, especially at the 7 month mark, you can find people renting out points as low as $14-$16 per point -- Which isn't that different than a few years ago.



Yes -- While I wasn't explicit, that factors into efficient long-term use of points. It's why renting will usually be better than buying with any of the 2042 resorts --- It's hard to imagine getting great re-sale appreciation on a 2042 resort if you buy now and sell in 10-15 years.



For Riviera -- yes. I bought 2 years ago at 170 per point. Re-sale is already in the $150-$160 range. Another year or 2, it could easily be more than I paid. But for any of the 2042 resorts, I would say it is unlikely that the points will be worth more in 10 years. Very unlikely.

Yes the 2042 resorts have much different math versus renting. I would not recommending buying a 2042 resort from just a pure economic standpoint. If someone wants to buy BCV because they love it, want to stay there every year for NYE or FW etc and does not want to risk renting and missing out that makes sense to me. The 2042 resorts can still come out cheaper than renting, but the math is much closer and it's not a hill I'm willing to die on. I still think SSR or anything after that the math still very much favors buying.

 

[tjkraz]

If we could travel back to 2009, $20,000 would have bought about 200 points at Bay Lake Tower, usable for 50 years.

Now, if we'd instead have invested that $20K, and contributed another $1000-1200 per year to mirror the payment of DVC dues plus aggressive interest estimates of 8-9%, you might be able to withdraw enough annually to pay for a 200-point rental without touching the $20k principle. Absolute best case scenario is you are vacationing annually on rented points and still have roughly $20k invested 30-40 years from now.

However, since 2009 the value of the BLT points has appreciated to the point that they're now worth about $32-34k. If you ride it out to the end of the contract, it will be worthless. But following the trends of the 2042 contracts, there's every reason to think the BLT points could be enjoyed for 30 years or more before being sold at a handsome profit.

As long as there is a desire to vacation at Walt Disney World, DVC contracts will hold resale value--especially the original 14 resorts which are not subject to resale restrictions. BLT points purchased at $170-ish today will continue to rise in value, just as dues will increase and rental prices will climb over time.

There are both pros and cons to renting. Renting involves zero commitment and essentially gives you 11-month booking access to every resort. But it also means zero control over the points / reservations, no ability to cancel or adjust dates, no ability to rebook a different room size or location if circumstances change.

Either approach is defensible depending upon personal affection for Disney, risk aversion, need for flexibility, etc.

 

[starry_solo]

Do you plan to go every year? Every other year? Every three years?

Do you like deluxe accommodations? How big is your family? Studio or one bedroom?

 

[RoseGold]

However, since 2009 the value of the BLT points has appreciated to the point that they're now worth about $32-34k. If you ride it out to the end of the contract, it will be worthless. But following the trends of the 2042 contracts, there's every reason to think the BLT points could be enjoyed for 30 years or more before being sold at a handsome profit.

Sure. Now try it with RIV. I don't think it's fair to act like a direct purchase now is the same thing as buying in 2009 and that you're buying some kind of rocketship investment. Heck, try it with buying BLT direct right now. I bought VGF in the Covid dip over the summer. Assuming they didn't finance, my seller roughly broke even.

Buying is risk. If Disney keeps messing with tickets or parks, those decisions could really impact us and the value of DVC.

 

[JETSDAD]

Most people who rent are not paying $17-18/pt for 11 month reservations. The 2 biggest brokers are charging $19-24/pt for 11 month window reservation with $19 only being for OKW, SSR, VB, and HHI. For 7 month reservations you're looking at $19-20/pt. Yes there are private rentals as well but most renters are not using those. Renting also means not having access to the cheapest rooms so owning can bring the cost down that way as well. There are some resorts that are also very hard to even get renting and private renters will charge more than even the brokers on those reservations. If someone is willing to book shorter notice reservations with private renters, or take their chance on last minute dedicated reservations, then there can be deals to be found. That's hard to plan around though for those wanting to take regular Disney vacations.

 

[Brian Noble]

Yes the 2042 resorts have much different math versus renting.

I have a soft spot in my heart for BRV, so I thought I'd check this out. I could imagine being able and willing to travel for the next 20 years (but not much more than that), so that's not a bad time horizon. I will assume I could earn about 6% after tax on the purchase price, so that's the opportunity cost of buying vs. investing it, adding the dues figure annually, and using that account to pay for whatever my vacation might have been.

The cost of a BRV point resale (using DVC Market's Nov '11 median as my source) is $123. Amortizing that over 20 years at 6% gives me $10.56/year for the cost of points. Dues are $8.11, for a total of $18.67. That is right on the border of the rent-vs-buy question. Renting might be a little favorable, but doesn't account for the cost of the hassle of renting every year vs. just buying and booking what I want.

If I instead amortized at the long-term rate of inflation (3.1%), the total cost drops to $16.36. Still not too far off renting.

