Opinions on resale purchase: How much do you weigh contract exipiration?

[CarolMN]

IMO the most important thing is the timeframe you plan on booking reservations versus the deed expiration date. If you tend to book further out than 7 months then probably best to purchase where you would like to stay. Even the shortest deeds still have more than 24 years remaining.

I agree. For me, it's much more important to vacation where I want to be, when I want to be there. Initial savings and future resale value just won't feel all that good if I'm not able to stay where I want to stay when I want to stay there.

 

[mustinjourney]

I can't justify todays costs for the new DVC units, and only those that have below normal math skills will think it's a good deal. JMHO

Have you seen the costs for hotel rooms direct from disney? GF studios are regularly $550+ per night even in late January (plus tax). Even buying direct at $185 -- your cost per point, including maintenance fees, in TODAY'S dollars, is somewhere between $11-$13 a point (MFs+($185/46 years*2)). This will vary depending on whatever internal rate of return you deem to be appropriate. In my case, I suck at picking stocks, so by spending money, I actually save money.

In any case, that VGF studio is now costing you somewhere around $200-$500 a night depending on the season and view. So even at $185 -- the DVC rooms can save a significant amount of money. Whether that is enough money to justify the restrictions in bookings is another matter.

 

[bwvBound]

IMO the most important thing is the timeframe you plan on booking reservations versus the deed expiration date. If you tend to book further out than 7 months then probably best to purchase where you would like to stay. Even the shortest deeds still have more than 24 years remaining.

Yeah, well, but ... some of us are able to make long range plans and want to use any/all of the DVC resorts. It is both out of reach and impractical for many, including me, to "own" at each place I would like to stay. I will stay at all those I wish ... but I will not tailer my purchase decision to buy a specific location just to stay there. That is silly to me.

 

[Ben E N]

Yeah, well, but ... some of us are able to make long range plans and want to use any/all of the DVC resorts. It is both out of reach and impractical for many, including me, to "own" at each place I would like to stay. I will stay at all those I wish ... but I will not tailer my purchase decision to buy a specific location just to stay there. That is silly to me.

That is the beauty of the DVC timeshare system. For those who want a very specific resort, such as BCV, they can buy into that. If it is too expensive upfront, then they can buy less points and go every other year using banking/borrowing. For those who are looking to get more use of their contracts, they can buy at a resort with a later expiration date and stay there most of the time, with the hope of staying elsewhere as well.
I think all of the options it allows for, plus the Disney name, is what is making DVC contracts rise in value when many other timeshares tend to just collapse in value.

 

[BillPA]

Like I said, lack of math skills.

 

[mustinjourney]

Like I said, lack of math skills.

so how is spending $250 a night on VGF studio a horrible deal compared to $550 per night for GF hotel?

 

[bwvBound]

That is the beauty of the DVC timeshare system. For those who want a very specific resort, such as BCV, they can buy into that. If it is too expensive upfront, then they can buy less points and go every other year using banking/borrowing. For those who are looking to get more use of their contracts, they can buy at a resort with a later expiration date and stay there most of the time, with the hope of staying elsewhere as well.
I think all of the options it allows for, plus the Disney name, is what is making DVC contracts rise in value when many other timeshares tend to just collapse in value.

I'll disagree with the "beauty" comment and simply offer "it is what it is." DVC remains one of my least favorite timeshares ... but it has one thing going for it: location, location, location. DVC is the only timeshare providing walking access to select WDW parks, or as triggered our purchase years ago, walking distance to the Dolphin/Swan/YC Convention Centers. Location wins.

 

[BillPA]

1st no one pays list, you can get 35% or more off, with the average list of $665 that's $432 of less cash and you cost per point is more like $17
$185 at 6.5%, a low rate in todays market is $12+ a point + $ 5.90 dues. With people renting you points at %15 or less, why buy?

 

[Ben E N]

1st no one pays list, you can get 35% or more off, with the average list of $665 that's $432 of less cash and you cost per point is more like $17
$185 at 6.5%, a low rate in todays market is $12+ a point + $ 5.90 dues. With people renting you points at %15 or less, why buy?

I think the point you are trying to make is that people are better off investing their money than they are putting it into DVC.
The math is possible, but you are not taking into account that the cost of deluxe resorts will also go up every year, most likely more or less in line with the stock market, and by buying DVC points at retail cost right now, you are paying $3.70 per point plus MFs, which only raise about 3% per year. At today's rates, that's about $200 per night at most DVC resorts. You cannot find that even with per night discounts.
Disney trades higher nightly fees for a guaranteed customer over 50 years.

 

[BillPA]

I see you don't understand the cost of money either.

 

[mustinjourney]

1st no one pays list, you can get 35% or more off, with the average list of $665 that's $432 of less cash and you cost per point is more like $17
$185 at 6.5%, a low rate in todays market is $12+ a point + $ 5.90 dues. With people renting you points at %15 or less, why buy?

