Can we profit off DVC?

[Steamboat Bill]

I am starting this new thread as my last thread: New rule enforcement on points
http://disboards.com/showthread.php?t=1205585 has morphed into a discussion on the topic of NOT transferring points for money.

Here is the HOT TOPIC I want to start. Lets all post our real opinions (good or bad)and try not to attack me or others personally as I am sure this thread could easily get out of hand.

Question:
Can we profit from our DVC memebrship? Specifically, should we be allowed to rent and/transfer points or reservations for a profit or whatever the market will bear?

Discussion:
DVC is a deeded real estate property with lots of rules. I know that commercial brokers have exploiting DVC for years. I am a small DVC owner with 500 points and use most of them for my family, but occasionally will rent/transfer points when I have extra.

I have NEVER pre-booked a holiday week with the intention of selling that reservation on eBay for profit as most commercial brokers will try to do.

 

[OneMoreTry]

Maybe you should have made this a poll.

I would say yes with restrictions. If we try to protect DVC from the free market won't it lose value? I didn't buy DVC as an investment, but I like the idea that I could sell it for more than I paid. To me the only question would be what restrictions to enforce to protect "the magic" (everyone say ooooooo ) for owners. I definitely like to feel special as a DVC owner even though, rinkwide, I realize it's just smoke and mirrors. I think those smoke and mirrors enhance the value, too.

Also, if I ever DID sell I would like the option of renting once in a while to go to WDW.

So I vote a .

 

[dianeschlicht]

I agree with the poll idea.

I think the operative word here is "profit". Profit in what way? Obviously some folks have made DVC renting their "business" and owning a few extra points and renting them out is one thing, but making it big enough to actually be your livelihood is wrong. Renting truly is allowed, but I don't believe any timeshare is set up to be turned into a business other than the original timeshare. Your 500 points is a drop in the bucket compared to the number of points the "commercial" renters are using.

The transfering thing is another issue. It is DVC's only way to stop the constant transfering of small amounts of points into some of those huge conglomerate accounts. If that is the only way they can curtail that activity in the short term, than I applaud them for trying to put a handle on it.

As for a small "profit" made by those who have a few extra points....yes, in that way there is probably a profit, but when you cross that line of transfering points that you don't pay maintenance on into your account to then be turned around and re-rented....that goes beyond normal profit from your few extra points.

BTW, I am using the "you" in a generic manner...not directed at the OP.

 

[Steamboat Bill]

Feel free to post this as a poll...I am not sure how to do this.

Perhaps we need to decide what a "profit" is.

There are two methods that I am aware of: renting points on DIS or making a reservation and selling that reservation on eBay.

Let't take a 150 point DVC contract at $100pp with $4 maintenance fees as our benchmark.

Total cost of each point (assume there are no financing):

$15,000 total cost and thus, lost opportunity of 5% in a CD = $750 per year = $5 per point.

Maintenance fees of $4 per point + lost opportunity costs = $9 per point "true cost"

Thus, any rental or transfer of points over $9 per point would be considere a profit in this example. If you are financing your DVC with 7% interest (or more), then you are toast and there is no possibility of profiting with rentals or transfers.

This example will deal with renting or transfering points. I am sure if you lock up a Christmas week at WVL or July 4 at BCV, you may be able to make a larger profit, but I have never done this and don't know how much they get on eBay. Perhaps someone can post an example of this.

 

[RobDoc]

...
Let't take a 150 point DVC contract at $100pp with $4 maintenance fees as our benchmark.

Total cost of each point (assume there are no financing):

$15,000 total cost and thus, lost opportunity of 5% in a CD = $750 per year = $5 per point.

Maintenance fees of $4 per point + lost opportunity costs = $9 per point "true cost"

Thus, any rental or transfer of points over $9 per point would be considere a profit in this example. If you are financing your DVC with 7% interest (or more), then you are toast and there is no possibility of profiting with rentals or transfers.

While your example may be appropriate for those buying today at SSR - since you are using $100 per point (even that is high for most purchases) and $4 maintenance fees - it does not work for those buying a resale at VB at $70 or for the great numbers of owners who purchased OKW years ago for less than $60 per point. In fact, many of those owners have already likely more than broken even on their costs and now can vacation (or rent to others) where their only expense is the actual cost of the maintenance fees. Thus, some would have a much greater "profit" than the example used above.

Regardless, I don't believe DVC (and they are the only ones who would "define" any of this) really cares what rate members use for rentals - only looking for a "pattern of rental activity" that would meet any criteria of "commercial activity". I don't think DVC cares what members paid for their points, what they could invest that money for today or what rental rate they get from their renters - in terms of whether anyone is actually making a profit.

