Has anyone thought through this idea?

[HokieGCC]

Suppose you bought roughly double the points you would want to use yearly. For example suppose you had 400 points but only used 200 and rented out the other 200. Keeping it simple your yearly MF would equal 400*$5 = $2000. It seems like you would be able to rent out between $8 and $12 per point so to make it simple again I assume $10 per. This would bring in $10x200 = $2000 yearly - matching the MF for the entire 400 points. That is also about 20% return on the $10,000 spent on the extra 200 points. The downside seems to be the hassle of getting your points rented but that seems to be about it. So what huge "gotcha" did I omit?

 

[Annabell]

Seems to be a good idea but can you do this every year ? Will Disney not restrict you in renting your points every year ? I thought renting is only allowed if you do that occasionally.

 

[KPOP]

its not a "gotcha" per se -
but there are risks involved in renting that you need to account for
- potential damage done by renters
- hassle of collecting funds
- no guarantee that you can rent all the points you want, at the price you want to collect

etc...

having said that, I am sure that what you have described is done quite often

 

[disneynutz]

Suppose you bought roughly double the points you would want to use yearly. For example suppose you had 400 points but only used 200 and rented out the other 200. Keeping it simple your yearly MF would equal 400*$5 = $2000. It seems like you would be able to rent out between $8 and $12 per point so to make it simple again I assume $10 per. This would bring in $10x200 = $2000 yearly - matching the MF for the entire 400 points. That is also about 20% return on the $10,000 spent on the extra 200 points. The downside seems to be the hassle of getting your points rented but that seems to be about it. So what huge "gotcha" did I omit?

Renters who cancel.
Renters who write you a bad check.
Renters who can't make up their mind.
Disney screwing up the reservation.
Income tax.
Hotel tax.

Bill

 

[CarolMN]

There is quite a bit of competition to rent points these days. There are several owners & brokers who do so already. They have established reputations and lots of good feedback. Some have their own websites.

Have you thought through how you will find your clients and why they would rent from you rather than someone who is experienced and has the feedback/reviews to prove it? Keep in mind that the DIS is only one of several websites that offers a "classified" ad board for owners and renters.

IMO, renting is not as easy as one might think. Do a search for rental threads and read about some experiences others have had - on both sides of the transaction. FWIW, most of the problems are the result of a misunderstanding do to an inexperienced owner or client, but there have been a few cases of fraud of fraud reported, on both sides of the transaction.

My advice is not to do this unless you can comfortably handle the expense of the larger purchase without renting. That way you won't get yourself in a bind if it takes you longer than you think to figure out what you are doing, or if you find out you really do not want to hassle with renting every year.

 

[chalee94]

it has occurred to many.

but it's a big hassle IMO - much cheaper to just buy what you want to use.

disney can change the rules (and has changed them in the past) to make renting more difficult. if you have trouble finding renters, you are still on the hook for all of the maintenance fees. same thing if maintenance fees go up and the rental price per pt stays the same.

not worth it.

 

[HokieGCC]

What is the hotel tax (as it relates to DVC)?

 

[Judique]

Suppose you bought roughly double the points you would want to use yearly. For example suppose you had 400 points but only used 200 and rented out the other 200. Keeping it simple your yearly MF would equal 400*$5 = $2000. It seems like you would be able to rent out between $8 and $12 per point so to make it simple again I assume $10 per. This would bring in $10x200 = $2000 yearly - matching the MF for the entire 400 points. That is also about 20% return on the $10,000 spent on the extra 200 points. The downside seems to be the hassle of getting your points rented but that seems to be about it. So what huge "gotcha" did I omit?

Do you really want to be a landlord? I know I don't.

I rented out my points quite easily this year. I had wonderful customers and I was grateful for the opportunity to be able to rent out what I couldn't use and recoup my money. Thanks to the Disboards for that!

However, I don't want to be in business doing rentals. I already have a job that is quite demanding and time consuming. I can see where this renting thing could easily get out of hand if I had to depend on it.

DVC for me is a luxury that I can afford whether I lose some points (expiry) or not. It is nice to have the possible rental perk but it was never set up to be a side business for someone.

So, yes what you are suggesting could be done in a limited way, but than you are assuming risk and your vacation plan is no longer a means of relaxing and having fun.

There is a mantra around here - Buy where you want to stay. Another one should be - Buy what you can afford.

 

[HokieGCC]

Not really thinking of making it a business - just wanted to know if it worked. Sounds like a hassle more than anything not worth the couple thousand bucks it saves - similar to not changing my own oil in my car - saves $5 but costs me an hour. Affording it would of course not be an issue if it were being considered. I think you convinced me of the hassle and if anything "underbuy" points verses "overbuy" - renting a few extra points is better than having too many to try and rent away.

 

[Deb & Bill]

Not really thinking of making it a business - just wanted to know if it worked. Sounds like a hassle more than anything not worth the couple thousand bucks it saves - similar to not changing my own oil in my car - saves $5 but costs me an hour. Affording it would of course not be an issue if it were being considered. I think you convinced me of the hassle and if anything "underbuy" points verses "overbuy" - renting a few extra points is better than having too many to try and rent away.

