I mean at this point, why is anyone buying direct?

[AnnaKristoff2013]

For the next 19 years, resale points can stay at any of the current resorts that have availability except RIV?

Really 18 years at this point.

 

[AstroBlasters]

Really 18 years at this point.

2042 - 2023 = 19

What am I missing? Is this a Jan 1 vs Dec 31 type of thing?

 

[sethschroeder]

With DVC I see it the same as a Disney trip. If I pay $2000 cash for a room, at the end of my trip the value of that room is $0. I spent that money and I’m not receiving any financial value back. I’m receiving something else, but not financial.

I use the same approach for DVC.

Yes but if its $0 after 10 years then the math would say to really go with DVC rentals instead.

 

[hhisc16]

Having theme parks and oceans really reduces this risk. HHI is the only one that this could happen, but the fan base is so loyal they will be chaining themselves to the doorknobs in 2042

There are timeshares in the Ozarks / Poconos / Smokey mountains that have people locked into 1k a year in MF when they sit empty at $600 / week deals. That is the classic timeshare nightmare.

That will be true about the loyal DVC HHI owners in 2042

 

[sethschroeder]

"Worthless" and even "negative value" can happen if the MF become more than the commonly available cash rate ( not the rack rate)

Disney is not discounting rooms below the cost of operating the resort itself. Thats what would need to occur since MFs are essentially the cost of running the resort along with some small additional overhead/profit.

 

[sethschroeder]

Having theme parks and oceans really reduces this risk.

Don't even put these two together.

There are 1000s of places all around the US and world that you can get a place on the ocean. Flip side there is a singular WDW with all available options for "ownership" belonging to Disney alone and for Hotels essentially just Disney with the Swan/Dolphin a tiny % of rooms exception.

 

[DonMacGregor]

Yes but if its $0 after 10 years then the math would say to really go with DVC rentals instead.

But that's not what is being said. Even if the cash resale value of the points is zero, the value in exchange for room reservations still exists.

 

[davidhr]

Yes but if its $0 after 10 years then the math would say to really go with DVC rentals instead.

It doesn’t matter. I paid for that contract to get a room. I’m getting that room.

I know what you say. It’s fine if you want to run your numbers like that. I don’t see a problem with it.

For me, the money I paid initially I consider it gone. It’s not coming back (that’s why I say if I sell and get anything more than $0, it’s a win). If I get the rooms as it states in the contract, I’m getting what I paid for. It doesn’t matter if the rentals were a better bet at that moment.

It’s like buying a car. You buy now and maybe the next month they run a campaign and it’s $3k cheaper. I don’t care. I bought for a price I was ok to pay. Some people go crazy because they could’ve saved more. Not me.

Now, if the annual dues are more expensive than renting, then that means that my bet with DVC is costing me more than I was expecting. But if we get to that point, we’re all going to be in the same problem.

 

[sethschroeder]

But that's not what is being said. Even if the cash resale value of the points is zero, the value in exchange for room reservations still exists.

When you do the math of the initial cash outlay + MFs over the course of 10 years you likely just broke even compared to rental.

Thing is rental is even less risky since you never sunk the initial cash outlay to start with.

So at that point go with Rental, have more flexibility in what you can rent (instead of 1 home resort), and have more flexibility in if you go at all or room size since you are not locked in to a specific amount of points.

 

[sethschroeder]

It doesn’t matter. I paid for that contract to get a room. I’m getting that room.

No it does matter.

I can go and rent a room for 10 years and spend the same amount of money as you buying the contract. Neither of us have money left over but here is the thing my path is much less risky than your path.

That is the point.

 

[AnnaKristoff2013]

What am I missing? Is this a Jan 1 vs Dec 31 type of thing?

I”m pretty sure the resorts expire at the end of January of 2042. They’re not open for the full year.

 

[sethschroeder]

It’s like buying a car. You buy now and maybe the next month they run a campaign and it’s $3k cheaper. I don’t care. I bought for a price I was ok to pay. Some people go crazy because they could’ve saved more. Not me.

Except that is before you bought..... its like saying in 5 years I know I will wreck my car and get $0 from insurance. Should I do a yearly car rental that will come out to $40k total or should I buy the car for $40k total.

Rental makes more sense because on a rental you can always pull the plug early or adjust what exactly type of car you want.

 

[sethschroeder]

Now, if the annual dues are more expensive than renting, then that means that my bet with DVC is costing me more than I was expecting. But if we get to that point, we’re all going to be in the same problem.

Except you paid $x amount up front. You would need to divide out your initial cash outlay + annual dues THEN compare it to renting.

So if you consider going in that your DVC contract is worth $0 after 10 years renting just likely makes more sense. On the flip side if you think your DVC is worth $0 after 20 years then buying makes more sense.

As an example when the 2042 resorts hit 10 years left you will not see them priced on resale how they are now because when doing the math people will see that renting makes more sense unless the buy-in is lower.

 

[DonMacGregor]

I fully understand the use of the word "risk" as a financial term (uncertainty or potential for financial loss), but some people use the term as if their DVC membership was collateralized with their first born son or their entire investment portfolio.