The POS doesn't even really mention "profit" - only "pattern of rental activity".

 

[drakethib]

I think you should be able to rent points that you won't use for whatever reason no matter what it is.

I have no problem with people buying extra points for the sole purpose of renting.

What ticks me off when people make reservations for peak times for the sole purpose of renting to make money.

To me, this is just wrong and I think you are screwing other members when you do this.

Just my 2 cents, YMMV.

 

[DemoBri1]

This is a very interesting topic, and one that could have arguments made on both sides that are very convincing. IMHO I think that we as DVC "owners" should have the rite to do with our points as we wish. We are the ones that put the money up for them, and we are the ones that continue to pay the maintenance fees.

That being said, however, there is a limit which I feel goes beyond the point of good faith. To me if you are a DVC owner then you should have some love and devotion to Disney. I don't agree with people who purchase large amounts of points to make several different reservations to hold them in "hock". I don't believe it's fair to another owner that should be shut out from a vacation because someone who has no intention of taking that vacation is holding the points hostage to the highest bidder.

I would love to be able to rent points out to someone and allow them to experience the "magic", but I would never purposely hold points to try and make a profit over someone. I wouldn't want to find out that I'm paying more for a room than I should have. I didn't get into DVC to make a profit. I joined to be able to provide wonderful vacations for my family.

What I do hope is that it never comes down to the fact that point renting becomes so abused that DVC begins issuing new rules on this subject. It's better that we try to govern ourselves now before we have to pay the piper.

Just my $.02

 

[joepoe]

Bill, are you an accountant? Because I think your premise of comparing the investment in DVC to a CD investment as opportunity cost is faulty.

You forget to include the capital appreciation of the points value over the years as well. Our points have appreciated 38% on the resale market since 2000.

Are you never going to go to Disney again if you buy your CD? If you are planning to go, then you need to include that cost as well. what is the present value of the cost of 36 years of accomodations (to 2042?)

Using my own formula, i figure our costs are closer to 5 bucks a point.

Feel free to post this as a poll...
Perhaps we need to decide what a "profit" is.

Let't take a 150 point DVC contract at $100pp with $4 maintenance fees as our benchmark.

Total cost of each point (assume there are no financing):

$15,000 total cost and thus, lost opportunity of 5% in a CD = $750 per year = $5 per point.

Maintenance fees of $4 per point + lost opportunity costs = $9 per point "true cost"

Thus, any rental or transfer of points over $9 per point would be considere a profit in this example. If you are financing your DVC with 7% interest (or more), then you are toast and there is no possibility of profiting with rentals or transfers.

This example will deal with renting or transfering points. I am sure if you lock up a Christmas week at WVL or July 4 at BCV, you may be able to make a larger profit, but I have never done this and don't know how much they get on eBay. Perhaps someone can post an example of this.

 

[fishermouse]

I think you should be able to rent points that you won't use for whatever reason no matter what it is.

I have no problem with people buying extra points for the sole purpose of renting.

What ticks me off when people make reservations for peak times for the sole purpose of renting to make money.

To me, this is just wrong and I think you are screwing other members when you do this.

Just my 2 cents, YMMV.

IMO: You can't have it both ways, if you are going to buy extra points for the sole purpose of renting, it would be poor bussiness sense not to make as much as possible. Therfore snatching up the best dates only makes sense. Not that I approve just pointing out that if one is OK the other just makes sense. I do understand that at times folks will have points leftover and renting or transfering should be reserved for that purpose only. One transfer a year plus banking and borrowing should be enough to keep most of us from loosing any points.
To answer the original question time share renting seems a poor investment compared to all the other ways to build your money. This statment of course does not apply to commercial renters that have figured out how to use other peoples points to turn a profit.

 

[kathytx111]

Maybe you should have made this a poll.

I would say yes with restrictions. If we try to protect DVC from the free market won't it lose value? I didn't buy DVC as an investment, but I like the idea that I could sell it for more than I paid. To me the only question would be what restrictions to enforce to protect "the magic" (everyone say ooooooo ) for owners. I definitely like to feel special as a DVC owner even though, rinkwide, I realize it's just smoke and mirrors. I think those smoke and mirrors enhance the value, too.

Also, if I ever DID sell I would like the option of renting once in a while to go to WDW.

So I vote a .

I agree

 

[Steamboat Bill]

Bill, are you an accountant? Because I think your premise of comparing the investment in DVC to a CD investment as opportunity cost is faulty.

You forget to include the capital appreciation of the points value over the years as well. Our points have appreciated 38% on the resale market since 2000.

Are you never going to go to Disney again if you buy your CD? If you are planning to go, then you need to include that cost as well. what is the present value of the cost of 36 years of accomodations (to 2042?)

