How Long To Recoup Your Initial DVC Cost?

[Dean]

I wasn't talking about anyone in particular. I don't bother to read any of these "analyses" anymore, and I haven't read any of the scenarios in this thread for more than a few seconds. My eyes glaze over.

My initial reaction to DVC was similar to yours. I took the tour alone, and immediately decided I wanted to buy. Fortunately for my family, I didn't -- instead deciding to go home and research.

A random Google search led me to the DIS, and the info I gained here led me to make my first purchase resale. I later bought an add-on direct because of the numbers -- it actually WAS a better deal than buying resale (that was in 2005, I think). That's actually the only time I've looked seriously at the numbers for my own purchase.

I can crunch the numbers with the best of them. I can prove anything with numbers, but I didn't bother. It really was not important.

I generally do read the thread's I post to but occasionally if one is long, I may offer my opinion based on the OP if I'm sure of my position. I believe I've always stated when that was the case. However, I've more started simply offering my view or opinion without trying to offer complicated reasons trying to convince people that don't want to be confused with real information, knowledge or experience. After all it's my opinion people can take it or leave it.

 

[Brian Noble]

I think you need to be careful not to lump everyone who has performed an analysis of the options into one group of people who have "bent assumptions and monkeyed with the costs/benefits".

I'm not even sure it is true.

Most people posting here are offering the opinion that the OP is far too optimistic, and that the numbers do not support the idea of buying extra to rent and defray the costs of ownership. Yet, most people here own DVC. If they were hell-bent on making the math work out, wouldn't you think they'd be jumping up and down in agreement?

I see the same thing with folks who own a second home in a vacation destination like OBX. Nearly every single one of them will tell you that renting only puts a dent in the costs; it does not cover them. The current owners are in many ways the most realistic. Those who are thinking of jumping into the market are the ones blinded by phantom profits.

 

[bighoo93]

I'm not even sure it is true.

Most people posting here are offering the opinion that the OP is far too optimistic, and that the numbers do not support the idea of buying extra to rent and defray the costs of ownership. Yet, most people here own DVC. If they were hell-bent on making the math work out, wouldn't you think they'd be jumping up and down in agreement?

I'm not sure whether the numbers support buying extra, but I do think he was pretty much right in his initial post about the number of years to earn back his purchase price if he did just rent them out.

I see the same thing with folks who own a second home in a vacation destination like OBX. Nearly every single one of them will tell you that renting only puts a dent in the costs; it does not cover them. The current owners are in many ways the most realistic. Those who are thinking of jumping into the market are the ones blinded by phantom profits.

You are absolutely right about OBX, specifically. My father in law owns a house there, and the way to make money there, if at all is through price appreciation, which of course has not been the scenario for quite a few years (and is not feasible long term for DVC). The primary reason for this is that almost everyone has a mortgage on the rental property, and those payments take a huge chunk of the rental income. My FIL put a significant down payment, so he actually just about balances out. Anyone doing less has no chance. And in the case of actually owning a physical piece of real estate, there are a ton of expenses plus your own effort that you can't think of until you own. It is just really complicated. Neither of these is quite the same for DVC. If you have to take out a loan to buy DVC, then the whole thing blows up, but the investment is much lower than buying a beach house so it shouldn't be necessary. And the costs involved are less complicated and are historically documented. While you don't know what they will be for sure in the future, you do have history as a guide, where as for beach houses nobody has any way to know what they are really getting into until they've done it before.

 

[nunzia]

This sounds great until you actual try to rent these points and realize how frustrating it is to get what you want. I personally has a hard time renting Aulani from Dave's and realized I wanted to control the fate of my own reservations.

I hear stories of the same troubles at VGC..I like to control my own points at my own resort and not count on others having extra points for me to stay in a DVC villa. It is 'worth it' to me to own DVC for the great trips we have and the ability to book at my home resort 11 months out. I don't expect a car to pay for itself..it's meant to get me around and as long as it gets me around how I want it's worth it. That's it..if and when it is not worth it, the car or the DVC, I will sell and feel it was money well spent.

 

[bighoo93]

I can crunch the numbers with the best of them. I can prove anything with numbers, but I didn't bother.

Actually, that's not the point. You seem to always say or imply that "crunching the numbers" or doing analysis = "proving anything with numbers". That isn't the case.

The idea of doing analysis like this is to understand likely scenarios and see how the economics shake out. You aren't going to predict everything perfectly, so you need to understand the sensitivity of each variable on the outcome and take that into account. In fact, running these analyses helps you to gain that understanding. For some reason, you keep assuming that any analysis is just people plugging in whatever numbers they want in order to justify their decision. Maybe some people do that, but it is stupid. People doing something stupid doesn't mean that doing the analysis isn't useful, it means that doing it stupidly isn't useful. For some reason, you seem to imply or say that it is all worthless, and that is simply not true. You don't seem to like quantitative analysis, and that is fine. It isn't for everyone and it doesn't make you any better or worse a person. But being able to "crunch the numbers" does not mean "prove anything with numbers." If someone puts in stupid numbers, they haven't proved anything at all, except an inability to perform a decent analysis.

