Buying small contracts.. a better way to buy DVC?

[codina818]

Recently I have been re-thinking some purchasing decisions.

Previously, I was all about getting big contracts (loaded with points hopefully, but now, I am thinking about getting small contracts.

Example: There are a few VGC and BLT 25 pt contracts out there (A few brokers have them)..haven't seen many of these and they usually disappear real fast.

When u look at it from a cost ppt... they seem prohibitive..

Yet, in looking at it long term, they have an appeal because they really never go down in price. (I SAID LONG TERM!!). Theoretically, you could own it for a long time and recover most, if not all, of what you paid into them. And when u want to sell, they move quite quickly.

For all those reasons, they seem to be a better long term play then a medium to large size contract.

I am still analyzing this..but it seems enticing..

What has been the collective experience out there with regard to all of you that have had and Sold your small contracts? Any input would be appreciated.

 

[chalee94]

Small contracts are easier to resell or divide among heirs.

Large contracts give you a better deal upfront (less closing costs and lower price per point).

If you hold the contract to expiration, the large contract is a better value. But it's true that most don't hold it to expiration.

Large contracts are also easier to keep track of. Points from smaller contracts from different resorts cannot be combined until 7 months out. Depends on what you are trying to do.

 

[chalee94]

Also while DVC prices historically have mostly increased, that is not guaranteed. DVC may continue to make changes that damage resale value, for one thing.

 

[BillPA]

small contracts tend to cost more, and all those closing costs will really kill any deal.

 

[KAT4DISNEY]

If you're speaking of doing the buying in resale I don't know that there's enough or any gain by buying small vs larger. At least I haven't noticed any resort where the point cost has tanked for everything except small contracts and the small contracts come with higher closing both on the buying and selling end (due to a few fixed fees in selling). You will pay more up front for them and so selling them for more is just an offset. But then consider the additional fees and it might actually be a smaller percentage increase vs a nice sized fully loaded contract. I had some smaller contracts that we had bought direct and resale and ultimately sold. After all was said and done I realized I'm good with mid-sized contracts. The only real benefit IMO to the small contracts is that they generally sell faster but I can wait the extra time vs the pain of selling multiple small with the multiple fees, multiple agreements, multiple contracts, multiple closings etc etc. I'd only buy less than 100 point contracts because they were filling in a shortage that I needed. I wouldn't do it as a plan when I was actually wanting 150-200 points or more.

 

[Disney Dad ADL]

Recently I have been re-thinking some purchasing decisions.

Previously, I was all about getting big contracts (loaded with points hopefully, but now, I am thinking about getting small contracts.

Example: There are a few VGC and BLT 25 pt contracts out there (A few brokers have them)..haven't seen many of these and they usually disappear real fast.

When u look at it from a cost ppt... they seem prohibitive..

Yet, in looking at it long term, they have an appeal because they really never go down in price. (I SAID LONG TERM!!). Theoretically, you could own it for a long time and recover most, if not all, of what you paid into them. And when u want to sell, they move quite quickly.

For all those reasons, they seem to be a better long term play then a medium to large size contract.

I am still analyzing this..but it seems enticing..

What has been the collective experience out there with regard to all of you that have had and Sold your small contracts? Any input would be appreciated.

Say you buy a resale 200 point contract at $100 pp and a resale 50 point contract at $120 pp today. Say in 20 years the 200 point contract is $50 pp (down 50%). Your hypothesis is that the 50 point contract will be worth > $60 pp (I.e. the small contract will go down less than %50)?

I'm not really sure why that would be the case, but maybe you have some data to support this?

 

[codina818]

Say you buy a resale 200 point contract at $100 pp and a resale 50 point contract at $120 pp today. Say in 20 years the 200 point contract is $50 pp (down 50%). Your hypothesis is that the 50 point contract will be worth > $60 pp (I.e. the small contract will go down less than %50)?

I'm not really sure why that would be the case, but maybe you have some data to support this?

That is what I am looking for actually. It is just a sense I have over the years of looking at contracts.

