DVC is a tool to preserve capital, not an something to provide investment-rate returns. Any financial portfolio should contain a mix of risk and goals. If everything was measured based on opportunity cost, we'd all live in tents and each beans and rice.
Currently no way, likely overvalued simply because it's Disney and many will make decisions with their heart more than their head. One might have been able to make the argument when SSR, AKV and BWV were under $50 a points a few years ago. IMO it's inflated partly due to the hype of VGF and the Poly. There is risk to owning and a lot more risk if one is financing the vacations in anyway. IMO comparing to rack rates for DVC is a poor benchmark. The 2 best comparisons are what one would have spent without owning DVC and what it would cost to rent privately compared to owning. Even the most conservative of evaluations is close to best case scenario, there is a lot more that can go wrong than any upward potential. IMO one needs to receive a 20% discount or a 20% additional value compared to one of the 2 benchmarks I mentioned above. Even comparing to hotel rooms one needs to assume a modest discount, usually 20% also. One should also consider the Time Value of Money. Having such money in low interest bearing accounts like a money market is a function of choices, not of return. Personally I think one should consider PART of any money as long term investments at market rates. I use 50% short term (1%) and 50% long term (8% after taxes which I see as conservative) and an inflation rate of 4% for cash rooms, rental costs and dues. That assumes a resale purchase at a cheaper resort. For a more expensive property like VGF or the Poly, I'd use more 25% short/75% long or similar depending on specifics. I also use a return of investment timeline of 10 yrs, that's about the longest one can predict a good outcome. After that the risks start to overtake the benefit.
As Crisi said but I did qualify as long term (5 yrs of more) and that one would leave it alone is an assumption. The only people who followed that philosophy and lost money in 2008 were there the ones that jumped ship. There has been as much or more volatility in the housing market as well chosen investments over the years. But you can chose your own number though I'd see 8% before taxes as the floor given the other assumptions of appropriate investing, long term. As a comparison having money in a MM or similar is a guaranteed loss of 2-3% yearly, also not a good prospect from an investment standpoint. Personally I'm opposed to having a significant amount of just cash sitting around not earmarked and not as a cushion for emergencies but I could see using a car fund or similar and saving up extra to replace the monies used or just saving extra a couple of years to buy DVC.
They may not be typical but the reasons are different than most would think. It's because most don't put the effort on the front side to make good choices and they do the worst possible thing, listen to the news and pull out when things seem rocky.
30 yrs is a pretty good track record for me but it actually goes back far beyond that time. IIRC the S&P 500 return through it's life is over 10%. A large part of the point was that it really just takes effort, commitment and perseverance not much smarts to do long term investing. The alternative isn't very attractive. If you listen to the news too much all the makes sense is food, guns and supplies, even cash isn't helpful in that situation.
I value a DVC purchase by comparing it to what it would cost to rent the same thing from some other owner. To do that, I come up with a first-year "total cost" per point value by (a) amortizing the purchase price across the RTU horizon and (b) adding the dues to that figure.
This is a really good point, and one of the reasons we ultimately did not buy DVC. We instead bought (resale) timeshares that were significantly less expensive, and in some cases in systems with significantly more options. Our vacation philosophy has been that we'll take an exchange into DVC when it was possible to do so, and when it wasn't---or when we wanted to do something else---we just vacationed elsewhere.
There really isn't an "average price". If you buy direct from Disney the minimum contract currently is 50 points but it used to be higher in the past so that could change. You need to look at the point charts to figure out how many you need based on where you intend to stay and what type of room (studio up to 3 bedroom units are options). If you buy direct your resort options are limited to what Disney is currently selling and what they have active wait lists for. If you buy resale you can buy as little as 25 points. Also if you buy resale you will save a lot of money unless you are looking for a brand new resort where not many contracts are being resold yet. The resale market is volatile and apparently a few years ago there were extremely low prices but they have been going up for the past couple years apparently. I can tell you since we started looking in the fall the asking price for smaller contracts (up to 100 points or so) has risen significantly (prob about 20% higher right now) and some brokers websites say that those prices are firm so it would seem that they are actually getting those inflated prices since they are not negotiating. If I were you I would look at the resale search engine and get an idea of what contracts that fit your specific vacation needs are currently listed for and check the ROFR threads for this year to see what they wound up paying. You also typically pay closing costs (a few hundred dollars) and MF (if there are current use year points). Those items are negotiable but based on the current seller's market I wouldn't really count on it. Once you buy the contract you still have to pay MF every year but that varies based on resort and # points. You can look at current costs as well as find how they have previously roses to get an idea of past MF cost inflation.