 

[Dean]

I'm not sure whether the numbers support buying extra, but I do think he was pretty much right in his initial post about the number of years to earn back his purchase price if he did just rent them out.

The OP assumptions were overly optimistic because it ignored the potential of the money invested, did not account for return of principle and assumed the contract had the same value at the end as at the beginning. He also compared DVC to itself which is a contracted view. I'd say if it makes sense to do that for a few points, it makes sense for more but it really doesn't. If you use better assumptions but the same principles, you'll stretch it out to 12-14 years for most situations, longer for some. It depends in part on what you compared to within DVC and you should look at both the points for a given option AND the cash option for a given situation.

On a more general note, I don't think most people who post these issues really want a full picture. I think most have about made up their mind and are looking for confirmation. Generally they've ignored risk, made assumptions that may be somewhat reasonable but are the most optimistic scenario possible or close to it.

 

[DougEMG]

I'd say if it makes sense to do that for a few points, it makes sense for more but it really doesn't.

The only way it makes sense is if you paid very little for your points.

For example at $20/point, renting DVC points would be a very good investment, generating a lot of cash flow for your outlay.

At direct prices it is impossible to ever consider DVC anything other than a pre-paid vacation.

So if I could buy right now at $20/point, I'd stock up and start renting points out big time.

FYI: Last year I had a few OKW contracts that I lost to ROFR that worked out to $23/point....guess what I wanted them for.

 

[Caren90]

The OP assumptions were overly optimistic because it ignored the potential of the money invested, did not account for return of principle and assumed the contract had the same value at the end as at the beginning. He also compared DVC to itself which is a contracted view. I'd say if it makes sense to do that for a few points, it makes sense for more but it really doesn't. If you use better assumptions but the same principles, you'll stretch it out to 12-14 years for most situations, longer for some. It depends in part on what you compared to within DVC and you should look at both the points for a given option AND the cash option for a given situation.

On a more general note, I don't think most people who post these issues really want a full picture. I think most have about made up their mind and are looking for confirmation. Generally they've ignored risk, made assumptions that may be somewhat reasonable but are the most optimistic scenario possible or close to it.

Dean, you are correct on both comments. I am currently earning 10% on my investments and renting DVC points would not be able to touch this once all of the other costs have been factored in. I know over time that may/will change, but so will all the variables of owning DVC.

I would also be concerned about buying and renting all the points over the next 8 years. Who knows what will happen between now and then on every front (life is a fickle thing...).

I also agree with your "made up their mind" comment.

Stephen

 

[Caren90]

The only way it makes sense is if you paid very little for your points.

For example at $20/point, renting DVC points would be a very good investment, generating a lot of cash flow for your outlay.

At direct prices it is impossible to ever consider DVC anything other than a pre-paid vacation.

So if I could buy right now at $20/point, I'd stock up and start renting points out big time.

FYI: Last year I had a few OKW contracts that I lost to ROFR that worked out to $23/point....guess what I wanted them for.

Doug, I currently own a few contracts that I "bought" for about $25 per point when all was said and done.

Stephen

 

[k3chantal]

The only way it makes sense is if you paid very little for your points.

For example at $20/point, renting DVC points would be a very good investment, generating a lot of cash flow for your outlay.

At direct prices it is impossible to ever consider DVC anything other than a pre-paid vacation.

So if I could buy right now at $20/point, I'd stock up and start renting points out big time.

FYI: Last year I had a few OKW contracts that I lost to ROFR that worked out to $23/point....guess what I wanted them for.

Which is probably why DVC has ROFR in the contract.

 

[DougEMG]

Doug, I currently own a few contracts that I "bought" for about $25 per point when all was said and done.

Stephen

Very nice....I was extremely sad to have had mine ROFD as up to that point Disney had not been exercising ROFR very very infrequently so I hadn't expected to lose them.

I've ranged in price from $22 up to $43 with an average over all my points of $33. I was just lucky in that I started my "addonits" when the market was at it's lowest.

 

[Brian Noble]

Which is probably why DVC has ROFR in the contract.

$20-$25/pt also turns out to be about the cost for construction and development of new resorts...assuming Tim's info is correct. (And, the resulting ratio of development cost/price is pretty close to what Wyndham reports for their sales, as well---so it is probably in the ballpark.)

http://forums.wdwmagic.com/threads/...ncreasing-in-march.861216/page-3#post-5368720

Edited to add: and Doug's $20 threshold is exactly what I was talking about in my first post in this thread. The real way to make money on a timeshare rental is to pay as little as possible to acquire it---that limits your exposure to risk. DVC at current resale prices works out to be only mediocre, and that could be putting it kindly.