There is arguably some benefit to renting (no initial capital expenditure, flexibility WRT resorts, etc.), as well as some drawbacks (no perks, no real control over reservations, potential lack of flexibility calendar-wise), so there is no "right" answer that checks everyone's boxes.

 

[DonMacGregor]

As an example when the 2042 resorts hit 10 years left you will not see them priced on resale how they are now because when doing the math people will see that renting makes more sense unless the buy-in is lower.

And that will be the real challenge for the rental market. At that point, you will have owners trying to rent points that have zero resale value, while other owners will be trying to rent points that are retaining their full resale value. If I'm looking to rent points in 2030, am I going to even look twice at renting RR or VDH points when I know that someone sitting on BRV points will be renting them out for significantly less?

Does the overall rental market drop out because many resorts will have low-value points available? Someone renting out full-value points can only go so low, but there will be downward pressure from the cheap/zero value points.

 

[davidhr]

Except you paid $x amount up front. You would need to divide out your initial cash outlay + annual dues THEN compare it to renting.

So if you consider going in that your DVC contract is worth $0 after 10 years renting just likely makes more sense. On the flip side if you think your DVC is worth $0 after 20 years then buying makes more sense.

As an example when the 2042 resorts hit 10 years left you will not see them priced on resale how they are now because when doing the math people will see that renting makes more sense unless the buy-in is lower.

What you say is correct, but I think you’re not following what I say.

I’m not saying that the contracts will be worth $0. I’m just saying that when I bought that contract, I ran all my calculations considering I won’t get that money back. This is how I do it. Realistically I know I should get something back.

You say that it does matter. Of course it matters. To you. I’m just saying that it doesn’t matter to me.

Again, let’s just be happy with our awesome vacations

 

[Sandisw]

I know I’m a bit extreme in this, but for me the purchase price is a sunk cost. I say to myself “I paid for x years of vacations in advance”. That’s done.

If I have to sell, anything I can recoup is a “win” because I was considering 0. I know most people don’t do this and that’s ok. I see it this way because any money I use for DVC wasn’t going to be invested. It was going to be spent on something anyways. Trips, a nice car, or something like that.

That is where we are and consider it a bonus.

I will admit I have benefited in selling for more than I paid for most of the contracts..which did allow me to buy different ones instead.

Had that not happened then my holding would look different right now.

But, I think the safest way is to assume sunk cost, ask yourself if that still would be okay, and if it is, go from there.

 

[Brian Noble]

There is an economic comparison that makes sense between renting and buying assuming no residual value. What is the NPV of buying and paying dues on a point for N years, then relinquishing the contract for free? Compare that to the NPV of renting that point for each of N years. That gives you the "what costs less" number. You have to make some guesses at inflation, rates of increase for dues/rents, etc. but the answer isn't super sensitive to being wrong by a little bit.

And, it might well "cost less" to rent for ten years than to buy, use, and relinquish after ten years--even resale. It certainly "costs less" to rent than buy from the developer over that horizon with those assumptions. For a simple example, consider the case where dues and rents both increase at exactly the rate of inflation every year, whatever that happens to be. You buy retail at about $210, plus add about $8 (present-value) in dues each year for ten years, for a total of $290. As long as you are renting for less than $29/pt, renting over the ten year horizon wins vs. buy-use-relinquish. Not hard at all.

Resale gets more interesting. Now you are at say $105+80. $18.50 is a lot closer to a push. Longer term? $210 bought at 20 years w/$8 PV/year dues is $370. The rental break-even is (drum roll please): $18.50. Now you're thinking with portals!

(Yes, I know this is over-simplified and my brother-in-law the CFO is freaking out. My degrees are all in engineering, and the Rights And Privileges Pertaining Thereto include permission to do back-of-the-envelope calculations.)

But, as @DonMacGregor wrote, the dollars-and-cents part is only part. Cash has the advantage of flexibility: if your preferences for (or ability to take) vacation evolve, cash can evolve right along with you. DVC might or might not. It's simpler to book and modify owning than it is as a renter. Owning also delivers what I think of as the real value of timeshares, which is: vacations that are use-it-or-lose it become higher priorities. Some of us need that to actually go on vacation.

 

[Nursemanit]

Don't even put these two together.

There are 1000s of places all around the US and world that you can get a place on the ocean. Flip side there is a singular WDW with all available options for "ownership" belonging to Disney alone and for Hotels essentially just Disney with the Swan/Dolphin a tiny % of rooms exception.

They belong together - there may be thousands of places on the ocean, but they all retain value. A timeshare on the ocean is less risk ( not including higher MF from storm damage) than a timeshare in the mountains/ski slope / or golf course.

Also, Swan/Dolphin is not a tiny percentage, 2620 rooms about the same as RR, BWV, BWI, YC, BC, BCV combined ( 2,745)

 

[Sandisw]

2042 - 2023 = 19

What am I missing? Is this a Jan 1 vs Dec 31 type of thing?

They end January 31st, 2042. So, by the time a resale owner buys and closes, and can use the contract, it is less than 19 years of use,

As of today, those resorts have only 19 years and 22 days.