Buying resale contract vs. renting points -- where is the cutoff?

[TDK44]

Curious to know if anyone has a way that they think about the tradeoff between renting points for a stay that you know you want vs. just trying to find a resale contract that would allow you to have that stay plus the added bonus of then owning that contract going forward.

Is there a threshold in anyone's mind for where it would make sense one way or the other?

For example, in a few years I am hoping to either transfer in or rent 300 points at a resort I don't own at during a time where the 11-month home resort advantage is key, so I'd have to rent to make that stay happen. Alternatively, I could look to buy a 100 point contract at that resort and bank/borrow my way to that same stay when the time comes, and then I'd own that contract going forward.

I'd probably be looking at a total cost over the next 5 years of 2.5x to buy the contract versus just renting the points. If I could get the right contract at the right price, that spread could tighten.

I don't necessarily want or need another contract, but at some point the residual value of the contract 5 years out from now outweighs the extra cost today.

Anyone who has had a similar situation in the past have any thoughts on how you went through thinking about this?

 

[DanCali]

IF

(i) you are looking to buy resale, and
(ii) not at a resort expiring in 2042,

then I think buying is pretty much a no brainer even if you benchmark is the point rental cost and not rack rates.

The reason being is that you'd be saving $12-$14 (paying dues vs points rental cost) each year and so in ~10 years you will probably recover all the upfront payment and still have a substantial residual value in the ownership. This argument likely also applied to resale contracts at a restricted resort like RIV, but you'll obviously get more flexibility with an O14 resort.

10 years is a relatively long time for payback but these are 35-40 year contracts. I own some Westin/Marriott (perpetual) deeded weeks where the payback on buying resale was 4-5 years, but that's because of depressed resale values at other developers. The fact that DVC held resale value better (at least historically, at the unrestricted resorts) is not a bad thing per se!

 

[Mouseforward]

I literally just paid about the equivalent of $22 a point to buy a tiny BW contract. Is it financially worth it on a spreadsheet - no. However I can now click and book at 11 months for 7 days instead having to rent some points every few years and merge a reservation. So to me it was worth it.

I would not however purchase BC @130 or overpay for any 2042 resort unless I "had to have a studio at my dates" The math only works for possibly BRV.

For the occasional big 500 point trip, I would just scroll down and rent some $18 (or less) points and stay at SSR. I also like SSR so that helps.

 

[TDK44]

IF

(i) you are looking to buy resale, and
(ii) not at a resort expiring in 2042,

Definitely only resale, and not a 2042 resort.

I think the other thing I'm weighing is I'll definitely have more points than I'd need between my (then) two contracts in 7-8 years from now. I guess the big assumption would be that resale value would need to hold up in order to be able to offload one of them then.

My back of the envelope math would say that if I could sell the contract in 5 years for ~85% of what I bought it for today that I would break even between buying and owning for only a few years vs. just renting the points.

 

[HyperspaceMountainPilot]

Definitely only resale, and not a 2042 resort.

I think the other thing I'm weighing is I'll definitely have more points than I'd need between my (then) two contracts in 7-8 years from now. I guess the big assumption would be that resale value would need to hold up in order to be able to offload one of them then.

My back of the envelope math would say that if I could sell the contract in 5 years for ~85% of what I bought it for today that I would break even between buying and owning for only a few years vs. just renting the points.

If you need to sell inside of 10 years I would not buy. Prices have been trending downward and there’s no real reason to assume that trend won’t continue. On a 100 point contract, you’re likely to spend at least $20/pt simply on closing costs (buying) and broker fees (selling).

 

[VGCgroupie]

100% buy in my opinion. Paying thousands to stay could be put towards a contract. To me it’s a no brainer. I’ve owned my first contract for just a year and it’s paid for itself at 64% already. I could sell today and come out with a pretty decent profit. All of my other contracts owned less than a year are between 35%-50% paid for. Hands down best choice I made vs paying cash

 

[AwfulWaffle]

I’m not a renter of my points because I don’t have enough of them to go around but I’ll be interested to see how rentals look a couple years into the future with the recent changes that were made. Yes I know we are allowed to rent as long as it’s not in a commercial fashion. Not arguing any of that or even speaking intelligently about that world, just curious once the commercial renters go away how spare will rentals become? I rented before I was an owner and never had an issue within finding availability. Will be interested to see if that remains true in the future. I can’t say if you should buy or rent, do the numbers and see what works best for you and your family. We are a family of 5 so it was a no brainer for us because two bedrooms are just too expensive but every family is different. Either way you are going
To Disney and staying at a deluxe resort so it’s not a bad day either way

 

[AstroBlasters]

If you need to sell inside of 10 years I would not buy. Prices have been trending downward and there’s no real reason to assume that trend won’t continue. On a 100 point contract, you’re likely to spend at least $20/pt simply on closing costs (buying) and broker fees (selling).