It seems that the small point contracts have held their value better than the other contracts. For example, 50 point AKV contracts are going for about $100 (asking price).. whereas the other contracts that are bigger are around 80-85. Some SSR small contracts are going for similar prices.
So there doesn't seem to be as much of a negative effect with small contracts as with bigger contracts.

I never was interested in small contracts before.. but over the years, it is something I noticed, ergo this thread asking for people's experience in this regard. I am tempted to buy some small BLT contracts or VGC.. those have consistently gone UP over the years.

 

[KAT4DISNEY]

I am tempted to buy some small BLT contracts or VGC.. those have consistently gone UP over the years.

But so have the large contracts at those resorts. With the very small contracts the multiple closings costs will be adding a whopping $25/pt! (I originally guessed $10-$15) So suddenly that it's costing you more like $$125/point for that small contract vs $87-$90/pt on the larger. I'd prefer to gamble on lower up front cost than any perceived potential down the road (which I do not feel has happened). The best scenario was for those people who when buying direct split their contracts and for example are now able to sell their small AKV contracts for what they paid or a few dollars more vs if they had bought a single large contract and now were selling for a few dollars less. But in buying resale that difference will be factored in so there's less to gain IMO.

Let's say you want 200 points. If you buy that large AKV contract at $85/point ($17,000) plus lets say $725 closing costs from TTS (wow - they've gone up!) for a total of $17,725 or $88.63/pt.

Now, buy that same 200 points in 25 increments at $100/pt ($20,000). That's 8 contracts with what appears to be closing costs of $630/contract = $5040! So your total purchase is $25,040 or $125.20/pt. IMO the chance you can compensate for those additional up front costs when you go to sell is virtually 'nil. ie - the premium of a small contract vs a mid-sized contract will not spread to the same degree.

 

[Disney Dad ADL]

That is what I am looking for actually. It is just a sense I have over the years of looking at contracts.

It seems that the small point contracts have held their value better than the other contracts. For example, 50 point AKV contracts are going for about $100 (asking price).. whereas the other contracts that are bigger are around 80-85. Some SSR small contracts are going for similar prices.
So there doesn't seem to be as much of a negative effect with small contracts as with bigger contracts.

I never was interested in small contracts before.. but over the years, it is something I noticed, ergo this thread asking for people's experience in this regard. I am tempted to buy some small BLT contracts or VGC.. those have consistently gone UP over the years.

Ah, I see. The problem with trying to figure that out is that large contracts have also increased in price, it's just that a small contract carries certain % premium over the large. A small contract hasn't really "held it's value" better than a large contract per se, they've both gone up. It's very difficult to get hard data on this other than looking at old ROFR threads. But even then it's hard due to loaded vs stripped contracts, and also expected variance due to the small amount of data you will actually get.

If you were to compare the value of 200 points resale contract 5 years ago to now and a 50 point contract 5 years ago until now, I'm guessing you won't see much of a difference in the amount they have increased percentage-wise.

Also, as mentioned earlier, closing costs are much higher for small contracts when taken as a % of the entire purchase.

 

[Dean]

Recently I have been re-thinking some purchasing decisions.

Previously, I was all about getting big contracts (loaded with points hopefully, but now, I am thinking about getting small contracts.

Example: There are a few VGC and BLT 25 pt contracts out there (A few brokers have them)..haven't seen many of these and they usually disappear real fast.

When u look at it from a cost ppt... they seem prohibitive..

Yet, in looking at it long term, they have an appeal because they really never go down in price. (I SAID LONG TERM!!). Theoretically, you could own it for a long time and recover most, if not all, of what you paid into them. And when u want to sell, they move quite quickly.

For all those reasons, they seem to be a better long term play then a medium to large size contract.

I am still analyzing this..but it seems enticing..

What has been the collective experience out there with regard to all of you that have had and Sold your small contracts? Any input would be appreciated.

