Monthly Fees vs. Cost of OOP Room

[RayJay]

And the cost of actually buying the points gets factored in how?



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Missy,

I did say it pays for itself after 4 to 5 trips, that was the initial cost but I wasn't clear.

After initial costs it's just dues but yes we need to factor in initial costs.

Thanks
RayJay

 

[RayJay]

I think the difference between the $4,000 and the $1,000 or $3,000 over the above stated 5 or 6 trips equals $15,000 to $18,000 and covers the purchase price. Every trip thereafter you only pay the dues which will increase above the $1,000 but never catch the then current price of the room so you save the difference. I hope this helps.

Yes, thanks for clarifying, and as we all know it can be less if you go resale, my buy in was only $12,000 so you could argue savings after 4 trips.

One important factor is we only go during school breaks so this is prime time which I believe saves us more if we didn't have DVC.

Thanks
RayJay

 

[RayJay]

I think the difference between the $4,000 and the $1,000 or $3,000 over the above stated 5 or 6 trips equals $15,000 to $18,000 and covers the purchase price. Every trip thereafter you only pay the dues which will increase above the $1,000 but never catch the then current price of the room so you save the difference. I hope this helps.

Sorry, one more thing, is because we go at prime time you don't get any discounts so it is way worth it. Now if you go during free dining or other rack rate discounted times I think the calculation can be way different.

RayJay

 

[rlmas]

I could not agree more with every one. It depends on you own vacation habits and such. On thng to add to is the issue of selling and as some have said taking a loss. In the above examples, some posters actually recognize a profit and others have recovered some of their up front cost. If I had to sell, I would calculate my gain by comparing the price I received to my net position. As RayJay said they are at a profit and if they sold for one half the original price and received $6,000 they could add that as additional profit. With our own membership, we paid $16,000 to buy 200 points that I could sell today for maybe $12,000. We have had it for 7 years and just broke even including an interest factor of 2.5% as an opportunity cost even though we paid cash. In this case the $12,000 would be profit.

 

[Deb & Bill]

Excuse me if this has been posted, or something similar. I copied and pasted this from an older thread , debating the same topic, a few months ago.

This is how I figured the cost per point on my reservations.

I have 50 Boardwalk points that cost me 80$ / per point. = 4000.00
Points are good for 30 more years .... 50 x 30 = 1500 points total.
4000 divided by 1500 = 2.67 per point.

I now add the 2.67 to my annual maintenance per point and that is the ACTUAL cost per point to use.

So if maintenance is 5$ per point per year.... this year my cost per point for reservation equals...
2.67 + 5.00 = 7.67 per point.


Missing from this equation is any interest paid on loan to purchase the points (though I didn't take any loans).... also closing costs, you can add that into original cost of purchase.

My numbers, above are very similar to my actual transaction... though not exact. They are hypotheticals to show how I figure the true costs of my vacation.

I have rented my points out in the past , and used the $$ to go on other vacations (or in the case of this year.... pay my son's medical bills)

Maintenance is not always going to equal $5 year per point. If you haven't read the future maintenance cost thread, it's a real eye opener.

 

[ELMC]

I agree that there are different ways of looking at it, and I'm not sure anybody can say that their way is the "right" way. The problem I have is when people make comparisons to rack rates as if they are the only option. There is also a much cheaper option, renting DVC points, that oftentimes doubles the time frame it takes to break even by comparison.

The counter argument to that, of course, is that people say that since they do pay rack rates, it is a fair comparison. Fair point. However, I cannot see how people would willingly pay rack rates. They probably also pay sticker price for their cars and asking price when they go to buy a house.

So I guess it's a fair comparison if you actually pay rack rates. But that begs another question...why are you paying rack rates?

 

[kendzee94]

If I travel at Christmas, the discounts are not in effect. That's when the rack rate for me, at least, would come into play.

 

[alice99]

Maintenance is not always going to equal $5 year per point. If you haven't read the future maintenance cost thread, it's a real eye opener.

I don't have to read that thread, as I know the maintenance fees will go up. I planned ahead for that. Thanks.


My numbers, above are very similar to my actual transaction... though not exact. They are hypotheticals to show how I figure the true costs of my vacation.

