DVC Property "Rent to Own"

[tcrandal]

Background information:

My family has rented points from DVC owners for the past 4 years, and average about 300 points a year and rent them for $10 pp. We would obviously be good candidates to buy, as we spend so much, however we do not have cash onhand to purchase, and I strongly feel that financing the purchase would negate the financial benefit, even though we could easily finance it.

Something came along in which someone is looking to sell their property and is willing to do "seller financing" at 0 percent. I am proposing that they would hold the title for 5 years during a payment period, and we would have full use of the points during that time. Additionally, we would be responsible for the Maintenance fees during the payment period. We also state if we pay early the transfer would take place upon full payment.

I looked at the resale averages for OKV, and see they seem to average $57 for 2042 and $71 for 2057 based on the ROFR records. Am I being fair offerring the average price, even if they have all points available for the 2010,2011 and 2012 years?

I know it's a sweet deal for us, but also want to make sure we cover everything in a contract, that keeps the seller safe, as well as us. For instance, the more morbid items are what would happen if seller passed during the "payment period"? We would obviously get an attorney to review with us any agreement, but I wondered if anyone else had a similar experience with this out there.

Would really love to become an owner, since we already pay so much yearly for Disney vacations at DVC!

Thanks,
Tom

 

[Brian Noble]

If I were doing this, I would get the advice of a lawyer rather than the armchair counsel of the DISboards. Many employers have legal coverage that could be used for this sort of thing. Even if yours does not, the money you would spend drawing up a contract, etc. would be well worth it.

 

[5forDiz]

Totally agree with what Brian recommends on sound legal advice. This situation sounds like it has high probability of becoming messy. Also, a DVC contract being sold by a member to another individual still must pass Disney's ROFR process : Disney can decide they are buying it from the seller despite your offer or other arrangements, etc. and then you are back to square one; jmho I wouldn't go through the expense of lawyers, etc. for find out that Disney is exercising their right to ROFR that contract.

Think about starting off buying a small resale and add to your points in future years when you have additional cash to spend to build to the number you have in mind ~and~ maybe after you have also had the chance to try other DVC resorts you will perhaps find that you would like to own your additional points at more than one resort as well. If you skipped a trip or two to save $3000+ to rent points and buy half the amount of points you think you'd need, let's say 150pts, then those 150 could be banked or borrowed or a combination of both to make a trip every other year OR buy 100pts and by using both banking & borrowing you can have as many as 300pts to use every 3rd year.

Read as much as you can here on buying resale ( there are some great SSR deals to be had ) and this is a great place to ask any and all questions; take your time to make the very best decision, DVC isn't going anywhere for a long time to come.

Best wishes

 

[jrtoastyman]

As other PPs have mentioned, the ROFR makes this problematic. Even if you think it would pass muster now, perhaps 5 years from now, Disney will be more aggressive about buying back its properties, and then you've paid all of this money in, you don't have anything to show for it, and there's no way to get it back from Disney, because once they exercise their right, it's over. Sounds like a risky proposition to me.

 

[Greysword]

I wonder how this would work mechanically. Are you basically borrowing the money from the owner, then using those proceeds to purchase their DVC? If you set this up as two separate transactions, you may be ok, since the property will pass through Disney's RoFR process and change owners. You'll then be on the hook to the lender for the funds.

 

[BrentR]

I wonder how this would work mechanically. Are you basically borrowing the money from the owner, then using those proceeds to purchase their DVC? If you set this up as two separate transactions, you may be ok, since the property will pass through Disney's RoFR process and change owners. You'll then be on the hook to the lender for the funds.

Essentially the Sellers would act as the mortgage company as well. The contract would need to go through ROFR all paperwork filed to change ownership then the Sellers would place a lien against the buyers interest in the property. There would be a little more to it "mechanically" however that is basically how it should work.

If they didn't do it this way and kept the old owners on the deed until the contract was paid it open up a whole bunch of issues of which a couple are, what happens if Disney acts upon ROFR in 5 years, then the buyers have paid out all this cash and they essentially lose the contract to Disney. Another would be during this 5 years they would either have to be listed as an associate on the contract to be able to make reservations or the owner/seller would have to make all the reservation for the buyer during the five years.

Seems the only way that it can be done cleanly is to have the sellers carry the note and act as mortgage and if that is what OP is intending then all should be well especially if the seller is offering 0% interest.....

If they have any extra $$ to lend out at those rates please give them my name!!

