Renting Points

[LisaS]

Sorry, but you are wrong. You are looking and seeing rate increases of 3% or more in a great number of years, but the years where there were no increase or negative increase greatly impact the "average".

1996 - BWV - $3.70 per point
2006 - BWV - $4.69 per point

If it had averaged a 3.5% to 4% increase each year, it would be more than it currently is. In fact, a 3.5% annual increase would already have it up to $5.22 and a 4% annual increase have it at $5.48.

The average rate of actual increase is 2.4% per year.

You are only looking at BWV and yes, the average dues increases at BWV since it opened have been 2.4%. But here are the average dues increases by resort and you'll see that the average across ALL resorts is 3.6%:

OKW: 3.6%
BWV: 2.4%
VB: 4.1%
VB(sub): 4.1%
HH: 3.3%
VWL: 4.2%
BWC: 4.4%
SSR: 2.4%

Average across all resorts: 3.6%

It's also interesting to look at increases just in the last 5 years:

OKW: 6.3%
BWV: 4.2%
VB: 5.8%
VB(sub): 9.0%
HH: 5.5%
VWL: 4.9%
BCV: 4.4%
SSR: 2.4%

Average across all resorts: 5.3%

 

[robinb]

Edited ... Lisa already beat me to it .

 

[LisaS]

In my analysis, I used only present day value, because it equates to present day money. To use future values but to equate it to present day money is a mathematical inequity and thus holds no real truth.

What could be bought for $9 in 1970, surely can't be bought for the same $9 today and what can be bought for $9 in 2006 won't be bought for $9 in 2042.

Yes, I agree which is why I think it makes more sense to look at the cost of points year by year. Here's how I calculate the cost of my own points, again we'll use my modifications to your original numbers:

Purchase 150 points resale at $83/pt + closing costs = $12,950
Cost/point/year: $2.40

Annual dues for 2006: $4.50

Subtotal: $6.90

Loss of interest income from original $12,950, assuming it had been in a CD for a year at 4% and assuming 28% tax loss on the interest: $372.96

Loss/point: $2.50

Total cost of points for 2006: $9.40

 

[crisi]

Yes, I agree which is why I think it makes more sense to look at the cost of points year by year. Here's how I calculate the cost of my own points, again we'll use my modifications to your original numbers:

Purchase 150 points resale at $83/pt + closing costs = $12,950
Cost/point/year: $2.40

Annual dues for 2006: $4.50

Subtotal: $6.90

Loss of interest income from original $12,950, assuming it had been in a CD for a year at 4% and assuming 28% tax loss on the interest: $372.96

Loss/point: $2.50

Total cost of points for 2006: $9.40

Don't forget that if you rent your points, you'll also own income tax on the income from that. So if you rent $60 points for $10 a point, you'll make $600. You could justify writing down the dues at - for convience lets say $4. So you'll need to claim income of $360 ($6 x 60 points) - (I don't think the IRS would let you write off depreciation on the original cost of the contract if you bought it for personal use - I am not a tax professional however). So you'll pay $100 in taxes at a 28% marginal
rate.

I actually don't think much more than $12 is supportable from a renters point of view - with minimal maidservice, poor cancellation policies comparied to CRO, and the risk involved in a private transaction. But I don't think that anyone who purchased above about $65 will make a profit over just having invested the money if they rent at less than $10 - especially when you consider the time involved - the owners time to facilitiate the transaction is worth something. Owners who do rent however, do have to realize that not all owners purchased at over $80 - there are plenty of people who own near $60 a point (and some lower), who do make a nice profit at $10. And plenty who don't care if they do more than cover dues on this transaction.

 

[4myson]

So, have we all agreed? $12/per point to rent?

 

[JudyS]

....As far as the negotiating on price, $10 per point may be a very generous rate for the renter, but it may very well be an even more generous rate for the rentee.

Let's assume I buy 150 points on resale @ $83 per point. The cost for this is $12,450. Over the course of the term, let's assume $4 per point for maintenance fees per year. This brings the total cost of ownership to $34,050.

$34,050 / 150 points / 36 years = $6.31 per point per year.