 

[Caren90]

Very nice....I was extremely sad to have had mine ROFD as up to that point Disney had not been exercising ROFR very very infrequently so I hadn't expected to lose them.

I've ranged in price from $22 up to $43 with an average over all my points of $33. I was just lucky in that I started my "addonits" when the market was at it's lowest.

Doug, I believe you and I were purchasing around the same time. I also had two OKW contracts taken back by Disney, but my BWV contracts snuck through.

Stephen

 

[DougEMG]

$20-$25/pt also turns out to be about the cost for construction and development of new resorts...assuming Tim's info is correct. (And, the resulting ratio of development cost/price is pretty close to what Wyndham reports for their sales, as well---so it is probably in the ballpark.)

Excellent point, I didn't even think of that as one of the additional reasons they would have ROFR'd those contracts. I had always assumed that it was because they were pushing OKW and wanting more OKW contracts turned into extended OKW contracts.

 

[DougEMG]

Doug, I believe you and I were purchasing around the same time. I also had two OKW contracts taken back by Disney, but my BWV contracts snuck through.

Stephen

It was early spring of 2012 that I lost 4 OKW contracts in a row, so I gave up on OKW. After that I picked up 4 SSR contracts and 3 BWV all with no problems. I then went on holidays over the summer and when I came back prices had started going up so I stopped looking. I had thought that the prices would then come back down in early 2013 once MF were due, but that never really happened either. Then when DVC announced their price increase, resale prices took another jump up. So no more DVC for me at these prices.

Kind of funny when you think about it, that by announcing a price increase DVC increased their sales

 

[rojen]

Is DVC self insured? I worry about a hurricane hitting central florida and causing a lot of havoc. I know it's inland, but it's also built on a swamp.

Looking at the VB and HHI MFs makes me worry about some sort of storm hitting property and jacking up MF.

And I don't think that $12 per point will last much longer. People will realize how soon 2042 is and resale prices for the older resorts should drop pretty fast. I'm only 30, and buying anything older than SSR was right out the window due to that. Gonna be hard to get $12 to rent when $30 will buy. Assuming people come to their senses on resale pricing.

 

[bighoo93]

The OP assumptions were overly optimistic because it ignored the potential of the money invested, did not account for return of principle and assumed the contract had the same value at the end as at the beginning. He also compared DVC to itself which is a contracted view. I'd say if it makes sense to do that for a few points, it makes sense for more but it really doesn't. If you use better assumptions but the same principles, you'll stretch it out to 12-14 years for most situations, longer for some. It depends in part on what you compared to within DVC and you should look at both the points for a given option AND the cash option for a given situation.

Actually, none of what you said is true. Go back to the original post and read it again. It was just about making back the cost of the initial purchase.

On a more general note, I don't think most people who post these issues really want a full picture. I think most have about made up their mind and are looking for confirmation. Generally they've ignored risk, made assumptions that may be somewhat reasonable but are the most optimistic scenario possible or close to it.

I don't understand why you would assume such negative and condescending things about people you don't know. The OP actually asked for feedback and suggestions. I think most people who post this sort of thing would like to know if they are on the right track or not. Whether they get good advice or not is an entirely different matter.

 

[Dean]

The only way it makes sense is if you paid very little for your points.

For example at $20/point, renting DVC points would be a very good investment, generating a lot of cash flow for your outlay.

At direct prices it is impossible to ever consider DVC anything other than a pre-paid vacation.

So if I could buy right now at $20/point, I'd stock up and start renting points out big time.

FYI: Last year I had a few OKW contracts that I lost to ROFR that worked out to $23/point....guess what I wanted them for.

IMO and looking at this strictly from an investment standpoint, if it makes sense for 10 years, it makes sense for 40 and if it makes sense for 200 points, it makes sense for 2000. It gets more complicated and variable once you start using it for personal use part of full time. I realize that extra points may reduce the up front cost but I don't believe that has enough effect to alter the long term option. Plus I think most people over value current and banked points in a loaded contract.

 

[bighoo93]

Dean, you are correct on both comments. I am currently earning 10% on my investments and renting DVC points would not be able to touch this once all of the other costs have been factored in. I know over time that may/will change, but so will all the variables of owning DVC.

I would also be concerned about buying and renting all the points over the next 8 years. Who knows what will happen between now and then on every front (life is a fickle thing...).

Of course there is risk, but what about your investments that are currently earning 10%? That's guaranteed? If so, do you mind sharing, because I'd like to invest...everything I've got.

 

[rojen]

Plus I think most people over value current and banked points in a loaded contract.

I don't know, if you're willing to put up with the hassle of renting the points, $12 off your per point cost is pretty nice. Or $24 depending on how loaded it is. Even subtracting MFs for the current year, you're reducing your out of pocket by a bunch.