DVC "cost of room" math. Is this right?

Discussion in 'DVC-Mousecellaneous' started by eeyoresmom, Nov 28, 2018.

  1. eeyoresmom

    eeyoresmom DIS Veteran

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    Is my thinking correct here...or correct enough?lol I was just thinking about what my DVC rooms actually cost me in terms of dollars not points. I bought my 220 point contract in 2008 for $16,000 and will have 35 years of use with it ( paid cash). Currently I am paying around $1400 a year in dues. 16000 divided by 35 use years is $457 a year. $457 plus the dues is $1857 a year for my 220 points. That's about $8.50 per point. I just booked an OKW studio at 10 points per night, so I am "paying" around $85 a night? I would have spent this money on travel anyway so I'm not losing out on any growth. Does this sound right??
     
  2. CarolynFH

    CarolynFH DIS Veteran

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    You'll probably get many different reactions, but it sounds right to me - as long as you do keep the membership for 35 years! OTOH, if you sell it before your 35 years is up and get more than you paid for it, then your cost per night goes down!

    I think the real point to be made is that the real benefit of DVC in terms of saving money on accommodations comes from keeping your membership for years. When you buy DVC, you prepay much of your WDW hotel room costs, and the longer you keep it the better you do.
     
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  4. crisi

    crisi DIS Veteran

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    If you are willing to ignore the time value of money, that works fine.

    (Time value of money basically says if you would have taken the $20k you put into DVC points today, set it aside, and spend it slowly on Disney vacations over the next twenty years, it will be worth more than $20k because you'll earn interest on it. My take on it is that inflation hits Disney hotel rooms harder than average, so its basically a wash - but that presupposes that you'd take those vacations anyway, and it also assumes you have the discipline not to spend $20k but would invest it. Both of those are rather large suppositions when doing these calculations)
     
  5. DougEMG

    DougEMG DIS Veteran DVC Gold

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    Take any 3 DVC owners and they will probably each have a different way to determine what their room is costing them.

    You can bet that Disney isn't ignoring the time value of money. Assuming an earning rate of just 3% over inflation, your $16,000 would be worth $43,710 after 35 years.

    On the bright side, you could sell your contract now and get all your money back. So one could say your costs were any interest you lost on that money over your 8 years of ownership plus your annual MF.
     
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  6. supersnoop

    supersnoop What time is the three o'clock parade?

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    The time value of money argument gets old. Yours calculation is that your points in 35 years cost roughly $2 in today’s dollars. If your rate of return equals inflation, then they cancel out and your calculation is already accurate. The time value of money only impacts the calculation if you’d earn more that inflation by investing.
     
  7. eeyoresmom

    eeyoresmom DIS Veteran

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    I would not have invested the cash I used to purchase. That money would have gone to travel someway.
     
  8. crisi

    crisi DIS Veteran

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    Which is why there is a calculation called "future value of an annuity" There is math for that.

    And Disney doesn't ignore time value of money - which is why they sell timeshares - money in their hands now is worth more than money at some future possible date. But there assumptions are also different than yours or mine. They assume a much higher ROI (8% is reasonable for us, they might think they can get 10 or 12% or more - when I was doing ROI calculations in corporate America, we were using 20% - which I though was ridiculous).
     
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  9. Micca

    Micca SAHG: Stay At Home Grandfather

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    When we bought our first contract I distinctly remember our guide stating that "You're paying for your vacations in advance." I actually think the benefit of ownership is much more than that, but I appreciated that they weren't over hyping the deal. Had we not bought our DVC points I feel like we'd have ended up spending as much or more for moderate or value accomodations. So I won't do the math, but I can say that it was definitely the right choice for us.
     
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  10. Ben E N

    Ben E N DIS Veteran

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    I bought for a bit more and a bit more recently, and just ballpark $10 per point. Either way, I'm still paying the money, and I know that the time value plays with things, but it's easy in my mind to think "I'm paying $220 a night for this room", etc. It's all just fun to think about anyway, as if we still own DVC, then it's worth it to us, and if it isn't worth it, practically all of us can sell for a profit at this point.
     
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  11. ziravan

    ziravan Welcome Home

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    220 points x 35 yr = 7700 points. You paid 16,000 in 2008 dollars so 16,000/7700= $2.08 per point plus MF = price per point.

    2019 OKW dues 7.23 so $9.31/point.

    Or $93.10 in 2019 dues

    ($6.72 plus $2.08 = $8.80 in 2018 dues or $88.00/night).
     
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  12. crisi

    crisi DIS Veteran

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    I also think that how "right" you need to be depends on what you are doing with the information And, somewhat paradoxically, it isn't the right question to ask.

    If you own the points are are just trying to figure out the cost as a matter of interest, use whatever feels comfortable for you - the method you are using is by far the easiest. Its also a pretty good method for figuring out you cost for the occasional rental to friends (but not for points you buy to rent out regularly to strangers)

    If you are figuring out if you should buy DVC because you need to save money, then TVM is important - and yet it isn't. Because the question that needs to be asked is "can I afford it?" Because if you are buying and you need to save money for it to work financially for your family, then the answer to that question is probably no, you can't afford it. There is risk that financial point math doesn't take into account - you might need that money for medical expenses or a job loss or a new baby. You might find dues and ticket prices go up much faster than your income. And can I afford it is a much more subjective question.

    If you are asking the question to argue on the Disboards - you'll get TVM and we will have a long discussion about what the appropriate interest rate is to plug into the equation, which will veer off into historical stock returns, possible salvage value, total cost of ownership, risk analysis, etc.
     
