Rental Value vs. Rising Maintenance Fees

[Sleepingbooty]

We are not current DVC owners, but are strongly considering buying in the next few months. I'm researching all I can about every aspect of ownership. One thing I like about DVC is that if you cannot or choose not to use your points one year, you can rent them out. In fact, if I'm doing my math right, it looks like you could feasibly rent them out every other year and it would cover two years of maintenance fees.

My question is this: how is it that rental value seems to have changes little, if at all, over the years?

I was reading a stickied thread about rental rates and concerns. The thread was started back in 2003 and people were talking about getting $11 per point. So, its almost 10 years later, and if I look at the rent / trade board it looks like $11 per point is still the going rate.

However, maintenance fees were obviously quite a bit lower in 2003. Take OKW for example. In 2003, maintenance fees were $3.49. Now they are $5.20. I realize that MFs have risen less slowly than rack rate resort room prices, but what I don't understand is why point rental value hasn't risen at the same rate as MFs?

 

[Sandisw]

I think one thing that may have hurt the rental rate is the economy and more people needing to rent out points and willing to accept that $10/$11 per point rental rate.

Everything is going to be based on what the market will accept...in addition, Disney seems to have had to increase their discounts as well so when that happens, the difference between rentals and just booking through Disney need to be good enough to make someone accept the risk of renting.

IMO, though, I think one should not go into DVC with the expectation or need to rent out points as you just never know what will happen down the road.

 

[k3chantal]

We are not current DVC owners, but are strongly considering buying in the next few months. I'm researching all I can about every aspect of ownership. One thing I like about DVC is that if you cannot or choose not to use your points one year, you can rent them out. In fact, if I'm doing my math right, it looks like you could feasibly rent them out every other year and it would cover two years of maintenance fees.

My question is this: how is it that rental value seems to have changes little, if at all, over the years?

I was reading a stickied thread about rental rates and concerns. The thread was started back in 2003 and people were talking about getting $11 per point. So, its almost 10 years later, and if I look at the rent / trade board it looks like $11 per point is still the going rate.

However, maintenance fees were obviously quite a bit lower in 2003. Take OKW for example. In 2003, maintenance fees were $3.49. Now they are $5.20. I realize that MFs have risen less slowly than rack rate resort room prices, but what I don't understand is why point rental value hasn't risen at the same rate as MFs?

I would be careful to purchase if your thought is "I can always rent it out". Especially if this is how you are figuring to pay for the MF's each year. When you sign your contract, you are signing that you will abide by DVC rules, which do mention renting your points out. And though in your original post you said that you may only do this every other year, the ability to rent out your points really should not be on your list of reasons to buy.

I would only purchase IF I can buy a contract 'outright', I am comfortable with paying, on a yearly basis, the MF's, and I know I can, within reason, afford to pay for flight, passes, food and other travel expenses. Remember, all you are getting with this purchase is a pre-payment of accommodations that may save you money over the course of several years IF your thought was that you would be vacationing in WDW again and again.

 

[disneynutz]

The reason that the rental rates don't go up is because you are dealing with people. Just try to get all of the owners to agree on raising their prices together. If you try to rent your points at $12, someone else lists at $10, guess who gets the business?

Bill

 

[Sleepingbooty]

I think one thing that may have hurt the rental rate is the economy and more people needing to rent out points and willing to accept that $10/$11 per point rental rate.

Everything is going to be based on what the market will accept...in addition, Disney seems to have had to increase their discounts as well so when that happens, the difference between rentals and just booking through Disney need to be good enough to make someone accept the risk of renting.

IMO, though, I think one should not go into DVC with the expectation or need to rent out points as you just never know what will happen down the road.

Good points. Although one of the things that makes DVC more attractive than other timeshares (of course number one is that it is AT Disney) is that there is a strong market for rental points, I suppose there could come a time in the future where MFs have gotten so high that flat rental rates make renting points out not as worth it.

