DVC is Scary Expensive, but is it Worth It?

[Bing Showei]

A ROI of 5% is not bad at all, the company handling or investing my pension funds can’t even average that and haven’t done some for the last few years. This year they are down 1,5%.

So by saying you can average 7% you might be right but it all depends on the investment and who is doing it for you.

Ben E N's suggestion that one look at an index fund is key to his point point. Index funds at a large retail brokerage firm are "passively" managed because they will mirror whatever index they follows. As such, management fees will always be significantly lower than "actively" managed funds. FUSEVX follows the S&P and has been my vehicle of choice.

The S&P, like anything that reflects the broader economy will have ups and downs, but historically over the last 90 years has averaged almost 10%. But unlike a timeshare, the S&P's recovery is also tied more closely to the general economy. At it's nadir in this last recession, the S&P500 saw a much quicker and robust rebound than DVC ever did at its low.

A timeshare should never be looked at as ann investment vehicle. No financial advisor who truly honors their fiduciary responsibilities will advise diversifying a client's portfolio by buying a timeshare.

 

[Cyberc1978]

If your company handling you pension funds can't get better than 5% over 36 years they should be indicted. As a short term investment, the market goes up and down - but it averages higher than 5% historically over 30 years - in fact, the worst period over the last nearly a century it returned 8% over 30 years.

http://awealthofcommonsense.com/2016/05/deconstructing-30-year-stock-market-returns/

I got a new job a few years back and was forced to move my retirement funds to a new company. They haven’t been doing that well since my funds was moved but I certainly hope they will going forward.

I pay just shy of 20% each month and as long as I don’t loose money I’m okay. If they continue to underperform I’m gonna look into moving my funds again.

 

[Cyberc1978]

Thank you for that! Same boat here.

It also probably greatly depends on your age. My 20 yo daughter starting her first retirement fund with money she won't really miss and knowing she's got 50 years to recoup losses is going to invest differently than DH & I in our early/mid 40's with a desire and probable ability to retire at 60ish. DH would actually like to retire at 55 I'm sure. We're in play it very safe mode already.

55 that would be nice. In my country with my age I need to work until I’m 69 unless I want to self retire and pay for everything my self. At 69 the government will pay me approx $1.5k per month in pension so my retirement funds need to go on top of that at 69. I do however not expect to work that long.

 

[Cyberc1978]

Ben E N's suggestion that one look at an index fund is key to his point point. Index funds at a large retail brokerage firm are "passively" managed because they will mirror whatever index they follows. As such, management fees will always be significantly lower than "actively" managed funds. FUSEVX follows the S&P and has been my vehicle of choice.

The S&P, like anything that reflects the broader economy will have ups and downs, but historically over the last 90 years has averaged almost 10%. But unlike a timeshare, the S&P's recovery is also tied more closely to the general economy. At it's nadir in this last recession, the S&P500 saw a much quicker and robust rebound than DVC ever did at its low.

A timeshare should never be looked at as ann investment vehicle. No financial advisor who truly honors their fiduciary responsibilities will advise diversifying a client's portfolio by buying a timeshare.

I agree a timeshare is not an investment but Dvc can be rented which most other timeshares can’t.

Hands down I have no experience in the investment world, passive or active. I solely rely on the company handling my funds.

If I could buy a DVC strictly for renting I might would have done so. For me DVC is a hoppy and an investment in my family’s future vacation time and memories.

The money I have already put into Dvc will not come as an expense to my family in any way. Meaning I bought Dvc to use it and maybe rent it if I can’t use my points. Some years I rent more than others. If I loose my job I can still afford DVC but I might need to cut back on my total number of vacations.

 

[Ben E N]

I agree a timeshare is not an investment but Dvc can be rented which most other timeshares can’t.

Hands down I have no experience in the investment world, passive or active. I solely rely on the company handling my funds.

If I could buy a DVC strictly for renting I might would have done so. For me DVC is a hoppy and an investment in my family’s future vacation time and memories.

The money I have already put into Dvc will not come as an expense to my family in any way. Meaning I bought Dvc to use it and maybe rent it if I can’t use my points. Some years I rent more than others. If I loose my job I can still afford DVC but I might need to cut back on my total number of vacations.

