is my rudimentary math right?

[connorsmom911]

Ok, so I'm looking at a resale contract on the Timeshare store right now, OKW 50 pts/$75 pt (hypothetically of course, can't buy right this second, but I'm researching for down the road). If we're planning to start small, bank and borrow so we only go every 3 years (points coming in 2006, we bank and borrow 2008 points to travel in 2007, then bank 2009 and borrow 2011 to travel 2010 etc) and stay in a 1 bdrm OKW for 1 week in adventure season (yes, I know its 160pts, we'd have to rent the extra 10 or pay cash for one night or something).

Ok, so my rudimentary math (no, I don't want the CPA version or the financial planner version, although you guys are great and I couldn't live without you...)

50pts x 36 yrs (pts don't come till 2006) = 1800 pts
$3750 / 1800 pts = $2.08 plus
$4/pt maintenance (yes, I know, I'm just using that number for now)

so, about $6/pt, so my once every 3 yrs vacation will be 150x6=$900 for the week (plus however I do the extra 10 pts) for a 1bdrm villa...wheeeee!?!?!?!

Did I figure right? Opinions?

And yes, I've read all about that "addonitis" thing that will throw this whole plan out the window once we actually buy...

Tracey

 

[LisaS]

$4/pt maintenance (yes, I know, I'm just using that number for now)

so, about $6/pt, so my once every 3 yrs vacation will be 150x6=$900 for the week (plus however I do the extra 10 pts) for a 1bdrm villa

As you stated, at approx. $4/pt for maintenance fees your vacation will cost approximately $900. But you do need to be realistic about the dues -- they will go up. I have been told by DVC to expect dues to increase by approximately 3% per year. Some use the figure 3.12%, based on the amount dues have increased in the past.

Using 3.12%, in 10 years (2015) your dues will be around $5.40/pt so your vacation will cost you around $1100. By 2025 your dues will be around $7.35/pt so your vacation will cost approx. $1400, and by 2035 your dues will be approx. $10/pt, so your vacation will be costing you around $1800.

When you consider that WDW's hotel rooms will also be increasing in price over the years, it should still be a good deal relative to paying for a moderate or deluxe resort room.

 

[Doctor P]

Your rudimentary math is just fine. When one considers increases in income and inflation, its reasonable to expect that the maintenance fee issue will be somewhat cancelled out.

 

[JimMIA]

Rudimentary math is actually preferable to the CPA/MBA stuff for this kind of a decision. This is not an investment for which you need to consider opportunity costs, calculate the projected internal rate of return to compare with other investment options, etc.

Your math is perfect, with one slight correction. You don't have any closing costs shown, and you will have to pay them on a resale. Closing costs on small contracts have been lowered significantly just recently, but you still need to add that in.

As far as a strategy, I'd plan on paying a little more than $75 for OKW. That's right on the borderline for ROFR, and you don't want to lose a contract you like. The most important number is NOT the lowest price, but the price that will clear ROFR. Your resale broker can guide you in that regard.

When you get ready to buy, you really need to be ready to pull the trigger. You need to know what you want, what you can pay, and then I'd recommend that you call TTS and tell them exactly what you are looking for.

Small contracts appear rarely, and when they pop up, they usually sell immediately. If you call and get on their list, you will get a shot at a contract before it is advertised.

Good luck!

 

[Y-ASK]

Did I figure right? Opinions?

I'd say yes you figured it right. But maybe you could do better by going with double the points with the thoughts of still only using 150 everything three years:

Total cost not including closing
100 x $75.00 = $7,500.00

Number points you plan to use
50pts x 36 yrs (pts don't come till 2006) = 1800 pts
$7,500.00 / 1800 pts = $4.17 plus

Rent the rest of your points at $10.00 per point to cover the entire Mainteance Fee.
50 X $10.00 = $500.00 per year

Minus Maintance Fees
100 X $3.86 = $386.00
$500.00 - $386.00 = $114.00

$114.00 / 50 Pts = $2.28 per point per year.

At this point in time you'll see a small profit of about $2.28 per point with the plan of increaseing the rental per point price as the maintenance fee goes up. If you work it out right you may get away with only having to rent points once every three years.

Cost of Points $4.17 minus $2.28 = $1.89

so your once every 3 yrs vacation will be 150 pts X $1.89 = $283.50 for the week plus another $100 bucks for the extra points needed for a 1bdrm villa...

What's not to like ?

Y-ASK

 

[tamu91]

You're not too far off IMO.

It's inevitable that DVC maintenace fees will only go up (why not, everything else does ) and perhaps even at higher rate as resorts get older but everything else probably will as well so when do we get to welcome you home

 

[Caskbill]

There are two ways to do these kind of calculations. One is to figure in inflation rates and what things will cost in 30 years, and what hotels will cost, and what salaries will be, etc.