I would be careful to purchase if your thought is "I can always rent it out". Especially if this is how you are figuring to pay for the MF's each year. When you sign your contract, you are signing that you will abide by DVC rules, which do mention renting your points out. And though in your original post you said that you may only do this every other year, the ability to rent out your points really should not be on your list of reasons to buy.

I would only purchase IF I can buy a contract 'outright', I am comfortable with paying, on a yearly basis, the MF's, and I know I can, within reason, afford to pay for flight, passes, food and other travel expenses. Remember, all you are getting with this purchase is a pre-payment of accommodations that may save you money over the course of several years IF your thought was that you would be vacationing in WDW again and again.

I agree with you. We are certainly not thinking about purchasing just to rent the points back out. We intend to use them. For the last 7 years we have visited WDW at least once a year, if not more often. We will continue to do that for at least the next few years. But I can foresee a time when we might want to do something different, say every other year. I like that we could rent our points out during those years. I just wouldn't like to see MFs rise to the point where it outstripped any return we could get from rental.

The reason that the rental rates don't go up is because you are dealing with people. Just try to get all of the owners to agree on raising their prices together. If you try to rent your points at $12, someone else lists at $10, guess who gets the business?

Bill

I guess I would have thought that rental brokers, like David's, would sort of set the pace for very gradual increases, and individuals would follow the trend.

 

[Deb & Bill]

...I guess I would have thought that rental brokers, like David's, would sort of set the pace for very gradual increases, and individuals would follow the trend.

He's already charging $13 a point so he can get his cut of the deal. The owner get $10 of the $13. There are other brokers out there who charge $12 a point for the reservation, but I'm not sure what the owner gets.

 

[joeyrose]

more owners today, more points available for rent. supply and demand dictates price. in the last year or so i believe the average rental price has creeped up about $1-2 point from $10 (where it had been for some time) to $11-12. some get more as they own at popular resorts (and paid more) and are savvy managing their points. but there will always be those who are less ocd about this and end up having to rent cheaply at the last minute. the economy collapse certainly didn't help, and then on some venues there are those cheapo prohibited rci exchange rentals that drive down perceptions about price. renting can certanly cover one year's maintenance fees and two with some work and luck. i like that and add it to my list of reasons to buy dvc.

 

[Deb & Bill]

However, DVC could come up with a better definition of commercial renting that could blow it all out of the water.

They came up with the fact that no person could be an associate member on more than four contracts to stop the rental business a while back. They made it so that you had to pay for the dining plan when you added it to the reservation instead of letting you pay for it when you arrived.

They could decide that if one of the owners isn't on the reservation, no Magical Express or dining plan. Who knows?

 

[Nikisha421]

However, DVC could come up with a better definition of commercial renting that could blow it all out of the water.

They came up with the fact that no person could be an associate member on more than four contracts to stop the rental business a while back. They made it so that you had to pay for the dining plan when you added it to the reservation instead of letting you pay for it when you arrived.

They could decide that if one of the owners isn't on the reservation, no Magical Express or dining plan. Who knows?

This scenario would be the real killer...because if renting there is no way really around this option....

 

[crisi]

One thing to remember is that members have different cost of ownership and different dues. Lets say you bought OKW many years ago for $55 a point. Its been "paid for" for years and you've gotten the value out of it. Your dues are $5.20 a point. You are in a situation where you want to rent your points quickly and easily, but you don't need every penny. A $10 a point rental is a good deal for you.

Let's say you just bought Aulani last year on a loan and then you lost your job. Your spouse is still working and you are hoping that by renting your points, you'll be able to hang onto it and not resell it at a loss. There is no way you can afford the airfare for a trip. Your dues are $5.96, but there is that loan. $10 a point isn't really going to do it for you - but you have to compete with that guy with OKW points who paid his off years ago and has almost $1 less in dues per point.

There are a LOT of DVC points available, and not all owners need to wring every penny from those points. As long as you are competing with people who can let their points go for $10 per, the price won't move much unless you can find someway to add value, like Dave does as a broker.