So if you were to rent your points for $9 per point, you'd be getting a 43% return on your investment. That's one heck of a return. I don't know of any investor that would be closed-minded to "only" receiving 43% per year as a return.....

If it's a heck of a return, why not buy a bunch of points and start renting them out? You'll probably say that you don't have the $12,450 purchase price just sitting around. Well, neither does anyone else, when you stop and think about it. It costs a ton for most people to borrow that $12,450 purchase price in the first place. Even for those who have the money available already, they are giving up the income they would have made by investing that $12,450 elsewhere. This is why renting at $9 a point would be a lousy deal for DVC owners. If it were possible to finance that $12,450 purchase at 0 interest, then your calculations would work. But, Disney charges 10% interest -- that's about $1200 in the first year alone, which you haven't account for.

 

[Johnnie Fedora]

Ok, but you aren't Disney...
I apologize for being redundant, since I just posted this same thing on the DVC Planning Board on the "What the heck is going on?" thread, but I'll add it here too...

You can not compare the savings over rack rate to the rental price. $10 a point IS a great deal over rack rate....but if the per point price was $12-$15 I would say "thanks but no thanks" and pay rack for smaller accomadations through Disney. People who pay rack for villas have enough money to do so and aren't going to go to the trouble to rent points, assume risk etc. The market for renting points is in the people who can afford mod and value, but are willing to go to a little more trouble to get more bang for their buck...I think if you want to work the math based on percentage savings over rack, you need to compare what these people are paying at a mod. I could still pay rack at POR and save money through Disney over renting points for a 2 BR villa to fit my family. (OK we would be squeezed in the room with a shoe horn), but if I'm saving enough, I'll do it...we are never in the room anyway, I don't need a kitchen on vacation. Don't get me wrong, I love the villas, I just don't love them enough to pay rack or even close to rack for them.

I just think that the market determines the price....if the risks involved and the product were truly worth $15 a point then renters would be bidding that for points to get an advantage over others looking to rent at the same time. You just don't see that happening. It might happen in the future...but I think anyone wanting $12 or over is going to have a hard time unloading their points. If you need to unload them, you need to unload them. Also, the time value thing doesn't really bear any weight with a renter....if it is so troubling for you to rent out your points than don't rent them out. (OH _ but you NEED to rent them out to pay for a cruise?) Let's not forget that renters are doing a huge service to the members as well.

Also, let us not forget that the market rate for DVC members to have points tranferred into their acct is currently between $9 and $11, so members have the same good fortune on buying points.

It's all good.

I may not be Disney, but the accomodations are, therefore they have the same imperical value from a vacation enjoyment standpoint. The main question is how much of a discount makes up for the problems associated with a private rental. 20%, 40%, 60%?? It would be truly an interesting experiment to see if the rental rates jumped to $12/point overnight if DVCers could no longer rent out their points. How many renters (besides yourself) would really be driven away?? Do the 5-7% annual CRO increases in resort rates drive you away?? I doubt a two dollar/point rental rate increase will send as many renters away as you think, my opinion of course. If guests don't use the kitchen and are not ever in the room, I can see why it may be better/cheaper for them to stay in two connecting All-Star rooms rather than a 2-BR DVC unit.

Your assumption that the only renters seeking DVC accomodations are from the value or moderate crowd has not been my renting experience. Several of my renters have gone to WDW for years and have stayed deluxe before tuning to renting points. Well-to-do people like to get things for the cheapest price too. That's part of the reason they have money.

 

[Plutofan]

Don't forget that if you rent your points, you'll also own income tax on the income from that. So if you rent $60 points for $10 a point, you'll make $600. You could justify writing down the dues at - for convience lets say $4. So you'll need to claim income of $360 ($6 x 60 points) - (I don't think the IRS would let you write off depreciation on the original cost of the contract if you bought it for personal use - I am not a tax professional however). So you'll pay $100 in taxes at a 28% marginal
rate.

