Does DVC just not work for some people?

[pilferk]

That only works if you actually have a handle on what that lifetime looks like. For capital equipment like the above-mentioned truck? Sure. We all pretty much know how long that will last. For a particular family's vacation preferences? If you know what your vacation preferences will be with high confidence, even for your own family, 10 years from now, you're a better seer than I.


What's wrong with standard amortization of the purchase price over the horizon at a particular cost-of-capital rate? You even get to choose the rate and the horizon! What's not to like?

In any event, as others have, I will let you have the last word on this if you like. I've made my point as best I can, you clearly do not agree with it, so we can all move on.

As an interesting diversion:

We paid 96 per point for AKV in 2007. We'll use 200 points because it's a nice round number (and there looks to be decent number of resales at that price point), and close to what we actually bought. The up front retail of that contract would have been 19200.

Resale listings, for that contract size, seem to be for around $70 per point on The Timeshare Store. They may GO for less...I don't know (anyone who does, point me in the direction of the sell prices). That means the contract is listed at 14000.

So, that contract, purchased in 2007, has lost about 27% of it's value over 5 years (retail to resale), or about $5200.

 

[DannysMom]

Resale listings, for that contract size, seem to be for around $70 per point on The Timeshare Store. They may GO for less...I don't know (anyone who does, point me in the direction of the sell prices). That means the contract is listed at 14000.

The DisBoards has an awesome ROFR thread where you can see what selling prices are getting through ROFR (or taken.). Look here: http://www.disboards.com/showpost.php?p=46116044&postcount=3614

Sent from my iPad using DISBoards App, please excuse any typos.

 

[bigdave10000]

As an interesting diversion:

We paid 96 per point for AKV in 2007. We'll use 200 points because it's a nice round number (and there looks to be decent number of resales at that price point), and close to what we actually bought. The up front retail of that contract would have been 19200.

Resale listings, for that contract size, seem to be for around $70 per point on The Timeshare Store. They may GO for less...I don't know (anyone who does, point me in the direction of the sell prices). That means the contract is listed at 14000.

So, that contract, purchased in 2007, has lost about 27% of it's value over 5 years (retail to resale), or about $5200.

But how much are the 1000-1200 points that you had use of worth? Minus MF's of course.

 

[pilferk]

But how much are the 1000-1200 points that you had use of worth? Minus MF's of course.

That's actually the point.

The "up front" portion of the cost of those points would breakdown to about $1045 per year.

Which would mean roughly $5.23 per point, per year? Something like that.

Add dues costs in 2012 of around $1090 (approx $5.44 per point).

 

[pilferk]

The DisBoards has an awesome ROFR thread where you can see what selling prices are getting through ROFR (or taken.). Look here: http://www.disboards.com/showpost.php?p=46116044&postcount=3614

Sent from my iPad using DISBoards App, please excuse any typos.

Thanks! I'll check it out and see what I can find.

Looks like the average on the ROFR thread is about $66 per point for AKV, and that includes all contract types and banking/borrow statuses.

 

[DougEMG]

Does it really limit your risk? Or just artificially front load it in the analysis? Looking at the product, 6-7 years is ultra-conservative (given we're looking at a product on the market for roughly 20 years, in an area that has committed capital improvements for the next 6 to 7 that we know of). The fact is, you're buying for whatever term is left on the contract.

It's a 50 year contract, at the outset.. You're either going to hold it or sell it at some point during the 50 years. If, at the outset, you see through to a point where you might sell...then that approximate point would be a decent risk window to look at.

Sure, 50 years is a best case scenario. But 6-7 (or even 10) is surely the opposite end of the spectrum...and not really any more (or less) realistic than 50. They're arbitrary points, seemingly, with no actual connection to the product, itself. At this point, what we have is 20/50 (the 2042 contracts, 20 years in (or 40% of the contract), are worth about 50% at resale)...and that's with a floundering economy. That doesn't seem like justification for a 6-7 (or even 10) year risk window.

I would agree, when looking at things like ROI/opportunity costs and break-even points..you'd like your numbers to be right around 10 years. I'd also agree that the front half of the contract is "worth more" (and the resale numbers we've seen bear this out) than the back half, especially considering inflation. But assigning 100% of the up front purchase cost to the first 10%, 15% or even 20% of the contract doesn't seem to make sense, really (again, keeping in mind...this is just to flesh out a rough nightly room rate or "cost to operate").

So when computing/projecting a rough nightly room rate...I don't see it. I don't see how an exceedingly short risk window really should factor in to that analysis.

Could you explain your thought process?

My preference in using a short time frame is that I feel more confident that my assumptions about the value and my ability to use DVC will continue to hold true over the shorter time frame. The longer out one looks, the more likely that my assumptions will fall apart.

