Rental Rates/Concerns

[anniet]

Originally posted by RuthnPaul
This person must have a tremendous amount of points to be able to book even a studio almost every other week over a 2-year period.

I agree! One would have to have a tremendous amount of points to do this, but they wouldn't have to book every other week- they might be booking say 2 or 3 studios during peak times and selling them to different people.

 

[OurDogCisco]

Originally posted by BCVOwner2002
Do you think they actually claim all of that as rental income?

Well, probably not because this could be a real gray area. I am not sure exactly how the transactions are being handled and I'd have to review the state law. But rental income is taxable in Florida. I don't know how timeshares work into the picture or if they are even addressed. So, that could be another issue? HTH...

 

[RuthnPaul]

Originally posted by anniet
I agree! One would have to have a tremendous amount of points to do this, but they wouldn't have to book every other week- they might be booking say 2 or 3 studios during peak times and selling them to different people.

Anniet, you're absolutely correct and I realized that after I re-read the OP (but I was just too lazy to edit my post )

RuthnPaul

 

[anniet]

Originally posted by ClarabelleCow
yup, but how could you proove it?

hmmmm....PROVEN? Not real sure.

But there IS strong evidence that suggests it may have been done.

 

[MarkRG]

This has got to be against our contract in some way or another. Has anyone made DVC aware of this?

 

[CarolMN]

Originally posted by anniet
hmmmm....PROVEN? Not real sure.

But there IS strong evidence that suggests it may have been done.

"Not real sure"

"suggests"

"may have"



LOL, Anniet! I nominate you for Queen of the DVC Forum Star Chamber!

 

[Dean]

The questions are two in my mind. First, does DVC care? I say they don't as they obviously know about this already. While I'm assuming, I can bet they haven't even questioned the member about it officially or sent them a letter of inquiry or instruction. The second is whether DVC could prevent this if they wanted, I say no as they'd be applying a different standard to one member over another, namely DVD themselves.

As to the rental, I doubt it's an issue with the state of FL but it could be with the federal government. Some experts feel that timeshare rentals fall under the 2 weeks per year option for condo's, others do not. Obviously this is beyond that and I'm sure would be an issue if not reported. Still, the actual profit would be far less than $30K so even at this level, the amount of federal tax actuall due would be small.

The other thing that bothers me is that there is obviously an axe to grind. Something not being reported in the thread and I suspect, something not appropriate for this BBS. I'd suggest to the OP they may want to rethink where this is going and that asking a moderator to remove this thread is an option. Not because I care to discuss it, I have never backed down for discussions in this area, it's just that I strongly suspect there's some dirty laundry that some people may not want to air on this forum. It's also a simple process to get down to 2 or 3 people to guess who's being discussed here. If I'm wrong, so be it.

 

[PamOKW]

Dean has the bottom-line. I would venture to guess that there is nothing that happens at DVC resorts from multiple rentals to too many people in a room that Disney isn't aware of. It takes a lot to "pull one over" on Disney. They will decide to step in when and if they see potential harm to Disney.

Do I like to hear a situation like this? No. My main concern with large scale rental is that it increases the likelihood of large groups -- like spring breakers -- using the resorts in an abusive manner. The only thing we can do is to trust Disney to control the situation.

 

[TnRobin]

I would like to remind you that personal attacks are against DIS posting guidelines. A few of these post are bordering on that edge. As long as you keep this in the hypothetical, it is fine, but if you start infering these accusation toward specific people, then I will remove any and all references to this rental situation.

 

[ripleysmom]

"Still, the actual profit would be far less than $30K so even at this level, the amount of federal tax actuall due would be small."

I disagree with this. Even if you figure 100 points per rental at $4.00 point, the net profit on that would still be about $14,000. Take 15% of that and the taxes due would be about $2,000. Interest and penalties would rack that number up another $1,000 or so. I'm thinking that it might be worth the IRS's time to look at someone with that kind of activity.

 

[Dean]

Originally posted by ripleysmom
"Still, the actual profit would be far less than $30K so even at this level, the amount of federal tax actuall due would be small."

I disagree with this. Even if you figure 100 points per rental at $4.00 point, the net profit on that would still be about $14,000. Take 15% of that and the taxes due would be about $2,000. Interest and penalties would rack that number up another $1,000 or so. I'm thinking that it might be worth the IRS's time to look at someone with that kind of activity.

Assuming we're talking about a true "commercial" venture here where it's a business and no or minimal personal use. There are more costs than just the dues and costs of the points. You'd be able to deduct the dues and a return of principle. You'd also be able to deduct the computer, internet access, second phone line, possibly cell phone, mail costs, long distance calls and any interest paid onloans. Also mileage going to the bank, post office and the like and depreciate the car if it were enough. One could also deduct any losses or wasted points off the top.

