Riviera Resale. Why?

[CastAStone]

*sigh* another thread of people ripping Riviera and the resale restrictions. We get that you hate it but it seems every week we see another thread about it and it's getting exhausting.

It's perfectly acceptable to not like Riviera, just like I don't like the Grand Floridian but the reality is the resort will sell out. At some point all resorts going forward will have resale restrictions (unless they decide to remove the restriction) and than Riviera will be no different than any other in terms of restrictions.

I love AKL and BWV but the length of contract and restrictions with not being able to access to new resorts was a deal breaker.

Also, I personally think Riviera is stunning. People are going to like Riviera the same as those who love BCV. There will be plenty of buyers and the value will never get super low.

It's getting very difficult to book outside your home resort at 7 months (at least for Studios) so you might as well buy where you love. For me, Riviera checked so many boxes.

Personally I don’t think there’s anything wrong with buying Riviera direct if you intend to use it for 20+ years. My friends who have been were blown away!

I just wouldn’t pay much for it resale.

 

[_Iowa_]

I used this calculator: https://www.calculatestuff.com/financial/npv-calculator

Used default 5%, $32000 investment (200 points at $160, admittedly doesn't include closing, and $2000 cash flow every for 49 years (200 points at $10 above MFs)

$4,337.44 NPV, unless there's a mistake there somewhere

Got it. First off I read too quickly. But now I've typed up this whole damn thing so I'm going to post it anyway.

Yes you can see a gain on your investment, but it's a poor one. The red flags just went off when I saw your post because I ran these numbers a ton and any way you realistically slice it it isn't a good moneymaker.

I do think your assumptions are too generous in favor of DVC.

Concerns/Assumptions:

• Is $10/point premium attainable, every year?
  • I'm going to assume it is. Side note - I inflated both the annual dues and the premium by 3% each year which helps your cause but I thought it was more realistic. Year one you have $2,000 to invest, Year two $2,060 and so on.
• Closing Costs
  • I don't think they're fair to ignore but I've done so for the sake of this equation
• Interest rate
  • This is the big one. 5% over 50 years is super, super bad, assuming we're dumping this into a total market index fund. Yes, future results could be worse than historic averages but if that's the case over 50 years then maybe people aren't spending a ton to rent DVC points either.
  • I used 7%. Still historically a little low, but again, trying to be conservative but realistic here.
• Taxes
  • This is the BIG one I'm not really going to touch. Renting DVC points counts as income. I'm guessing most people dropping 30-35k on points are in at least the 22% marginal bracket, even assuming no state taxes. Yes, investments are taxed, too, but generally at a lower rate and also easier to shield, like if any of this can be put into a retirement account to grow

If you lump $32k into the stock market and see a 7% annual return you'll have $880k in 49 years. If instead you buy these DVC points and rent them out at your premium each year you'll end up with $743k, a difference of $137k. If you include $1,000 worth of closing costs you're up to $177k difference.

When I think of investing I always assume the opportunity cost is a pure index fund investment, because that's what nearly everyone's investments should be with a 50 year time horizon. So again, I read too quickly and was wrong. It does have a NPV, it just isn't a very good one given the risk involved. You'd be much better off investing or, if you were OK with the lower return, then doing it in a much more stable and liquid vehicle.

 

[Bearval]

*sigh* another thread of people ripping Riviera and the resale restrictions. We get that you hate it but it seems every week we see another thread about it and it's getting exhausting.

It's perfectly acceptable to not like Riviera, just like I don't like the Grand Floridian but the reality is the resort will sell out. At some point all resorts going forward will have resale restrictions (unless they decide to remove the restriction) and than Riviera will be no different than any other in terms of restrictions.

I love AKL and BWV but the length of contract and restrictions with not being able to access to new resorts was a deal breaker.

Also, I personally think Riviera is stunning. People are going to like Riviera the same as those who love BCV. There will be plenty of buyers and the value will never get super low.

It's getting very difficult to book outside your home resort at 7 months (at least for Studios) so you might as well buy where you love. For me, Riviera checked so many boxes.

I personally have no issue with the resale restrictions. What is stopping me from buying is the point charts and maintenance fees.

 

[Lorana]

I personally have no issue with the resale restrictions. What is stopping me from buying is the point charts and maintenance fees.