The other way is to just calculate everything into 2005 dollars. In many ways this is preferred as it gives you an answer that is more meaningful. This is what you did and it's an excellent way to get the big picture.

If today it is going to cost you $6.00 point total and a room is 15 points/night, you have a feel for the equivalent $90 of 'value'. This is a number you can understand. The fact that it will go up over the years is irrelevant. You know that whatever it is, it will be equivalent to $90 in today's money.

It is much more difficult to understand the true meaning of costs for future or past years when we only look at the dollar amounts. For example if a room in 2042 will cost $1000/night, that really has no true meaning for us, just as much as we can't understand the true meaning that a room in 1850 only cost $0.50 for a night. For all we know, in 2042 $1000 might actually be cheaper than paying $90 today, and in 1854 paying $0.50 might have been a whole month's salary, meaning it was much more expensive that $90 is today.

It's all relative, so converting all costs to 2005 dollars makes a lot of sense.

So, without being too loquacious (oops...too late), ......your calculations are just fine.

 

[LisaS]

If today it is going to cost you $6.00 point total and a room is 15 points/night, you have a feel for the equivalent $90 of 'value'. This is a number you can understand. The fact that it will go up over the years is irrelevant. You know that whatever it is, it will be equivalent to $90 in today's money.

I agree with most of what you said in your post, especially when you write about understanding the value in today's dollars. But I do feel it is worth pointing out to anyone who is looking into DVC that the dues will increase over time. When we first spoke with our guide, she emphasized that we should expect the dues to go up at least 3% per year on average. She said they have had angry phone calls from owners complaining that their dues went up, so she wanted to be sure we understood that this would happen.

Also, for people like me who are getting close to retirement, the dues will continue to go up but my income will not once DH and I retire. We crunched the numbers prior to deciding to buy into DVC and looked at how the dues would increase over time. I wanted to be sure that our DVC dues would still be manageable for us, even at the end of the contract. An annual increase of 3%-4% doesn't sound like much, but compounded over 35 years it does add up!

 

[joepoe]

Ok, so I'm looking at a resale contract on the Timeshare store right now, OKW 50 pts/$75 pt (hypothetically of course, can't buy right this second, but I'm researching for down the road). If we're planning to start small, bank and borrow so we only go every 3 years (points coming in 2006, we bank and borrow 2008 points to travel in 2007, then bank 2009 and borrow 2011 to travel 2010 etc) and stay in a 1 bdrm OKW for 1 week in adventure season (yes, I know its 160pts, we'd have to rent the extra 10 or pay cash for one night or something).

Tracey

My opinion, take it or leave it, is don't hassle with DVC if you are going to go so infrequently.

 

[Y-ASK]

To the orginial poster, what did you decide to do? Just curious...

Y-ASK

 

[erikthewise]

It is a complicated question with a lot of variables. Your method is probably as good as any given that what happens over 36 years just can't be accurately predicted.

But I think it likely that this method underestimates the cost of points. You are getting a low number because you are dividing by points you won't even see for 20 years and more.

If I offered to trade you my 100 points for 2035 use year in return for your 100 points for 2005 use year, you would laugh in my face. What if I offer 150 points, or even 200 points, from 2035 use year? I'll bet you still wouldn't trade. I know I wouldn't. Future points simply aren't worth as much, and the farther in the future they are, the less they are worth today. Your method treats 36 years of points as if they were all the same.

I do agree that only planning to go every 3 years means DVC does not make sense. At that frequency, I'd say just rent points or pay for a resort.

 

[Y-ASK]

Future points simply aren't worth as much, and the farther in the future they are, the less they are worth today. Your method treats 36 years of points as if they were all the same.

I'm not sure if I understand what you are saying. Are you saying that in 2005 100 pts are only going to be worth "X" and in 2035 they are going to be worth less than "X"? If that is what you're saying then I'd have to disagree with that. If I can rent 100 points for $10.00 per point in 2005 and the Maintenance Fees continue rise and the rack rate continues to rise don't you think the rental cost per point will rise too?

I mean if someone who rents points today is getting about a 50% discount off the cost of paying the rack rate and the rack rate increases significantly over time do you really think the value of your points are going to go down? I really don't think it matters if you rent your points on the very last month before the timeshare expires or tomorrow, your points are still going to be worth a certain amount to someone who wants to vacation at WDW for a week or so and that amount will increase over time. Now as far as trying to sell your timeshare in the distant future, that's a different story.

Y-ASK

 

[rinkwide]

I'll gladly sell you my year 2032 allotment of points for $9 per point.

 

[connorsmom911]

Hey there,

We haven't made a decision yet, actually still waiting for the DVC DVD for some more information and more discussions of course. I don't think we will be in a position to buy this year, so I'm just watching and reading, seeing what contracts are selling for, playing with Caskill's planners to see how future vacations would be etc. As much as I'd like to buy before the price goes up, we'll probably have to bite it for a while. We have a new house, so I think the driveway, fence and deck may have to come first (although I would rather do Disney!!).