Assuming one is talking 3000 points ($10 pp rentals) and NO lost points, the taxable income would be more in the $7-10K range at the MAX with taxes maybe $1500-3000 depending on the bracket. If one did a SEPP or IRA related to the income, one could likely wipe out almost the entire tax bill, delaying it indefinitely.

And assuming a $150,000 to $180,000 investment to do that yearly, or half that for everyone other year, it makes me wonder why anyone would even complain. It seems the threads should be more like, why does that "person" think they can make any money renting out DVC. The numbers simply don't add up and the risk is too high for the return if the goal is the rental itself.

 

[ripleysmom]

Dean, the interest on that loan is probably already being deducted anyway so it should be left out of the equation.

As to the rest of the expenses that you had listed, it would be a very large stretch to claim a couple of thousand out of it (unless one has no compunction about stretching the truth). All of the expenses that you have listed would have to be dedicated to that business in order to be fully deductible, otherwise they should be subject to personal use %s.

As far as investing money in an IRA to avoid taxes, I'm thinking that is probably not happening.

 

[dermel]

I feel our policies at DVC are terrific.

However, if a large percentage of the membership believes individual members renting high demand units is a problem, could we prompt DVC to take a vote and tweak our policy. If we were not allowed to change the name on an existing DVC reservation, wouldn't that make the ability to reserve high demand holidays to auction off nearly impossible.

 

[Dean]

Originally posted by dermel
I feel our policies at DVC are terrific.

However, if a large percentage of the membership believes individual members renting high demand units is a problem, could we prompt DVC to take a vote and tweak our policy. If we were not allowed to change the name on an existing DVC reservation, wouldn't that make the ability to reserve high demand holidays to auction off nearly impossible.

There are two issues. One is the POS and the other is the legal aspect in FL. IMO, based on wht I've heard about case law (FL and HI) where condo rental rules were held to apply to ALL parties including a management company, DVC could not legally restrict the rights of owners without restricting their own. The only ways I could think of would be to create a system where not all owners had access. That means something like a lottery or a special season preference list, both of which DVC has already done. While I think there are changes that could do what you suggest, they would restrict all owners far more, IMO.

 

[Dean]

Originally posted by ripleysmom
Dean, the interest on that loan is probably already being deducted anyway so it should be left out of the equation.

As to the rest of the expenses that you had listed, it would be a very large stretch to claim a couple of thousand out of it (unless one has no compunction about stretching the truth). All of the expenses that you have listed would have to be dedicated to that business in order to be fully deductible, otherwise they should be subject to personal use %s.

As far as investing money in an IRA to avoid taxes, I'm thinking that is probably not happening.

As one who has moonlighted at times over the years, and therefore been in a similar situation, I disagree. If you were talking one rental a year, I'd agree with you. But remember, we're framing this as a "commercial venture", as a real business (the two are synonomou I believe) and were talking $15000 or more per year, likely more. The deductions I mentioned are real, they would have to meet use requirements and as such, only a percentage might be able to be deducted. I can guarantee you if it were I, I'd be deducting all those things plus a home office. Though I can deduct some of them now based on my regular job. I can also tell you that I've done a SEPP (similar to an IRA but more dollars) every year I had moonlighting income mainly to avoid a portion of the taxes on the additional income. I even deduct the miles when I go to a medical education meeting in town.

 

[vernon]

Originally posted by anniet
Now, I know for sure that season ticket holders can and do sell their tickets for their value to friends/family and maybe others, but selling them for profit is not allowed, closely monitored on internet venues and the offender is punished when they attempt

I agree with Dean that ticket scalping and condo rentals are very different cases. I believe that it would be possible to argue that a person renting out points is not "scalping" as they are selling their points for considerably less than the customer would be charged if they were to pay "gate" or "rack" prices for their room.

This leads me into my next agreement with Dean, I do not see how Disney can stop owners from renting out points. Disney themselves are the biggest sellers of points when they rent out the rooms at DVC units. IMHO they could not legally argue that it was illegal for an individual to rent out points ( at a lower cost than they themselves do) while wishing to protect their rights to do so. IMHO they would fall down on 2 points. 1) A corporation could not stop private individuals from acting in the same way they do and 2) Any attempt to close down rentals ( while renting themselves) could,should and would be argued as price fixing by Disney to maintain an artificially high price by removing the competition from the market.

