Followup - "Sell me on DVC"

[kboo]

I had a diffent approach to my calculations before buying DVC.
I used to stay in Values and offsite. I wanted to stay in deluxes but didn't really want to pay $300 to $600 per night to do so. So I looked at DVC and calculated if I could afford it. I wasn't really looking at savings, because I would never book the Poly or the Contemporary for cash, I was looking at upgrading my type of accommodation. From this point of view, it hasn't been an investment, I'm actually paying more than before (more trips, more flights, more food, more tickets), but I'm also enjoying my vacations more.
And it was also an emotional decision, but that's another story.



That's what I did. Shortly after buying my first contract I got a new job offer and moved to London. This meant I went from planning a visit every three years, to twice every three. So I started looking for an add-on, but contracts in the 75-100 range were even more uncommon than now. So I ended up buying a 150 points add on: it was cheaper, it was loaded which meant I could offset some of the initial costs renting those banked points and I also thought it was a good idea to have a few extra points in case I wanted to visit during a more expensive season, book a bigger unit from time to time or as an insurance against reallocations. I also though I could rent the extra points to offset the dues and it worked very well until now. I think I've rented enough points to cover all the dues I've paid in my 7 years of ownership.
However, key to this strategy is being able to affort to pay the dues on all points without any problem. While the rental market has been very good in the latest 5 years, it's not guaranteed.

This was our decision process too - except for the staying in values and offsite. We really liked the deluxes and when our kids weren't in school and DH and I each had periodic work conferences in Orlando, it was easy to look for good deals in "low" Disney season and score 30% off deluxe rooms, and take our kid out of day care, and enjoy 1 comp airfare, sometimes comped/partially comped hotel. Also = one often-cited restriction (planning 7-11 months in advance) turned out to be worth something more: When we came down for work conferences, one parent was partially working during that time. So it wasn't exactly the easy Disney family vacation, and it became very difficult with the addition of a 2nd kid. But DVC essentially forced us to plan at least one true family vacation each year, which in turn led us to be more forward-thinking about when and where we take vacation generally. We do a lot better about planning not only our Disney vacations but also our non-Disney vacations.

DVC does not save you money. I don't see how it could. It will save you a TON of money on accommodation cash rack rates. But it won't save you money.

I'll elaborate. If you didn't have DVC, would you go every year? Would you then be enticed to go every 2 years? Would you buy annual passes? Would you buy every freaking piece of merch that you can get your hands on? My guess is no. DVC feeds the WDW addiction. Do I regret this? Not a single bit. That place brings me and my family so much freaking joy that I'm proud of every penny spent.

The right (cheap way) to do DVC is buy half the amount of points for a stay, go every other year in a studio for one week. And leave it at that. Unfortunately, that's not what happens. You end up adding on contracts. You start taking extended family down. You become known as the Disney Family to everyone you know. People are surprised when they see you and you don't have Mickey ears on.

So no, it's not an investment. It's a life choice. You are making WDW your home and a part of your life. You are saving money on per night accommodations but the number of "per nights" is likely to be drastically greater than if you hadn't joined DVC. The number of WDW gear sprinkled throughout your home and life is likely to be drastically greater than if you hadn't joined DVC. Again, I don't regret this one bit

Agree with this point completely. We are That Disney Family among all our friends and our kids' friends. But we take a heck of a lot more vacations than they do, too!

 

[DisneyRegulars]

With regards to question 3) and renting out points to pay dues. We used this exact strategy when purchasing additional points after our initial purchase. We were going to use 310 points for ourselves, and then rent 150 to cover our yearly dues. Well it’s been 7 years or so now, and we have yet to rent a single point. Spending them is just too much fun. It’s nice to know we could rent them if we needed too, but actually renting points takes an extreme amount of discipline that we just don’t seem to have.

Also, we own at SSR and have never had any trouble with split stays and trying out other resorts in the summer or in january when we tend to travel.

 

[gscott8075]

I recently sold my two DVC interests - same resort, same use year - the 50 point contract sold in two days for $22 a point more than the 140 point contract which took two months to sell. Used the same broker and they were listed the same day. If I had to do it again, I would have bought three smaller contracts.

 

[CanadaDisney05]

It isn't just a hotel room though. Even a studio with it's kitchenette was more convenient for me than a hotel room. Having the kitchenette or a kitchen, and more space enhances my experience. Staying in a better resort, in a better location enhances my experience. Not having to wait for a bus after fireworks at least some of my days enhances my experience. If it's just a room you want, then I don't think DVC will enhance your experience, but it did mine.

But could you not get this for cash price? I don't believe these rooms are off-limits to non-DVC members.

 

[crvetter]

But could you not get this for cash price? I don't believe these rooms are off-limits to non-DVC members.

Yeah it doesn't enhance the experience when looking at your way (just a reminder DVC owns a very little amount of the DVC Resorts owners own the lions share though so sometimes of the year certain DVC rooms are hard to come by with Cash). Perhaps they meant it enhances the experience they can afford otherwise, which is likely true.

