Pre-Paying for Your Entire Contract

[RamblinWreck]

Ok, so I just used my first DVC contract for the first time.

You'll never guess what has happened. I decided I need more points!

I currently only own a piddly little 50 point Grand Floridian contract. I got a big transfer from someone from this year, and also rented a room from another DVC member to string together an amazing trip with stays in a few different resorts and room types over 10 days.

Coming back to re-analyze the cost of DVC membership (geez, things have really gone up, haven't they?) I thought of a different way of looking at how economical different resorts are.

I like the analysis dvcresalemarket does by calculating the average cost per point over the life of the contract, and then adding in the annual dues. https://www.dvcresalemarket.com/blog/best-economical-dvc-resort-to-purchase-fall-2020/

However, I wondered if there was another way to think about it. Not all points are created equal. People with more in demand resorts like Grand Floridian can rent their points for $19 per. Saratoga Springs seems to be going for $16 typically. If we assume that rental prices per point will rise in line with annual dues, then you can calculate how much it would cost for someone to essentially pre-pay for their entire contract up front by buying enough points over the ones they intend to use so that they can rent out enough points to cover all dues.

For example. If I want to use100 points at Grand Floridian every year, those points go for an average of $197 resale. Dues on those points would be $681. If I want to be able to neutralize my dues for the rest of the contract, I would need to buy 156 points or more. (56 points * $19 = $1064 in rent. 160 points * $6.81 = $1062). So in this instance, the total true cost per point of pre-paying for the use of 100 GF points per year is $305 (156 points * $197 / 100). Since the contract expires in 2064, the cost per point per year is $7.09 ($305 / 43).

So that means that if you buy enough points to cover, via rental, the cost of the points you intend to use and the points you intend to rent out, you can expect that the true cost to you for 100 points at the Grand Floridian is $709 per year of use, all paid up front.

Even with how crazy resale prices are right now, that's not too terrible, considering that will get you 5 nights in a VGF studio most times of the year.



Even if you don't like the idea of pre-paying for everything, I think it's just another interesting way to look at the resorts' comparative values. There are obvious risks to the strategy as well. You are certainly taking on more risk by putting more money down upfront, and you are counting on DVC rentals to continue to be lucrative. If DVC keeps expanding, there could eventually be more supply than demand in that arena.


Here's a ranking of how economical each WDW resort is on the resale market based on DVCresalemarket's average price per point, each resort's annual dues, each resort's average rental price (as observed by me on the rent/trade board, but anyone can correct me on them), and how many years are left on the contract.



1. Riviera ($5.76 per point per year)
2. Polynesian ($6.28)
3. Copper Creek ($6.59)
4. Grand Floridian ($7.09)
5. Saratoga Springs ($7.27)
6. Animal Kingdom ($7.18)
7. Bay Lake Tower ($7.71)
8. Boulder Ridge ($11.64)
9. Boardwalk ($12.39)
10. Beach Club ($12.96)

And just for fun.....

Vero Beach ($16.07)




The rent per point of each resort I used for my calculations was
Riviera ($18)
Poly ($19)
Copper Creek ($17)
Grand Floridian ($19)
Saratoga Springs ($16)
Animal Kingdom ($17)
Bay Lake Tower ($17)
Boulder Ridge ($17)
Boardwalk ($19)
Beach Club ($19)
Vero Beach ($15)

 

[Marionnette]

Renting to pay off your contract is a risky proposition. COVID taught us not to regard it as a guaranteed income stream.

 

[RamblinWreck]

Renting to pay off your contract is a risky proposition. COVID taught us not to regard it as a guaranteed income stream.

It absolutely is taking on more risk. There's no doubt about that.

If anything, though, I would say that COVID and how it was handled should make people feel much better. The worst global crisis in over 100 years hardly affected people's points at all. As long as you were proactive about making reservations you didn't lose anything.

 

[MICKIMINI]

Honestly, I wouldn't want to rent on a regular basis. I tend to buy loaded contracts and rent the excess points to help defray the cost. I have had great experiences with my actual renters and find they come back to inquire about other reservations.

People who have rented in the past are great, but it can be a long, painful process to put together a reservation for someone who doesn't know the process. Often people ask for prices and you find their exact reservation and they ghost you. When I rent, my points are available until I get an agreement for that reason. I plan on taking a couple days to focus on renting after I list a contract, being available, answering questions, etc. If you had a lot of points to rent each year it might be more work than you think. Don't forget those pesky income taxes...between the MF's and taxes there is not much meat left on the bone. Just a few things to consider.

Good luck!

 

[Marionnette]

It absolutely is taking on more risk. There's no doubt about that.

If anything, though, I would say that COVID and how it was handled should make people feel much better. The worst global crisis in over 100 years hardly affected people's points at all. As long as you were proactive about making reservations you didn't lose anything.

Hardly affected people's points at all? I think you would find a large number of individuals who would refute that claim, including those who lost banked points and members who cannot borrow enough points to complete a reservation due to current restrictions.

 

[FSUSammy]

The other thing I've seen mentioned on this board a lot is that we have no clue if at any point they will change the rules. They can easily make it so that you can't rent out your points and then what?

 

[RamblinWreck]

The other thing I've seen mentioned on this board a lot is that we have no clue if at any point they will change the rules. They can easily make it so that you can't rent out your points and then what?

Then you’d have more points than you wanted and you would likely want to sell the contract.

I can’t imagine why they would ever do that though.

 

[erionm]

The other thing I've seen mentioned on this board a lot is that we have no clue if at any point they will change the rules. They can easily make it so that you can't rent out your points and then what?

If they tried that, then DVD should be prevented from renting out developer inventory.

 

[Starport Seven-Five]

Renting points out has a pretty mediocre ROI in my opinion. A 100 point VGF contract would yield $1900/year at current rental rates and have annual dues of $681. Assuming you paid 20k for that 100 point contract, you would have a return of 6.1%... and that's assuming every point was rented at $19/point.

I was trying to justify a larger contract (easier to find and less dollars per point) by renting out the remainder. I was better off buying a smaller one and sticking the rest of the money in the stock market.

 

[Sandisw]

Then you’d have more points than you wanted and you would likely want to sell the contract.

I can’t imagine why they would ever do that though.

The ability to rent is part of the POS. To make that change, it would be a big deal and I think would need a member vote as i would be a material change to the contract.

So, I don’t think they can ever get rid of it.