Agreed. I would be very skeptical with residual value predictions at this point. I agree the risk is to the downside and not the upside. I’m obviously still very long DVC points, but I wouldn’t buy with a plan to sell in the short to intermediate term after taking into account the transaction costs.

 

[Brian Noble]

The only reason to buy is that you anticipate needing (or at least wanting) those points for regular stays over at least the next 10-15 years.

 

[TDK44]

If you need to sell inside of 10 years I would not buy. Prices have been trending downward and there’s no real reason to assume that trend won’t continue.

Agreed. I would be very skeptical with residual value predictions at this point.

Definitely hear this, and that's what I'm wrestling with. I think I'm more approaching it from the angle that it would give me the option to continue owning in 5-7 years, and that option would only cost an extra couple thousand today, given that I'd be shelling out for renting points anyway.

The only reason to buy is that you anticipate needing (or at least wanting) those points for regular stays over at least the next 10-15 years.

Agreed -- if anything, in 10-15 years I would probably be looking at selling off my 270 point contract (which expires sooner anyway) and downsizing, so in all likelihood I would keep this smaller contract for much longer. So residual value will matter more for the larger contract, but I will have already gotten a ton of value out of it during my ownership period.

I’ll be interested to see how rentals look a couple years into the future with the recent changes that were made.

This is probably the only thing holding me back. If I knew that in ~10 years when I probably wouldn't need as many points anymore that I would be able to rent them out, then this becomes a no-brainer buy decision from a financial perspective.

--

Thanks everyone for your thoughts! Lots to think about, and probably will wait to see how things shake out over the next year in terms of resale / overall economy before making a decision (unless the right contract comes along!)

 

[CraigInPA]

The challenge in the math is whether you attribute any value to the fact that you can use it for future stays. If you're renting points once, you're likely going to pay between two to three times the annual dues. If you do the 100 point resale, you'll be paying dues on 3 years, so that's a wash. But, in the end, if you have put out the full value of the resale contract, and hope to sell it for no-profit and no-loss at the end of the 3 year term, you're literally flipping a coin. I can foresee issues with reselling any of the 2042 resorts and Riviera with it's resale restrictions and breaking even. On the other hand, something like Poly, BLT, or AK, you might achieve a gain or you might break even. But, if you have an ongoing need for those additional points, then the resale after 3 years equation goes away, and it is likely a good proposition.

 

[VGCgroupie]

I guess my take is way different than others and based off my experience. You just need to sit down and see where your break even is and when you buy, buy smart. Obviously DVC isnt better than investing elsewhere. But if you buy and use all the points for 4 years every year vs cash and then sell at 4 years I don't see how you would lose money, it may not be a money maker but you'd be hard pressed to lose money.

Im not a financial advisor.

 

[jparilla]

100% buy in my opinion. Paying thousands to stay could be put towards a contract. To me it’s a no brainer. I’ve owned my first contract for just a year and it’s paid for itself at 64% already. I could sell today and come out with a pretty decent profit. All of my other contracts owned less than a year are between 35%-50% paid for. Hands down best choice I made vs paying cash

Just curious, how do you personally measure the contract paying for itself? I keep a sheet comparing cost to rent the same room, book the same room or comparable via cash, and to just book Pop Century (since that was what we came from). Wonder what others like to measure by.

 

[VGCgroupie]

Just curious, how do you personally measure the contract paying for itself? I keep a sheet comparing cost to rent the same room, book the same room or comparable via cash, and to just book Pop Century (since that was what we came from). Wonder what others like to measure by.

