CRAZY QUESTION: DVC Hobby Business?

[thewelts]

This may be nuts, but I'm curious to hear some feedback.

Scenario: If I invested $100,000 in DVC points -- let's say 5 contracts for 900-1000 points (Poly, VGF, VGC, HHI & ???).

Would it be realistic that I can rent these points as a hobby business for $12-$15 per point.

I have been actively renting points (as a "rentee") for the past 5 years so I feel like I have some experience on the process of renting. I have never owned a timeshare. I spend lots of time researching Disney properties and reservations.

Does anyone else out there do this? If so, would you be willing to talk to me about your experiences -- both positive and negative.

Basically, I am looking for a creative way to invest $100,000 -- hoping to earn $8,000/year while keeping the $100,000.

Crazy?

 

[supersnoop]

First of all, a real estate timeshare is not going to be a risk-free investment. your entire principle will be at risk. Plus, since DVC is a right-to-use contract with an expiration date, the asset value will (should) decrease over time.

Second, DVC specifically prohibits "commercial activity" in the contract. That definition is left up to interpretation. Some say if you make more than 20 reservations in a year, they'll come after you. But, that's a policy and could change. If you never travel on your points, or only travel 10%-25% of the time, they could get wise to your activity.

And, finally, the return isn't going to be that great. After maintenance fees, it seems like you're getting an 8% return, but you're putting in lots of effort, plus, as noted earlier, your asset value is decreasing. Adjusted for inflation, you'd probably get your money back after 12 or 13 years.

Personally, I don't think I would invest $100,000 and essentially take on a second job for $8,000/year, especially when that asset is as risk of both depreciation and policy.

 

[MountainMouse]

I share the sentiment of the PP that too much risk is involved, not enough reward, and it's a depreciating asset. Wouldn't be for me, the money would very likely be better off in an investment account. I wouldn't characterize it as a lot of work though. If the average rental is 150 points then you're looking at 6-7 rentals/year. If you get an in demand resort and can book at 11 months you shouldn't have a problem renting. At very best you'll make $8/point on a rental, probably 6-7 realistically and be prepared to just break even or lose if the economy tanks.

 

[thewelts]

Thanks so much for your thoughtful and helpful replies. This would not be for me... I am trying to help my mother (age 70) preserve her (very) limited nest egg.

I have personally enjoyed my DVC rental experiences and feel like I can offer the same to others.

I suspect I should keep looking for other options for her. Your replies have been very helpful -- thank you!

 

[jerseyduke]

Put VGF maintenance fees at 6 per point (a little high, I know, but easier math)

say you can rent it for 16 a point. That is clearing 10$ per point. Picking up a resale contract at say 120 per point, that is 12 years before you begin to show a profit. After that you have 3 more 12 year periods to "make money". Every 12th year nets you your initial investment back, so at the end of it all, your 100K investment will turn into a 300K sum over 48 years. That is not a good ROI at all.

Not to mention, when using real estate as an investment, you usually want some tax benefits associated with it.

 

[crisi]

And, finally, the return isn't going to be that great. After maintenance fees, it seems like you're getting an 8% return, but you're putting in lots of effort, plus, as noted earlier, your asset value is decreasing. Adjusted for inflation, you'd probably get your money back after 12 or 13 years.

It also assumes every point gets successfully rented and you get paid for it. Over a few years. with that much of a business going, someone will end up not paying you, a check will bounce, you'll end up with points in holding. To run DVC rentals as a business and make dependable money means non-refundable all money up front transactions - and a heart of iron when the sob stories start rolling in about rented points for honeymoons for weddings that got cancelled, job loss and illness meaning cancelled trips.

When I needed to rent my points, I used David just so I didn't need to face that problem - but that meant I got a smaller amount of money for my points.

 

[twinmom108]

Not to mention if your renter damages Disney property you could be held liable for the damage.

 

[chalee94]

Put VGF maintenance fees at 6 per point (a little high, I know, but easier math)

say you can rent it for 16 a point. That is clearing 10$ per point.

and then there are taxes to be paid on the income...

 

[crisi]

This may be nuts, but I'm curious to hear some feedback.

Scenario: If I invested $100,000 in DVC points -- let's say 5 contracts for 900-1000 points (Poly, VGF, VGC, HHI & ???).

Would it be realistic that I can rent these points as a hobby business for $12-$15 per point.

I have been actively renting points (as a "rentee") for the past 5 years so I feel like I have some experience on the process of renting. I have never owned a timeshare. I spend lots of time researching Disney properties and reservations.

Does anyone else out there do this? If so, would you be willing to talk to me about your experiences -- both positive and negative.

Basically, I am looking for a creative way to invest $100,000 -- hoping to earn $8,000/year while keeping the $100,000.

Crazy?

By the way, what you are looking to do, make 8% a year and guarantee the principle on a $100,000 is not really possible. You can pretty much depend on at least that through the stock market OVER TIME, but you can't GUARANTEE the principal and a downturn in the market could leave her with half the assets she has. Which is the same issue with DVC, a downturn could leave her with the value of the principal half of what it is.

 

[disneynutz]

This may be nuts, but I'm curious to hear some feedback.

Scenario: If I invested $100,000 in DVC points -- let's say 5 contracts for 900-1000 points (Poly, VGF, VGC, HHI & ???).

Would it be realistic that I can rent these points as a hobby business for $12-$15 per point.

I have been actively renting points (as a "rentee") for the past 5 years so I feel like I have some experience on the process of renting. I have never owned a timeshare. I spend lots of time researching Disney properties and reservations.

