Stripped contract

[grepes]

Them chicken fingers add up

 

[PlutoNotPlanet]

The DVC Math makes sense assuming you don't get any points you are not paying the maintenance for. If you are the math is different in that you should remove the 'free maintenance' from the cost of purchase. For example, I just bought 250 SSR points for $88 a point plus $1455 closing - total $23,455. But I got 250 2024 points that I didn't have to pay the maintenance for. So backing that out (250*8.14) my cost drops to $21,420. With 30 years left of use, the cost per point per year is $2.856 ($21,420 / 30 / 250).

So what good is this number? It lets me figure out what my actual cost per point is and then my actual room cost. So I just booked 3 nights at Riviera in a 1 bedroom in September for 87 points with 2025 points. Those points carried a maintenance of 8.6729 per point. So all these points are costing me $11.53 a point ($2.856+$8.6729). The 87 points I booked cost me $1003.11 (87*$11.53) or $334.37 per night.

Getting back to the topic of this post, i.e. buying stripped contracts, the cost of buying them is the reduction of usable years. So to keep things simple, lets say you buy at SSR which has 30 usable years remaining and you buy for $100 a point. That cost is $3.33 a point per year. If you get a stripped contract and only have 28 usable years left, your cost is increased to $3.57 a point per year. On the 3 nights at the Riviera that adds $23.28 (($3.57-$3.33)*87) to the cost of those 3 night. Basically you miss out on 2 orders of chicken fingers!

yes, that's 2 orders of chicken fingers for every 3 nights.
For SSR resale $100PP, 1 year stripped is like $3.5PP more than it appears

 

[Chili327]

Getting back to the topic of this post, i.e. buying stripped contracts, the cost of buying them is the reduction of usable years.

Perfectly stated. Would you pay that same price in a year? If yes then nothing wrong with doing it now if you don’t need the points.

 

[PlutoNotPlanet]

And that’s based on the condition that seller credits the MF

 

[BlueGreen5]

The other thing to keep in mind about stripped versus loaded contracts is simply a buyer's preference on price point. Especially with larger contracts, and first-time buyers, a fully-loaded contract might be out of reach for some buyers, but strip it out and lower the price by $7pp and all of a sudden it seems more palatable, even though it's a worse deal.

An analogy: most people do not shop for houses based on the price per square foot - they shop based upon the price. If the price on one house is out of their price range, it doesn't matter if the price per square foot is better than another, smaller house in the same condition and same neighborhood that is within their price range. Yes, the smaller house is a "worse" deal, but buyers are bound by their financial limitations.

I know...the concept of financial limitations is a very intangible, abstract, theoretical, unproven, and unscientific concept when it comes to DVC.

 

[Girlstar30]

The other thing to keep in mind about stripped versus loaded contracts is simply a buyer's preference on price point. Especially with larger contracts, and first-time buyers, a fully-loaded contract might be out of reach for some buyers, but strip it out and lower the price by $7pp and all of a sudden it seems more palatable, even though it's a worse deal.

An analogy: most people do not shop for houses based on the price per square foot - they shop based upon the price. If the price on one house is out of their price range, it doesn't matter if the price per square foot is better than another, smaller house in the same condition and same neighborhood that is within their price range. Yes, the smaller house is a "worse" deal, but buyers are bound by their financial limitations.

I know...the concept of financial limitations is a very intangible, abstract, theoretical, unproven, and unscientific concept when it comes to DVC.

My brain just looks at the $124 price on a stripped contract vs the $135 price that is standard and thinks "$124 ic cheaper" in hindsight, I could have used those additional points for our 3 week vacation this year and I probably should have coughed up the extra. Oh well

 

[PlutoNotPlanet]

The other thing to keep in mind about stripped versus loaded contracts is simply a buyer's preference on price point. Especially with larger contracts, and first-time buyers, a fully-loaded contract might be out of reach for some buyers, but strip it out and lower the price by $7pp and all of a sudden it seems more palatable, even though it's a worse deal.

An analogy: most people do not shop for houses based on the price per square foot - they shop based upon the price. If the price on one house is out of their price range, it doesn't matter if the price per square foot is better than another, smaller house in the same condition and same neighborhood that is within their price range. Yes, the smaller house is a "worse" deal, but buyers are bound by their financial limitations.

I know...the concept of financial limitations is a very intangible, abstract, theoretical, unproven, and unscientific concept when it comes to DVC.

Makes perfect sense. But if the budget is limited, shouldn't the rational choice be buying a smaller contract?

 

[BlueGreen5]

Makes perfect sense. But if the budget is limited, shouldn't the rational choice be buying a smaller contract?

I'll pose this question to you: if your price range on a home is $X, does that necessarily mean you should be buying a smaller house? What about a larger fixer-upper? Stripped contracts are essentially fixer-uppers! It depends on your immediate and long-term needs. "Needs" being used very loosely in this sense.

 

[Girlstar30]

Considering a lot of families go into debt taking their families to Disney, people don't always make the most rational decisions for their situation . People like me that dont have all of the cash upfront before purchasing, we want the Disney memories and the longer vacations too and will take on a loan to make it happen, knowing that the interest is a ripoff, but at least I'm saving more than what I've been doing which is paying out of pocket every year.. Paying an extra $1700-$2000 to finance short term makes way more sense to me than shelling out $10,000 for our upcoming 2.5- 3 week stay this year and then having nothing to show for it after.. hell, even if i let the loan run for four years, the interest would probably be cheaper than an out of pocket 3 week stay at Disney Deluxe hotels

 

[LittleBitGoofy]

Often I have buyer clients who decide to go "farther out" to get the home size they want within their budget rather than a smaller home in their most preferred location. I could see this translate to someone buying that bigger contract at SSR instead of a smaller one Poly, RIV, VGF, etc.

