Maintenance Dues out of this world

[Parkhopper13]

Parkhopper let me know if the above numbers satisfied you're fetish.

Also if your yearly income is say $30K/ yr and you get a 2% raise per year, you will be happy to hear that in 48 years you will be making .....

=$30K X (1.02)^48 = $77,612 / yr
If you boss really likes you and you get 3% raise each year you would be making just under $124K / yr.

This proves sucking up to the boss for a mere 1% increase in your raise really pays off.

Your numbers look pretty close. Nice analysis. I will warn against making different inflation assumptions for different things, such as MF, salaries, and accomodations. I understand you did it in order to show conservative numbers, which is usually a good idea, but realistically, I would suggest using constant inflation across all categories.

 

[bigalpf1]

I wish I would have bought before.Best deal in town.

 

[salmoneous]

Note: This is not meant in any way shape or form to be an argument against buying DVC, or a negative statement about DVC at all. Just some thoughts for the number crunching geeks in the thread like myself...

Why assume that maintenance costs will only rise at the inflation rate? I can see that operating costs will rise with inflation. But right now that's about all you are paying for. These are newish buildings - not a lot of maintenance involved in the maintenance expense. But eventually, you are going to have to do real maintenance. And once you start, it only gets worse.

I know this is an exaggeration, but you wouldn't take the maintenance expense for the first few years of a car and project a lifetime of expense using inflation?

 

[Jeremy&Susan]

Almost ever financial analyst uses a limited few tools in predicting future performance.

The main tool used is past performance or historical performance. DVC maint fees historically rise at just under 4% and that is why I used 4% above. Please keep in mind that past performance is absolutely no way to positively ensure future performance, that is what a risk assesment is based on.

That leads me to my next major tool in predicting future performance, risk. The greater the risk, the greater the variability.
So if historically Company A averaged 4% increases but those fees varied from -2% to +10% yearly over ten years, that company would be interpreted as less risky than Company B that averaged 4% increases over the same ten years but varied between -10% to +30%.
In other words "Based on Disney's solid track record in property and vacation site management you can be reasonably assured that future performance will closely approximate past performance."

Chances are that as all the properties age, they will cost a bit more to maintain as their age increases. This is probably not a big number (I would guess a 1/2%-1% more once the buildings get to be in their last 10-15years of life).

I may actually research this a bit further and submit it as a thesis. Interesting topic, "Disney Property Management, Historical Overhead Trending".
Yeah it aint War & Peace.

 

[salmoneous]

As a finance analyst myself (that's what it says on my business card) I personally think it only appropriate to use past performance/trend analysis/etc. when you've got good reason to believe that the future will be similar to the past. In the case of an aging building, I wouldn't make that assumption.

I do think you could look at the increases in maintenance costs over the first few years of OKW/BWI/VWL and draw some reasonable estimates about the costs of SSR maintenance points in the early years (similar management teams and designs should lead to similar cost performances.)

But to project out 50 years of costs, I'd want to see some good data on similar types of buildings that have gone through 50 years of expenses. I'd also want to look to see how much reserving current management is doing for easily anticipated costs (e.g. are funds being built with current dues to cover appliance replacement.) Finally, I'm really curious to see what's going to happen in the last 5 years or so of the contract. Are members going to want to spend money to keep the buildings in great shape just to turn them over to Disney?

 

[mamatojon]

Note: This is not meant in any way shape or form to be an argument against buying DVC, or a negative statement about DVC at all. Just some thoughts for the number crunching geeks in the thread like myself...

Why assume that maintenance costs will only rise at the inflation rate? I can see that operating costs will rise with inflation. But right now that's about all you are paying for. These are newish buildings - not a lot of maintenance involved in the maintenance expense. But eventually, you are going to have to do real maintenance. And once you start, it only gets worse.

I know this is an exaggeration, but you wouldn't take the maintenance expense for the first few years of a car and project a lifetime of expense using inflation?