I actually don't think much more than $12 is supportable from a renters point of view - with minimal maidservice, poor cancellation policies comparied to CRO, and the risk involved in a private transaction. But I don't think that anyone who purchased above about $65 will make a profit over just having invested the money if they rent at less than $10 - especially when you consider the time involved - the owners time to facilitiate the transaction is worth something. Owners who do rent however, do have to realize that not all owners purchased at over $80 - there are plenty of people who own near $60 a point (and some lower), who do make a nice profit at $10. And plenty who don't care if they do more than cover dues on this transaction.

In the over all calculation of your cost your dues is your biggest cost. Buying your DVC resort at $65 or $90 for the sold our resort only makes a difference of .69 per point profit which is not all that much ($90-$65)/36 years. Even those who bought back at the begining are still not making a great profit when you figure mortgage interest or lost investment income on the orginal investment. Remember that DVC is a prepaid vaction plan so amortizing the orginal investment may be allowed as a deduction for income taxes. You need to discuss your situation with a tax professional.

 

[Deb & Bill]

Ok, but you aren't Disney...
... The market for renting points is in the people who can afford mod and value, but are willing to go to a little more trouble to get more bang for their buck...I think if you want to work the math based on percentage savings over rack, you need to compare what these people are paying at a mod. I could still pay rack at POR and save money through Disney over renting points for a 2 BR villa to fit my family. (OK we would be squeezed in the room with a shoe horn), but if I'm saving enough, I'll do it...we are never in the room anyway, I don't need a kitchen on vacation. Don't get me wrong, I love the villas, I just don't love them enough to pay rack or even close to rack for them...

Your post clearly indicates why you will never be an owner. You don't have the owner mentality. Owners don't own their DVC points because they think they can save money. Heck, we spend a lot more money than non-owners. And I don't mean just on buying the points. They own DVC to get a prepaid vacation. Lots of members will spend lots of time in their villa, some not even going to a park for an entire day. We know we will be coming back again, maybe even in a few months.

Members don't usually try to squeeze as many people in their room because they like the space. (Some members will put 5 in a one bedroom, but I think that the majority of them wouldn't.) DVC villas aren't just hotel rooms.

And with four kids, you won't be staying in POR very long since the max in the AB rooms with the trundle is five (maybe six if you have a little one under 3 - but I couldn't imagine squeezing a family of six in a single hotel room with two double beds).

If a family of six wanted to save money on their vacation, I'd advise them to get two value resort rooms or stay offsite.

 

[Plutofan]

OK all,

I know I'll probably get flamed for this, but here goes.

I am not a DVC member, though will probably purchase a resale within the next 24 months.

I did not know of the limited availability of studio standard view rooms. For me, when I read "standard" I assume that it's the norm and not the exception, therefore it would be easier to attain a ressie for a standard than preferred view. I made this honest mistake when looking for a rental just days ago and feel insulted when other feel I should have known that standard wasn't easily attainable.

As far as the negotiating on price, $10 per point may be a very generous rate for the renter, but it may very well be an even more generous rate for the rentee.

Let's assume I buy 150 points on resale @ $83 per point. The cost for this is $12,450. Over the course of the term, let's assume $4 per point for maintenance fees per year. This brings the total cost of ownership to $34,050.

$34,050 / 150 points / 36 years = $6.31 per point per year.

So if you were to rent your points for $9 per point, you'd be getting a 43% return on your investment. That's one heck of a return. I don't know of any investor that would be closed-minded to "only" receiving 43% per year as a return.

All that being said, I gladly rented from a DVC'er @ $10 per point for an upcoming stay. She was fantastic to deal with and the additional $56 I would have saved by looking for a $9 per point wasn't worth the aggrivation of bartering for the $$$.

I'm not telling you what to do with your money, but when I do purchase DVC, if I decide to rent, I'll let the economics of the decision determine what my price will be.

Thanks all, let the flaming begin.