As an example, I'm on the west coast in Canada, so to get to WDW airfare is a significant cost. If airfares were to suddenly double in price; it wasn't that long ago that oil was suppose to go to $200/barrel; that would suddenly make going to WDW not quiet so attractive an option, regardless of how good a deal I got on the room.

Another example, my wife has never been a good flier. A few years ago she became so scared of flying that she couldn't fly for about 2 years. So for two years we couldn't and didn't go to WDW.

DVC is a luxury purchase, which for me means I'd rather be ultra conversative when determining if it is a good buy or not.

One only has to look at how many current owner are trying/wanting/needing to sell at a unrealistic price because they have a loan and they need to get that loan amount back. Obviously things never worked out for those people the way they originally planned.

So for me DVC = long term saving + less flexibility over just booking a hotel annually.

So for me personally, the 6-8 years before the savings started was acceptable, having to wait 12+ years would have been unacceptable and I wouldn't of bought DVC, and at 9-10 years I'm not sure what I would have done.

In the end, I bought a lot points resale because I thought it was a good deal and I was willing to assume the risk of owning in order to achieve those long term savings.

 

[pilferk]

My preference in using a short time frame is that I feel more confident that my assumptions about the value and my ability to use DVC will continue to hold true over the shorter time frame. The longer out one looks, the more likely that my assumptions will fall apart.

As an example, I'm on the west coast in Canada, so to get to WDW airfare is a significant cost. If airfares were to suddenly double in price; it wasn't that long ago that oil was suppose to go to $200/barrel; that would suddenly make going to WDW not quiet so attractive an option, regardless of how good a deal I got on the room.

Another example, my wife has never been a good flier. A few years ago she became so scared of flying that she couldn't fly for about 2 years. So for two years we couldn't and didn't go to WDW.

DVC is a luxury purchase, which for me means I'd rather be ultra conversative when determining if it is a good buy or not.

One only has to look at how many current owner are trying/wanting/needing to sell at a unrealistic price because they have a loan and they need to get that loan amount back. Obviously things never worked out for those people the way they originally planned.

So for me DVC = long term saving + less flexibility over just booking a hotel annually.

So for me personally, the 6-8 years before the savings started was acceptable, having to wait 12+ years would have been unacceptable and I wouldn't of bought DVC, and at 9-10 years I'm not sure what I would have done.

In the end, I bought a lot points resale because I thought it was a good deal and I was willing to assume the risk of owning in order to achieve those long term savings.

Which is a great explanation of why you'd choose a shorter time frame to work out ROI/opportunity cost AND your break even point. All that makes sense.

Given your situation, it does explain the shorter than average time frame...but it also goes to the point that it's a VERY individual "feel" type number. And no one's is really any better than another.

It also doesn't address why you'd use the same time frame to determine a rough nightly room rate, on a year to year basis (aka cost to operate). That's the part I REALLY don't get. They're very separate and different things.

 

[Chuck S]

The thread seems to be straying far from the simple question that was asked. The basic answer is that DVC is not a "one size fits all" type thing, as with any timeshare. Any individual considering purchasing a timeshare should take the time to weigh all the options, and consider just what they want from ownership. The true "value" of any timeshare is in the use of the timeshare for your personal vacations, weighed against your normal vacation habits and overall costs.

It works for some and not for others. For those that are perfectly happy seeking discounts or free dining, and staying in Disney value accommodations or offsite regularly, DVC is probably not a good fit. Nor is a great value if you plan to regularly use points outside the DVC resort system.

Just as buying a luxury car isn't for everybody, neither is timeshare ownership.

If, however, you stay regularly in a moderate or deluxe class Disney accommodation, DVC can be a a bit of a savings in the long term over regular cash stays.

 

[DougEMG]

Agree that this is all very personal.

I'm not reducing my risk in any individual year of something bad happening, I'm just reducing the length of time that I care about the risk. I kind of think of this as self insuring. If something bad happens in year 10 after I've already passed my break even point, then so what. If something bad happens in year 4, then bad news for me!

It also doesn't address why you'd use the same time frame to determine a rough nightly room rate, on a year to year basis (aka cost to operate). That's the part I REALLY don't get. They're very separate and different things.

I'm not sure what you mean here.

Here's an simple example of how I look at it without worrying about increasing MF or anything else just to keep the numbers simple for the example.

Assumptions: Buy SSR for $50/point, pay annual MF of $5/point, rent for $10/point.

So $50 / ($10 - $5) = 10 years to break even

So I need to decide do I want to take 10 years to break even on owning this. What are the bad things that could happen to me in those 10 years that would make my initial assumptions not work.

One example would be that Disney places a ristriction on renting. If Disney does this in year 4, bad for me. If Disney does this in year 20, I don't care.

 

[pilferk]

I'm not sure what you mean here.

Here's an simple example of how I look at it without worrying about increasing MF or anything else just to keep the numbers simple for the example.