 

[RamblingMad]

I’m still not sold yet. But I can see why people purchase DVC. You basically get extended living accommodations on property.

If you do want an asset and plan to go to Orlando every year, another option might be to buy a condo or townhouse in Orlando. When you decide you’re done going to WDW, you can sell it or just use it as a rental property.

 

[chalee94]

I’m still not sold yet. But I can see why people purchase DVC. You basically get extended living accommodations on property.

If you do want an asset and plan to go to Orlando every year, another option might be to buy a condo or townhouse in Orlando. When you decide you’re done going to WDW, you can sell it or just use it as a rental property.

A lot more money upfront, a lot more in annual maintenance costs and Orlando has a glut of offsite rental options.

And as you mention, it's still off property, so no fast passes or bus/monorail/walk to the parks.

I can't imagine cross shopping DVC and condos. If you aren't hitting the parks, there are much cheaper lodging options available (including offsite timeshares.)

 

[AdamsMum]

But could you not get this for cash price? I don't believe these rooms are off-limits to non-DVC members.

I would never be able to pay cash prices, they aren't affordable to me. I purchased my DVC in small contracts, paid cash, 2 resale and 2 direct. I did this when the $CAD was almost at par with US$, and back in 2007 when the prices were much lower. I don't go to Disney in summer because I can't bear the heat, and I believe that's when the best discounts appear. Prior to purchasing, I stayed at moderates, mostly POFQ. Even that was starting to be excluded from some discounts. I feel fortunate that I had the ability to purchase at the time I did (or at all), and it turned out to be a good deal for me. At today's prices, I don't know if I'd be buying.

 

[CanadaDisney05]

I would never be able to pay cash prices, they aren't affordable to me. I purchased my DVC in small contracts, paid cash, 2 resale and 2 direct. I did this when the $CAD was almost at par with US$, and back in 2007 when the prices were much lower. I don't go to Disney in summer because I can't bear the heat, and I believe that's when the best discounts appear. Prior to purchasing, I stayed at moderates, mostly POFQ. Even that was starting to be excluded from some discounts. I feel fortunate that I had the ability to purchase at the time I did (or at all), and it turned out to be a good deal for me. At today's prices, I don't know if I'd be buying.

Ah the dream. When $CAD was at par. That's actually the biggest thing holding me up from jumping in. If the CAD stays the same forever and ever, the value remains the same. But if the CAD gets stronger, then all of a sudden any value from buying into DVC may be eliminated.

 

[CanadaDisney05]

If you do want an asset and plan to go to Orlando every year, another option might be to buy a condo or townhouse in Orlando. When you decide you’re done going to WDW, you can sell it or just use it as a rental property.

Buying a condo or townhome I don't think can really be brought into the picture. Sure it's another option. But it's not even in the same ballpark of cost. A condo is what? 300K? A DVC contract with 150 points is probably about 15k? Between condo fees, maintenance, property taxes, and the work involved, the cost of this would far exceed any value. Your also losing the benefits of staying on property including the resort, the location, the fastpass booking window & the Disney transportation. If you want to stay offsite, unless you come down for 6 months per year, your better off just renting an Air BNB

 

[RamblingMad]

The cost of DVC is easily a down payment on a condo. That’s why I bring it into the picture. The downside is that you’re not on property. The upside is that you have possible property appreciation.

Since buying DVC is a real estate transaction, I can definitely see a condo as a viable alternative. And if you really like FL that much to come back each year, it’s also a potential retirement home in the future.

In my warped mind, I see it as a viable alternative when thinking about buying DVC.

 

[lovin'fl]

The cost of DVC is easily a down payment on a condo. That’s why I bring it into the picture. The downside is that you’re not on property. The upside is that you have possible property appreciation.

Since buying DVC is a real estate transaction, I can definitely see a condo as a viable alternative. And if you really like FL that much to come back each year, it’s also a potential retirement home in the future.

In my warped mind, I see it as a viable alternative when thinking about buying DVC.

Yes. Especially for us who bought a lot of points (and intended to buy more) to be able to sort of winter at WDW. We have 650 (but are in process of selling 200) and planned to buy about 1500 so we could spend several weeks of winter. But it is cheaper to buy a vacation condo than buying 1500 DVC points (and paying MF on 1500 points).

 

[CanadaDisney05]

The cost of DVC is easily a down payment on a condo. That’s why I bring it into the picture. The downside is that you’re not on property. The upside is that you have possible property appreciation.

There is also possible depreciation on the condo and appreciation on DVC. Both have the element of risk/reward. However, because the investment in DVC is about 1/20th of that of the condo, the risk is greatly reduced. The mortgage payments, maintenance, condo fees, property taxes, and management costs (someone to manage the property while your not in Orlando) would be a real hindrance from a cash flow perspective also.

If you decided to buy the condo, and then rent it out as an Air BNB while your not there, then I can see a possible benefit. You would have to run the numbers. But at that point, your running a business.

