Have to figure in resale value and renting

[dolphinea]

The other thing I've been thinking about, to throw into this mix, is that you really have a *sweet* price on your resales and on renting your points.

I ran some figures and saw where I could purchase 350 points, and rent a week's reservation each year (probably in early December because that's when I travel and it would work with my proposed use year of Dec. or Oct.) on the Rent/Trade board at my home resort, use the rest of the points for myself, and the rental would cover all of dues for the year plus a little extra.

When I took that "little extra" and divided it by the purchase cost for the 350 points, it came up with a return in the 2% range, which is what you'd get on that money for a savings account.

Add the probability that for the 6 to 9 years it would take to "break even" for me, the price of my points at a potential resale are well-supported by Disney's current DVC expansion plans (SSR, Eagle Pines), so I'm not very likely to lose that principal if I need to recoup it due to some life emergency....

I don't know, it's starting to look like a pretty good use of my capital at this point, especially if we are talking about money that really is disposable income (which if I did this, it would be -- paying off the house entirely first, college for son taken care of, etc.).

Does anyone think my 350 points/rent a week/use a week idea is really a bad one, or morally unacceptable to DVC owners -- am I missing something?

Thanks for all your thoughts and input, this has been a great thread!!

~Amanda

 

[CarolMN]

A few things to consider before implementing your plan:

1. Have you included the broker's commission in your calculations for resale? They do take (IMHO), a fairly hefty percentage of the sale price and most brokers have minimum commissions. My gut says that the broker's commission pretty much wipes out the possibility that you will be able to recoup all of your principal in the first few years.

2. Renting points takes time and is not a sure thing, especially if you are counting on a set price per point. It is not as easy to do as one might conclude from reading posts here on the DIS. You may have to kiss a lot of frogs before you find your prince, if you know what I mean!

3. There is no guarantee that Disney will continue to support the prices of the existing DVC resorts to the same degree that they have in the past. I think that is a possibility if the extra years for SSR turns out to be a big selling point.

4. The paperwork that you sign at purchase states in more than one place that DVC is not an investment and that you will be competing with Disney if you rent your interest. They do that so that buyers have no recourse from Disney if renting (or resale of the interest) doesn't pan out the way the buyer hopes. For example, if hotel/resort prices are heavily discounted, you may have some trouble getting your price. Renting points is risky for the person who rents, there are usually more restrictive cancellation policies and they don't get housekeeping. For some, those "negatives" require a really good price to overcome.

All in all, you are pretty much counting on things to stay the same in the DVC marketplace and I don't think that is realistic. Your assumptions may not turn out to be valid.

If you can afford the extra points even without renting some of the points, then you may not be assuming more risk than you can tolerate. Since you are planning to use "disposable" income and use points yourself, DVC probably makes sense for you without considering the 2% return. FWIW, there are many other "investments" out there with risks equal to DVC that will return lots more than 2%. Even if your analysis is correct and DVC does return 2%, comparing it to a savings account is like comparing apples to pumpkins. They are not at all similar animals. DVC is a LOT more risky (as an investment vehicle) than a savings account!

JMHO and some other things to think about!

Good luck with your decision.

 

[WDWguruDH]

Sounds good on paper, just a couple points.
First, some here don't like people that buy points to rent - your plan is a little different and probably should not raise to many feathers.
Second, counting on rental prices and resale value in your figures is risky. We never know what will happen in the future, DVC has bucked the traditional trend of timeshares and kept most of its' value(increased for some) and been easily rentable. If this changes, your figures would suffer.
Your plan is probably good for the next several years, beyond that, it is a risk. I would not use this to justify a purchase, if it is just one of the many reasons, it is probably ok to include.

 

[Muushka]

I ran some figures and saw where I could purchase 350 points, and rent a week's reservation each year (probably in early December because that's when I travel and it would work with my proposed use year of Dec. or Oct.) on the Rent/Trade board at my home resort, use the rest of the points for myself, and the rental would cover all of dues for the year plus a little extra.

Does this mean that you plan on renting a week's reservation each year in early December? If yes, yup, my feathers are ruffeled. That is such a hard time for DVC members to get reservations for themselves, nevermind having to compete with people reserving them to rent! I saw a couple of these over on the rent/trade board. UUUGGGHHH.

I know you are just throwing this out for feedback, and if what I thought is wrong, please accept my appology.

 

[dolphinea]

Yes, I hope nobody is going to get angry at me as a person for not knowing how everyone feels about the topic yet, being a total newbie.

That's why I'm asking.