Assumptions: Buy SSR for $50/point, pay annual MF of $5/point, rent for $10/point.

So $50 / ($10 - $5) = 10 years to break even

So I need to decide do I want to take 10 years to break even on owning this. What are the bad things that could happen to me in those 10 years that would make my initial assumptions not work.

One example would be that Disney places a ristriction on renting. If Disney does this in year 4, bad for me. If Disney does this in year 20, I don't care.

Right, all that makes perfect sense. You're calculating a break even point.

HOWEVER, the genesis of the converstation/tangent we're on was a suggestion that, when trying to figure out a rough nightly room rate for an upcoming trip, that rather than divide the up front costs over 50 years...that instead, they should be divided over 10 years (as well as include opportunity cost). The reply you initially replied to was in response to my suggestion that time frame (for cost to operate/rough nightly room rate) was too short. Confusing, I know....

In other words:

((Purchase price/50) + annual Maint fees) / number of nights booked = rough estimated room rate

Ex:
(19200 /50) + 1090 / 7 = $210 per night.

vs

(Purchase price/10 + Maint fees) / number of nights booked = rough estimated room rate

Ex:
(19200/10) + 1090 / 7 = $430 per night.

With the objective being to find an estimate of a rough nightly room rate for a given, specific, trip. I concede that the 50 year term is a best case scenario and likely not a completely accurate depiction given the history we've seen in the resale market. But 10 years seems WAY overly conservative in terms of use, historical ability to use, resale prices of the 2042 contracts, etc.

I suspect that's not what you were talking about, though....which is why there's some confusion.

As Chuck suggested, we're probably getting too far afield of the initial question asked...so I'll leave the discussion for another thread, should it ever pop up.

 

[crisi]

I'm a ten year person as well. Decide if you break even at ten years. More than that it's gravy. But few of us can look ten years into the future and do a good job of evaluating risk. Ten years from now, will you still have your health, your job? Will your kids marry and give you grand kids (maybe you are pretty sure they won't if they aren't yet in kindergarten, but it becomes something of a guess after that).

But I also believe that if this NEEDS to make financial sense to you in order to work, then it doesn't work. It's a luxury purchase. If you need to break even on your luxury purchase, it's a luxury you should thing twice about. And it doesn't matter if you are looking ten years out or forty. If you can't afford to loose a little money on this deal, rent or pay cash.

 

[DougEMG]

HOWEVER, the genesis of the converstation/tangent we're on was a suggestion that, when trying to figure out a rough nightly room rate for an upcoming trip, that rather than divide the up front costs over 50 years...that instead, they should be divided over 10 years (as well as include opportunity cost). The reply you initially replied to was in response to my suggestion that time frame (for cost to operate/rough nightly room rate) was too short. Confusing, I know....

Okay, I got it now.

Normally calculating room cost like that doesn't really interest me (I actually charge myself the rental rate since I view it as an opportunity cost) , but if it did then I would be doing it pretty much the same way as you are.

 

[Dean]

As for the shorter time frame, there's really only one way to look at the issue as it applies to the discussion at hand. Make the best assumptions one can and then decide to buy or not or to possibly sell if one owns already. Ultimately the ONLY way the shorter time frame makes a differences is as a guide whether owning DVC is a reasonable option or not, otherwise it's just an academic discussion. IMO, if one can't get a return of investment by around 10 years including reasonable assumptions for the time value of money, buying DVC is not a reasonable choice from a financial standpoint. YMMV. Further, one can't appropriately use the DVC rates (rack or otherwise) as the benchmark unless you were prepared to consistently pay those rates without owning DVC. The other variable, which I alluded to earlier in the thread, is that it assumes the only choices are staying off site, paying Disney cash rates or buying DVC and the reality is that there are other potential choices. I'll leave any additional value above financial considerations to another thread as they are variable and personal with little to no objective criteria to consider.

 

[ELMC]

The other variable, which I alluded to earlier in the thread, is that it assumes the only choices are staying off site, paying Disney cash rates or buying DVC and the reality is that there are other potential choices.

Such as renting or purchasing a $1 timeshare on ebay in the hopes of trading into DVC through RCI. Granted, these options come with risk and require a certain amount of work and knowledge, but when asking the question that the OP asked, "Does DVC not work for some people?" these are other options that should be considered as an alternative to ownership.

 

[Dean]

Such as renting or purchasing a $1 timeshare on ebay in the hopes of trading into DVC through RCI. Granted, these options come with risk and require a certain amount of work and knowledge, but when asking the question that the OP asked, "Does DVC not work for some people?" these are other options that should be considered as an alternative to ownership.

