I'm second guessing my decission on the extension.

[tvwalsh]

As the last day approaches to buy the OKW extension at $15, I am beginning to think that I should be extending both my contracts instead of just the one I might sell some day.

How often can someone buy something fom Disney at 60% of tomorrow's price?

 

[dvc at last !]

subscribing...

still not decided -

when the price per point increases will I kick myself ?

For sure there will be 2 prices for OKW -

with and without the extension !

 

[PBader]

We extended our contract and are very content with our decision.

 

[Jimdvc]

How often can someone buy something fom Disney at 60% of tomorrow's price?

How often is someone asked to pay 60% of the price and then not use it for 35 years?

Those pts you are extending are for nights at the resort 35 years from now.

Do a quick calculation of what your $ would grow toif invested in a 8% return mutal fund, and allowed to site for 35 years.

 

[tvwalsh]

If you have a mutual fund that you are confident will return 8% a year for the next 35 years, PLEASE send me the name of the mutual fund!

 

[Jimdvc]

If you have a mutual fund that you are confident will return 8% a year for the next 35 years, PLEASE send me the name of the mutual fund!

You may want to review the historical averages of funds. I doubt if you can find ANY 35 year block of time within the last 35 years where 50% or more of funds have done less then 8%.

A rule of thumb when looking at LONG time horizons is 10-12%, based upon past historical averages.

 

[DISNEY FIX]

If you have a mutual fund that you are confident will return 8% a year for the next 35 years, PLEASE send me the name of the mutual fund!

You may want to review the historical averages of funds. I doubt if you can find ANY 35 year block of time within the last 35 years where 50% or more of funds have done less then 8%.

A rule of thumb when looking at LONG time horizons is 10-12%, based upon past historical averages.

At least you will have somewhere to spend it.

 

[Jimdvc]

At least you will have somewhere to spend it.

Very true.

 

[pilferk]

How often is someone asked to pay 60% of the price and then not use it for 35 years?

Those pts you are extending are for nights at the resort 35 years from now.

Do a quick calculation of what your $ would grow toif invested in a 8% return mutal fund, and allowed to site for 35 years.

Quick question:

What did you use for room rate increase %? I love playing with these types of numbers and would like to see what scenario you're running, exactly.

 

[TisBit]

Quick question:

What did you use for room rate increase %? I love playing with these types of numbers and would like to see what scenario you're running, exactly.

Here we go again.....

 

[Jimdvc]

Quick question:

What did you use for room rate increase %? I love playing with these types of numbers and would like to see what scenario you're running, exactly.

I didn't use any. I simply said invest (on paper) the cost of your extension, and see (on paper) what they could grow into over the course of 20-30 years. Run an example of a Roth Ira where you could have each of the spouses invest 5 or 6 k depending on their age and income, and see what the grows into over the course of 20+ years. Keep in mind 20-30 years from now when they cash in the Roth IRA it will be 100% income tax free. Meaning if they put 5k as an example into a Roth Ira vs spending 5k on an extension, and that 5k gets on average 8% (made up #), that the 5k in 25 years would be around 33-34k and would be 100% income tax free. So when you contract runs out, as a result of you not extending the contract, you have 33k in the bank which should generate atleast $1650 in intrest a year, and you will also not be paying the taxes/dues, which in 20-30 years could be??? 2-3-4k per year?

So take the $1650 a year in intrest and the 3k(made up #) in taxes and dues, and you have 4650 a year to spend on a room, and STILL have the 30 in the Roth Ira.

Just a thought, and more then anything just playing devils advocate.

When you buy a DVC contract today, you use it today. INSTANT VALUE, INSTANT return for your investment.

When you do an extension, you are playing a whole nother game. DVC gets your $ today, and you get no value for 35 years, that is a WHOLE nother ball game.

 

[pilferk]

Here we go again.....

I'm just curious....no arguing about the conclusion.

Here's what I get when I run the scenario we're talking about:

Assuming an 8% return on your mutual fund.

And a room rate increase of 3.12% (which is the average mousesavers used a couple years back).