 

[alice99]

I've been following this thread ..... and agree with all opinions posted above.

When I rent out my points I don't make much of a profit when I consider what I paid for the points + maintenance fees. I rented out points through David's, but it's not really profitable. My concern is to get rid of the points I am unable to use, mores than a larger profit.

The other consideration, which may not be relevant to others, is the fact that by not taking that vacation.... I am saving $ that I would have otherwise spent on Gas/airfare/rental car, theme park tickets, food and souvenirs. This is just a fringe benefit though.....this is a slightly different topic.

 

[zavandor]

But I can foresee a time when we might want to do something different, say every other year. I like that we could rent our points out during those years.

In your scenario, what I would do is buying half the point you foresee to need for one year stay. Banking or borrowing you'll be able to use your points every other year.
If in the first years you'll want to go every year, you can arrange for transfers every other year. Sure, it will cost more per point than only MF, but in the long run it will be better.

 

[Brian Noble]

I would be careful to purchase if your thought is "I can always rent it out".

This is very wise advice.

Every year, DVC gets bigger---more contracts, more owners. Some fraction of those will be looking to rent out their points, and that means the supply of points on the rental market also goes up every year. Unless *demand* for those points also grows along with it, prices can't even remain stable, let alone rise. People like David have done a good job of marketing the option of point rental, and perhaps that will continue. But, perhaps not.

 

[AllieV]

I guess I would have thought that rental brokers, like David's, would sort of set the pace for very gradual increases, and individuals would follow the trend.

Personally, I agree with this statement. I've been renting around 8 or 10 years. Maybe David's existed, but it's wasn't known like it is now. Back then, you went onto ebay and looked for someone selling a week -- if you even knew about the rental market. The going rate was about $5-6 a point. It's doubled in that time frame. I blame the price fixing that the professional rental market brought about. Would it have doubled anyway? Maybe. Rental rates have to keep pace with dues anyway.

I've seen an increase of about 50 cents per year average, so every 2 years it might go up a buck (rental rates per point, that is). Some have argued otherwise, but this is what I've noticed.

 

[Deb & Bill]

Personally, I agree with this statement. I've been renting around 8 or 10 years. Maybe David's existed, but it's wasn't known like it is now. Back then, you went onto ebay and looked for someone selling a week -- if you even knew about the rental market. The going rate was about $5-6 a point. It's doubled in that time frame. I blame the price fixing that the professional rental market brought about. Would it have doubled anyway? Maybe. Rental rates have to keep pace with dues anyway.

I've seen an increase of about 50 cents per year average, so every 2 years it might go up a buck (rental rates per point, that is). Some have argued otherwise, but this is what I've noticed.

Nah, it's been stuck at around $10 a point for the last ten to twelve years. David charges $13 - he gets his cut out of that ($3) and the owner gets $10.

 

[DougEMG]

I do expect rental rate increase to start excellerating?

Take for example BWV with MF of $5.6/point. In about 2 years it will be at $6/point and 4-5 years after that it will hit $7/point. Similar increase will be happening with hotel rates and traditionally hotels have increased faster than MF. So a large number of owners are going to be wanting more than $10-$11 per point once their MF hit $6-$7 per point and I'm betting they are going to get it since it will still be a good deal compared to hotel rates.

Definitely though it will be brokers such as Daddio and DVC Paul that will lead the way as they will have to start charging more as they run out of owners willing to rent for $10/point.

2 years ago I rented out my points only through brokers for $10/point. Today I don't use them at all and am getting anywhere from $11-$13 a point.

 

[Caren90]

Someone has mentioned this before, but the supply of points available through resale contracts and DVC new construction may create a problem for renters.

I expect that there are some people who have bought distressed contracts recently for the purpose of having more points to rent. Let's face it, this has been a buyers market for the past few years and if sellers are under financial stress they will walk away from contracts or sell them at a cut rate. Disney cannot buy them all back through ROFR.