Same. I think I'd like the resort and transportation (fingers crossed we get to do our first stay there in November!), but the point cost was so much higher than AKL, BRV and CCV, and the dues were start off over $8/point, and that was the non-starter for me.

 

[RaymOOOnd]

Got it. First off I read too quickly. But now I've typed up this whole damn thing so I'm going to post it anyway.

Yes you can see a gain on your investment, but it's a poor one. The red flags just went off when I saw your post because I ran these numbers a ton and any way you realistically slice it it isn't a good moneymaker.

I do think your assumptions are too generous in favor of DVC.

Concerns/Assumptions:

• Is $10/point premium attainable, every year?
  • I'm going to assume it is. Side note - I inflated both the annual dues and the premium by 3% each year which helps your cause but I thought it was more realistic. Year one you have $2,000 to invest, Year two $2,060 and so on.
• Closing Costs
  • I don't think they're fair to ignore but I've done so for the sake of this equation
• Interest rate
  • This is the big one. 5% over 50 years is super, super bad, assuming we're dumping this into a total market index fund. Yes, future results could be worse than historic averages but if that's the case over 50 years then maybe people aren't spending a ton to rent DVC points either.
  • I used 7%. Still historically a little low, but again, trying to be conservative but realistic here.
• Taxes
  • This is the BIG one I'm not really going to touch. Renting DVC points counts as income. I'm guessing most people dropping 30-35k on points are in at least the 22% marginal bracket, even assuming no state taxes. Yes, investments are taxed, too, but generally at a lower rate and also easier to shield, like if any of this can be put into a retirement account to grow

If you lump $32k into the stock market and see a 7% annual return you'll have $880k in 49 years. If instead you buy these DVC points and rent them out at your premium each year you'll end up with $743k, a difference of $137k. If you include $1,000 worth of closing costs you're up to $177k difference.

When I think of investing I always assume the opportunity cost is a pure index fund investment, because that's what nearly everyone's investments should be with a 50 year time horizon. So again, I read too quickly and was wrong. It does have a NPV, it just isn't a very good one given the risk involved. You'd be much better off investing or, if you were OK with the lower return, then doing it in a much more stable and liquid vehicle.

I agree that buying DVC is silly-ridiculous if your comparison is to buying the sp500.
But then I doubt most people buying DVC would ever consider investing outside of an automated 401k. As my mom would say, aren't I "gambling" and shouldn't I "sell it" after the next rally?

 

[_Iowa_]

I agree that buying DVC is silly-ridiculous if your comparison is to buying the sp500.
But then I doubt most people buying DVC would ever consider investing outside of an automated 401k. As my mom would say, aren't I "gambling" and shouldn't I "sell it" after the next rally?

Well then that’s sobering. If you don’t have a healthy chunk of your retirement paid for you shouldn’t be dropping five figures on vacations. At that rate, holding money in your bank account can be seen as a "good investment" if the alternative is only contributing up to your 401k match.

 

[glamdring269]

There is no way I will buy Riv with the current restrictions. Nothing particularly wrong with the resort itself but nothing overly positive about it in my opinion. And it definitely comes standard with the most crushing/crippling restriction of any resort.

I don’t think we will really know the full impact of the restrictions for a few years when we start seeing multiple contracts on the market simultaneously. Let’s see how in a rush new buyers are for the next resort when they see people still fetching more via resale for a 2042 resort than Riviera.

 

[MICKIMINI]

There is a 100 point RIV listing with 19, 20 and 21 points for $155. I don't pay much attention as DH calls it "the prison" and it just isn't our style and restrictions make it a no go, but that low price caught my eye this morning. That is a big loss, likely never used and now has little value (no surprise) as resale. I have noticed a few RIV contracts, though not as low priced as this and I suspect they will go lower.

 

[zakdavid]

I bought some Riviera points primarily because by the time I joined that was the active resort and since I'm in my 20's I wanted a Epcot area resort with the 50 year deed. But I then added on the rest resale. Been using it a ton, and I love switching resorts way to much to ever buy Riviera resale

 

[EYL]

There is a 100 point RIV listing with 19, 20 and 21 points for $155. I don't pay much attention as DH calls it "the prison" and it just isn't our style and restrictions make it a no go, but that low price caught my eye this morning. That is a big loss, likely never used and now has little value (no surprise) as resale. I have noticed a few RIV contracts, though not as low priced as this and I suspect they will go lower.