 

[joeyrose]

I could not agree more with every one. It depends on you own vacation habits and such. On thng to add to is the issue of selling and as some have said taking a loss. In the above examples, some posters actually recognize a profit and others have recovered some of their up front cost. If I had to sell, I would calculate my gain by comparing the price I received to my net position. As RayJay said they are at a profit and if they sold for one half the original price and received $6,000 they could add that as additional profit. With our own membership, we paid $16,000 to buy 200 points that I could sell today for maybe $12,000. We have had it for 7 years and just broke even including an interest factor of 2.5% as an opportunity cost even though we paid cash. In this case the $12,000 would be profit.

oh geez, make sure you understand the tax code (and loopholes) here. i would never, ever report this anecdotal $12k as profit. i would consider myself in a loss situation here and feel certain that this loss can be justified to satisfy the irs. frankly, i expect the irs has never had anyone report a profit when selling a timeshare.

 

[disneynutz]

Owning a DVC interest will save you money on your resort stays, the longer you own, the more you will save.

Owning also makes you a repeat Disney vacationer and the longer you own, the more money spent on things other than your room.

Each person needs look at their total costs to see if owning is advantages.

Our family would not vacation at Disney as often if we were not owners. Yes we save on the cost of our room but we have spent thousands on our Disney vacations and we will spend thousands more before we sell our contracts.

Would we vacation somewhere else as often, probably not.

Are the Disney vacations something special, you bet your ears they are, but they are expensive.

Bill

 

[ELMC]

With our own membership, we paid $16,000 to buy 200 points that I could sell today for maybe $12,000. We have had it for 7 years and just broke even including an interest factor of 2.5% as an opportunity cost even though we paid cash. In this case the $12,000 would be profit.

I think this is the Pixie Dust talking here. You bought an asset for $16,000. You (hypothetically) sell it for $12,000. That is a $4,000 loss. The fact that you received a benefit from this asset while you owned it is irrelevant.

 

[Sandisw]

I think this is the Pixie Dust talking here. You bought an asset for $16,000. You (hypothetically) sell it for $12,000. That is a $4,000 loss. The fact that you received a benefit from this asset while you owned it is irrelevant.

It really comes down to how people are defining a "loss". If its strictly a dollar's out/dollars back in, then yes, anytime we spend money, we are at an immediate loss from the start.

But, in this case, the person spent $16,000 and after 7 years, got $12,000 of it back--so for 7 years, they paid $4000 for vacations. Wouldn't classify it as a loss--wouldn't classify the $12,000 return as a profit either...

Personally, I don't see DVC as a true gain/loss situation because its not an investment. It's simply a way to pre-purchase vacation.

IMO, the mistake that some make in considering DVC a monetary asset that will have a liquidation factor down the road. While we currently have a market for it, the true benefit in owning DVC is the value it provides you in terms of vacation and there is no way to account for that on a balance sheet...but I don't think it should be considered irrelevant, because that is really the return that one is expected to get from DVC.

When we bought, we assumed a resale value of $0. We then figured out how many years, assuming we would be getting a typical Disney discount, it would take us to "break" even...once we knew that, we could then decide whether we saw ourselves wanting to continue with our Disney trips beyond that point...it was a yes, so we bought.

If I was to look at this from a monetary loss, it would be having to sell before I hit the break even point--when I would have spent more owning DVC then I would have to remained a cash guest.

As someone previously mentioned, there is simply no one right or wrong way to look at all of this but new buyers need to go in with eyes wide open as to what they are and are not buying and what to expect down the road.

Anyone who needs to have a product with a resale value should really not buy a timeshare, DVC included.

 

[ELMC]

It really comes down to how people are defining a "loss". If its strictly a dollar's out/dollars back in, then yes, anytime we spend money, we are at an immediate loss from the start.

But, in this case, the person spent $16,000 and after 7 years, got $12,000 of it back--so for 7 years, they paid $4000 for vacations. Wouldn't classify it as a loss--wouldn't classify the $12,000 return as a profit either...

Personally, I don't see DVC as a true gain/loss situation because its not an investment. It's simply a way to pre-purchase vacation.

IMO, the mistake that some make in considering DVC a monetary asset that will have a liquidation factor down the road. While we currently have a market for it, the true benefit in owning DVC is the value it provides you in terms of vacation and there is no way to account for that on a balance sheet...but I don't think it should be considered irrelevant, because that is really the return that one is expected to get from DVC.

