How much are the extra 12 years worth?

[RayRing]

We are looking to purchase additional points.

We will either buy a resale or buy from Disney at SSR.

In my mind, if not on paper, I am calculating the cost of 150 additional points at SSR at ~$80/point ($85/point * 150 pts = $12,750 - $800 (2 AP) = $11,950 / 150 pts).

For resale, I am thinking the cost per point would be ~ $75, plus that years maintenance fees.

It appears to me that the cost per point, for either option, comes out pretty close.

Given that you get an additional 12 years on the contract at SSR, it would appear that purchasing the additional points at SSR would be the best option.

However, SSR is not my first choice of home resorts. I currently own at OKW, and was originally thinking of adding points on there.

Now I am stuck. Really stuck.

I think that I would pay a little less for 150 resale points, but I would be forgoing the extra 12 years.

It is extremely difficult for me to try and guess what the monetary value of the extra 12 years would be, or how much of a benefit they would be 38 years from now.

Does anyone have great insights to help me with my decision, or a least a crystal ball.

 

[DrTomorrow]

Greetings!

Yeah, there's a lot to think about (at least for folks like us ).

I'll leave the Net Present Value of the additional 12 years to those who are interested.

I'll address a few other issues.

As tjkraz will probably chime in, the cost differential between resale and Disney is quite small; even more so taking the resale closing costs and DVC APs into account.

Even though you like OKW, it seems that quite a few people feel it advisable to purchase an add-on at a different resort, thus increasing the 11-month opportunities you'll have.

As to the extra 12 years 38 years from now: How old are you? Do / will you have any children you'd like to pass this along to?

My $.02 - while this IS a big purchase, and deserves much thought, there is a significant intangible aspect of the decision to buy DVC - first-time or add-on - that defies spreadsheets and decimal points.

Good luck and look at it this way - either way, you'll have MORE DVC POINTS!!!

 

[tjkraz]

If your first choice of resorts would remain OKW, I'd go with the SSR points. You will probably never have trouble booking OKW at the 7 month window, so you would be free to use your new SSR points there whenever you please. And, you may just find that you like SSR more than you had expected.

 

[Dean]

To a certain extent it depends on the age and interest of the person. But I think for raw value, it's worth far less than 12/50 times the purchase price. I'd say it's worth a max of around $10 pp more, less if you don't want to stay there a significant portion of the time.

 

[princess&tig]

They are worth nothing for another 38 years

 

[tjkraz]

Originally posted by princess&tig
They are worth nothing for another 38 years

Assuming one is able to keep the contract for the entire duration, that is true. However, if one should be forced (for reasons unforseen) to sell their DVC contract a few years from now, one can project that an SSR contract will be worth more than the other resorts, all things being equal.

If I were forced (or just decided I wanted) to sell in 30 years, which would be worth more:
- BWV with 8 years remaining.
- SSR with 20 years remaining.

I think RayRing is correct in showing that the costs are very, very close in the resale vs. SSR debate when you factor in the value of the APs received.

The only other element not addressed is the possibility of finding a good OKW contract with banked points which could be used or rented. Banked points would return some value (personal or monetary) which is not an option with SSR.

So, the question Ray needs to decide is whether the to go with resale (additional time required / 38 years / lower overall investment if banked points rented) or SSR (easy purchase process / 50 years / higher cost.)

The difference in dues betwen OKW and SSR for 150 points is about $30 per year, which is fairly negligible IMO. And, that's before knowing what sort of increase will occur due to the pool enhancement at OKW.

 

[vernon]

In $ terms I think I'd agree with Dean. I'd put the "value" at about $7-10 per point. For someone less than age 35 I think it is a stronger factor than for someone over the age of 45.

 

[pumpkinboy]

Originally posted by DrTomorrow
...I'll leave the Net Present Value of the additional 12 years to those who are interested...

OK, I admit it, I'm a finance wonk. I had to do the calculation when we were deciding on add-ons early in the year.
When I did my NPV calculation, the extra 12 years came out to be worth less than $2 a point. When we added on initially, we did it at BWV.
Nevertheless, once they announced the AP incentive, we jumped on it (we got it for $90 per point after the $5 per point DVD give back, plus we got this year's points with it since we bought Phase I).

 

[JoeThaNo1Stunna]

I think the value of the extra twelve years will become greater every year. Ten years from now when BWV or OKW only has 28 years left and SSR has 40, imagine how the resale value of SSR will be larger than that of OKW. I know myself as a prospective buyer in about four years won't consider purchasing any of the 34 years contracts, when I could get SSR for 46 years. Right now, the gap b/t the two isn't that large, but it will get larger and larger when those 2042 contracts become shorter and shorter.