Please do not take this personally but posts like this are the reason renters think that DVC members are making a lot of money renting and why renters make ridiculously low offers per points. Under the F & F promotion if you bought your points at $83.30 that would be an initial cost of $1.70 per point, plus dues of $3.98 = $5.68. If you have a mortgage at 5% (which is very conservative) then that would add another $4+ to your cost. It will be lower as your mortgage comes down. If you are lucky not to have a mortgage than your lost income on the orgional investment would be $4+. Thus anyway you look at it either your actual costs are probably at least $9 or your oportunity cost is around $9 just to get a 5% return. This is a very simple example and does not factor in uncle sams portion or the present value of a dollar or inflation. As you can see renting at $10 under most circumstances would not be considered a great return. Remeber this is a prepaid vaction plan where the value of your original investment will be zero at the end of the term. At some point in time the value of your orginal investment will lose money and no one knows how soon that day will come. So by far the renters are getting a great deal since they have no money at risk and they are getting 20-60% off the Disney rack rates.

 

[LongIslandCouple]

Please do not take this personally but posts like this are the reason renters think that DVC members are making a lot of money renting and why renters make ridiculously low offers per points......

.......If you have a mortgage at 5% (which is very conservative) then that would add another $4+ to your cost. It will be lower as your mortgage comes down.

To me this is a discussion about mathematics. I'm not taking it personally.

Either I would buy it outright or not at all. I am probably too conservative with my money and wouldn't finance it. It's that $4 per point cost that you are adding on that is the big difference. I guess this is why I don't get the argument of why it should be more.

Maybe after I purchase I'll feel differently, if not I'm sure I'll get bombared with plenty of people offerring $9 for my points.

 

[Plutofan]

The point that I wanted to make is that there are a lot of DVC members who have mortgage's with Disney that are selling their points at $9 - $10 per point and that is there right. But the renter should know and be thankful that these people are subsidizing your vacation. It is a good deal for the seller if they had some points that they will lose but the bottom line is where would you find a complete stranger who would pay for part of your vaction. Disney is realy a magical place.

 

[my4kids]

Your post clearly indicates why you will never be an owner. You don't have the owner mentality. Owners don't own their DVC points because they think they can save money. Heck, we spend a lot more money than non-owners. And I don't mean just on buying the points. They own DVC to get a prepaid vacation. Lots of members will spend lots of time in their villa, some not even going to a park for an entire day. We know we will be coming back again, maybe even in a few months.

Members don't usually try to squeeze as many people in their room because they like the space. (Some members will put 5 in a one bedroom, but I think that the majority of them wouldn't.) DVC villas aren't just hotel rooms.

And with four kids, you won't be staying in POR very long since the max in the AB rooms with the trundle is five (maybe six if you have a little one under 3 - but I couldn't imagine squeezing a family of six in a single hotel room with two double beds).

If a family of six wanted to save money on their vacation, I'd advise them to get two value resort rooms or stay offsite.

First, I find it amazing that you can decide from this post that I will never be an owner.... you have no clue what I own or what I will ever own.

That said, as of right now I am not an owner because for my family it would not be worth it for us in our current situation. But my whole point was NOT to have the mentality of an owner, but to state the mentality of a RENTER! $12 a point is not feasible from the renters point of view at this time, and that is why the current market price is $10. If you think I'm wrong and there are people out there who will jump at the chance to pay $12, go over to the rent and trade board and give it a try....

And by the way, I can fit my whole family into a mod room (one is a baby) the kids are small and we are never there. And whether you can imagine it or not, it really doesn't affect my vacation. Like I said ,we are never in the room, because we know we will NOT be back in a few months. We have also stayed in 2 rooms at an All-star and that was fine for us too. I'm willing to pay a little more for a villa than 2 rooms at an all-star through renting points and assuming risk, but not a whole lot more...like I said , for a whole lot more, than I will just stay with the mod. or 2 rooms in an all-star.

I just notice on these boards that many (not all) owners want their points to be worth as much to the renter as they are to them, and if they were, we would be owners too. Being an owner would be a terrrible investment for us with our current vacation habits...So right now your points are worth about $10 to me. If they are worth any more to someone else, then God bless ya! It's America and I hope you sell them for as high as you can. You just won't be selling them to me or many other people that high.

