Should I be anxious about yearly dues increases? (Am I overreacting?)

[Nelson Rodriguez]

Hello Everyone,

Thanks again for allowing me to ask questions in this vibrant community.
My general question is due to yearly per point dues.
I am looking for a contract in VGC for ~230 points.
I was calculating the approximate year over year increase of dues for 230 points till the end of my contract. (2060 is projected.)

Here are my Q's on the matter:
1) Do you feel this can be a reality? Can yearly dues get to the projected maximum of $11,000?
2) How long do people keep their contracts if this is the case?
3) Am I calculating this right? Seems a bit high, but my fuzzy math is concerning to me.

Thanks,
NR

 

[davidl81]

Hello Everyone,

Thanks again for allowing me to ask questions in this vibrant community.
My general question is due to yearly per point dues.
I am looking for a contract in VGC for ~230 points.
I was calculating the approximate year over year increase of dues for 230 points till the end of my contract. (2060 is projected.)

Here are my Q's on the matter:
1) Do you feel this can be a reality? Can yearly dues get to the projected maximum of $11,000?
2) How long do people keep their contracts if this is the case?
3) Am I calculating this right? Seems a bit high, but my fuzzy math is concerning to me.

Thanks,
NR

View attachment 518217

I would use an average of about 3.5% increase and rerun your numbers. And although it’s hard, you can’t think about cost 40 years from now in today’s dollars.

 

[Sandisw]

Honestly, I think trying to look at it for the entire life will make most people shy away.

Id look at current rates, assume that the average increase of MFs will be a wash against raises in prices of cash rooms, and decide if it’s worth it in the long run to own vs, be a cash guest,

 

[Nelson Rodriguez]

I would use an average of about 3.5% increase and rerun your numbers. And although it’s hard, you can’t think about cost 40 years from now in today’s dollars.

I totally get that. That is why I'm call it fuzzy math. thanks for the heads up on the 3.5%

 

[Ruttangel]

Why worry about anything you can’t control?
If DVC becomes completely uneconomical then what kind of product is that

 

[sethschroeder]

Just remember MFs can only cover the general upkeep of the resort and future improvement. So any increase you see is the cost pretty much to running things where as hotel rooms that you might get in the future would also increase their profit piece.

$100 night today is ($50 cost / $50 profit)
$200 night in 40 years is ($100 cost / $100 profit)

Except in 40 years you are only paying the cost not the profit. So essentially you "saved" the extra $50 in profit that you don't need to pay since it was "prepaid" with a discount.

 

[AvidDisReader]

Due are greatly effected by wages that are paid employees. The new union contract that was signed will increase wages to $15 minimum by 2022. The HOA dues may stay stable for 2021 due to the shut down this year, but beyond that you can count on steady increases more likely greater than the 3.5% mentioned above.

 

[Lorana]

I totally get that. That is why I'm call it fuzzy math. thanks for the heads up on the 3.5%

The CAGR for the Grand Californian is currently ~5%.

https://www.dvcresalemarket.com/buying/annual-dues/

 

[RoseGold]

These rules of thumb and numbers are based on WDW and FL law.

Reality is CA could do a lot. They could put in HI style fees, they could charge earthquake tax. The whole place could burn down. It could shut down for six months in a pandemic. Lots could change in 30 years, and you can't control any of it.

Historically, VGC has been one of the best buys in the system, and still is at these high prices. That should probably hold, but we can't predict the future.

If the future DL tower comes out as cheap as people seem to think it might, then maybe you could think about shifting to there.

 

[sethschroeder]

These rules of thumb and numbers are based on WDW and FL law.

Reality is CA could do a lot. They could put in HI style fees, they could charge earthquake tax. The whole place could burn down. It could shut down for six months in a pandemic. Lots could change in 30 years, and you can't control any of it.

Historically, VGC has been one of the best buys in the system, and still is at these high prices. That should probably hold, but we can't predict the future.

If the future DL tower comes out as cheap as people seem to think it might, then maybe you could think about shifting to there.

Who is thinking DL Tower is going to be cheap? I think people will think RIV is direct cheap in comparison to DL.

 

[Dean]

Hello Everyone,

Thanks again for allowing me to ask questions in this vibrant community.
My general question is due to yearly per point dues.
I am looking for a contract in VGC for ~230 points.
I was calculating the approximate year over year increase of dues for 230 points till the end of my contract. (2060 is projected.)

Here are my Q's on the matter:
1) Do you feel this can be a reality? Can yearly dues get to the projected maximum of $11,000?
2) How long do people keep their contracts if this is the case?
3) Am I calculating this right? Seems a bit high, but my fuzzy math is concerning to me.