I'm not sure that that's a "big loss" actually. I mean, the current incentives for 100 points at the Riviera cut it down to $190/pt. Really, all the buyer is saving is $35/pt. Isn't that a typical "resale loss"?

Nothing wrong with Riviera itself, IMO. Looks great and I look forward to touring it the next time I'm on property. But really, it's the resale restrictions that turn me away. Not so much for the value, but what it may do to the availability of the rooms in the future. If they ever dropped that, wifey may not be talking to me for a few weeks after she sees the credit card bill.

 

[glamdring269]

The gap might even be even smaller. Aren’t direct closing costs cheaper? Plus you can use a cc which can really add up Via points or cash back depending on which you use.

 

[DVC Doctor]

I have read too many of these posts to keep debating, BUT here we go again

DVC is NOT a traditional investment and should NOT be compared to the S&P
DVC is a real estate play and normal benchmark ROI should be 3% in most resort areas
You should only buy DVC with cash or take a short term low interest loan
Renting value is generally annual dues + $10pp
Renting DVC points is real work
99.9% of people will not pay taxes on rentals
Doubtful people will maintain ownership 50 years, but DVC has very high original owner percentages

^^^ If you really want to compare DVC to S&P then DO NOT BUY DVC and just live off your investments and pay cash for vacations

Got it. First off I read too quickly. But now I've typed up this whole damn thing so I'm going to post it anyway.

Yes you can see a gain on your investment, but it's a poor one. The red flags just went off when I saw your post because I ran these numbers a ton and any way you realistically slice it it isn't a good moneymaker.

I do think your assumptions are too generous in favor of DVC.

Concerns/Assumptions:

• Is $10/point premium attainable, every year?
  • I'm going to assume it is. Side note - I inflated both the annual dues and the premium by 3% each year which helps your cause but I thought it was more realistic. Year one you have $2,000 to invest, Year two $2,060 and so on.
• Closing Costs
  • I don't think they're fair to ignore but I've done so for the sake of this equation
• Interest rate
  • This is the big one. 5% over 50 years is super, super bad, assuming we're dumping this into a total market index fund. Yes, future results could be worse than historic averages but if that's the case over 50 years then maybe people aren't spending a ton to rent DVC points either.
  • I used 7%. Still historically a little low, but again, trying to be conservative but realistic here.
• Taxes
  • This is the BIG one I'm not really going to touch. Renting DVC points counts as income. I'm guessing most people dropping 30-35k on points are in at least the 22% marginal bracket, even assuming no state taxes. Yes, investments are taxed, too, but generally at a lower rate and also easier to shield, like if any of this can be put into a retirement account to grow

If you lump $32k into the stock market and see a 7% annual return you'll have $880k in 49 years. If instead you buy these DVC points and rent them out at your premium each year you'll end up with $743k, a difference of $137k. If you include $1,000 worth of closing costs you're up to $177k difference.

When I think of investing I always assume the opportunity cost is a pure index fund investment, because that's what nearly everyone's investments should be with a 50 year time horizon. So again, I read too quickly and was wrong. It does have a NPV, it just isn't a very good one given the risk involved. You'd be much better off investing or, if you were OK with the lower return, then doing it in a much more stable and liquid vehicle.

 

[_Iowa_]

I have read too many of these posts to keep debating, BUT here we go again

DVC is NOT a traditional investment and should NOT be compared to the S&P
DVC is a real estate play and normal benchmark ROI should be 3% in most resort areas
You should only buy DVC with cash or take a short term low interest loan
Renting value is generally annual dues + $10pp
Renting DVC points is real work
99.9% of people will not pay taxes on rentals
Doubtful people will maintain ownership 50 years, but DVC has very high original owner percentages

^^^ If you really want to compare DVC to S&P then DO NOT BUY DVC and just live off your investments and pay cash for vacations

Just to clarify - I think we're saying the same thing here. I probably read too far into the first post about it being an investment, but I guess that's my entire point - DVC should be purchased without any intention of making money. Like you might spend 25k on DVC instead of spending it on a new car.