 

[joeytdog]

Background information:

My family has rented points from DVC owners for the past 4 years, and average about 300 points a year and rent them for $10 pp. We would obviously be good candidates to buy, as we spend so much, however we do not have cash onhand to purchase, and I strongly feel that financing the purchase would negate the financial benefit, even though we could easily finance it.

Something came along in which someone is looking to sell their property and is willing to do "seller financing" at 0 percent. I am proposing that they would hold the title for 5 years during a payment period, and we would have full use of the points during that time. Additionally, we would be responsible for the Maintenance fees during the payment period. We also state if we pay early the transfer would take place upon full payment.

I looked at the resale averages for OKV, and see they seem to average $57 for 2042 and $71 for 2057 based on the ROFR records. Am I being fair offerring the average price, even if they have all points available for the 2010,2011 and 2012 years?

I know it's a sweet deal for us, but also want to make sure we cover everything in a contract, that keeps the seller safe, as well as us. For instance, the more morbid items are what would happen if seller passed during the "payment period"? We would obviously get an attorney to review with us any agreement, but I wondered if anyone else had a similar experience with this out there.

Would really love to become an owner, since we already pay so much yearly for Disney vacations at DVC!

Thanks,
Tom

Tom,

Hello, we are serial renters as well. The way I look at it is if I pay $10pp and take out $5 in maint fees per year, I am paying $5pp more. Buy in at $100 and your breakeven is 20 years. Finance it and it is even longer

I have rented about 300 points each year 4 years in a row

Dont worry about owning for now. Until you have cash on hand, just rent.

This seems like a messy situation for sure

Nothing wrong with renting. It may actually be better in the long term anyways

Best of Luck

Talk to a lawyer btw

 

[marynvince]

Tom,

Hello, we are serial renters as well. The way I look at it is if I pay $10pp and take out $5 in maint fees per year, I am paying $5pp more. Buy in at $100 and your breakeven is 20 years. Finance it and it is even longer

I have rented about 300 points each year 4 years in a row

Dont worry about owning for now. Until you have cash on hand, just rent.

This seems like a messy situation for sure

Nothing wrong with renting. It may actually be better in the long term anyways

Best of Luck

Talk to a lawyer btw

Bad Math here. You can easily get 300 pts for $60 per point. $18,000. You are already in for $12,000(300*$10*4), in a period of 3 years( first year doesnt count as a year). So 2 more years, 5 total and you have paid $18,000 in rental. At MF of $5.00 per point, $7500 in MF over 5 years (2.5 years or "rentals") Payback is much less than 20 yrs, even less than 10.

Everyone likes to prove their way is the right way. Do what makes you feel comfortable and what you can afford. While the no interest loan idea sounds good, seems like it may be more trouble than it's worth. Good Luck

 

[CKCruising]

I don't think the ROFR is much of an issue as long as it is addressed in the contract. If you buy for $57pp, after 5 years (or the full term), you have given the owner the full $57, the points are to be transferred to you. If Disney chooses to ROFR, you get the $57 back...The owner has the money they wanted, you have paid "nothing" for 5 years of vacations. If Disney chooses not to ROFR, you have the points.

With a good contract in place, this seems like a win for you. In the worse case senario, the owner backs out along the way and you have to either choose legal action (in a different state?) or walk away. Even if you walk away, you are not on the hook for much (MFs over your point rental cost).

 

[CarolAnnC]

Also, DVC may deem this "commercial renting" and disallow it. They control the definition and if they feel it is bypassing their ROFR they may not like it.

I would continue renting, or save up for a purchase one day. Resales will be a more attractive price for you, too.

 

[drusba]

My understanding of what the OP wants to do is enter into a contract under which the buyer agrees to pay a set price per point, e.g., $57 a point, with payments to be made over a period of years without interest and in the interim the seller retains the deed and thus the legal interest in the property but the buyer gets all rights and obligations of use and thus the equitable interest in the property.