 

[CanadaDisney05]

Yes. Especially for us who bought a lot of points (and intended to buy more) to be able to sort of winter at WDW. We have 650 (but are in process of selling 200) and planned to buy about 1500 so we could spend several weeks of winter. But it is cheaper to buy a vacation condo than buying 1500 DVC points (and paying MF on 1500 points).

This is an interesting scenario. On the surface, I agree. Once your talking about spending several months in the area, the benefit of outright purchasing a place makes more sense. But lets do some rough math. (FWIW, the math gets more complicated because at the end of your SSR contract, you have no asset, but you would have a nice piece of property at the end of your mortgage on the condo). I will also keep everything in today's dollars for simplicity.

Lets assume you bought 1500 points at SSR for $95/point. Maintenance fees are $6.4 per point. So that is an upfront cost of $142,500, and annual maintenance fees of $9,600.

If you financed the DVC over 10 years at 7%, your monthly installment would be $1,654 + 800 of maintenance fees for a total monthly cost of $2,454 for the first 10 years. Once the financing is paid off, your monthly cost is down to $800/month.

If you bought a condo for 300K, and mortgaged it at 3.5% over 25 years with a 20% down payment (60K), your monthly mortgage would be $1,202. Add in ~$400 of condo fees, ~$250 of property taxes, ~$250 for maintenance, ~$300 for utilities. Now your total monthly cost for the first 25 years is $2,402.

So for the first 10 years, your monthly cashflow is roughly the same. For the next 15 years, DVC wins by ~$1600/mo. So the cash flow you save by going DVC is 60,000 + (1600 x 12 x 15) = 348,000.

Of course when you own the condo, even though you paid roughly 350K more in cash, you have an asset that is worth 300K today and hopefully a lot more in 25 years. FWIW, the condo would have to average appreciation of less than 1% to be worth more than the $348K in 25 years. On the other hand, you can invest that $348K in cashflow savings and maybe earn even more than the home appreciation.

So theoretically, the condo would be the better investment. However the difference isn't staggering. And you lose a lot of benefits by going this route.

1) Your likely not on some deluxe resort.
2) You have to maintain the property yourself, even while your not there.
3) I didn't factor in things like home insurance and other miscellaneous expenses.
4) If your main reason for this is to visit Disney, you lose the major conveniences that come with staying on property
5) Owning the home is far less liquidable than DVC. Atleast with DVC, if you choose not to visit Disney, you can rent your points. Even in a down economy, you will still be able to get something for your points.

 

[RamblingMad]

I’m finding condos on Zillow near WDW in the $200k ballpark, not the $300k.

There is no reason to not set this up as a vacation rental when not there.

So the real question is: what is the value of staying on property via DVC versus buying an offsite property?

 

[CanadaDisney05]

I’m finding condos on Zillow near WDW in the $200k ballpark, not the $300k.

I didn't actually do any research into the local market. Perhaps there is some opportunity.

There is no reason to not set this up as a vacation rental when not there.

Well setting up a vacation rental from far is not that simple. (Even from close by). There is a lot to it. It's essentially running a small business. Theoretically this will make the numbers better, it's not an apples to apples comparison in terms of time commitment.

So the real question is: what is the value of staying on property via DVC versus buying an offsite property?

Plus the value of vacation vs the value of running a side business.

 

[lovin'fl]

Plus owning 1500 DVC points gets you a 1BR for like 6 weeks a year whereas owning a condo gets you (likely a 2 or 3 bedroom) for all 52 weeks a year. And 23 years down the line you can sell the condo and get your money back whereas the OKW/BWV/HHI points (that I own currently) will be done and gone.

 

[CanadaDisney05]

Plus owning 1500 DVC points gets you a 1BR for like 6 weeks a year whereas owning a condo gets you (likely a 2 or 3 bedroom) for all 52 weeks a year.

That is for sure. I started with the assumption that if you own 1500 DVC points, this was adequate for the amount of time you spend in Orlando. If you have to pay for more hotel on top of the DVC points, then the numbers tilt much more favorably to to owning a condo. There is a reason people buy or rent homes vs staying in a hotel 365 days per year.

 

[CraigInPA]

Well setting up a vacation rental from far is not that simple. (Even from close by). There is a lot to it. It's essentially running a small business.

If you're going to AirBnB it, it won't be renting for much, because of the glut of hotels ($29.95 per night out on I4) and people with condos also having the same idea. On the other hand, if you purchased a house in Golden Oak, that would rake in the bucks. But, the $3M price of a house in Golden Oak changes the metrics entirely.

 

[RamblingMad]

That is for sure. I started with the assumption that if you own 1500 DVC points, this was adequate for the amount of time you spend in Orlando. If you have to pay for more hotel on top of the DVC points, then the numbers tilt much more favorably to to owning a condo. There is a reason people buy or rent homes vs staying in a hotel 365 days per year.

I think, it really depends how many points someone plans to purchase. At a certain tipping point, a condo makes more sense.