Renting Points We Are Selling Too Low

[byoung]

Some have been selling on Ebay at 14-15 for a few years now.

 

[DBBN]

Everyone is complaining that they are barely breaking even at $10 a point, but I am not understanding the math.
You purchase VWL at $92 with 36 more years equals $2.55 per point. Dues are $4.46(?) so that comes out to be basically $7 per point and SSR would be closer to $6 per point.

So if you rent out your points at $10 you are making either $3 or $4 pp, the renter gets a break on the crazy rack rates and everyone is happy. Why are people looking for $12 -$15 ???

I consistently rent at $12.00 per point (my price is firm) exclusively from the Dis Rent/Trade board and will likely raise our price again to $13.00 for our 2007 points. I expect to continue to raise the price by $1.00 per year until I get some resistance from renters looking for our points. Why am I looking for $12.00 to $15.00 per point? Because that is the value I place on our points.

I will note I haven't calculated my break even point and doubt I ever will but a significant percentage of the proceeds of our rentals goes to the IRS for the purpose of Fedaral Income Tax and to the great state of Maine for the purpose of our State Income Tax.

 

[snowbunny]

To not take into consideration "lost income" when purchasing property is foolish.

Of course. My point is simply that you're mixing apples and oranges - the price per point rental breakeven analysis that you did only applies to people who would have actually invested that money instead of using it for something else. I just think it's a stretch to assume that the majority of people who buy DVC would have saved that money instead. In truth, nobody knows, but most news reports I have read indicate that the savings rate of average Americans is at an all-time low.

 

[boatboatboat]

dvc owners are not average.

most have investments.

 

[mikesmom]

We own DVC. We have investments. We bought DVC at $67/pt (BWV). I could sell it now for well over $80/pt. I wish all my investments had done that well.

 

[Dean]

Of course. My point is simply that you're mixing apples and oranges - the price per point rental breakeven analysis that you did only applies to people who would have actually invested that money instead of using it for something else. I just think it's a stretch to assume that the majority of people who buy DVC would have saved that money instead. In truth, nobody knows, but most news reports I have read indicate that the savings rate of average Americans is at an all-time low.

Maybe, but another group would have to add in the loan costs as well. Another option I don't think we've discussed in this vein is that if one uses DVC points for exchange options, those usually have a cost associated which raises the per point cost of ownership over time. Still it's only worth what one will pay for it regardless of your built in expenses associated.

 

[Dean]

We own DVC. We have investments. We bought DVC at $67/pt (BWV). I could sell it now for well over $80/pt. I wish all my investments had done that well.

That's only applicable if you sell while it's high. DVC has a shelf life which is rapidly approaching the time of degradation.

 

[Maistre Gracey]

DVC has a shelf life which is rapidly approaching the time of degradation.

Of course, nobody really knows this for certain.

MG

 

[Dean]

Of course, nobody really knows this for certain.

MG

It depends, what we don't know is how fast or when; but we do know what's going to happen. Resale values will start to decline at some point, likely at around 27-28 yeas out.

 

[Maistre Gracey]

It depends, what we don't know is how fast or when; but we do know what's going to happen. Resale values will start to decline at some point, likely at around 27-28 yeas out.

Again, that is speculation.
If you have a secret formula to time the markets, please let us know so we can all make millions!

MG

 

[Dean]

Again, that is speculation.
If you have a secret formula to time the markets, please let us know so we can all make millions!

MG

So secret, no formula, just seen a ton of RTU timeshare and the story has always been the same to one degree or another. Will if be less severe or later with DVC, no one knows. In part it depends on what DVC does for future resorts, ROFR, etc, as to how or when it will happen. But to say that the question of whether it will happen or not is simply speculation is a very interesting position. Much like speculating whether cars will be more expensive in 5 or 10 years than they are now.

 

[boatboatboat]

What do the educated DVC owners think DVC will do for current owners when there is a small amount of time left on the contract?

 

[Dean]

What do the educated DVC owners think DVC will do for current owners when there is a small amount of time left on the contract?

Do for them or to them? I'd suspect they will prorate the points the last year or two, suspend banking the last 2-3 years at least and suspend borrowing the last year or so.