I do think that with all the new SSR rooms, it is going to get harder and harder to book times most in demand, and it will get even harder when Eagle Pines gets built in the next five years, as that was supposed to be really big, too.

Where your home resort is may become very important.

Definitely something for me to consider -- and makes me think all the more that I want VWL as my home resort, as it is 1. small and 2. where I'd be happiest "having" to stay -- seriously, can I move to Orlando tomorrow and have a job there, please? That pays $35K a year with benefits? Please? LOL

~Amanda

 

[5infam]

I actually think it is a good plan!! Although some seem to think it may fall apart in a few years, I think the opposite. Looking at history so far, prices keep going up and up as far as hotel costs and purchasing into DVC. Therefore, it stands to reason that rental prices MAY increase over time as well. This will truley need to happen though as maintenance fees are sure to increase. Also, no disrespect meant to those that disagree with renting, but this is your financial plan (I know you asked for opinions) and if it makes since to you and you are not violating any DVC rules, then I say do what makes the most finacial sense to you!!

 

[Dean]

Originally posted by Muushka
Does this mean that you plan on renting a week's reservation each year in early December? If yes, yup, my feathers are ruffeled. That is such a hard time for DVC members to get reservations for themselves, nevermind having to compete with people reserving them to rent! I saw a couple of these over on the rent/trade board. UUUGGGHHH.

I know you are just throwing this out for feedback, and if what I thought is wrong, please accept my appology.

You're only competing with another owner, regardless of what they use the points for. The destination has little or no meaning on your chances of getting what you want. Just call day by day at the 11 month window and you should have no problems.

 

[Muushka]

Originally posted by Dean
You're only competing with another owner, regardless of what they use the points for. The destination has little or no meaning on your chances of getting what you want. Just call day by day at the 11 month window and you should have no problems.

Dean! I can't believe I am debating with the timeshare guru!

Anyway, if everyone (or even several people) purchased DVC with the intention of renting their points at the highly desired time of the first 2 weeks of December, do you really believe it will not have an impact on people like me who count on that time to book our vacation? I currently call day by day for our December reservation at VWL and have not had a problem, but I dread the day that I can't book because of not being able to get to the phone faster than the 'other guy'. And then see the reservations posted on the rent trade board. Not good!

Yes, I hope nobody is going to get angry at me as a person for not knowing how everyone feels about the topic yet, being a total newbie.

No dolphinea, I thought you were just in the inquiry stage, that is why I tried to lighten up a bit with the . I had just visited the rent trade board before reading your post and thought if I could persuade just one person not to make reservations to sell for that time of year, well, it would give my life meaning .

Anyway, about wanting VWL, I so agree with your reasons to buy there. Good luck with your decision. And I may be the only one on the boards that feels that way about December!

 

[Dean]

Muushka, I do believe it will have little or no impact. Remember those points have to go somewhere and I suspect the demand for rental for those times are no more, or less, than the demand across the entire membership. Regardless, anyone who owns points has the legal and contractual right to rent them. To me, that makes it a none issue.

 

[Shamus]

BUT IS IT ALLOWED????

ARTICLE XII
USE RESTRCITIONS

12.1 Personal Use. Except for units owned by DVD .........................Use of Vacation Homes and recreational facilities for commercial purpose or any purpose other than personal use described herein is expressly prohibited. "Commercial purpose" shall include a pattern of rental activity or other occupancy by an Owner that the Association, in its reasonable discreation, could conclude constitutes a commercial enterprise or practice. ......................

I would think renting every December would be a pattern of Commercial purpose. MHO Just a friendly warning


Shamus

 

[CarolA]

Repeat after me!

TIMESHARES ARE NOT INVESTMENTS! Especially not one's that sell for what Disney's does. In theory I might could do this with a "cheap" resale at one of the other time shares where I paid just a few thousand (i.e., $2,000) for my original investment.

You have NO gurantee that Disney will continue to support the ROFR as they currently do. Should they quit your theory on resale if you need the money has a MAJOR flaw. My theory is that near the end of my contract I will be doing good to be able to give this thing away. That is fine.

By the way, you also owe taxes on the rental income since you just made it a business rather then a casual one time occurance. That could impact your 2% return (which is pretty pathetic, have you tried either a mutual fund or a money market!)


Now for those of you who object to this method, may I suggest that the IRS is your friend. All it takes if for someone (friend or foe) to turn in this "unreported" income to the IRS for them to make a call. (No I am not going to do this, I don't really care, but I know people who have been turned in. I am an accountant!)