Many exchange companies rent excess inventory directly to the public as do many timeshares. There are a number ways to rent timeshares owned by individuals. Many timeshares offer preview stays for free or close to it. Condo's can be rented easily. There are sites like priceline. I'm sure we can come up with others if we try. For DVC stays one can rent from members as well and while it's against RCI's policy to rent exchanges, it is done and can be a good value for the one that rents.

As for risk, ALL timeshares carry large risk including DVC. That risk will vary a little in character and specifics from one situation, resort and system to another. I'll be the first to say that some $1 timeshare could be the most expensive purchase you ever made, but in general terms, better to have a few hundred $$$ investment and dues that are generally less if things don't work out. Almost everyone who buys a timeshare off ebay is more informed than most DVC members were when they purchased and I'll include myself in the latter group. People talk about DVC's flexibility and that's true in some areas but FAR from true in others with many systems being more flexible in certain areas than is DVC. To me the bottom line is to be informed, get as much info as you can on all potential options and make the best decision you can based on facts and reasonable assumptions. Try to remove emotion as much as possible. I've seen many that own or are considering DVC say something like "I'd never even consider another timeshare". Their choice of course but to limit the choices without basic info seems unreasonable. It's like buying a given auto without even considering other similar choices.

 

[pilferk]

Okay, I got it now.

Normally calculating room cost like that doesn't really interest me (I actually charge myself the rental rate since I view it as an opportunity cost) , but if it did then I would be doing it pretty much the same way as you are.

When I initially looked at where our break even point would be, I used rack rate hotel rooms (NOT villas...standard deluxe level hotel rooms) and a $10 per point rental rate comparison...along with a mod rate (but, since we have a family of 5...there's only really one mod we could stay in). Sounds like you did roughly the same thing.

But what I was talking about, above, is roughly what it turns out I am going to pay in a specific, given year on a specific, given trip.

 

[gripp35]

But what I was talking about, above, is roughly what it turns out I am going to pay in a specific, given year on a specific, given trip.

Interesting. I have been crunching the numbers similar to the short-term break-even point discussion, but have not really looked at this "nightly room rate". Although, as DougEMG said, I am not very interested in this from a "would DVC work for me" perspective, it's another nice number to crunch!

Thanks for the off-topic discussion!

 

[Missyrose]

When I initially looked at where our break even point would be, I used rack rate hotel rooms (NOT villas...standard deluxe level hotel rooms) and a $10 per point rental rate comparison...along with a mod rate (but, since we have a family of 5...there's only really one mod we could stay in). Sounds like you did roughly the same thing.

But what I was talking about, above, is roughly what it turns out I am going to pay in a specific, given year on a specific, given trip.

The only fallback of a plan like this is the question of "would you actually pay rack rate for a Disney hotel room?" Many, many of us Disboarders would not, there would typically be some sort of discount (unless you typically travel at ONLY the most crowded times: Christmas, New Years, Easter).

 

[pilferk]

The only fallback of a plan like this is the question of "would you actually pay rack rate for a Disney hotel room?" Many, many of us Disboarders would not, there would typically be some sort of discount (unless you typically travel at ONLY the most crowded times: Christmas, New Years, Easter).

I have, in the past (so I/we would, now). When I started traveling to WDW in the mid 90's (again, as an adult, where I'm picking up the tab), on property discounts were, at best, few and far between (AP + CM are all that I really remember). There was a time, not so long ago, where there were NOT the kinds of discounts offered on WDW rooms, either as flat rate % or as "free" dining. But it's a valid point.

But the obvious counter point is: Can you depend on those discounts over the next 10-ish years (because that was my target break even point...ten or less) and can you reduce them to a predictable model. That's the piece I always struggle with.

You can always say "Well, this is the max I would pay" (which, essentially, is what I did for my personal analysis by using rack rates and rental rates..because given no other option we would pay them), but then you have to consider you might price yourself out of the on-property market (or choose not to travel to WDW). That's another consideration, altogether, and would speak to personal judgment on the value of staying on property.

Personally, I used rack rates and rental rates because they've been relatively stable, with relatively predictable increase patterns...and we WOULD pay them. We were making almost yearly trips, with or without a discount available.

As a quick aside, I plugged in a 30% rack rate discount into my calculation spreadsheet (keep in mind, this is from 5 years ago and is using all the numbers/projections/etc that were valid THEN) and the break even would be (or is that "would have been"?) right around year 10...basically pushing it out 2 years further than the one I considered in 2007.

That's using the same 200 point contract at AKV at $96 per point scenario that I used as an example, earlier.

 

[Brian Noble]

Will your kids marry and give you grand kids (maybe you are pretty sure they won't if they aren't yet in kindergarten, but it becomes something of a guess after that).

But, if they are in pre-school, a different 10-year question is: "Will my kids still enjoy WDW when they are tweens/teens?"

Hint: mine would rather go to Universal. Or even non-Orlando destinations. I often agree with them.