 

[CRSNDSNY]

Originally posted by JoeThaNo1Stunna
I think the value of the extra twelve years will become greater every year. Ten years from now when BWV or OKW only has 28 years left and SSR has 40, imagine how the resale value of SSR will be larger than that of OKW. I know myself as a prospective buyer in about four years won't consider purchasing any of the 34 years contracts, when I could get SSR for 46 years. Right now, the gap b/t the two isn't that large, but it will get larger and larger when those 2042 contracts become shorter and shorter.

But also consider that there will be newer DVC resorts after SSR probably by that time with contracts that extend beyond SSR's.

 

[tjkraz]

Originally posted by CRSNDSNY
But also consider that there will be newer DVC resorts after SSR probably by that time with contracts that extend beyond SSR's.

Maybe yes, maybe no. It took 12 years of DVC before they opted to extend the contracts beyond 2042. Those who bought BCV points in 2003 only received 39 years of ownership.

It's also hard to speculate at what point they might quit building DVC resorts. At some point one can assume that either the marketplace will become saturated (not as many willing purchasers) or Disney will realize that DVC has started to erode profits at their cash resorts (which I'm certain has already happened to some degree).

One also needs to factor in that the price could be double the current $95-85 per point by the time even longer contracts are available.

You can drive yourself crazy trying to predict the marketplace in 5 or 10 years. The only solid basis for a decision is what we know to be true today.

 

[brivers222]

For my family the extra 12years will be priceless as we will only be in our Mid 60's when the first contract expire. Coming into retirement we will have more oportunities to relax down at WDW in the last 12 years.

 

[Dean]

Originally posted by CRSNDSNY
But also consider that there will be newer DVC resorts after SSR probably by that time with contracts that extend beyond SSR's.

I hope you're right but I doubt it.

 

[CRSNDSNY]

Do you suppose that if they did develop another DVC resort that they would sell the longer contracts (similar to SSR)?

 

[goodcook5]

I was in a quandry also. ssr was not my favorite--so big and not as close to the mgm and epcot as bcv or bw, but 12 years will be nice for the kids later. We bought into the presale for the cost, and then bought a few points at boardwalk--because deep down that is the property I want to stay at. SSR does not close until june, so we are using the bw points right away.

Have you seen SSR and do you like it?

Do you like other DVC properties better?

How important is it to be able to book 11 mos vs 7 mos where you want?

 

[Dean]

Originally posted by CRSNDSNY
Do you suppose that if they did develop another DVC resort that they would sell the longer contracts (similar to SSR)?

I think you can bank on any new DVC resort being the same expiration as SSR or longer. Likely the same for the next 10 years or so.

 

[CRSNDSNY]

Originally posted by Dean
I think you can bank on any new DVC resort being the same expiration as SSR or longer. Likely the same for the next 10 years or so.

What do you suppose prompted them to offer the longer contract with SSR? Is it a timeshare trend?

 

[tjkraz]

Originally posted by CRSNDSNY
What do you suppose prompted them to offer the longer contract with SSR? Is it a timeshare trend?

I think it had to do with a couple of factors:

1. Value - They're selling points now for a lot more than when OKW opened. If SSR is to be selling for another 5+ years, it would be very difficult to continue to escalate the price when people buying in 2008 would only get about 33 years of ownership.

My guess is that DVC's typical customer is a family in their early-30s to early-40s. If you give someone in that age bracket a contract that will take them into their 70s, most will be content. But I think you'd have more trouble selling a contract with only 30 years remaining to someone who is 35 yrs or younger. From my own perspective, I wanted something that will take me well into retirement age.

I doubt they'll go a full 50 years with every future property--particularly if the next resort is to be something with added appeal like the Contemporary. But if any new resorts are still in DVC's plan past the end of this decade, I think they'll probably extend the date again.

2. Economy - They had to be worried how SSR would sell on some levels. Would people really embrace a resort that was neither on the monorail line nor close to a single theme park? How would DVC sell in the post-9/11 world? The extra long contract is part of the appeal of the resort, even if your typical economist wouldn't place a very high present value on years 39-50.

I'm sure Dean will chime in with his thoughts later...

 

[DrTomorrow]

Originally posted by CRSNDSNY
What do you suppose prompted them to offer the longer contract with SSR? Is it a timeshare trend?

I'll be curious to hear Dean's answer - here's my $.02:

1. Need to make it competitive to the DVC I resorts in resale. If they're going to charge $75 or more per point, they'd have to offer something.

2. Simple laddering. It's got to be better to have DVC Resorts "expire" at different times - assuming, of course, that they'll be building more after SSR.

 

[spiceycat]

okw (DVC) started out with a 50 year contract.

SSR is located in the same area as OKW - I think they wanted the same assumption.

as far as wanting SSR over BCV or BWV - remember your real estate training - location, location, location.

you cares if SSR goes for longer - would that really be prefer over being able to walk to a theme park?

In would think the location of SSR is seem by DVC as a handicapped - so to counter the location they gave it more years.

Now I love OKW - but it has bigger rooms - the location is great for me - but I also own points at VWL and BWV - for their locations.