As far as the vacations every 3 years, I think that would just be for the next 10 years or so. I think we would travel more as a couple once DS gets older and can't take him out of school so much, or worst case...that he doesn't want to go (HORRORS!!! NOT WITH MY GENES!!! ) Hubby and I would like to sneak in the occasional long weekend (well, not on actually weekends, we are shift workers, so our "weekends" are usually during the week) or bank for a family cruise or such.

And I fully expect and am planning for the "addonitis", so we'll work our way up to travelling every year instead of every 3. I think we'd just like to start small and add-on as we go. Financially it works better for us, and I like the idea that if things don't go as planned, or we change our minds, small contracts seem to go quick on resale, at least for now.

So, I'll keep you posted, just don't look for anything solid from us for a while. You never know though...as I always say, winning the lottery IS part of my future financial plan!!

Tracey

 

[T.E. Yeary]

rinkwide-

 

[Caskbill]

If I offered to trade you my 100 points for 2035 use year in return for your 100 points for 2005 use year, you would laugh in my face. What if I offer 150 points, or even 200 points, from 2035 use year? I'll bet you still wouldn't trade. I know I wouldn't. Future points simply aren't worth as much, and the farther in the future they are, the less they are worth today. Your method treats 36 years of points as if they were all the same.

Either I'm missing what you're trying to say, or else you're way off base. The Value of points does not change (althought fhe cost of points may change for either purchase or rental)

5 years ago, 100 points would get me 10 weekday nights in a Studio at OKW during Dream season (10 pts/night).

Today, 100 points will get me 10 weekday nights in a Studio at OKW during Dream season. (10 pts/night)

In 5-years, 100 points will get me 10 weekday nights in a Studio at OKW during Dream season (10 pts/night)

If I traded you 100 points today for 200 points in the year 2035, I got the better deal.

With your 100 points you would be able to get 10 weekday nights in a Studio at OKW during Dream Season (10 pts/night)

In 2035 I would be able to get 20 weekday nights in a Studio at OKW during Dream Season (10 pts/night)

The value of the points does not go down every year, it remains constant. It gets you the same accommodations every year.

So the value doesn't change. It's not affected by inflation. While the 'cost' may change, that is relative year by year, but not applicable to the point's value. Just because the 'cost' of something may be affected by inflation, it doesn't affect it's 'value'. It's similar to a gold standard. For example in 1850 an ounce of gold would get you a certain amount of goods. Let's say it got you the equivalent of a month's worth of groceries. So let's just say that was equivalent to $2.00.

Now today let's say that an ounce of gold still gets you a month's worth of groceries. Call that $200.00. So the 'cost' of the gold has gone up considerable, but the value has not. It gets you exactly the same thing it did 150 years ago. That's how DVC points are similar. The points get you the same accommodations year after year.

So to say that the value of the points decreases every year is totally incorrect. The value of the points remains constant.

 

[Y-ASK]

Boy am I glad you posted Caskbill. I was beginning to think that my comprehension level was going south . I started to question myself on that one and was really hoping that erikthewise would post back and explain what he meant.

Y-ASK

 

[ccw]

Who knew it could be so complicated? I have NOTHING to add to the number crunchers posts (holy cow!) but will just say that I also like to justify my purchase in terms of how many room nights I have gotten versus my initial out of pocket expense (plus the annual dues but i have a small OKW contract so that is not a big number...yes, i know it will get bigger. I've been a DVC member for 5 years) The other thing that is pretty nice is NOT having to rent rooms thru Disney and fork over big bucks just for the TAXES (isn't it around 11-12% now?). For those people spending $2000 or more for a stay, taxes are adding up to real money!

 

[erikthewise]

I think maybe my point was misunderstood. I did not claim that e.g. 2025 use year points will be worth any less in 2025 than 2005 use year points are worth today. I am comfortable with Caskbill's claim that the values are the same.

What I claimed is that 2025 use year points are worth less TODAY, in 2005, than 2005 use year points. Not because of inflation, but because of utility.

If you wish to disagree with this then you must admit that trading 100 2005 use year points for 100 2025 use year points is an even trade. Perhaps this is true for an immortal being with infinite patience. But I suspect very few actual people would be willing to trade, even for 120 2025 use year points. Likewise I don't imagine Rinkwide has had a lot of takers for his offer.

An unrelated issue: If you really believe your annual points only cost you $6 each, why not buy 1000 points and rent them each year for $10-$11 each. Then you'd be making $4000-$5000 each year for the next 48 years, and that would only increase as rental prices go up!

 

[connorsmom911]

I'll think about those 1000 pts (like that contract on resale right now!!), but the whole idea of buying small was cause that's all i can afford!!!

Tracey