To be fair, 6.5% would have to be done after including your income taxes -- so 6.5% net return would mean you would have had to have over 8% gross. Not to mention, not everyone would take the DVC purchase money and have it invested in anything and earning interest/dividends. In my case, money we would have spent on landscaping was used to purchase the DVC contracts -- so that money really didn't have any interest bearing value. It was going to be spent either way. I don't have an amortization table in front of me -- but my napkin calculations would have yielded an IRR value in the neighborhood of 5%. I simply took the price per point over the number of years and then doubled that number to factor in the IRR. It's an easy way to get an estimate...since the IRR is all guesswork anyways and certainly not guaranteed.

1. Plenty of people pay list price on Disney hotel rooms. Not to mention, Disney doesn't offer 35% discounts often with places like GF. Besides, even taking 35% and your $17 cost per point, it is STILL CHEAPER to go with DVC over paying cash to disney for the similar hotel rooms. For example, the trip I'm doing in January for four nights at VGF cost me 80 points. A hotel room at GF for the same nights is currently $700 a night plus tax, which is around another $85 a night. So even at your $17 cost per point as a direct owner, the room is $340 per night using DVC points. (discounted room would be $512 per night including tax)

2. Regarding renting points at a place like VGF -- it's not easily done at $15 -- Renting VGF points is usually in the $17-$19 range. Nevermind you don't have control over the reservation...so there is risk involved. For a lot of people out there, renting is just not something they are comfortable with doing.

3. Also -- renting points provides no other member benefits -- whereas purchasing direct does provide additional benefits (granted, unless you're getting the AP discount, they are largely worthless). For example, the AP discounts save us $800 per year right now -- that's not insignificant.

4. Your math fails to take into account the value of the underlying asset that can be sold at any point in the future. So there can be quite a bit of value in that.

 

[BillPA]

I will always have the total amount that would have been paid, plus it will be growing because my return has been more than the 8% you mention. Just look at the current cost verses renting. I have been a member for almost 25 years, my buy in was $57.50 a points. I cannot justify any DVC at $185 a point and just pointing out to others that they can't either if they understand the cost of money and the options to rent points and the lack of a 40+ year commitment. I understand DVC is NOT and investment, especially at todays prices. It's you money, do as you please, I am just trying to point out that many think their costs are $185/50 years + dues, that is not even close.

 

[mustinjourney]

I will always have the total amount that would have been paid, plus it will be growing because my return has been more than the 8% you mention. Just look at the current cost verses renting. I have been a member for almost 25 years, my buy in was $57.50 a points. I cannot justify any DVC at $185 a point and just pointing out to others that they can't either if they understand the cost of money and the options to rent points and the lack of a 40+ year commitment. I understand DVC is NOT and investment, especially at todays prices. It's you money, do as you please, I am just trying to point out that many think their costs are $185/50 years + dues, that is not even close.

I agree that it is not Cost/years + maintenance fees. That simplistic formula is complete nonsense, and I'm sure it is what the Disney DVC guides probably break out to unsuspecting guests. Clearly, you have to adjust the first part by an appropriate money factor to take into account the time value of money -- which is exactly what I did when I doubled that number.

It would seem you're arguing over what the appropriate IRR should be. I said in my original post that will depend on your own personal situation.

 

[Dean]

I'll disagree with the "beauty" comment and simply offer "it is what it is." DVC remains one of my least favorite timeshares ... but it has one thing going for it: location, location, location. DVC is the only timeshare providing walking access to select WDW parks, or as triggered our purchase years ago, walking distance to the Dolphin/Swan/YC Convention Centers. Location wins.

And the shame is it's almost all by choice. Comparatively speaking poor maintenance, poor effort and poor non DVC options.

I think the point you are trying to make is that people are better off investing their money than they are putting it into DVC.
The math is possible, but you are not taking into account that the cost of deluxe resorts will also go up every year, most likely more or less in line with the stock market, and by buying DVC points at retail cost right now, you are paying $3.70 per point plus MFs, which only raise about 3% per year. At today's rates, that's about $200 per night at most DVC resorts. You cannot find that even with per night discounts.
Disney trades higher nightly fees for a guaranteed customer over 50 years.

I don't think that's Bill's stance at all. What I'd say is that from a math standpoint a studio will likely break even or save money compared to a moderate or a 2BR compared to 2 moderate hotel rooms. But it's a long term commitment and it represents considerable financial risk going forward with other requirements to make it reasonable. Plus if you have to finance it it's either not important to them or one can't afford it (or both). It's simply a controlled way of staying on property cheaper than some options and more expensive than others. Off property is less and while most of my stays on in DVC resorts, they are mostly with exchanges where my cost is dramatically less than even the cheapest DVC purchase. High risk but high reward in my situation. Looking beyond the math is that most people just blow the extra money elsewhere so you then get into the added value vs the cost issue. The added value is far more subjective and personal than the math component.

 

[Ben E N]

I don't think that's Bill's stance at all.