DVC "makes financial sense" only if you're 1) Planning on going to Disney/disney owned properties often and 2) if you plan on paying for higher end stays instead of doing an Orlando Holiday Inn or one of the cheaper WDW hotels. And that's OK - we did it because we wanted to, not because we thought it was either a good investment or that it saved us money on our vacations.

 

[Drewferin]

The 100 point on Fidelity got taken off the market. Was listed at $160 and they only got low ball offers it sounds like from the broker. I offered $100 a point...

 

[RhodyKP]

I bought some Riviera points primarily because by the time I joined that was the active resort and since I'm in my 20's I wanted a Epcot area resort with the 50 year deed. But I then added on the rest resale. Been using it a ton, and I love switching resorts way to much to ever buy Riviera resale

OMG I just noticed your profile pic

 

[zakdavid]

OMG I just noticed your profile pic

Haha. I do my best to be funny

 

[Noah_t]

That's the nature of a public forum. Not everyone reads all the posts and new people join all the time. There are a few questions that have been asked countless of times and people still replies and those replies are helpful.
In the case of Riviera resale, I think it's better to be sure that everyone who might consider buying a contract knows exactly what he's buying. It is a completely different product. If you buy Riviera resale, you're not buying a Vacation Club property, you're buying one single resort, with the added inconvenience and risk that there are 250,000 members who can book your resort while you cannot book theirs. This is a risk, how big and how much it's going to affect people is still unkown and there is nothing people love discussing on the Internet more than things they don't know much about
The old trick still works: if such threads bore you, just skip them.

Also, sometimes there is a point to the complaining. If enough people voice their disappointments there is a possibility something might change.

 

[Noah_t]

While I agree that discussing the resale restrictions is helpful for new buyers, not everyone is posting responses in that vein. For example:



I would hope that people could understand that not everyone values the same things and some might prefer to buy something that another would not. If you need some help with understanding what motivates others to buy RIV because you don't get it, I'm sure there are those of us who would be happy to explain. Some things we value as RIV owners:
- Long contract since we are younger buyers in our 30s with young kids
- Skyliner access to EP/HS and other resorts since we value that amenity
- Beautiful rooms and resort style that we personally love
- 1BR and 2BR villas that sleep more people comfortably on pull down Murphy beds instead of traditional sofabeds, so while it is more point heavy, I plan to book 1BRs for longer due to the bed configuration, plus the rooms are a good size
- Dining options (we've eaten there several times and were very happy with the dining)
- Incentives bringing the direct points down to a reasonable cost for us (again, younger buyers and we paid cash for all our DVC points without stretching our finances)

Just sharing my thoughts. In the end, there will still be those who just don't "get it" because they don't want to understand another's point of view. Such is life.

Nope. Wrong

Yeah I get this completely. I know plans change and everything, but sort of like a marriage you don't go into a DVC contract thinking you're going to sell it in 10 years. Of course just like a marriage things happen so it isn't bad to plan, but if RIV is your favorite resort I absolutely get buying it direct. Resale would be tough for me to understand without a pretty big discount, because there isn't a resort I love so much that it'd be the only place I wanted to stay. Even there you still have ways around it.

RIV will probably never make sense for my family but I get why it would for someone else.

Of course at a certain price it actually would make sense. For me I would consider it if it was between 40-60 PP. Those high maintenance fees are a little scary especially so soon. Then again if i factored in what i pay for Ubers its might balance out a bit.

 

[Noah_t]

Also, I personally think Riviera is stunning. People are going to like Riviera the same as those who love BCV. There will be plenty of buyers and the value will never get super low.

I can respect most everything else you said but this statement, no way. There is no way Riviera can ever come close to the draw of beach club unless they build a lazy river that winds itself all through and around the resort, right up to the Skyliner station.

 

[Noah_t]

Not that anyone should be buying strictly to invest, but even at current direct incentives one can buy 200 points for $160/point and rent out the next 49 years at "only" $10/point above maintainance fees and you'd still see a positive net present value.

That is a huge assumption to make that you will get 10$/point above maintenance. The majority of renters are struggling right now to get that kind of money. You could get yourself into a lot of trouble with that forecast.