Rent to cover DVC dues

[Chol]

So how many people buy double the points they need so that they can rent half and cover the dues of the points they use? Did this ever come back to bite you?

 

[Maistre Gracey]

Would take a number of years to cover your initial outlay for the points.
Does not seem wise to me.

 

[RoseGold]

Did this ever come back to bite you?

2020 comes to mind.

I wouldn’t buy DVC to rent. I did buy Poly because of its high (pre-covid) rental demand, and I knew I could rent it here and there if I needed to. But this was not a long term strategy.

 

[Sandisw]

I don’t think it’s a wise strategy. Buying extra that you know you can rent occasionally since you may not need, but regulary?

All sorts of issues could arise. I could never do it because I’d last about a year and would then just find a way to justify using them for myself!

 

[WilsonFlyer]

It would be pretentious to not acknowledge that people do this, and likely many more than we realize. I have considered it. I'm just not sure how many it would take to give me the discipline to not use them all myself so I've never gone down the rabbit hole. And that's honestly the only reason.

 

[mistysue]

I have definitely thought about it, done the math, and realized it could pay off fairly quickly depending on resort chosen.
I mean at this moment renting gets you somewhere around $11 per point more than dues. While dues go up, rates have been going up faster, so if you buy at a good price after around a decade it's a profit, or you can figure it over the life of the contact... buying Poly direct a couple years ago the points only cost $3/pt/year. I could be renting those points right now and calling it a profit around $5-9 per point.
It's like the ultimate coulda/shoulda/woulda to dream about "wish I had bought 20 years ago" - and it's uncertain if in another 20 years it will be the same way.

I didn't do it because if I want to invest 5-6 figures, there are many options that are more beneficial to my family. Unfortunately they are less fun than the plan where we can randomly stay in a bungalow if the market is having a bad year. We did buy slightly more than we "need" - keeping in mind that I can always find someone to rent to for a night or two.

 

[cruisehopeful]

I know lots of people do that. I can't imagine the break even point for that. You'd have to do some projective math to figure out when the first profit would hit and if it's even worth the hassle of dealing with the lookyloos.

 

[Heather07438]

if it's even worth the hassle of dealing with the lookyloos.

This is to consider. Some recent rental boards look excruciating with pages of correspondence and slim results. Some have great luck at a quick transaction and others are bombarded with unrealistic or half-hearted requests.
Without patience for that a broker could be used but there goes a big chunk of profit.
Plenty of people do fine it’s just not a sure easy thing to do.

 

[crisi]

So keep in mind the downsides of renting - particularly as a "business"

1. You will tie up a lot of capital in rental points. Will your ROI on rental equal investing that money over the long term?
2. Legally you must pay taxes on the profit - so you aren't making as much money as you think.
3. It will, as Heather and Cruise point out, take some time. Subtract the value of your time from the profit. If you have plenty of extra time, then it probably isn't a big deal
4. It isn't risk free. A lot of owners refunded money during Covid, some of them will simply end up out those points. Other owners who rent have gotten stiffed by their renter. If you take half up front, half 30 days out, a late cancellation could leave you with half your expected return, and points in holding. Legally, Disney could hold you responsible for damage done to the room. (We have never heard of that happening).
5. Keep in mind you'll be in competition for customers with owners who bought their points at $60 a point and Disney itself. When demand exceeds supply, this isn't an issue. When supply exceeds demand, you will be easily undercut.

 

[Brian Noble]

So how many people buy double the points they need so that they can rent half and cover the dues of the points they use?

Every time I have looked, the ROI is not much better (and sometimes worse) than what I might expect to earn by investing the purchase price in a low-cost highly-diversified index fund. Yes, I might clear $11/pt at some resorts, but it would cost $150/pt or more to buy them, and that's an ROI of 7.3% (or worse). Compare that to the long-term rate of return of the SP 500 (not particularly diverse) that returns an inflation-adjusted 7% for literally no work at all.

What's more, that's before taxes. Rental income is taxed as regular income, while money cycled through an index fund will fairly quickly be treated at the lower capital gains rate. At that point, the not-particularly-diverse index fund does better than a DVC rental, despite being infinitely less work.

 

[bobbiwoz]

^ so just buy the more points and use them.

 

[Brian Noble]

^ so just buy the more points and use them.

Exactly! The time you don’t spend managing rentals can be spent on vacation.

 

[Chol]

Thank you all for your perspectives, a very interesting topic to me. I did not consider the index fund approach, and I agree having points OR money in an index fund are both temptations you need to be strict not to dip into. But the idea of ongoing free dues and hence accomodation is a fun one.

 

[Shellyred8]

We bought a second contract thinking we would rent some of the points out. Turns out we ended up using most of them ourselves for extra vacations! We have rented the points a few times to friends and family, but for the most part, we've used them ourselves.

 

[Mickeys gal 52]

I did that initially thinking I would use it to pay some of my real estate taxes. But I do the same thing and end up just using him for more vacations

 

[skittles67]

If I bought more points, I would end up using them!

 

[The Jackal]

There were some people who saw the value back in 2008 and 2009. They bought lots of points for bottom basement prices and rent points to offset some of the maintenance fees. At today’s prices, no way, but at $40-50 per point it’s a different story.

 

[StitchesGr8Fan]

Keep in mind you have to pay tax on the rental income, so you won’t make as much as you think.