"Renting" points does not make them yours. You need a transfer of points if you need more than you have. If you "rent points", the member who owns the point still owns them and you cannot combine them with your points for a single night. You'd be asking a member to book a single night or two for you using their points and then link their reservation to your reservation.

DVC will allow you to purchase additional one time use points at 7 months out (they don't have a home resort) - up to 24 points for $15 each. So if you are trying to get that hard to get reservation at your home resort at 11 months out and you are short, you'd need a transfer from another member. Since you are limited to one transfer in or out a year, not all members are willing to use their once a year transfer for a small number of points. Then those points you transfer must match your home resort and UY (you cannot borrow transferred points, but you can bank them).

 

[howardlee2]

renting points is a BIG hassle. people constantly ask for reservations that couldn't be found by other renters.

renters regularly change their minds on dates, accommodations, etc

you are not getting a 20% return on your investment. that would be true if you could sell it for what you bought it for. have you checked for instance the recent prices for OKW points vs what some of us paid?? no way can we get those $$ back. this is if anything a depreciating asset.

 

[mikron]

Been doing that since 2004, not one problem. Same with my Sister and Brother. We get 100% of the reservation within 10 days of sending the renter their reservation. Have a renter agreement that speels out conditions and no refund policy. We will help renter re rent if needed. Have never had a canacalation since 2004. It's easyer now they let you pay and don't have to do the 50 postings over 6 months anymore. We rent large point reservations and don't do more then 4 or 6 per year.

 

[logan115]

Suppose you bought roughly double the points you would want to use yearly. For example suppose you had 400 points but only used 200 and rented out the other 200. Keeping it simple your yearly MF would equal 400*$5 = $2000. It seems like you would be able to rent out between $8 and $12 per point so to make it simple again I assume $10 per. This would bring in $10x200 = $2000 yearly - matching the MF for the entire 400 points. That is also about 20% return on the $10,000 spent on the extra 200 points. The downside seems to be the hassle of getting your points rented but that seems to be about it. So what huge "gotcha" did I omit?

Your math is off. Your return on the "extra" 200 points is closer to 10%. You paid $50/pt and your MFs are $5/pt. If you rent them for $10/pt, you net $5/pt each point. That $5/pt profit divided by the $50 cost is a 10% return - ie you clear $1000/yr on your $10K "investment."

Not as rosy, but 10% is still pretty good compared to CDs, bonds, and the sub 1% rates you're getting now in a checking/savings account.

Chris

 

[Brian Noble]

Your return on the "extra" 200 points is closer to 10%.

Exactly. And, that's a pre-tax return. Still not bad. But, it is easier to do MUCH MUCH better with another (non-Disney) timeshare with a lower cost basis. It's also worth asking yourself how much of your time it will take to earn that $1K/year (hint: more than you'd think) and whether or not there are *other* things you could do with that much time that would be more remunerative.

There are a lot of people who have tried to become timeshare landlords. Very few are successful, and it looks a lot more like a "job" than anything else. When you actually work it out, most people are getting a pretty low hourly rate for the work.

 

[chunkygal]

It would work and would work better if you bought at $25 per point.
I have never had a problem renting my points although people changing their minds about dates and the calling DVC is annoying, but better than losing. I can usually sell to people I know.

My problem is, like income, you "grow" into your points. We bought 515 thinking we would hardly ever use that many, but guess what?

 

[HokieGCC]

My math is actually correct. The first $10,000 is for the 200 points to use for vacations and is excluded in my calculation and is not considered an investment for the purpose of making money. The second $10,000 to purchase the second 200 points is the investment money that brings $2000/year covering all 400 poinrs worth of MF's when rented every year. Therefore, the annual rate of return on the second $10,000 is $2000 or 20%. I still am pretty "talked out" of this because of the hassle but believe I captured the numbers correctly.

 

[Dean]

Suppose you bought roughly double the points you would want to use yearly. For example suppose you had 400 points but only used 200 and rented out the other 200. Keeping it simple your yearly MF would equal 400*$5 = $2000. It seems like you would be able to rent out between $8 and $12 per point so to make it simple again I assume $10 per. This would bring in $10x200 = $2000 yearly - matching the MF for the entire 400 points. That is also about 20% return on the $10,000 spent on the extra 200 points. The downside seems to be the hassle of getting your points rented but that seems to be about it. So what huge "gotcha" did I omit?

This issue has been discussed extensively over the years. If you include the up front costs and a return of principle to account for the declining value due to the RTU, it comes out to around a 2-4% return IIRC though it does vary a little with your assumptions. IMO, one would need to get return of principle in 10 years, cover the Maint fees adjusted over time and also get around 20% return after that to make the risks worthwhile.

 

[Brian Noble]

One other risk that I don't recall being mentioned: it seems to me that rental rates on the open market are growing more slowly than dues. If that trend holds, it will squeeze you, and possibly before the payoff horizon.

 

[Fish1371]

Don't see why u would not be able too

 

[HokieGCC]

Not sure what happened to my post but my math is correct.