Is DVC a good investment? For exampple...

[Torontogal]

My husband and I want advice. We are seriously considering buying DVC for our personal enjoyment since we have 2 very young children. We maynot be able to travel each year so we were wondering whether it is feasible to make $$ on the years we do not travel by renting our points. I would love to know whether anyone has used DVC as both a investment and for personal enjoyment with the family.
Please advise.

 

[sagwanamu]

Trying to make money out of renting point? Hmmm... It will be tough... and it all depends on if you finance (and how much you put down) or paying cash to purchase.

For example, if you purchase 200 points SSR with 20% down, you are talking about 200 per month payment plus 60 dollar maintenance. In order to break even, you need to rent all of your points at $15.6 per point (current rate is $10 (+/-)), and I bet it will be very hard to even break even.

Instead of trying to make money out of it, why don't you wait until you are ready to use the points? Or if you really want to buy it now, buy it now and take vacation to one of DVC resorts (you know you don't have to go to park even if you go to WDW and they have resorts where you can relax while your young ones play around in the pool or on the beach). I bet you will need a vacation once in a while raising two young ones, right?

I have a two year old and another one coming in October. And that's exactly what I will be doing next few years (relaxing on the pool side/beach while young ones play in the water or on the sand).

Like most of people here say, DVC is prepaid vacation, not an investment.

Good luck....

 

[Disney Doll]

It's great for personal use. As an investment, I am not so sure.

When DH and I were first buying, we looked at it every which way form Sunday, and we determined that if you travelled to WDW every ohter year, DVC still made sense. Basically, you could bank one year's points and then use them the next year, to book a bigger unit or a longer length of stay.

For example...we started with 200 points and a September Use Year. Meaning every September, we get 200 points in our bank. Now, say we used all of our 2003 points. On September 1, 2004, we got another 200 points. Between September 1, 2004 and September 1,2005, we know we won't be going to WDW, so we bank our September 1, 2004 points. That means that as of September 1, 2005, we now have 400 points to spend...tha banked points from 2004 plus the new points from 2005. 400 points can give you a pretty nice vacation!!!!!!

Now of course, you can also rent the points out in those years when you don't go. It would certainly earn you some $$, maybe enough to pay a little toward the maintenance fees etc. But as a true money-making investment, I don't think it flies really well.

 

[jbthi]

I think I would probably buy fewer points now, if I didn't think I would go each year. That way I could bank and borrow and go every 2 or 3 years. You can always add on later if you want more points.

You can probably rent if you need to, but I wouldn't want to buy depending on that.

June

 

[Deb & Bill]

The member documents make comments about renting points out and this is a negative comment in the documentation. There could come a time when rental of points would not be allowed. Don't know how they would do it, but they might do it. So you should not purchase points with the hope to rent them out to make a profit on them.

By the way, I saw an article about E-Bay income coming under the auspices of the IRS and being taxable income. The points rental could also be considered taxable income with certain caveats.

Buy your DVC points with the plan on taking a vacation using the points. It's a prepaid vacation plan, not an investment plan.

 

[Cruelladeville]

DVC might be a good investment if your main purpose was to vacation, and to make a bit of money. We use our's kind of that way--we vacation, and rent a few points to pay for cash items for our vacation. Last year I rented enough points to pay for plane tickets, and a cash night at AKL, for example. Strictly speaking, DVC isn't a very good investment, unless you count all the nights in a hotel that you saved. If we sold our DVC contracts, which we have owned for about 7-8 years, we would recoup our original investment + dues, and maybe a little extra, since we bought at $54 a point, and we could sell for about $78 a point. All our nights for all those years would be free, which I think makes DVC a great investment.

 

[JimMIA]

I agree with DisneyDoll's analysis. DVC is primarily for vacations, not an investment. You certainly can rent points at +/- $10 pp if you choose, and there are folks who appear to be in that business. I wouldn't hesitate to rent points out, but neither would I buy DVC based on the ability to rent points.

Rather than counting on renting points to offset expenses, I would buy fewer points and make judicious use of banking, borrowing, and renting from other DVC owners to maximize the value. With banking and borrowing, even a minimum 150 point contract gives you 300 points every other year, or 450 every third year, plus you can rent more points if you need them.

For example, even in years during which we plan to use our full allotment of points, we plan to bank about half of them. Then we'll borrow from the following year to fill out whatever we need. Doing it that way, we will borrow only the exact number of points we need, so we won't be in danger of losing any unbanked points at the end of the use year. The caveat with that scenario is that if you cancel a trip late in the use year, you could end up with distressed points, but that is true no matter what strategy you use.

If we need a few extra points one year, we'll rent them from another DVC owner. I'd rather pay $10 pp one time than pay $4+ dues each year for points I don't really need.

 

[JimMIA]

For example, if you purchase 200 points SSR with 20% down, you are talking about 200 per month payment plus 60 dollar maintenance. In order to break even, you need to rent all of your points at $15.6 per point (current rate is $10 (+/-)), and I bet it will be very hard to even break even.

I see what sagwanamu is saying here, but accountants will do backflips reading that kind of financial analysis. I won't beat it to death, but that is a flawed analysis.

Your initial cost is the purchase of an asset. At some future date, you may decide to resell that asset with a resulting gain or loss, but the amortized purchase price is not what you consider in analyzing the cost of renting points.