This may be a simple issue of supply and demand with regard to rental prices remaining or becoming somewhat flat or it could lead to the inability to rent points easily since the market may be saturated with rental points. If this is the case, Disney doesn't need to take any more steps to try and curb renting. They will simply allow the market to manage itself.

Stephen

 

[Brian Noble]

Take for example BWV with MF of $5.6/point. In about 2 years it will be at $6/point and 4-5 years after that it will hit $7/point. Similar increase will be happening with hotel rates and traditionally hotels have increased faster than MF. So a large number of owners are going to be wanting more than $10-$11 per point once their MF hit $6-$7 per point and I'm betting they are going to get it since it will still be a good deal compared to hotel rates.

Doug, the problem is that the cost basis is only part of the story. The other part of the story is supply/demand. It is true that if rental prices don't rise, some number of owners who might otherwise rent no longer will, and that will provide some price support. But, there will also be a segment of owners who "have to" rent, because they no longer use it themselves. Those folks will take more or less anything they can get, and they are the ones who establish where the floor ends up. As the system matures, you can expect the number of such owners to grow. The question will be: does demand grow as well?

Time will tell. But, I would not be buying DVC with a long-term plan to rent it out. For starters, there are too many other timeshares with much better ROIs and much lower downside risk because their cost basis is so much lower.

 

[DougEMG]

Doug, the problem is that the cost basis is only part of the story. The other part of the story is supply/demand. It is true that if rental prices don't rise, some number of owners who might otherwise rent no longer will, and that will provide some price support. But, there will also be a segment of owners who "have to" rent, because they no longer use it themselves. Those folks will take more or less anything they can get, and they are the ones who establish where the floor ends up. As the system matures, you can expect the number of such owners to grow. The question will be: does demand grow as well?

Time will tell. But, I would not be buying DVC with a long-term plan to rent it out. For starters, there are too many other timeshares with much better ROIs and much lower downside risk because their cost basis is so much lower.

Totally agree that it is a supply/demand issue. So the factors that go into that are:

1 - how many people want to visit WDW and stay at DVC
2 - how much are people willing to pay to stay at DVC
3 - how many people have points to rent
4 - how low are people willing to go when renting their points

I'm betting that the demand will always be greater than the supply.

From what I've seen, too many other timeshares can not rent out for enough to even cover their MF. That's never been the case with Disney and if I had to bet, it never will be. If you want to stay on site, then Disney is your only option and from what I see a lot of people prefer to be totaly immersed in the "pixie dust" and are willing to pay top dollar to do so.

Here's my predication/assumptions though, "by 2017 average rental rates for DVC will increase to $12 per point, by 2022 they will have increased to $13/point". If that hasn't happened then I'll change my view and conside that supply is out stripping demand.

For myself, my breakeven point is around the year 2018/2019 so it isn't that long a time period to take the risk. By breakeven I mean that by that time I will have either used or rented the equalivalent of what I paid for my points.

Note: I would never recommend someone to buy more points than they could afford with the plan to pay for it by renting out their points because the worst case senario could happen. So while I do plan to rent out half my points, I can afford to pay the MF on all my points without having any real impact on my finances, it just means I'll be spending longer winters in WDW than I originally thought.

 

[DougEMG]

Here's my rental experience, all of which are just point rentals, no reservation rentals.

- For the previous two years ago I rented out points for $10/point no problem.
- Earlier this year I rented out 1,000 points in 2 days for $11/point.
- This year I've also rented out just over 300 points at $12/point and one rental of under a hundred points for $13/point.


I'd say that the average rate today is $11/point and while there are some people offering rentals for under $11/point, typically there aren't many of them and there is usually an issue with the points having a short life left on them, thus they can't be used to book the most popular rooms and resorts.

In my view, owners of popular resorts for popular times can get $12/point today provided they make their points available in the 7-11 month window so they get home resort advantage for those popular times.