It's definitely food for thought. It's also interesting just how close to the rental line buying is. I suspect that's not an accident, given Smith's invisible hand etc. etc.

 

[Microbuns]

Assuming you buy SSR points now @$135 and ride it out until 2054, with 4% MF increases and rental point cost increases, you break even at different rental point costs depending on your personal rate of return:

Investment rate of return (AKA discount rate)	Rental point cost below which it is cheaper
3%	$10.20/pp
5%	$11.50/pp
7%	$13.00/pp
13%	$18.00/pp

If we do the same for a non-cost effective resort (BCV @ $160, ride out to 2042), the chart looks quite different.

Investment rate of return (AKA discount rate)	Rental point cost below which it is cheaper
3%	$13.90/pp
5%	$15.20/pp
7%	$16.80/pp
8.5%	$18.00/pp

These both miss the possibility that you will use less points when renting.

 

[DonMacGregor]

I have a soft spot in my heart for BRV, so I thought I'd check this out. I could imagine being able and willing to travel for the next 20 years (but not much more than that), so that's not a bad time horizon. I will assume I could earn about 6% after tax on the purchase price, so that's the opportunity cost of buying vs. investing it, adding the dues figure annually, and using that account to pay for whatever my vacation might have been.

The cost of a BRV point resale (using DVC Market's Nov '11 median as my source) is $123. Amortizing that over 20 years at 6% gives me $10.56/year for the cost of points. Dues are $8.11, for a total of $18.67. That is right on the border of the rent-vs-buy question. Renting might be a little favorable, but doesn't account for the cost of the hassle of renting every year vs. just buying and booking what I want.

If I instead amortized at the long-term rate of inflation (3.1%), the total cost drops to $16.36. Still not too far off renting.

It's definitely food for thought. It's also interesting just how close to the rental line buying is. I suspect that's not an accident, given Smith's invisible hand etc. etc.

That's why we own SSR direct (2054), but have purchased all but 25 of our BRV (2042) points via resale.

 

[bakerworld]

We joined DVC when we started vacation bi-annually at WDW and then realized we actually started fitting in a 3rd stay. At that point we had also started to stay exclusively at the BC so it made sense to purchase. When we had young we only went about every other or 3 years so joining DVC wouldn't have worked for us back then. The plus about joining in our 50's was actually looking at DVC for resort stays, as by that time we'd been to the parks many many times. Just remember DVC is only a room you are pre-paying and not park tickets, air, food or souvs.

 

[davidl81]

Sure. Now try it with RIV. I don't think it's fair to act like a direct purchase now is the same thing as buying in 2009 and that you're buying some kind of rocketship investment. Heck, try it with buying BLT direct right now. I bought VGF in the Covid dip over the summer. Assuming they didn't finance, my seller roughly broke even.

Buying is risk. If Disney keeps messing with tickets or parks, those decisions could really impact us and the value of DVC.

How do we have any idea what DVC will cost in 2034? All we can do is look at historical trends and see that it's likely direct points will be north of $300/pp and resale will also increase. We don't know how RIV's resale restrictions will play long term, but it is fair to assume that DVC prices will be 150% of todays prices in that time frame short of the 2042 resorts.
And you cannot comparing buying VGF at the very bottom of a dip to try to make a point about the DVC market. If you would have liquidated your investment portfolio in April 2020 you could make the case that the stock market is a horrible investment. Never use a single data point to try to prove a point, use a trend of data over time.

 

[tjkraz]

Sure. Now try it with RIV. I don't think it's fair to act like a direct purchase now is the same thing as buying in 2009 and that you're buying some kind of rocketship investment. Heck, try it with buying BLT direct right now. I bought VGF in the Covid dip over the summer. Assuming they didn't finance, my seller roughly broke even.

Buying direct rarely yields the best results, especially in the short term. 2009 BLT at $100 per point (during the Great Recession) didn't look as good as resale at most other resorts.

Riviera may not appreciate as rapidly as prior resorts due to the resale restrictions. But there are two things we know to be true: Disney hotel rates will continue to climb and DVC purchase prices will rise. As long as there is demand for on-site Disney hotel accommodations, there will be demand for DVC...even if one of those alternatives involves staying at the same resort year-after-year.

Buying is risk. If Disney keeps messing with tickets or parks, those decisions could really impact us and the value of DVC.

Both approaches include some risk. I'm skeptical of the idea that WDW / DVC is entering a death spiral.

Ticket prices and hotel rates will settle at a level that draws the highest crowds. They always have. I wouldn't expect anyone to consider DVC ownership if they weren't comfortable with the current economics.

 

[DVChris]

Most people who rent are not paying $17-18/pt for 11 month reservations. The 2 biggest brokers are charging $19-24/pt for 11 month window reservation with $19 only being for OKW, SSR, VB, and HHI.

Just checked one of the big rental brokers and they are charging $26 per point for a CCV studio reservation in June. Can't imagine what they would charge for the same room in December. Wow!