Small contracts are easy to sell now and command a premium but the extra closing costs will erode any savings. If one can find a single seller and buys smaller increments like they are larger ones as a single transition or if one is going to buy retail anyway, certainly get the smaller contracts. But in reality there is a cost to this strategy that can easily be north of $10 a point and one can only hope to get back PART of that cost if they sell later. Otherwise my opinion is that strategy of buying multiple smaller contracts resale is a poor one. I don't believe anyone should buy to sell later and I believe there are things Disney can and possibly will do that will reverse this situation anyway. Plus just the extra closing is not worth it along with the higher up front cost per point. I wouldn't do this just to get 25, 50, 75 or even 100 points separate if that's the ONLY motivation. However, once one gets to around 350-400 points I generally would break it up mostly for different home resorts more than anything else. Or if one is looking at multiple home resorts and are sufficiently educated and experienced, that can be a different ballgame.

 

[codina818]

Small contracts are easy to sell now and command a premium but the extra closing costs will erode any savings. If one can find a single seller and buys smaller increments like they are larger ones as a single transition or if one is going to buy retail anyway, certainly get the smaller contracts. But in reality there is a cost to this strategy that can easily be north of $10 a point and one can only hope to get back PART of that cost if they sell later. Otherwise my opinion is that strategy of buying multiple smaller contracts resale is a poor one. I don't believe anyone should buy to sell later and I believe there are things Disney can and possibly will do that will reverse this situation anyway. Plus just the extra closing is not worth it along with the higher up front cost per point. I wouldn't do this just to get 25, 50, 75 or even 100 points separate if that's the ONLY motivation. However, once one gets to around 350-400 points I generally would break it up mostly for different home resorts more than anything else. Or if one is looking at multiple home resorts and are sufficiently educated and experienced, that can be a different ballgame.

This used to be my philosophy.. but I am now re-examining it. There seems to be some anecdotal evidence that I could have been wrong.. egro this thread seeking actual data.

And u make valid points.. but assume u can get 4 x 25 or 4 X 50 .. closing costs diminish alot after the first contract. Title companies dont charge additional title search fees if all the contracts are from the same seller.

And the long term advantage.. seems to be that the small contracts will alway give u back at least the price difference.. AFAIK.. but it is more of a guesstimation rather than raw hard data.

 

[Disney Dad ADL]

This used to be my philosophy.. but I am now re-examining it. There seems to be some anecdotal evidence that I could have been wrong.. egro this thread seeking actual data.

And u make valid points.. but assume u can get 4 x 25 or 4 X 50 .. closing costs diminish alot after the first contract. Title companies dont charge additional title search fees if all the contracts are from the same seller.

And the long term advantage.. seems to be that the small contracts will alway give u back at least the price difference.. AFAIK.. but it is more of a guesstimation rather than raw hard data.

Well, here's someplace to start if you want to start compiling data. I would just be wary of any data from "new" resorts, as you can see based on the current Poly situation that it takes awhile for resale values to settle out (I'm skeptical that Poly resale value will be higher than VGF in the long run as it is now, but that's my personal opinion). Looks like they didn't start compiling the data on the first page (like pangyal so kindly does currently) until section iii. In section i and section ii it's located on the last page.

http://htp.disboards.com/threads/an...de-it-through-rofr-recently-section-i.720134/ - Summary on page 188
http://htp.disboards.com/threads/an...-it-through-rofr-recently-section-ii.1710667/ - Summary on Page 92
http://www.disboards.com/threads/an...it-through-rofr-recently-section-iii.1960185/
http://www.disboards.com/threads/an...-it-through-rofr-recently-section-iv.2661661/
http://www.disboards.com/threads/an...e-it-through-rofr-recently-section-v.3001288/
http://www.disboards.com/threads/rofr-thread-2014-jan-june-update-to-thread-on-pg-71.3232755/
http://www.disboards.com/threads/ro...lease-read-1st-post-for-instructions.3297614/

Seeing all those VGC contracts for $85 pp makes me a sad panda, lol.

ETA: Most of the newer threads can be found pretty easily by Googling:

"site:www.disboards.com rofr thread"

 

[codina818]

Kinda of a difficult thing to get hard numbers on.. It seems there may be too many variables..

HEY U CPA GUYS.. SOME HELP HERE!!

