CRAZY QUESTION: DVC Hobby Business?

[DenLo]

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

And it is not allowed per the rules.

Use of Vacation Homes and recreational facilities for commercial purposes or any purposes other than the personal use . . . . is expressly prohibited. “Commercial purpose” includes a pattern of rental activity or other occupancy by an Owner that the Board, in its reasonable discretion, could conclude constitutes a commercial enterprise or practice.

I expect if you make enough rental income for tax purposes as the OP proposes then that would constitute as a commercial enterprise or practice.

 

[DougEMG]

How does just buying an annuity compare with renting? Seems like you could get about $900 a month. Both the annuity and DVC eventually go zero.

 

[CarolMN]

How does just buying an annuity compare with renting? Seems like you could get about $900 a month. Both the annuity and DVC eventually go zero.

In the current environment, a $100K fixed annuity would provide more like $500-600 per month. An annuity generally does not increase with inflation and terminates at the annuitant's death.

There are many variations and not all are suitable for every investor. FINRA has some specific rules around suitability, especially for elderly investors.

 

[jessicaanne86]

I actually think it could have a decent return. I agree that it would take 9-14 years to get return back, depending on the property. I think that is the key. Think if you had the Grand Floridian Villas, you might get your money back faster as the price per point would be higher for that resort and it would always be booked I would imagine. That would be the only resort I would invest in as renter, however...it is against your contract. Selling 200 points at $15 per point adds up to $150,000 over a 50 year period. The buy in right now for The Grand Floridian Villas is $33,000. I know because I just bought in today. Add annual dues to that and your profit goes down quick. However, the price to rent per point will also go up in time. You might charge $15 today but what will a point for the Grand Floridian be worth in 2035? I think the question is worth asking depending on what property you own. I know DVC members say points are points but I really think certain properties will really be what sets resales apart in the future. That is just my opinion.

 

[Mississippian]

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!

This actually might have been a good idea about three or four years ago. Prices were very low, but rental prices remained relatively high. The numbers don't work very well now.

 

[bellablue2]

i don't recommend this for your mother, particularly at her age.

i'm not too much younger, but have always enjoyed the business aspects of owning dvc. i have done very well with dvc rentals for about seven years...making roi of about 10% average across resorts. this is even with my having bought at prices before the great recession. i don't own anywhere close to the maximum number of points one can, but the cash flow is a nice supplement to my retirement income.

moreover, based on current resale prices, my principal has remained intact.

it's work, takes some savvy, and there's some risk. but, for me, it's better than having the money sit in the bank drawing ridiculously low interest. and, unlike an annuity, i expect the points to have some value after i die.

 

[zavandor]

You might charge $15 today

What if DVC builds a tower in the Disneyland hotel, (as many rumors suggested in the past) inundating the market with more points at Disneyland?
GCV get a premium now, because there are so few units there that the 11 months window is very important. But we cannot be sure about the future.

So the risk of buying DVC for profit may be higher that it could appear.