Thanks,
NR

View attachment 518217

I too would use 3.5% but one needs to realize it could be a lot more in some situations and there could be special assessments. In reality even if a 5 or 6% increase makes it unworkable because of that alone, one likely shouldn't participate anyway or should sell if that's an option at that time. But if the increase is too much it likely makes the ability to sell questionable as well.

 

[RoseGold]

Who is thinking DL Tower is going to be cheap? I think people will think RIV is direct cheap in comparison to DL.

Obviously, no one knows what the pricing will be, but I've seen guesses that put it close to RIV, which would be a steal IMO. Resale restrictions matter much less there.

 

[Bearval]

Hello Everyone,

Thanks again for allowing me to ask questions in this vibrant community.
My general question is due to yearly per point dues.
I am looking for a contract in VGC for ~230 points.
I was calculating the approximate year over year increase of dues for 230 points till the end of my contract. (2060 is projected.)

Here are my Q's on the matter:
1) Do you feel this can be a reality? Can yearly dues get to the projected maximum of $11,000?
2) How long do people keep their contracts if this is the case?
3) Am I calculating this right? Seems a bit high, but my fuzzy math is concerning to me.

Thanks,
NR

View attachment 518217

Going forward they will most likely be higher than the past. The additional sanitation procedures are here to stay and someone is going to have to pay for the extra staff to perform these tasks

 

[PedroD]

I did similar math and got similarly freaked out. Then I did the math on a similar annual percentage increase for the average nightly cost of the rooms if I booked through Disney today. If you think the dues number was high, check out this number!

And since people seem to be selling their contract for many cases higher point values than what they paid originally, I think we need to think about the potential for increase in the point value if you decide to resell down the road.

Finally, people are renting their points and that rental fee is likely going to be higher than the annual maintenance fee on your points.

My conclusion thus far is that this is only a good investment if you are pretty sure you will visit annually for at least the next 20 years if not the entire contract. If not, you need to be willing to lose some percentage of the anticipated appreciation on your down payment (as compared to investing that money however you wish). You might be able to defray or even make some money by selling points or reselling the contract down the line. But my math said I'd be better off to take the value of the initial buy in, multiply it by 2.5-3x, and set that big lump aside in an interest bearing or investment account and then use that money to pay for your vacations as you wish. But...that way you will not likely be able to get into the bigger rooms with different bedroom options and would be booking in standard resort rooms. But it also gives you more flexibilty and doesn't lock you in to annual trips (which have additional required costs for food and tickets that you need to include).

Its not a smart financial move in my estimation. But it is a smart investment if you are going to otherwise go to Disney every year well into the future. Just my dos centavos.

 

[sethschroeder]

Obviously, no one knows what the pricing will be, but I've seen guesses that put it close to RIV, which would be a steal IMO. Resale restrictions matter much less there.

1% chance its in the same ballpark as RIV for total costs

 

[wbl2745]

Looking at your spreadsheet, it appears you used 15% as the year to year increase project. For example, 7.29 / 6.34 = 1.15 which is a 15% increase. Compound interest is scary, but check your math. I'm not sure it's as bad as you think.

 

[Lorana]

I too would use 3.5% but one needs to realize it could be a lot more in some situations and there could be special assessments. In reality even if a 5 or 6% increase makes it unworkable because of that alone, one likely shouldn't participate anyway or should sell if that's an option at that time. But if the increase is too much it likely makes the ability to sell questionable as well.

Going forward they will most likely be higher than the past. The additional sanitation procedures are here to stay and someone is going to have to pay for the extra staff to perform these tasks

Grand Californian's CAGR to date is 5%. I would bet on that, rather than 3.5%, especially because of increased sanitation costs going forward. While it's possible it may be less than that, it's historical trend is 5% yoy. Last year, it was 5.3%, the year before 6.5%, and the year before that 4.9%

 

[Dean]

Grand Californian's CAGR to date is 5%. I would bet on that, rather than 3.5%, especially because of increased sanitation costs going forward. While it's possible it may be less than that, it's historical trend is 5% yoy. Last year, it was 5.3%, the year before 6.5%, and the year before that 4.9%

Ultimately it doesn't change the answer from a purchase or keep/sell standpoint. Run the numbers both ways if one wants. My point would be that dues will increase and if you can't afford it at 5% you can't afford it at 4% or 6%. There is also the risk of a special assessment which is more likely at some resorts than others.

 

[sethschroeder]

I mean if its 5% or 3.5% the hotel side will increase more substantially anyways to cover that cost and make more money in the long run.

We might have short run extra discounts like over the next couple years but over 50 years profit will keep going up where as the profit is locked in and pre-paid for DVC.

 

[Nelson Rodriguez]

I mean if its 5% or 3.5% the hotel side will increase more substantially anyways to cover that cost and make more money in the long run.

We might have short run extra discounts like over the next couple years but over 50 years profit will keep going up where as the profit is locked in and pre-paid for DVC.

Thank you for that insight!