The working hypothesis I have is that the resorts, esp the newer ones, will have a drop in price (historically, that is the pattern they have followed) but the small point packages have seemed to keep their value up more over the long term. Granted the prices have fluctuated, sometime greatly, but as a general rule, the smaller packages seem to have an insatiable demand that defies the big swings..

But I would really be helpful if some people out there had some small point packages that they regularly monitor and recently sold. That would be good hard data.

Right now, separating the wheat from the chaff seems daunting.

But just an example, I bought SSR direct from Disney at about $85 per point. I can sell the regular sized points (150 and up) for about $80.. . But if I had bought 25 or 50 point packages, .. well we are looking at at least $90.. a significant differential.

So that is what got me wondering.

 

[Disney Dad ADL]

Kinda of a difficult thing to get hard numbers on.. It seems there may be too many variables..

HEY U CPA GUYS.. SOME HELP HERE!!

The working hypothesis I have is that the resorts, esp the newer ones, will have a drop in price (historically, that is the pattern they have followed) but the small point packages have seemed to keep their value up more over the long term. Granted the prices have fluctuated, sometime greatly, but as a general rule, the smaller packages seem to have an insatiable demand that defies the big swings..

But I would really be helpful if some people out there had some small point packages that they regularly monitor and recently sold. That would be good hard data.

Right now, separating the wheat from the chaff seems daunting.

But just an example, I bought SSR direct from Disney at about $85 per point. I can sell the regular sized points (150 and up) for about $80.. . But if I had bought 25 or 50 point packages, .. well we are looking at at least $90.. a significant differential.

So that is what got me wondering.

Well, the threads I linked start from 2005 I believe, so I think that you will get a lot more data from those ROFR threads than you will get from responses I'm guessing. There are probably hundreds of data points in there, and more importantly it's what people actually paid rather than listing prices, which may or may not reflect what they are actually selling for.

Also, buying direct is a very different question than buying resale. If you're buying direct, then yes buying small contracts probably makes sense depending on the closing costs because you are paying the same no matter what size contract. But buying 25 point contracts resale for a 25%+ premium over a 150 point contract and expecting that they will hold their value better is a losing proposition IMO. But look at the data and maybe you can prove otherwise.

 

[zavandor]

I bought two contracts at SSR during the recession, one 65 points contract and the other with 125 points. I paid around the same amount pp, but now the smaller one is worth a bit more. So I'd say that the price gap increases if the market is good for the seller, but during next recession (when, not if) the price gap will probably get smaller than it is now. So buying small contracts is a risky proposition if you do it just as a long term financial plan.

 

[Dean]

This used to be my philosophy.. but I am now re-examining it. There seems to be some anecdotal evidence that I could have been wrong.. egro this thread seeking actual data.

And u make valid points.. but assume u can get 4 x 25 or 4 X 50 .. closing costs diminish alot after the first contract. Title companies dont charge additional title search fees if all the contracts are from the same seller.

And the long term advantage.. seems to be that the small contracts will alway give u back at least the price difference.. AFAIK.. but it is more of a guesstimation rather than raw hard data.

If you can get them from the same seller, as I acknowledged above, it can be a win win depending. If they're on the same deed it should simply be one closing. I don't normally recommend title insurance so that's an unnecessary expense for MOST DVC purchases. I also question the seeming guarantee that smaller contracts will always be a premium. It might be but I think there's a good chance this will not continue long term and it could reverse. And likely the best one can do is break even ignoring the additional closing costs resale to resale. So if they keep pace with current trends, 50*4 would cost your somewhere in the range of $2500 extra over the same 200 points as one. Including $1500 that's gone ( extra closings). Another items is many resale companies used to have a minimum sales charge if one is trying to move them later, that might come back at some point. It seems more likely to find a favorable contract on a larger contract, loaded vs stripped can easily be $10-15 a point. Maybe one wants different home resorts and has a plan where the extra costs are worth it. And if you are buying retail anyway, it does give other options at little to no cost.

 

[codina818]

Many people still "add-on" thru DVC (ie direct) and are playing something like 150+ ppt. For those poeple, buying resale is clearly a MUCH better option.