 

[Deb & Bill]

...
I just notice on these boards that many (not all) owners want their points to be worth as much to the renter as they are to them, and if they were, we would be owners too. Being an owner would be a terrrible investment for us with our current vacation habits...So right now your points are worth about $10 to me. If they are worth any more to someone else, then God bless ya! It's America and I hope you sell them for as high as you can. You just won't be selling them to me or many other people that high.

When you are willing to spend $40K on your points, like I did, give me a call..

 

[Deb & Bill]

The point that I wanted to make is that there are a lot of DVC members who have mortgage's with Disney that are selling their points at $9 - $10 per point and that is there right. But the renter should know and be thankful that these people are subsidizing your vacation. It is a good deal for the seller if they had some points that they will lose but the bottom line is where would you find a complete stranger who would pay for part of your vaction. Disney is realy a magical place.

Great post. And, you know, lots of non-members think THEY are doing the members a favor by renting a reservation from the member.

 

[my4kids]

When you are willing to spend $40K on your points, like I did, give me a call..

Alright, I really don't know what point you are trying to make here - did you even read my post?

AND in regards to,

"Great post. And, you know, lots of non-members think THEY are doing the members a favor by renting a reservation from the member. "
__________________
Deb

If it is such a huge favor you are doing for someone, than don't rent out your $40K points! It can be win-win on both sides - maybe not for you - but you don't sound like you rent out anyway, which makes me wonder why you care what others do.

 

[browniemtb]

I think we struck a cord here. My opinion, not that it means much, is that we, as DVC owners, have a lot invested into the ownership. The way I look at it is that if you called Disney direct and wanted a 2 bedroom a BWV for April vacation you would probably be looking a $5000 to $6000 for a week. If a renter, who is use to renting at deluxe resorts, pays $12 per point that same 2 bedroom villa would cost $3720...at least a 25% savings. So instead of looking at this whole things as what we as DVC owners are making look at what you would be saving even at $10+ per point. If some one is used to the All Star pricing then stay at the All Stars. I heard they are very nice but no way near a DVC resort. To all the DVC renters out there I'd say $15 per point starting tommorrow..... .....
Brownie

 

[Maria395712]

browniemtb
I agree I like to check disney price and rent at about 40% .off you can't get that with AAA or AP anymore. I prefer to rent by the night ,not the point $175.00 a night at BWV studio is a great price. even higher at holiday time NYE is renting for about $530.00 that night in a studio .
maria

for Dec 2- 5 nights stan studio
I rented it for $140.00 a night someone else would have gotton $90.00 a night, at $140.00 still an awesome bargain, jan 8- 5 nights BWV studio, $125.00 a night again awesome bargain both standard view I won't give DVC away ay $90.00 ever again

 

[my4kids]

I think we struck a cord here. My opinion, not that it means much, is that we, as DVC owners, have a lot invested into the ownership. The way I look at it is that if you called Disney direct and wanted a 2 bedroom a BWV for April vacation you would probably be looking a $5000 to $6000 for a week. If a renter, who is use to renting at deluxe resorts, pays $12 per point that same 2 bedroom villa would cost $3720...at least a 25% savings. So instead of looking at this whole things as what we as DVC owners are making look at what you would be saving even at $10+ per point. If some one is used to the All Star pricing then stay at the All Stars. I heard they are very nice but no way near a DVC resort. To all the DVC renters out there I'd say $15 per point starting tommorrow..... .....
Brownie

The thing you aref orgetting is that most "deluxe" rack paying customers are paying for a room, not a villa ,and that is much less per week. I'm just saying that if all the All star -two room familys "stay there" as you put it, people who are in need of renting out their points are gonna have a problem .

 

[Deb & Bill]

browniemtb
I agree I like to check disney price and rent at about 40% .off you can't get that with AAA or AP anymore. I prefer to rent by the night ,not the point $175.00 a night at BWV studio is a great price. even higher at holiday time NYE is renting for about $530.00 that night in a studio .
maria

for Dec 2- 5 nights stan studio
I rented it for $140.00 a night someone else would have gotton $90.00 a night, at $140.00 still an awesome bargain, jan 8- 5 nights BWV studio, $125.00 a night again awesome bargain both standard view I won't give DVC away ay $90.00 ever again

Good for you, Maria.