Using my own formula, i figure our costs are closer to 5 bucks a point.

I am definatly NOT an accountant. In reality, I am trying to establish what the true cost of points are and determining their worth so if and when I have too many points, I can rent them.

You are correct, I forgot to account for capital appreciation, but this is hard to quantify as most Timeshares (except DVC) usually do not go up in value. In addition if you use The Timesahre Store for reslae, you must deduct about 10% for comissions.

Of course I plan on going to Disney and the OP example would use some of that CD money vs paying $9 pp per year. Remember CD income is a positive cash folw while MF is a negative cash flow.

Perhaps there is no real answer, I just wanted to start an interesting thread.

 

[Plutofan]

I am definatly NOT an accountant. In reality, I am trying to establish what the true cost of points are and determining their worth so if and when I have too many points, I can rent them.

You are correct, I forgot to account for capital appreciation, but this is hard to quantify as most Timeshares (except DVC) usually do not go up in value. In addition if you use The Timesahre Store for reslae, you must deduct about 10% for comissions.

Of course I plan on going to Disney and the OP example would use some of that CD money vs paying $9 pp per year. Remember CD income is a positive cash folw while MF is a negative cash flow.

Perhaps there is no real answer, I just wanted to start an interesting thread.

You should only include capital apprecaition if you expect to sell before 2042 or 2054 (SSR). At the end of the term there will be no value. Also there is no guarantee that DVC will appreciate. As the number of years left decrease it could get harder for the existing DVC resorts to match prior appreciation. Some believe that at some point the value of DVC will go down at the older resorts. So if you are planning to hold on to your points until they expire then I agree with you analysis as a starting point.

 

[joepoe]

I am definatly NOT an accountant. In reality, I am trying to establish what the true cost of points are and determining their worth so if and when I have too many points, I can rent them.
Perhaps there is no real answer, I just wanted to start an interesting thread.

Gallant effort. It is important to know what we are getting into, that is for sure. I for one do not think that the "commercial renters" are very many, nor that they are making much money if any.

 

[Caskbill]

Gallant effort. It is important to know what we are getting into, that is for sure. I for one do not think that the "commercial renters" are very many, nor that they are making much money if any.

Well, I can only comment that one commercial renter actually bragged on this board a year or more ago that he once got $21/point for a rental unit.

If I recall, I think he said he averaged around $15-$16/point. He rented via E-bay, mostly prime time 5-day weeks.

 

[Steamboat Bill]

I believe that there are 10-25 commercial renters out there. Just my guess. Thus, DVC shoudl try to limit their activity not ours. That is why I am against the new rule limiting transfers. They really need to stop the raping of the prime weeks by a few individuals with the intention of selling for big $$$ on eBay. I totally avoid Disney at holidays, but that is because I live in S Florida.

 

[barbarabini]

i thinkthe real profit to be made is if you can buy it with an employee or family discount and then resell it.

I wonder is disney ROFR'd those for the amount paid rather than the higher resale amount.

 

[mydogdrew]

I believe that there are 10-25 commercial renters out there. Just my guess. Thus, DVC shoudl try to limit their activity not ours. That is why I am against the new rule limiting transfers. They really need to stop the raping of the prime weeks by a few individuals with the intention of selling for big $$$ on eBay. I totally avoid Disney at holidays, but that is because I live in S Florida.

I approve of the limit on transfers as I believe the average member can work around the issues raised. However, if I have extra points some year I would absolutely rent a prime reservation if possible. It just makes sense to maximize income while limiting the time on the phone with MS. As long as I don't meet the definition of commercial renter (I've never transferred points into my account and I certainly did not purchase a contract with the intension of renting points), it's no one's business whether I stay during a prime week or if I make arrangements for someone else for that same week.

 

[Steamboat Bill]

i thinkthe real profit to be made is if you can buy it with an employee or family discount and then resell it.

I wonder is disney ROFR'd those for the amount paid rather than the higher resale amount.

If anyone was lucky enough to have a family get them the 15% discount, they would not get ROFRed because would be bought directly from DVC at full price - 15% cast member discount.

ROFR only applies to resales.

 

[spiceycat]

I think all DVC members are making a profit.

we all get great vacations to a place we all love - WDW!

what could be better!!!

I certainly couldn't afford to go to WDW as often as I do without DVC.

and last year plus some this year - when my brother needs money - renting DVC is so easy.

Of course renting my other timeshare was easy too.

 

[barbarabini]

--

i was wondering if you sold your dvc (purchased at the discount) -- whether disney would use the rofr and take the K at the original sale price rather than the resale bid - which would be higher?q

anyone know?