When we bought, we assumed a resale value of $0. We then figured out how many years, assuming we would be getting a typical Disney discount, it would take us to "break" even...once we knew that, we could then decide whether we saw ourselves wanting to continue with our Disney trips beyond that point...it was a yes, so we bought.

If I was to look at this from a monetary loss, it would be having to sell before I hit the break even point--when I would have spent more owning DVC then I would have to remained a cash guest.

As someone previously mentioned, there is simply no one right or wrong way to look at all of this but new buyers need to go in with eyes wide open as to what they are and are not buying and what to expect down the road.

Anyone who needs to have a product with a resale value should really not buy a timeshare, DVC included.

I agree with much of what you said, especially about DVC being a (valuable) way to prepay for vacations and that it is not an investment. The reason why I posted what I did above is because a lot of people on here are talking about DVC like it is an investment and then skewing the numbers in all sorts of ways. My point was that if you're going to treat this as an investment, you need to be honest with the numbers. If you are, you will (hopefully) realize that DVC is a bad investment.

The poster who said that he would have a $12,000 profit if he sold his DVC contract is a prime example of this. Nobody would pay $16,000 for a new car, sell it years later for $7,000 and say they made a profit of $7,000 because they were able to drive a bunch of miles while they had the car.

If you own DVC and you feel like you got a good value out of it, then that's great. But I would be very wary about throwing around words such as "profit" when describing DVC, because more often than not, your "profit" is the result of some fancy accounting and is not actually real.

 

[RayJay]

So I guess it's a fair comparison if you actually pay rack rates. But that begs another question...why are you paying rack rates?

EL,

I've never gotten any discounts when going during xmas, New years or Easter so yes I paid rack rate. So does everyone else during this timeframe.

So I don't understand your point?

I have also been to Disney during 25%, 30% off times and free dining, but that was when we could go at those times.

RayJay

Thanks
RayJay

 

[ELMC]

EL,

I've never gotten any discounts when going during xmas, New years or Easter so yes I paid rack rate. So does everyone else during this timeframe.

So I don't understand your point?

I have also been to Disney during 25%, 30% off times and free dining, but that was when we could go at those times.

RayJay

Thanks
RayJay

Everyone isn't paying rack rates during those times. Savvy consumers are renting points for reservations during this time and paying significantly less than rack rates.

But I do understand your point about no discounts being available during peak holiday periods. And if you're not comfortable renting points then you're not comfortable renting points, and I can respect that. But there have been many times on these types of threads where people make the comparison to rack rates regardless of the time of year they go in order to justify their purchase.

Those were my points, thanks for asking for clarification.

 

[DougEMG]

Back to the original question. If you buy resale, plan to hold for a long time, then even with paying MF you are going to spend a lot less on your room then paying for it with cash.

Every time I run the numbers DVC works out to a 70-80% discount on the cash rate. What is Disney's best discount 30-40%?

 

[rlmas]

WOW! I must say I am glad to see so many people with such passion about DVC. Few products could accomplish something like this. I have to say that I think everyone has made valid points from their perspective and much like opinions, none are wrong.

I would like to clarify a few things such as the use of the word "profit". Some have taken it literally and actually cautioned me not to pay the IRS based on this. Trust me, I will not. I used the word "profit" not in a literal sense, but as a term indicating financial advantage. Much has been said about rack rates as well. None of my analysis has used rack rates in the break-even or payback math. I have always used the actual cost to book like accommodations for the exact same time of year per the Disney website with verification from several booking engines such as expedia as well. When trading outside Disney, I again went directly to the destination's website with outside verification. Sometimes they are discounted, sometimes, like our trip last Christmas, they are not. It all averages out over the years. All usage of our points over the last seven years averages about $14.00 per point in equivalent cash price with some trips much higher and a few lower.

My analysis uses the upfront cost and adds an interest factor each year, dues each year and subtracts the actual cash cost of the accommodations received each year. The sum of these numbers each year results in a net cost or carrying value of the membership. If this carrying value of the membership in any given year is above the current resale market, a theoretical loss exists upon sale. If the carrying value is less that current resale prices, a theoretical "profit" exists.