There are some here that have a very detailed break even chart. I think ehh is one. If I remember correctly many resorts had around a 10 year break even with their breakdown. But it didnt factor in if you sold it. So if you break even or if you sell once you meet 60% towards a break even high probability you haven't lost money. We have yet to see any resort hit $0.00 per point resale.

Some take into consideration investing that upfront money vs buying DVC. I dont do that. I am perfectly fine "investing" in my vacations.

As for me I take the room I actually book to calculate my break even. I do factor in any discounts available on cash at the time. I think it is smart to calculate POP if thats where you would have normally stayed. I am slightly different as my stays prior to DVC were almost exclusively at DL not WDW and at DL I always stayed on property.

 

[Adam723]

I literally just paid about the equivalent of $22 a point to buy a tiny BW contract. Is it financially worth it on a spreadsheet - no. However I can now click and book at 11 months for 7 days instead having to rent some points every few years and merge a reservation. So to me it was worth it.

I would not however purchase BC @130 or overpay for any 2042 resort unless I "had to have a studio at my dates" The math only works for possibly BRV.

For the occasional big 500 point trip, I would just scroll down and rent some $18 (or less) points and stay at SSR. I also like SSR so that helps.

I just did the same. Purchase price + dues (with estimate for increases) comes out to $20/pp. The point chart at BWV makes it worth it to me. Would never be able to guarantee 17 years of rentals in a resort view studio renting points. Ease of use is a powerful positive to me.

 

[JPKanks]

If you need to sell inside of 10 years I would not buy. Prices have been trending downward and there’s no real reason to assume that trend won’t continue. On a 100 point contract, you’re likely to spend at least $20/pt simply on closing costs (buying) and broker fees (selling).

I don't think anyone should go in expecting to sell for more than they bought it for. This is a depreciating 'asset' so the expectation is there would be a lower value year after year.

 

[Brian Noble]

But if you buy and use all the points for 4 years every year vs cash and then sell at 4 years I don't see how you would lose money

I do.

Is it likely? I have no idea. But it is definitely possible. I watched prices crater during the Great Recession, and given the current global financial uncertainty, I cannot tell you that won't happen again.

I know that my take on this is very unusual, but I would never buy DVC unless I was comfortable with the possibility that it could be worthless on resale.

 

[DanCali]

But if you buy and use all the points for 4 years every year vs cash and then sell at 4 years I don't see how you would lose money,

The OP was basing his analysis based on rental rates (which is also how I would do it) and not cash rates. IMO that's a much fairer analysis, and looks at a much more competitive market that available to all who choose it.

It does feel great to stay at Aulani with subsidized points and then see that that 2BR is priced at $2900/night after tax. But how many people actually pay $20,000 per week for accommodations, even when they can theoretically afford it? In my case, I would absolutely never pay (even the discounted) cash rates, whether it's the DVC timeshares or Marriott timeshares, so they are a lot less relevant to my comparisons. It's kind of the same to me with the analyses that value credit card point at like 10c per point because you can transfer to some airline and book an overpriced business class seat that you'd probably never pay for otherwise. If I wouldn't pay for it, then it not worth that value (to me). So I cannot in good faith base financial decisions off those numbers.

 

[noisykid]

I literally just paid about the equivalent of $22 a point to buy a tiny BW contract. Is it financially worth it on a spreadsheet - no. However I can now click and book at 11 months for 7 days instead having to rent some points every few years and merge a reservation. So to me it was worth it.

I would not however purchase BC @130 or overpay for any 2042 resort unless I "had to have a studio at my dates" The math only works for possibly BRV.

For the occasional big 500 point trip, I would just scroll down and rent some $18 (or less) points and stay at SSR. I also like SSR so that helps.

Not quite sure I understand what you mean that you paid equivalent of $22/pt for a Boardwalk contract, please explain.

I agree on the $130/pt price for BCV. I think the cutoff for BCV/BWV should be about $120/pt given the 2042 expiration, and only then should it be more about convenience than the math.

 

[pzw90]

Not quite sure I understand what you mean that you paid equivalent of $22/pt for a Boardwalk contract, please explain.

I agree on the $130/pt price for BCV. I think the cutoff for BCV/BWV should be about $120/pt given the 2042 expiration, and only then should it be more about convenience than the math.

I think they are just taking all the points they will be receiving through the life of the contract. And splitting their total cash output by that number