Purchasing to Rent

[atthebeachclub]

Yeah.. maybe if you didn't have a day job and this was the only thing you were doing for income then MAYBE but for the amount of capital needed, uncertainty of having a consistent buyer, potential losses through scams, broker fees (if using one), taxes and regulation by Disney potentially putting an end to your little operation all make it not worth it IMO. I'd much rather put it in a HYSA or mutual index and just let it grow by itself and do something else to make money.

Agree. Wish it was easier to vacation in my IRA!

 

[matt_in_nh]

I mean after dues you can get like $10 per point per year. That would take a long time to break even. I think it makes sense to buy if you are a Disney nut and mostly want to use them. It will drive down the cost of your vacations over time and you stay in Deluxe. Better off investing elsewhere.

 

[BuzzLightyr]

As a finance guy and a real estate investor (and not a commercial renter) here is a framework.

Renting a house and being a landlord has certain returns. There are many markets that cash flow 10-12% returns (or cap rates), after factoring the cost of property management (collecting rent and handling maintenance requests), maintenance, taxes and insurance. Mortgages cost 7% and real estate investors would want more than the cost of the mortgage.

With DVC at current prices, you can probably get a 10-12% return with the cheaper properties if you rent out at the rental rates. Run a npv calculation in excel with the current payment out and rental income minus dues in, each year. Decent but not amazing. If you rent it out yourself, you can rent out for more in exchange for your time. The really cheap studios for 9 points per night that you can rent out for $30/point make the investment returns much better. That's what you need to make an investment worthwhile, renting out 15 point/night bay lake studios is less attractive.

 

[crisi]

I honestly don't see how it can be all that profitable between the purchase point cost, closing/title fees and annual dues plus paying taxes on the rental income. Maybe if you bought points 10+ years ago I guess when they were half the price.

I think that where its profitable, it tends to be people also involved in the buying and selling of resale contracts - you buy a loaded contract, rent points for a few years, sell a stripped contract. And if you are a timeshare broker, you are doing this all without the overhead of fees. And if you are a broker, this is a "side business" of squeezing the money out of your primary business.

I do not think its that profitable to buy points - resale or direct - and then rent points - its profitable, but for the time and risk, you are better off investing the money you'd spend on DVC and getting a job with the time you would spend dealing with renters and reservations.

 

[mort1331]

So I asked this question years ago when we were looking at buying in 2011. Yes the points had dropped per, and the Can$ was par.
I received all the same responses that everyone has given so far. Yet I went and purchased 2 contracts. 200 and 220. For the 1st bunch of years we just used our 1 contract and the other covered the dues and part of our park tickets. So I never paid out of pocket for our dues for approx 7 years. We went on 1 or 2 trips every year and were able to stay 5-7 days each time. So there alone going against discounted rack rates and not paying dues, we were in the black.
Now our girls are older, we are now using 1 and 2 bdrm, going longer, so we are using both contracts for us. I now look at dues as my rack rate. If I have a few points left over we rent them out to offset dues.
If I stayed with just the original intent, I might have bought more points and rented out more to cover full cost of our trips each year, it is doable.
I have not run numbers lately, with the Can$ at .73 it defiantly is not worth it. The plus side is if ever I need to sell, we are selling at more per point than we paid, plus the exchange rate benefit. If this were to happen, it would be very expensive due to my wife divorcing me....lol