Of course all of this assumes you would have paid for this level of accommodations in the first place. If you would not have done so, do not compare it to what you would have done unless you are trying to show that you are getting deluxe for moderate prices by paying something upfront.

My final point is that if your decision to purchase relies to heavily on analysis and cost savings, then DVC, or any other timeshare, may not be the right path for you. You really have to know you are committed to annual travel in deluxe accommodations. You have to love and trust Disney. You have to want to ensure future vacations for decades to come.

I hope this clarifies my point and i would like to say how much I enjoy reading about everyone's experiences and perspective.

 

[rlmas]

WOW! I must say I am glad to see so many people with such passion about DVC. Few products could accomplish something like this. I have to say that I think everyone has made valid points from their perspective and much like opinions, none are wrong.

I would like to clarify a few things such as the use of the word "profit". Some have taken it literally and actually cautioned me not to pay the IRS based on this. Trust me, I will not. I used the word "profit" not in a literal sense, but as a term indicating financial advantage. Much has been said about rack rates as well. None of my analysis has used rack rates in the break-even or payback math. I have always used the actual cost to book like accommodations for the exact same time of year per the Disney website with verification from several booking engines such as expedia as well. When trading outside Disney, I again went directly to the destination's website with outside verification. Sometimes they are discounted, sometimes, like our trip last Christmas, they are not. It all averages out over the years. All usage of our points over the last seven years averages about $14.00 per point in equivalent cash price with some trips much higher and a few lower.

My analysis uses the upfront cost and adds an interest factor each year, dues each year and subtracts the actual cash cost of the accommodations received each year. The sum of these numbers each year results in a net cost or carrying value of the membership. If this carrying value of the membership in any given year is above the current resale market, a theoretical loss exists upon sale. If the carrying value is less that current resale prices, a theoretical "profit" exists.

Of course all of this assumes you would have paid for this level of accommodations in the first place. If you would not have done so, do not compare it to what you would have done unless you are trying to show that you are getting deluxe for moderate prices by paying something upfront.

My final point is that if your decision to purchase relies to heavily on analysis and cost savings, then DVC, or any other timeshare, may not be the right path for you. You really have to know you are committed to annual travel in deluxe accommodations. You have to love and trust Disney. You have to want to ensure future vacations for decades to come.

I hope this clarifies my point and i would like to say how much I enjoy reading about everyone's experiences and perspective.

 

[mort1331]

Great thread,,Ive tried following and wondering when to jump in. All this talk about investment,,profit/loss,,IRS(scary). |But have any of you actually looked at this as a true investment.
Take SSR which could be bought at 60/point(resale) with a current MF under 5, a 200 point contract would be a 12k invest with just under 1000MF. But you could rent out those points at 10per for a gross of 2000 and net 1000. Thats a 8%return on intial investment. In this day, a nice safe investmet, if you dont take out a loan for the initial.
Alot of other factors for long term, but renting will be here to stay for awhile and the spread (MF compared to rent/) will stay fairly steady.
something else to think about, if some of you arent already

 

[DougEMG]

Great thread,,Ive tried following and wondering when to jump in. All this talk about investment,,profit/loss,,IRS(scary). |But have any of you actually looked at this as a true investment.
Take SSR which could be bought at 60/point(resale) with a current MF under 5, a 200 point contract would be a 12k invest with just under 1000MF. But you could rent out those points at 10per for a gross of 2000 and net 1000. Thats a 8%return on intial investment. In this day, a nice safe investmet, if you dont take out a loan for the initial.
Alot of other factors for long term, but renting will be here to stay for awhile and the spread (MF compared to rent/) will stay fairly steady.
something else to think about, if some of you arent already

You can easily rent for $11/point, so that makes the numbers look a little better.

The big problem is that eventually the contract is worth $0.

The 2nd biggest problem is having rental rates increase at the same rate as MF. Historically this has not happened.

So you have an asset with a diminishing value and probably a shrinking rate of return. At what point does it no longer become such a good deal?

Now I am planning on renting out half my points to pay for the MF on all my points, but when I run the scenario out into the future, my projections show that I have to keep renting out more and more points to cover all the MF. So I don't end up getting to use half the points for myself.

Anyone that wants/plans to do something like this had better look at what MF increases vrs rental rates increases are going to be as this can make some serious differences in the numbers.

Compounding is great when it is working for you, but a really ***** when it is working against you.