Invest the $15 per point, for 200 points, which equates to 3k.

In 2042, when OKW "expires", you'd have 44256.03.

If you went with a standard room in a deluxe hotel, in 2043 you'd spend about 4569.79 for 6 nights by my guesstimation and end in 2057 at about 6813.25. That's based off a relatively "cheap" deluxe room at $225 per night in value season, today. Your "break even" point would be somewhere between 2056 and 2057. At the end (in 2057) you'd have lost $794.38...pretty close to the "break even" point.

If you went for a DVC studio for 6 nights, on cash, in 2043, you'd spend about 5788.40 and in 2057 about 8630.11. That's based of SSR's value studio rate of $285 today. Your break even point would be between 2052 and 2053. By the 2057, you'd have lost 35748.13. Not quite so good, but not awful if you consider how far out it is. But, on the flip side, your 200 points would actually get you more than 6 nights, so....

If you went for a DVC 1 BR for 6 nights, on cash, in 2043, you'd spend about 7484.63, and in 2057 about 11159.07. That's based off of SSR's value season 1BR rate of $380, today. Your break even point would be between 2050 and 2051. By 2057, you'd have lost 84401.60. I'd say that's a definite loser.

It's not a TRUE comparison because the points chart say you'd have a TON of points left over with studio stays and even a few left over in a 1BR stay. But I was gonig more for a "invest in the mutual fund" comparison rather than a "DVC vs opportunity of investment" comparison.

I would have also needed to include the additional 10 years of dues payments (not the first 35 years because we're talking about an extension, only) if I were working out DVC vs opportunity cost. I haven't gotten that far, but will if ANYONE is interested. I somehow doubt anyone but a few numbers geeks like me really are. Reinvesting the dues for those 10 years will swing things back a bit in the favor of the mutual fund, but I'm not sure how much.

Edit: I added the dues info, with the scenario being you reinvest the dues into the mutual fund starting in 2043.

At the end, you make money in every scenario.

In the deluxe room scenario, you end up with 89272.80

With the DVC studio scenario, you end up with 55319.04

With the DVC 1BR scenario, you end up with 5665.58.

 

[Jimdvc]

pil what will your taxes and dues cost in 35 years?

Shouldn't that also be a factor?

 

[pilferk]

I didn't use any. I simply said invest (on paper) the cost of your extension, and see (on paper) what they could grow into over the course of 20-30 years. Run an example of a Roth Ira where you could have each of the spouses invest 5 or 6 k depending on their age and income, and see what the grows into over the course of 20+ years. Keep in mind 20-30 years from now when they cash in the Roth IRA it will be 100% income tax free. Meaning if they put 5k as an example into a Roth Ira vs spending 5k on an extension, and that 5k gets on average 8% (made up #), that the 5k in 25 years would be around 33-34k and would be 100% income tax free. So when you contract runs out, as a result of you not extending the contract, you have 33k in the bank which should generate atleast $1650 in intrest a year, and you will also not be paying the taxes/dues, which in 20-30 years could be??? 2-3-4k per year?

So take the $1650 a year in intrest and the 3k(made up #) in taxes and dues, and you have 4650 a year to spend on a room, and STILL have the 30 in the Roth Ira.

Just a thought, and more then anything just playing devils advocate.

When you buy a DVC contract today, you use it today. INSTANT VALUE, INSTANT return for your investment.

When you do an extension, you are playing a whole nother game. DVC gets your $ today, and you get no value for 35 years, that is a WHOLE nother ball game.

The implication (to me) was that the investment would either make up for travel costs or offset the value of the contract at resale.

The first you can guesstimate.

The second you can't.

So I followed the train to what, to me, was the logical conclusion. That you'd done the analysis. Sorry..... I forget that not everyone is a numbers junkie.

Anyway, in looking at the numbers, it sure looks like the conclusion I assumed you made was a good one so I'd take credit for it, if I were you.

If you look at the DVC opportunity cost vs travel costs, it sure looks to me like the extension is a loser.