  13. zavandor

    zavandor DIS Veteran

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    I have bought SSR for $50pp a few years ago and could resell it for more than I paid. I have also bought a bit more points than I need so I often rent points and those proceedings have paid all my maintenance fees.
    So i could say all my stays where free.

    OR

    There is an opportunity cost in booking DVC vs renting. I could rent all my points at $15 if I don't go to WDW (which is something I do once every three years). So a 28 points studio at VGF costs me $420 per night.

    So really, DVC math is the most subjective branch of science.
     
  14. GoingSince1990

    GoingSince1990 Earning My Ears

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    Once you've purchased the points, every year you have the choice of renting them out or using them to pay for a room. So the effective cost of the room is the number of points multiplied by what you could rent them for (per point). I generally rent extra points out at $14.50 per point using a broker so I calculate the dollar cost of a DVC room by multiplying the number of points by $14.50.
     
  15. Dean Marino

    Dean Marino DIS Veteran

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    There is a simple way to think of DVC "Room Cost". It makes two assumptions:

    1) YOU WERE GOING TO GO ANYWAY - If not? This all goes out the window :).
    2) CASH UP FRONT - no financing.

    Both were our case, during the "CD Interest rate Famine" that started in about 2008.... This was a GREAT time to effectively move cash to Disney :).

    Since joining DVC in 2012? We've kept a spreadsheet. We needed to hit "break even" on our 270 point, $28K CASH investment. As we always book our HOME Resort, twice per year, 9 nights per trip, always in APR and NOV? We've been able to track actual MAIN Hotel discounts - every trip.

    NOV 2018 trip? We have hit break even, vs DISCOUNTED rooms. Remember - we were going to go anyway. That "Cash up Front", plus dues, has now equated to neutral, vs DISCOUNTED Main Hotel Rooms. Our math says that we could sell all of our points for $1.00, triggering ROFR, and dump it all today at zero loss.

    Now - we were contrarian, and invested CASH in an offering that we would have bought anyway. One that tends to inflate by a good 5% per year :). When CD Interest rates were close to 0.25% per year.

    We made out like BANDITS. Going forward? Our Nightly Room Costs are about $120/Night - vs "discounted" $450/night. Initial investment paid OFF. Given our pattern? We go forward, saving over $5900 per year in room cost....

    Now, we are retired, 66, and if no one got this.... WE WERE GOING TO GO ANYWAY. This was never an "investment" for us.... it was Cost Minimization on the most expensive portion of the trips that we were going to MAKE ANYWAY.

    Just us - when folks ask about DVC? We sort of have a canned response....

    1) ONLY BUY WHERE YOU WANT TO STAY. That Home Resort 11 Month Booking Window is CRITICAL. PS - NOTHING is "sold Out". Explain to WDW under what conditions they will get your cash :). Watch what happens :). WE own BRV... and it was "sold out" for years :).
    2) ONLY BUY if you are going to go ANYWAY. THINK about this: is a child's college fund more important?
    3) HAVE CASH - do not finance. NO bank is going to give you a loan. FINANCE charges are nosebleed.

    Now, just OUR advice. Your situation is your situation. I've only related the experience of two 66 year olds, with grown children.
    All personal opinion - I'm not necessarily right, no one else is necessarily wrong.
     
  16. Jelly563

    Jelly563 Mouseketeer

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    I recently went to check in at VGF. It was a 2br villa for one night (about 49 pts). They said they did not show a reservation on points. When I gave my credit card for check in, they charged $1,789.00 on it. Thank God I was able to call the next day and get it worked out. There is no way I would be able to swing 2k for a night so booking vacations on points sure feels different.
     
  17. Cyberc1978

    Cyberc1978 DIS Veteran

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    TVM for me is null as my bank wont give me any interests and I have never invested my money except for in my family. That was also one of the reasons to buy into DVC.
     
  18. Networth

    Networth DIS Veteran

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    Do you go to Disney often enough to need rooms 1-2 years? Do you have the money to purchase? Does DVC booking 7-11 months work for you?

    It did for us so we bought in.
     
  19. E2ME2

    E2ME2 ET

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    This is so very close to our analysis. We bought in 2011 and, using a similar price comparison , my spreadsheet showed me breaking even in 2018.
    But talk to me about selling off to trigger ROFR. What price does DVC pay to buy back , when they invoke ROFR??
     
  20. zavandor

    zavandor DIS Veteran

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    There is no advantage (or disadvantage) for the owner if Disney decides to ROFR a contract. The owner will always get what is written in the contract, either by the buyer or by Disney.
    Dean was joking about selling a contract for $1.
     
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  21. Dean Marino

    Dean Marino DIS Veteran

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    Yup - we wouldn't do that :). The $1 listing was to drive home the concept of "break even", vs discounted rooms: Having paid off our initial investment + dues 2012 to 2018? We COULD, in theory, let everything go for $1, and be ahead by $1 :).

    Why drive that idea home so much? Well, a lot of folks avoid DVC thinking it's like a "timeshare trap": They will be stuck for 30 years. In fact, one is only "stuck" until all upfront costs + dues = what one would have paid for DISCOUNTED rooms, assuming you were GOING TO GO ANYWAY. For us? That period was 6 years, given OUR vacation habits. From here on out? As long as we still want to GO ANYWAY? It's all Gravy :).

    Now - FINANCE that up Front Cost? Oh, the time to hit "break even" extends a LOT :(.
     
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