While most of us owners ( me included) dislike the more extreme tactics used to maximise profit ( to the detriment of the rest of the members) These tactics are still yielding returns far lower than Disney are charging per room. Annoying as it is, you can't charge these people with scalping, because they are undercharging Disney.

IMHO the only way Disney can stop rentals is if they themselves step out of the market, and that isn't going to happen.

 

[CarolMN]

Originally posted by vernon
I...(snip).......IMHO the only way Disney can stop rentals is if they themselves step out of the market, and that isn't going to happen.

I agree!

IMHO, Disney rents out far more DVC rooms than all the people renting combined. I believe that is true no matter which day of the year it may be.

Just think about how many members use DVC points to cruise or take advantage of one of the "Collections". In essence, when you do that, you are really renting your points. You're just using Disney as your agent instead of doing it yourself! (And you are also paying quite a premium for the priviledge).


I'd love to know how Disney determines which nights and which size rooms to rent to the public (in order to turn points into cash required for member use of non-DVC options). There seems to be a fairly plentiful supply of DVC cash rooms available for all times of the year (even those times that are vey, very popular with members), especially if one is willing to pay rack rates!

Although I have no actual data to support my opinion, neither does anyone else and IMHO, logic is definitely on my side.

Best wishes -

 

[UConnJack]

I just spoke with a DVC staff member on my last trip, and was asking about point vs. cash reservations. She said that Disney begins renting out unreserved member inventory as early as 6-months!

I agree that blocking out of high demand times (including just weekdays) by those individuals (or "businesses") to make a profit is frustrating and disheartening. However, considering the Florida laws quoted here regarding timeshare/condo rentals, it doesn't seem there's much that can be done since DVC is effectively engaging in the same kind of business we would want these "members" to stop.

For those who want to book at the high demand times, we just need to remain vigilant in calling exactly at the 11-month window. The bright side is that these individuals or "businesses" that own or rent with large blocks of points don't get any special privileges with booking and still have to make them at the booking window.

All that said, I hope DVC does find some way to curb this without infringing on the more traditional members. However, I do believe that people have the right to use, rent, trade their points as they see fit (they do own them after all). Making and extra reservation or two to optimize your own or rented vacation options doesn't harm anyone since the number of points you have available to make those reservations are already factored into how much availability there is in a given year. I don't consider this to be abuse, but a benefit we can all utilize. However the large scale amassing of points simply to book up as much high-demand inventory as possible for rent at a profit can hurt the members by significantly limiting the rooms available at those times.

 

[Johnnie Fedora]

Originally posted by CarolMN
I agree!

IMHO, Disney rents out far more DVC rooms than all the people renting combined. I believe that is true no matter which day of the year it may be.

Just think about how many members use DVC points to cruise or take advantage of one of the "Collections". In essence, when you do that, you are really renting your points. You're just using Disney as your agent instead of doing it yourself! (And you are also paying quite a premium for the priviledge).


I'd love to know how Disney determines which nights and which size rooms to rent to the public (in order to turn points into cash required for member use of non-DVC options). There seems to be a fairly plentiful supply of DVC cash rooms available for all times of the year (even those times that are vey, very popular with members), especially if one is willing to pay rack rates!

Although I have no actual data to support my opinion, neither does anyone else and IMHO, logic is definitely on my side.

Best wishes -

CarolMN...I completely agree. I'm sure Disney has also rented out peak weeks at WDW, and not just HH and Vero. I'd rather see Disney just give you a cash equivelent "Disney dollars" for points and let me book my own room in the DC--with my own AP discount, or DCL--with my own early booking savings....but I doubt that will never happen....takes away all those handling fees.

Also, since Disney is renting out a portion of your real estate intrest for you, why do they charge sales tax to the guest who in essence "rents these points". Aren't taxes then being paid twice on member points exchanged to Disney? It's very grey to me.

 

[CRobin]

Originally posted by Johnnie Fedora
Also, since Disney is renting out a portion of your real estate intrest for you, why do they charge sales tax to the guest who in essence "rents these points". Aren't taxes then being paid twice on member points exchanged to Disney? It's very grey to me.

Not sure where they are charged twice. You only paid a real estate transfer tax when your purchased your interest, not sales tax.

Florida does not get (and is not entitled to) tax when you occupy "your property". You have paid a consideration up front when you bought those points, and real estate is not subject to Florida sales tax.

If, however, you are exchanging a good or service that is subject to tax in return for a monetary consideration, that is a sales transaction, and you are obligated to collect tax. Renting a hotel room would fall under this category.

In theory, when members are renting, they should be collecting Fla sales tax (as does Disney) and turning the tax over to the state.

Bet that doesn't happen with a great deal of frequency, though