I really don't know what the stance was, with the vague statements and bravado about his intelligence with money.
If it was that people should be buying resale, then that is obvious. Paying $185 for something when you could be paying just $130 is not a smart move.
If it was that people should have bought in earlier, then that one is obvious as well. I also hate hearing my grandmother tell me that she used to stay at the Contemporary for $58 a night.
If it was that people are better off staying a cheaper resorts, off property, or going to Disney less frequently, and investing the savings to make more money, that is also a fair point, but is not nearly as much of an apples to apples comparison.

As it stands, purchasing a 47 year contract at VGF at $185 a point, while ridiculously expensive, would still be cheaper than putting that money into investments and withdrawing from it every year to pay cash for comparative rooms at GF. Your money would not grow, as you would be spending the investment income, and it would decrease over the years as the cost of your hotel room increased. The math to that is pretty simple. Not that I would want to spend 47 years in a row paying cash out of pocket to stay at the same hotel every year.

If someone is concerned about making or holding on to their money, then no timeshare is a good idea for them.

 

[Dean]

I really don't know what the stance was, with the vague statements and bravado about his intelligence with money.
If it was that people should be buying resale, then that is obvious. Paying $185 for something when you could be paying just $130 is not a smart move.
If it was that people should have bought in earlier, then that one is obvious as well. I also hate hearing my grandmother tell me that she used to stay at the Contemporary for $58 a night.
If it was that people are better off staying a cheaper resorts, off property, or going to Disney less frequently, and investing the savings to make more money, that is also a fair point, but is not nearly as much of an apples to apples comparison.

As it stands, purchasing a 47 year contract at VGF at $185 a point, while ridiculously expensive, would still be cheaper than putting that money into investments and withdrawing from it every year to pay cash for comparative rooms at GF. Your money would not grow, as you would be spending the investment income, and it would decrease over the years as the cost of your hotel room increased. The math to that is pretty simple. Not that I would want to spend 47 years in a row paying cash out of pocket to stay at the same hotel every year.

If someone is concerned about making or holding on to their money, then no timeshare is a good idea for them.

I guess I know Bill's posting history so I have more of a have a feel for his intent and posting style. As for the financial comparison, there are many variables. Assuming one would invest the money in a real investment but draw out just to pay for the room plus adding in dues, an average of 20% discount on cash and the same rate of inflation for dues and rooms; the numbers will say it is cheaper for a deluxe and roughly break even for a moderate for SSR, just a little over break even for the high end retail at best. But that leaves out risks and variables over a very long period of time including personal situations and lost points if you have to cancel a time or 2 late in the course. My personal financial assumptions for the cash compared to buying VGF would be 1/3 of the price invested short term at almost nothing and 2/3 invested in real investments at a minimum of 8% after taxes drawing off the short term dollars first. The reality is that DVC really isn't a big money saver even on paper for the high end properties unless one both uses them only for those options AND would stay at that level consistently with cash if they didn't own. And the true reality is that only a VERY small % will actually save money owning DVC because of personal behavior that basically always supersedes the math.

 

[mustinjourney]

I don't disagree with much of anything you say. But for Bill to say "I don't understand math" is pretty asinine.

I don't recall any of his previous posts being that flippant and smug, so I was quite shocked at his tone. It certainly seemed unnecessary.

I guess I know Bill's posting history so I have more of a have a feel for his intent and posting style. As for the financial comparison, there are many variables. Assuming one would invest the money in a real investment but draw out just to pay for the room plus adding in dues, an average of 20% discount on cash and the same rate of inflation for dues and rooms; the numbers will say it is cheaper for a deluxe and roughly break even for a moderate for SSR, just a little over break even for the high end retail at best. But that leaves out risks and variables over a very long period of time including personal situations and lost points if you have to cancel a time or 2 late in the course. My personal financial assumptions for the cash compared to buying VGF would be 1/3 of the price invested short term at almost nothing and 2/3 invested in real investments at a minimum of 8% after taxes drawing off the short term dollars first. The reality is that DVC really isn't a big money saver even on paper for the high end properties unless one both uses them only for those options AND would stay at that level consistently with cash if they didn't own. And the true reality is that only a VERY small % will actually save money owning DVC because of personal behavior that basically always supersedes the math.

 

[MouseOfCards]

In my case, I suck at picking stocks, so by spending money, I actually save money.

We must have taken the same stock trading courses!

 

[Dean]

We must have taken the same stock trading courses!

That's why I don't buy individual stocks other than situations where I get other benefits or have inside knowledge (not illegal). Currently the only individual stock I own is RCCL for the added onboard credits.

 

[Ben E N]

I don't disagree with much of anything you say. But for Bill to say "I don't understand math" is pretty asinine.

I don't recall any of his previous posts being that flippant and smug, so I was quite shocked at his tone. It certainly seemed unnecessary.

I felt the exact same way. For the record, I thinking buying in at $185/pt is a very bad idea, but I was just trying to present the other side of an argument. To be called "bad at math" for it felt very unnecessary, both for me to read and for people who are looking to make sense of the purchasing process. I will assume that I caught someone who was having a bad day and needed an outlet for their frustrations.