Economics of buying DVC vs. Renting points

[havoc315]

I am NOT a financial consultant, but according to Wikipedia:

INVESTMENT - To invest is to allocate money in the expectation of some benefit/return in the future. In other words, to invest means owning an asset or an item with the goal of generating income from the investment or the appreciation of your investment which is an increase in the value of the asset over a period of time. When you invest it always requires a sacrifice of some present asset that you own today such as time, money, or effort.

Thus, for some people DVC is a true investment, but obviously it is just a timeshare

It's largely semantics, but I would dispute it is really ever an investment.
When investing, the central and main purpose is the expectation of financial growth and return in the future.
Though many people have managed to make a "profit" over the course of their DVC ownership, the main purpose of virtually every buyer is to USE the purchase, to stay in the resorts. Even those who have managed to make a profit, the annualized return is quite small.
So I suppose there are a few buyers out there who bought DVC, never really plans to use it, they keep paying the dues, maybe they rent it out every year, and they plan to eventually sell it for a profit. But such "investment" strategy would basically under-perform most traditional investments, with greater risks than most other investments.

 

[Dyefrog]

It's largely semantics, but I would dispute it is really ever an investment.
When investing, the central and main purpose is the expectation of financial growth and return in the future.
Though many people have managed to make a "profit" over the course of their DVC ownership, the main purpose of virtually every buyer is to USE the purchase, to stay in the resorts. Even those who have managed to make a profit, the annualized return is quite small.
So I suppose there are a few buyers out there who bought DVC, never really plans to use it, they keep paying the dues, maybe they rent it out every year, and they plan to eventually sell it for a profit. But such "investment" strategy would basically under-perform most traditional investments, with greater risks than most other investments.

But couldn't you make the same rationalization concerning your primary residence, assuming you own? I choose to own rather than rent my home primarily as an investment. Would you consider other forms of real estate that are lived in by the owners, no longer an investment unless they rent it out? I believe there are some DVC contracts that have doubled in value in 10 years.
Can't disagree though that most traditional investments i.e. stock market will outperform DVC as a return on investment. But how do you value the enjoyment or pleasure you get from DVC vs owning 1000 shares of DIS?

 

[havoc315]

But couldn't you make the same rationalization concerning your primary residence, assuming you own? I choose to own rather than rent my home primarily as an investment. Would you consider other forms of real estate that are lived in by the owners, no longer an investment unless they rent it out? I believe there are some DVC contracts that have doubled in value in 10 years.
Can't disagree though that most traditional investments i.e. stock market will outperform DVC as a return on investment. But how do you value the enjoyment or pleasure you get from DVC vs owning 1000 shares of DIS?

1 -- Owning your own primary residence isn't primarily an investment. You own instead of renting because owning is cheaper than renting in the long term. But if you're only planning on living in the same spot for under 7 years, the general advice would be to rent.
Yes -- real estate CAN be an investment. But that's not the primary consideration when buying a primary residence.
Example -- there are 2 properties for sale. 1 is in a run down neighborhood, horrible schools, run down building. But, there is some re-zoning going on, they are building a new commuter station... in 5-10 years, the values in the neighborhood are projected to explode. You can buy 10 acres for $x. This would be a great INVESTMENT property.
Another home, same price but far less property.. just a single family house, beautiful neighborhood, great schools. Home values are projecting to remain stable, go up with inflation, but not expected to explode.

If this was an "investment," you'd buy the first property. But if your primary motive is a residence, you'd buy the second property.

2. "Value of enjoyment or pleasure" -- That's why it's NOT an investment. Investments are designed to bring financial return, not "enjoyment or pleasure." If enjoyment or pleasure is the PRIMARY purpose of the purchase, it's not an investment. And yes, for some people, who purchased at the right price and right time, the value of their purchase has increased. But similarly, a gambler sometimes wins money. But gambling isn't an "investment." And similarly, DVC is not truly an "investment."
In some ways, DVC is even less of an investment than gambling -- At the end of your DVC contract, it is guaranteed that your purchase is worthless. You might get higher value for it if you sell it BEFORE the contract expires, but we know that a Beach Club Villa contract (for example) will be worthless as of January 31, 2042.