The only cost associated with the points you are renting is your annual dues (+/-$4), plus any cost associated with the rental itself (advertising, PayPal, etc) Those are the only costs which really tell you whether renting 2005 points, for example, is a sound financial decision or an unsound decision.

If you think I'm crazy, and are determined to consider the purchase price as a cost of rental, then you still need to look at it much more accurately. If you finance, for example, you are financing 49 years worth of points for only 10 years. So, to figure that correctly, you would need to multiply the $200 per month payment in the above example times 12 months, times 10 years, giving you $24,000. Now divide the $24,000 by the 49 years worth of points and you will get an annual cost of the amortization of $489.80. That's per year, not $200 per month. Divide that $489.80 by the number of points and that is your per point amortization cost. In the example above, that would be about $2.45 per point per year. Add that to $4 dues, and you get a total cost of about $6.45 pp.

Again, that is flawed logic, but if you're going to use flawed logic, those would be roughly the correct computations for the above example. The real number is $4+.

 

[jcodespoti]

DVC does not make for a "good" financial investment..Its a good vacation investment. If your looking for ROI then look someplace else and use DVC for what its original purpose was...to have fun.

Joe in CT

 

[Torontogal]

Thanks... thats exactly the financial analysis that I was doing which leads me to believe that its not a great investment but its not bad either when combined with using points for personal pleasure. My real number comes in at about $4.15

 

[JimMIA]

I liken the ability to rent points to the ability to use DVC points for cruises and other vacation options. Yes, those are benefits.

Are they the BEST use of points? Probably not.

Would I buy DVC for those fringe benefits? Most definitely not.

Would I let those benefits tip the scale in favor of buying DVC? No.

When I made the decision to buy, I made it solely on my family's anticipated use of the seven DVC properties alone. Based on that alone, I thought it was a great idea.

Sure there are other nice things, but that's why I bought. Many people's opinions may differ.

 

[RayJay]

Thanks... thats exactly the financial analysis that I was doing which leads me to believe that its not a great investment but its not bad either when combined with using points for personal pleasure. My real number comes in at about $4.15

It is a good investment for vacations.

150 pts = $661 in yearly dues at BWV

$661 is equal to 1 1/2 nights to stay in a 1 Bedroom if you paid cash.

You can get about 7 nights in 1 bedroom (not including fri, sat) for value season, so that leaves you with 5 1/2 nights left every year which would be $2200 if you paid rack rates.

$2200 divided by initial cost of $12000 buy in, paid off in 5.5 trips.

The other 32 years are free in a 1 bedroom for 5 1/2 nights. Add more points and this number goes up. And remember I already accounted for the dues.

Works for me.
RayJay

 

[jade1]

We bought BCV 2 and 1/2 years ago for $60 (rented the first year), now its over $90. You do the math.

 

[Mickmse2002]

It is always interesting to see what math and valuations members use to describe their purchase. I have seen a lot of different ways to do it.

 

[chips]

Rent minus maintenance is about 6 per point. Divide 6 by the cost of purchase and that equals the rental yield. 6/80 equals 7.5 percent. That is current intermediate term junk bond rate. Historically there has been an upward trend in cost per point. If however Disney discontinued rofr the cost per point could go down. Therefore it depends on how the individual views the capital appreciation or depreciation of the underlying asset. At 6/90 equalls 6.6 percent and the ten year bond close to 5 percent makes this contract more speculative. Theoretically a rtu should depreciate each year because it has fewer years left. To this point, hotel rates have gone up and dvc has become more popular. Cost per point has gone up

The most favorable use is personal use.

 

[RayJay]

Rent minus maintenance is about 6 per point. Divide 6 by the cost of purchase and that equals the rental yield. 6/80 equals 7.5 percent. That is current intermediate term junk bond rate. Historically there has been an upward trend in cost per point. If however Disney discontinued rofr the cost per point could go down. Therefore it depends on how the individual views the capital appreciation or depreciation of the underlying asset. At 6/90 equalls 6.6 percent and the ten year bond close to 5 percent makes this contract more speculative. Theoretically a rtu should depreciate each year because it has fewer years left. To this point, hotel rates have gone up and dvc has become more popular. Cost per point has gone up

The most favorable use is personal use.

Huh?

I like my calcs better, love ya man.

RayJay

 

[DVCconvert]

we were wondering whether it is feasible to make $$ on the years we do not travel by renting our points. I would love to know whether anyone has used DVC as both a investment and for personal enjoyment with the family.

I think so, for sure! Especially if you think there will be a few years in which you might not use the points for vaca, I believe the math proves out that if you buy a contract and rent it out for 11-12 years ( over the total term of the contract ) you will recover all of your MF's -at present rates- and your underlying priniciple investment)

If however Disney discontinued rofr the cost per point could go down.

IMHO, the likelyhood of that is 0 on a scale of 1 to 10.

 

[DE38]

A thought just came to me...if you can rent out points for around $10/pt now, in 10-20 years when hotel prices have gone up significantly would the going rate for a point go up also?

 

[RAD]

When we purchased the only thing I was looking at was how much non-DVC rooms in the resort were going up each and every year vs. locking into basically a fixed cost. Yes, the maintenance fees go up but it's only a few dollars a year, no where near as quick as regular rates were going up. It got to a point that we couldn't justify the dollars that Disney wanted for deluxe resort rooms (which is were we want to stay).