 

[Maistre Gracey]

So secret, no formula, just seen a ton of RTU timeshare and the story has always been the same to one degree or another. Will if be less severe or later with DVC, no one knows. In part it depends on what DVC does for future resorts, ROFR, etc, as to how or when it will happen. But to say that the question of whether it will happen or not is simply speculation is a very interesting position. Much like speculating whether cars will be more expensive in 5 or 10 years than they are now.

But as I've said before, DVC is unique because of the WDW Resort Hotels. The increasing price of the WDW Resorts will help DVC hold value.
Yes, that is speculation on my part.

It just doesn't make sense that in year 2035, when a room at WL is going for $800/night, that a room right next door at VWL will be worth $100.

MG

 

[boatboatboat]

Do you think Disney will offer to extend contracts?

If they just END the magic, they will have a ton of empty rooms.


If they thought selling SSR and HH the first time was hard, YIKES, the 2nd time will be MUCH harder.

I have no clue what they will do, and am very uneducated in what other time shares have done in the past.

It would just seem to me, that Disney would do what ever it took to keep their current owners booking rooms, and paying taxes/dues.

I really am interested in this.

I am new to the board, and have done thread searches but can't seem to find any that have discussed the issue, in deapth.

 

[Dean]

But as I've said before, DVC is unique because of the WDW Resort Hotels. The increasing price of the WDW Resorts will help DVC hold value.
Yes, that is speculation on my part.

It just doesn't make sense that in year 2035, when a room at WL is going for $800/night, that a room right next door at VWL will be worth $100.

MG

Even though this thread was about renting, this portion was about resale price. Do you really think DVC will sell for $80 per point resale with only a year or two remaining, if not you agree with my premise. We see people now who are looking to buy or bought recently but looked at DVC 10 years or more ago. In many cases it was obviously right for them but they didn't pull the trigger, frequently because of the cost and variables. I'd venture that EVEN if the dollars made sense buying late in the program, that many still wouldn't buy for a number of reasons. DVC WILL decline in value at some point, the only speculation is when, how much and how fast. Of course it will have the ultimate decline one day, go from X to zero.

I'd say that rentals are likely to do better than sales later in the RTU timing but that too will depend on supply and demand.

 

[Maistre Gracey]

Even though this thread was about renting, this portion was about resale price. Do you really think DVC will sell for $80 per point resale with only a year or two remaining, if not you agree with my premise.

I think it's a real possibilty, once you adjust for inflation.
That really goes to the heart of my arguement.

$80/pt in year 2040 is probably around $30/pt in todays dollars.

MG

 

[Dean]

Do you think Disney will offer to extend contracts?

If they just END the magic, they will have a ton of empty rooms.


If they thought selling SSR and HH the first time was hard, YIKES, the 2nd time will be MUCH harder.

I have no clue what they will do, and am very uneducated in what other time shares have done in the past.

It would just seem to me, that Disney would do what ever it took to keep their current owners booking rooms, and paying taxes/dues.

I really am interested in this.

I am new to the board, and have done thread searches but can't seem to find any that have discussed the issue, in deapth.

My first impression as yes but the more I thought about it the more I doubt DVC can or will offer any extension. It is my belief that they need a high degree of participation to offer the extension, somewhere in the 75-80% or so range. To get that much participation, they really need to offer free or nearly free extensions. Even at $10-15 per point in 2040, I doubt they'd get enough interest to justify the system continuing. They would likely have trouble for free. Now I could see the offering free extensions IF they are no longer building and selling. They would still have someone else paying for the upkeep and have a captive audience as a base for park and business sales. They certainly won't try to resell new 12 year ownerships. I doubt we'll get any inkling from DVC until they are through building and selling. The one area I could see would be to offer an extension with a new purchase of a min amount of points. Just my opinion as always.

 

[Dean]

I think it's a real possibilty, once you adjust for inflation.
That really goes to the heart of my arguement.

$80/pt in year 2040 is probably around $30/pt in todays dollars.

MG

Taking your numbers, $30 per point would be in the general range of $9000 todays dollars for a week in a 2 Br. Closing costs around $2000 and yearly fees for those points maybe another $5000 in 2040 $$. I simply think far too many people on this site over estimate the value and demand of DVC long term. As I've noted, I'll vote with my feet keeping only a smaller contract for future perks and an occasional points stay S-F.

 

[boatboatboat]

I don't understand why they wouldn't sell 12 year contracts?

Even if only 20% of the resort sold out, that would be 20% less for Disney to have to worry about selling.