It has been a couple decades since I have seen one of those arrangements but they are called land contracts, contracts for deeds, or real estate installment sale contracts. Normally they would also have interest built into the payments. They are in fact real estate sale contracts to which Disney would have its right of first refusal now, not five years from now when the contract has been paid. Disney could even take the contract under the same terms and pay the seller over time with no interest. Such contracts can (and should) be recorded with the local recorder of deeds. They may, depending on the particular state's laws, be subject to real estate transfer taxes now rather than five years from now. You should consult a lawyer because you must deal with such terms of what is done upon death or bankruptcy of seller, what happens when you default (often if the buyer substantially defaults, such as missing a few payments in a row, the contract is terminated, the buyer gets nothing, the seller keeps the property and the buyer gets no money back). In fact, the seller needs a lawyer because careful drafting is needed on his part including to assure not having to declare the sale price as a capital gain now for purposes of taxes (for example, someone suggested above that you might do a separate mortgage under which the deed is actually transferred and then the seller provides a separate loan with repayment provisions; in that situation, the seller may have to claim all of any gain now because he would be doing a separate loan to the buyer but then actually getting paid on paper for the full amount of the property so the deed is transferred).

The one issue I do not know the answer to is how Disney will treat this type of situation for purpose of use of the DVC timeshare. It may accept it for what it is and make the buyer the owner of record for purposes of use of the timeshare and payment of dues (this is very similar to a trust situation in which the deed is held in a trust but the equitable owners are individual beneficiaries of the trust whom Disney recognizes as the actual DVC members for use, perks and dues purposes). However, it may not and insist that the original owners still holding the deed are the ones of record responsible for dues and the buyer can only get reserving rights by being made associate members and then get no DVC perks. It will be important to find out before embarking on this track how DVD will treat the sale. I suspect, if you ask, even DVC personnel won't know because they have never seen a land contract before and will have to refer it to their lawyers who may ultimately tell DVC that it should treat it just like a trust situation.

 

[kristenrice]

What about buying a small resale and then transferring the points from this owner on a yearly basis? You would still have full control of the points and you would be a member yourself. You could always add-on when you have the finances. Obviously, Disney could change the transfer rules at any time which could leave you high and dry, but it seems like an option.

 

[DVC Dude]

Bad Math here. You can easily get 300 pts for $60 per point. $18,000. You are already in for $12,000(300*$10*4), in a period of 3 years( first year doesnt count as a year). So 2 more years, 5 total and you have paid $18,000 in rental. At MF of $5.00 per point, $7500 in MF over 5 years (2.5 years or "rentals") Payback is much less than 20 yrs, even less than 10.

Everyone likes to prove their way is the right way. Do what makes you feel comfortable and what you can afford. While the no interest loan idea sounds good, seems like it may be more trouble than it's worth. Good Luck

It is NOT bad math as the OP is referring to buying direct. With the resale restrictions, some people will pay $100pp to Disney rather than $60pp resale.

What about buying a small resale and then transferring the points from this owner on a yearly basis? You would still have full control of the points and you would be a member yourself. You could always add-on when you have the finances. Obviously, Disney could change the transfer rules at any time which could leave you high and dry, but it seems like an option.

^^^^^ That is the BEST advice and something I have been posting for years

 

[Brian Noble]

With the resale restrictions, some people will pay $100pp to Disney rather than $60pp resale.

If that is their reason for buying direct, those people are not thinking clearly. The resale "restrictions" are favors in disguise; those internal exchange options are almost never superior to just renting out your points and using the proceeds to book the cruise, hotel, or guided tour you desire.

 

[SabresFan]

I think a much simpler course is to buy it outright from the owner with the owner holding the mortgage. There's a lot less legal niceties to consider - lots of people buy stuff on credit, and that's what you are doing. Also, consider that by paying more per point and getting 0% interest you are essentially rolling the finance charge into the purchase price.

For a 300 point contract at OKW, you could probably pick it up for $50 per point if you're patient. If you can get a Home Equity Loan it should come in around 4% (tax deductible), so if you pay it off in 5 years, it would be the equivalent of buying at around $55 per point and paying 0% interest.

And you don't need to hire lawyers and make everything complicated.

 

[Greysword]

If that is their reason for buying direct, those people are not thinking clearly. The resale "restrictions" are favors in disguise; those internal exchange options are almost never superior to just renting out your points and using the proceeds to book the cruise, hotel, or guided tour you desire.

That's the clinical answer, but I would disagree, as I choose to avoid the labor and responsibility of renting points. Instead, I would (and have) use the points for a short trip to DLR, staying at the DLH or PP.

Although this avenue is not the more fiscally beneficial route, it is the least time consuming (from an administrative perspective), which holds more value for me and my family.

 

[AllieV]

If you've developed a relationship with these people over the years, maybe they'd be willing to add your name to the title now (is this allowed, folks?). Then if the person dies, you still have some rights to ownership. If Disney takes the buyback themselves, you'd also get some money back from them.