Yes, DVC rental can play a part in an overall portfolio. I have even taken to giving out small personal loans within mine, so who am I to judge other people's. As long as you have the view of knowing it will probably not get you as much in the long run, but can lead to a steady flow of yearly income (along with high yearly expenses), and the opportunity to use those points to vacation with, it can work as a piece of a money growth plan.

 

[crisi]

Ben E N's suggestion that one look at an index fund is key to his point point. Index funds at a large retail brokerage firm are "passively" managed because they will mirror whatever index they follows. As such, management fees will always be significantly lower than "actively" managed funds. FUSEVX follows the S&P and has been my vehicle of choice.

Vanguard's VFIPX is another one - and where a lot of my portfolio is.

 

[Cyberc1978]

Yes, DVC rental can play a part in an overall portfolio. I have even taken to giving out small personal loans within mine, so who am I to judge other people's. As long as you have the view of knowing it will probably not get you as much in the long run, but can lead to a steady flow of yearly income (along with high yearly expenses), and the opportunity to use those points to vacation with, it can work as a piece of a money growth plan.

Hi Ben

Just curious how do you give loans against your DVC?

Another thing to add is that at least in my country it’s not that common for people to invest their money except for retirement funds which can’t be used outside retirement except if you pay an extra tax of 60%. So by “investing” or using your savings for a DVC to rent with an average of 5% or more it can be a good “investment”.

If you go this route don’t lend any money or use savings which you can’t afford to loose.

 

[Ben E N]

Hi Ben

Just curious how do you give loans against your DVC?

Another thing to add is that at least in my country it’s not that common for people to invest their money except for retirement funds which can’t be used outside retirement except if you pay an extra tax of 60%. So by “investing” or using your savings for a DVC to rent with an average of 5% or more it can be a good “investment”.

If you go this route don’t lend any money or use savings which you can’t afford to loose.

Not giving loans against DVC. Put a few thousand into LendingClub. It was a fun experiment. Some loans paid me 25% interest, others defaulted after 3 payments. Overall I made money, but less than I would have by just putting money into index funds.
DVC is just for me. I was just pointing out that there are lots of ways of investing money outside of stocks and bonds. As long as stocks and bonds (or real estate, if that's your thing) are the backbone of your investments, I don't see a huge issue with trying something else with 10% or so of an overall portfolio.

 

[Bing Showei]

I don't see a huge issue with trying something else with 10% or so of an overall portfolio.

You buried the lead. That's a pretty important qualifier.

 

[ludari]

I purchased seven years ago and I feel it's worth it. I've really enjoyed the benefits of being a DVC member.

 

[crisi]

Not giving loans against DVC. Put a few thousand into LendingClub. It was a fun experiment. Some loans paid me 25% interest, others defaulted after 3 payments. Overall I made money, but less than I would have by just putting money into index funds.
DVC is just for me. I was just pointing out that there are lots of ways of investing money outside of stocks and bonds. As long as stocks and bonds (or real estate, if that's your thing) are the backbone of your investments, I don't see a huge issue with trying something else with 10% or so of an overall portfolio.

I always look at it as "I have safe money" - cash in the bank. "I have some fairly safe over a long horizon money" - index funds, bonds. "I have some money I have fun with to try and make money" - for me its mostly individual stocks - I know I probably won't beat the index, but its better to spend $350 on stock than on a Disney Dooney purse.

DVC has less risk as a small business than buying and selling art or coins - but it also has less of an upside because if you really know what you are doing with art or coins you can do well (but you need to know what you are doing or be lucky) whereas renting out DVC pretty much has a market imposed price cap - you are renting a commodity, you are competing with other owners, with Disney itself, and with other options in the Orlando area. Disney itself could make changes to policy that would make renting much less attractive if they feel that DVC rentals are impacting their own hotel profits significantly.

I love the ability to rent the points I normally use if I want to cruise instead .... or if this year is too busy to go to Disney. But I don't think the business plan for rentals is really a great one. Its ok, it isn't great.

 

[deerh]

We are in the process of purchasing another resale contract to just rent out. By the time the contract expires in 36 years we will have made $186,000 that is minus the dues. So our small investment ($25K) will payoff in the long run.