Does anyone else out there do this? If so, would you be willing to talk to me about your experiences -- both positive and negative.

Basically, I am looking for a creative way to invest $100,000 -- hoping to earn $8,000/year while keeping the $100,000.

Crazy?

First, you don't take money from the mouse and a rental business is competing with Disney.

Second, if it was a good idea, everyone would be doing it.

Bill

 

[djohn06]

I tend to be very bullish on rentals, but 100k is waaaaayy to much to sink into a timeshare all at once. I would find a much better and stable investment.

 

[dundey]

I have actually thought about doing this myself. There are some arguments that it could succeed, if you can buy the right kind of resales with loaded contracts. Renting the points that you'd get from the seller that have already been paid for in maint. fees will reduce your overall outlay. Then selling say 15 years from now, and most likely you'd make a profit on the points bought as well. Look where resale prices were 15 years ago! Those that say the points will decrease in value are wrong, at least for contracts with 45 years or so to go.

However, it IS alot of work for not so great a return and that's why I decided not to do it. Your mom would be better off with a quality MLP or BDC (stocks) yielding 6-10% PER YEAR. Even an investment is a lower yield high quality stock like Coke or McDonald's would be a better choice.

 

[Sandisw]

Let's not forget that DVC POS restricts commercial renting of one's own points so buying for those strict purposes alone would be prohibited and would be in direct violation of the rules. As we prohibit that here on the DIS, I am going to close this thread as answers have been shared. But will be holding a discussion with other moderators about it.

 

[Sandisw]

After discussing this with other moderators, I am re-opening the thread as the subject is one that is regularly discussed.

As a side note, let's be sure to keep it on topic in terms of the OP's original question.

Thanks all!

 

[Chuck S]

Truthfully, if you have $100k cash to invest, there are better options than DVC, assuming you have a reasonable credit score and debt to income ratio. Rental property, depending upon your area, may be a good choice. As with DVC, though, there are no absolute guarantees your principal will maintain its value.

For instance, I purchased a duplex last month. Each side is a 3 bed/2 bath. Cost was $230K, I put down 30% ($69K) with closing costs and so forth the total out of pocket was in the neighborhood of $75k. Monthly payments on the remaining bank note is $1350 per month, including property taxes and landlord insurance. Right now, one side is bringing in $1050 and the other is $1100, for a total of $2150 monthly. Less note payment, that is a monthly cash flow of $800 or $9600 per year on an initial investment of $75K. And if you buy a fixer upper, (and fix it up) your return would be greater. This property was pretty much turnkey, it was built in 2008, so less expensive than a brand new one. The rents are actually a little low for the area, they should be about $1200 each, but they are good tenants, so sometimes you make do with a little less to avoid problems.

 

[CarolMN]

This may be nuts, but I'm curious to hear some feedback.

Scenario: If I invested $100,000 in DVC points -- let's say 5 contracts for 900-1000 points (Poly, VGF, VGC, HHI & ???).

Would it be realistic that I can rent these points as a hobby business for $12-$15 per point.

I have been actively renting points (as a "rentee") for the past 5 years so I feel like I have some experience on the process of renting. I have never owned a timeshare. I spend lots of time researching Disney properties and reservations.

Does anyone else out there do this? If so, would you be willing to talk to me about your experiences -- both positive and negative.

Basically, I am looking for a creative way to invest $100,000 -- hoping to earn $8,000/year while keeping the $100,000.

Crazy?

Thanks so much for your thoughtful and helpful replies. This would not be for me... I am trying to help my mother (age 70) preserve her (very) limited nest egg.

I have personally enjoyed my DVC rental experiences and feel like I can offer the same to others.

I suspect I should keep looking for other options for her. Your replies have been very helpful -- thank you!

IMO, this idea is completely unsuitable for a 70 year old with a limited nest egg who wants/needs to preserve principal.

In today's market environment, there is NO legitimate investment whose primary objective is to preserve principal that will return 8%/year.

Please get some professional advice.

 

[dvcdream4fld]

First of all, I would bet some are doing or have done exactly what your talking about and had you done it twenty or so years ago then the historical data shows both a rental profit and a large return on your capital. However, like anything you put your money into, timing is everything, and like others have said, DVC is contract for points that will eventually run out. There is a good chance that the capital you have invested will not be recoverable as the contract runs out. In the meantime, I believe that renting points will still be possible throughout the contract unless disney stops owners from doing so. I have my own opinion on whether or not benefits from owners renting their points to potential dvc owners, but I will not go into it now.

 

[dvcdream4fld]

Continued from last post...I think that the potential the potential rental income is there, but I think as rental incomes go, there are many other rental income investments that you can be more confident that your capital investment will be recoverable.

 

[JimC]

I agree with Carol. Not likely appropriate for the situation you briefly described. Also agree that the best action is to get advice from a credentialed fee-based financial advisor for your Mom's situation.

If I wanted to get into real estate, I agree with Chuck's approach. But having been a landlord sometime ago, it comes with its own challenges and risks but the returns can be commensurate if you are careful and smart about it.

 

[djohn06]

I agree with the previous post that some are doing this. Even 2 years ago when SSR was in the 50's, AKV was in the High 50's, HHI in the 40's, BLT in the 80's this would have been doable. The market just doesn't support prices that are 30 to 50 percent higher now. 100k is a lot to risk like this. Unless that 100k makes up 5 percent of her savings I wouldn't fool around with it.