I could be wrong (and I often am when talking about the nuts and bolts of DVC) so somebody correct me please if I am... but I think that part of our dues every year includes a reserve for major projects - which would kind of cover what you are talking about, I think. I don't have my stuff unpacked yet here, so I can't look up what all the line items are, but I remember a discussion here awhile back about this.

 

[Parkhopper13]

I could be wrong (and I often am when talking about the nuts and bolts of DVC) so somebody correct me please if I am... but I think that part of our dues every year includes a reserve for major projects - which would kind of cover what you are talking about, I think. I don't have my stuff unpacked yet here, so I can't look up what all the line items are, but I remember a discussion here awhile back about this.

This is correct. Disney keeps a significant chunk of its MF in reserve for anticipated large projects. No program of this nature could charge for large repairs as they come up, the MF would skyrocket if most of the buildings got a new roof in a given year. Disney projects out the costs of these updates and repairs and smooths out the cost over the life of the project. There will probably be some unforeseen costs, but overall, the people that manage this program are not new to this type of business and can probably forecast with a fair degree of accuracy.

That being said, if some still feel that the inflation rate for the MF should be higher, they must then consider the opposite side of the coin, that if you don't buy into DVC, you will pay cash annually to stay at Disney resorts. The same principal will hold true. As these resorts age, they will need to be repaired, upgraded, maintained, etc. Disney will then pass those costs in their room fees, thus warrenting a higher inflation rate for a hotel room stay. So, long story short (too late), the inflation rate will remain consistent between both DVC and paying cash for annual trips at any Disney resort.

 

[fishermouse]

OK, to break this down even easier. Going by if the dvc dues keep going up just 4% (and they could go up to 15%) a year. On the 48th year of our contract as stated above..we'd be paying $6012 in JUST dues for that year. I am seeing that everyone who bought into DVC knows this and understands this.??! Now...In 24 years from now (thats half of the term)...wed' be paying $3006 a year in JUST dues.
I'm thinking there is gonna be ALOT of resales in a few years.

I'm pretty bummed....I really wanted to buy into this, but it looks like it is not the correct decision for us. Guess I'll still take my 19 days a year trip to WDW, but i'll be staying in values and moderates. Thats the way its been anyway and I havent complained yet.

Man I love WDW.!

DVC is not allowed to make a profit on dues so in order for the dues to reach your stated level inflation would have to increase at or near the same percentage keeping everything at an even rate. A few posts back there was a bean counter that summed it all up but the bottom line is if you can afford it now you should be able to afford it 20 years from now, all things being equal.

 

[Jeremy&Susan]

But to project out 50 years of costs, I'd want to see some good data on similar types of buildings that have gone through 50 years of expenses. QUOTE]

I'd like to see that too. It would be interesting to compare what Disney spends over time for upkeep compared to other companies.

As far as turning over property for Disney use in 50 years. That I think is a stretch. I doubt Disney will want it either after that many years of heavy use. They will more than likely tear it down and start up another themed DVC.


Hey Just thinking about the 50 year cost thing from above. I can't think of anything "similar" built 15 years agao, let alone 50. These are stick frame lumber / steel construction with stucco walls.
This style of building is not that old yet. I better stipulate, "for this type of intended use along it's size". I could see a whole bunch of people reminding me of row houses, small apartment buildings, large homes, etc.

 

[unixadm]

Read my thread Doing the Math - The real cost/savings

Yes, it is a lot of money, but if you like to vacation in luxury and only like to do villa type accomodations, there is a big savings over the years even with increasing maintenance fees.

I look at DVC as a pre-paid, discount accomodation package.

 

[fgauer]

Can we not apply logic to vacation please?

Let's be real, I can make a case why it makes no sense to take vacation, because the lost work time and lost investment potential will leave you with less money when you assend to the pearly gates....

HAHA! Bravo! CLAP CLAP CLAP