I was under the assumption that DVC specifically says you cannot rent for profit.. Have the rules changed? Just was wondering...

 

[Ben E N]

I was under the assumption that DVC specifically says you cannot rent for profit.. Have the rules changed? Just was wondering...

You can't commercially rent it out. To prevent that, they limit you to something like 15 bookings not in your name per year, but you can make a rental or two per year. If you have a small enough contract, based on current restrictions renting out is fine.

 

[Bing Showei]

I was under the assumption that DVC specifically says you cannot rent for profit.. Have the rules changed? Just was wondering...

Maybe you’re thinking of transfers? You can’t transfer points for money.

Renting is actually a right protected in your contract with DVD as long as you don’t start to pose serious competition with the mouse (commercial level activity).

 

[Frederic Civish]

I was under the assumption that DVC specifically says you cannot rent for profit.. Have the rules changed? Just was wondering...

Disney itself could make changes to policy that would make renting much less attractive if they feel that DVC rentals are impacting their own hotel profits significantly.

You can't commercially rent it out. To prevent that, they limit you to something like 15 bookings not in your name per year, but you can make a rental or two per year. If you have a small enough contract, based on current restrictions renting out is fine.

You CAN rent for profit. You just can’t do it too much.

I don’t see how it significantly impacts Disneys business - many of their resorts run at nearly 100% occupancy, year round. How are you taking their money? Besides, every renter purchases park tickets, buys meals and other things. If they couldn’t get a ‘deal’ on rentals, they might have less money to spend on Disney, and might not come at all. AND, and, and, every renter is a potential new DVC purchaser themselves. There is no better ‘demo’ than actually using it.

Supposedly, Disney will “Review” your usage and rentals after you get to 20 per year. One way around this would be to rent large blocks of points at a time, so . . . fewer rentals. It isn’t a money making proposition, but I could only justify all my points and all my contracts at 3 different resorts, because I can rent some of them out.

 

[crisi]

If Disney hotel profit is not at 100% occupancy (as it wasn't after 9/11 or in 2009), Disney may feel that renting is cutting into their profitability. For DVC rooms, if we don't rent, they get our money in park tickets and souvenirs, or our guests' money if you let someone use your points, or if we waste our points, they get that profit in breakage - they can upgrade CRO guests into DVC rooms - and selectively upgrade those guests that might buy DVC. Its a far better deal for Disney for them to be the one putting people into DVC rooms than for us to be the ones doing it.

After 9/11 Disney shut down parts of CRO resorts - that saved them a ton of operational costs that weren't being paid for by bookings. But DVC pay the operational costs via dues - so Disney "upgrading" into our unused rooms is very profitable for them.

You are right, in a good economy they don't care if we rent our points. There is money for everyone. Economies are not always good, and shareholder pressure during a down economy is intense.

 

[deerh]

As many will say.. IF you like Disney, and IF you go every year, and IF you will go to WDW/DL for years, and you love going on vacation and making plans 11 months out, then yes.. If you answer NO to any of these, rethink your purchase....

 

[Ben E N]

As many will say.. IF you like Disney, and IF you go every year, and IF you will go to WDW/DL for years, and you love going on vacation and making plans 11 months out, then yes.. If you answer NO to any of these, rethink your purchase....

I had that exact conversation with my wife's uncle last night. He has the money, loves Disney and goes almost every year, but plans his trips only a couple months out. I told him that DVC would not be a good fit for him. You really have to check off all your listed boxes, and have the money, to make it work to the fullest.

 

[Dean]

I got a new job a few years back and was forced to move my retirement funds to a new company. They haven’t been doing that well since my funds was moved but I certainly hope they will going forward.

I pay just shy of 20% each month and as long as I don’t loose money I’m okay. If they continue to underperform I’m gonna look into moving my funds again.

Were you required to move it to your company or just move it from the old company. Could you have moved it to an independent provider for that portion. In the US I'm not aware of a situation where one would have to move it to the new company but it's essentially always a good idea to move it from the old company and it's almost always best to move those funds to an independent option you have direct control over. I'm unsure if you move it to the new company if you could later move it again if still working at the new company but I doubt one could at that point.