Based on travel costs ALONE....the investment is a loser. But not once you take into account reinvesting your DVC dues. So..the moral is DON'T sell your DVC contract, use it til expiration, and THEN use your investment + your yearly dues reinvested to pay for travel costs. But DON'T simply invest the 3k, leave it for 35 years, and expect to travel on it in DVC level accomodations til 2057, either.

The 1BR is close enough that slight fluctuations away from the average are going to effect it a lot. And the studio comparison is probably flawed because with the number of points I looked at, you'd get more than 6 nights. But even taking that into consideration, the extension isn't a slam dunk...and all things considered, it probably should be to compel you to do it. IMHO, of course.

 

[pilferk]

pil what will your taxes and dues cost in 35 years?

Shouldn't that also be a factor?

I explained why I didn't, orginally (I wasn't looking at DVC opportunity cost...more just at being able to travel on the money invested) but thenI added it as an edit.

Using the average increase of the same 3.12% (again, mousesavers number from a few years back), you'd be paying 2907.46 in dues in 2042 and 4334.82 in dues in 2056. Assuming you reinvested it in the mutual fund, I provided the final "ending totals" in the post above.

In the deluxe room scenario, you end up with 89272.80

With the DVC studio scenario, you end up with 55319.04

With the DVC 1BR scenario, you end up with 5665.58.

So if it's a more direct "opportunity cost" comparison you're looking for, that would be it.

 

[Jimdvc]

Simply look at it this way.

Why would DVC sell you something today if it were NOT to their advantage?

I can't imagine paying for something today, that I can't use for 35 years.

Now on the flipside,if you did do an extension, it sure would make your contract worth a bunch more if you were to sell it with 20-15 years left on the contract.

 

[pilferk]

Simply look at it this way.

Why would DVC sell you something today if it were NOT to their advantage?

I can't imagine paying for something today, that I can't use for 35 years.

Now on the flipside,if you did do an extension, it sure would make your contract worth a bunch more if you were to sell it with 20-15 years left on the contract.

They wouldn't.

But define "advantage". For Disney, "advantage" simply means a greater profit.

It doesn't necessarily mean it's ABSOLUTELY a bad deal for the consumer. It CAN be to both parties advantage.

Now, in this case, it sure looks like it's probably NOT to the consumers best advantage based on use/value. Contract value is another animal, and I don't think anyone can reasonably speculate what the extension will do to resale prices over the short or long haul. That's the million dollar question and why people who are extending have to do it sort of blind (which is unfortunate).

I understand the cynical viewpoint, to some extent. But it's not entirely fair.

As for "not paying for something I can't use for 35 years"....I'd like to make a snide remark about Social Security and other things we pay for for the LONG term without using them (life insurance, for example) but they wouldn't be remotely apt comparisons. Suffice to say, I definitely see your point in relation to a luxury purchase.

Then again, we're BOTH DVC members, so there has to be some point where we ARE willing to pay now for long term use. Since it's an extension, you could almost look at it as paying for what you've already used, in a sense, to make the contract last longer. Either way, as the numbers showed, it doesn't look good for justification.

 

[Jimdvc]

It will be interesting in a few years to see the resale value of the contracts with the extension vs those with no extension. I assume we will see very few for sale with the 15 added years, as those are hard core DVC fans, who would IMO the least probable to be selling contracts for the next 5 years or so.

 

[tvwalsh]

I think my feeling is that Disney actually thinks that they are giving us a "deal" on the extension for a limited time only!

Considering all the things people like about OKW, as well as OKW's point structure,the size of the rooms, and it's 27 GVs, maybe OKW2057, will eventually sell on the resale market, and from DVC, for more than any other DVC resort. It could happen.

 

[Jimdvc]

, maybe OKW2057, will eventually sell on the resale market, and from DVC, for more than any other DVC resort. It could happen.

It should, based upon the number of years to contract end date.

Having a 2057 OKW resales on the open mkt wouldl KILL SSR resales. Both are large resorts where the 11mth window seldom comes into play other then for GV's. Why wouldn't you buy the 2057 OKW rather then the SSR.


But once again, I doubt we see many Extended contracts for sale.