 

[Girlstar30]

Yeah and people purchase 2042 resorts that are expiring in 17 years for the same price or more as one that expires 18 years later (BLT). To me, that's a bad deal, but for them maybe they only want it for 17 years and then they're done paying taxes or they love that resort and the extra cost is worth going to their favorite restaurant or walking to epcot. Everything is subjective, which is why it was pointless for me to ask this question anyways, but I did enjoy the conversation and I still like to *think* i got a good deal

 

[BlueGreen5]

Yeah and people purchase 2042 resorts that are expiring in 17 years for the same price or more as one that expires 18 years later (BLT). To me, that's a bad deal, but for them maybe they only want it for 17 years and then they're done paying taxes or they love that resort and the extra cost is worth going to their favorite restaurant or walking to epcot. Everything is subjective, which is why it was pointless for me to ask this question anyways, but I did enjoy the conversation and I still like to *think* i got a good deal

You bought a loaded contract at $135 and sold the stripped-away points for $19/pt ($11/pt price difference, plus you didn't need to pay the dues on those points, presumably, which are around $8/pt). That's a good deal, you should be happy! Congrats!

 

[Girlstar30]

You bought a loaded contract at $135 and sold the stripped-away points for $19/pt ($11/pt price difference, plus you didn't need to pay the dues on those points, presumably, which are around $8/pt). That's a good deal, you should be happy! Congrats!

Thank you, I'm ecstatic, signing those closing docs as I type!

 

[Brian Noble]

Everything is subjective, which is why it was pointless for me to ask this question anyways

I don't think it is pointless at all.

And that is because money is very much not subjective*. And while the other facets of ownership are, that one is not. It is useful to know that stripped contracts are over-valued and loaded contracts under-valued. So, there is usually some extra financial friction in buying a stripped contract. That doesn't mean one should never do it, but one should understand the costs.

----
*: Money, in the abstract, is not subjective. But the meaning of money very much is. So it gets murky quickly.

 

[Girlstar30]

I don't think it is pointless at all.

And that is because money is very much not subjective*. And while the other facets of ownership are, that one is not. It is useful to know that stripped contracts are over-valued and loaded contracts under-valued. So, there is usually some extra financial friction in buying a stripped contract. That doesn't mean one should never do it, but one should understand the costs.

----
*: Money, in the abstract, is not subjective. But the meaning of money very much is. So it gets murky quickly.

True i actually did learn some stuff from this thread

 

[BlueGreen5]

Often I have buyer clients who decide to go "farther out" to get the home size they want within their budget rather than a smaller home in their most preferred location. I could see this translate to someone buying that bigger contract at SSR instead of a smaller one Poly, RIV, VGF, etc.

Absolutely! That's why there is no one-size-fits-most approach to resale contracts. Home resort, size, expiration, stripped/loaded status, UY -- they all need to be factored in to a decision. Stripped contracts can be good deals. Loaded contracts can be good deals. VGF contracts can be good deals. OKW contracts can be good deals. A DEC UY can be perfect for some, like me, while others detest the awkwardness of them. Decisions decisions, but I'm glad OP is happy with their decision!

 

[Girlstar30]

Absolutely! That's why there is no one-size-fits-most approach to resale contracts. Home resort, size, expiration, stripped/loaded status, UY -- they all need to be factored in to a decision. Stripped contracts can be good deals. Loaded contracts can be good deals. VGF contracts can be good deals. OKW contracts can be good deals. A DEC UY can be perfect for some, like me, while others detest the awkwardness of them. Decisions decisions, but I'm glad OP is happy with their decision!

Yes! at first I wasnt thrilled about February UY but now i like the idea of starting out with fresh new points at the beginning of the year

 

[DanCali]

It depends on what you value them. I have a unscientific valuation of ~$20 per point, the way I get to that is if I wanted to go out and replace those points what would it cost me (rental market has a wide range depending where you look).

I think $20 is a huge overvaluation in my view, and here's why.

If the contract was not stripped, you would pay dues on the "unstripped" points of around $8-10 (resort-dependent). You do not pay dues on stripped points. So what makes you indifferent with this logic is:

• Option 1: Stripped contract and pay $20 to "replace stripped points" in rental market
• Option 2: But unstripped contract, pay $8-$10 dues on those points that may have been stripped.

These two options should make you indifferent. The difference between them is $10-$12/pt.

I suspect many of those willing to buy stripped contracts only at a $20/pt+ discount would probably not be willing to pay anywhere near a $20/pt premium for a loaded contract because, similarly, those loaded points can probably be rented for $20, but that's just a $10-$12 margin over the dues.


I personally think of it somewhat differently and am willing to buy stripped contracts at a more modest discount. On these boards people often describe the cost of owning DVC as the upfront cost divided by the number of years left (plus annual dues). With that logic, a stripped contract is just 1 less year to use the contract, and getting 39 years instead of 40 years of use is really not a big deal - so one could say it's just a 2.5% discount (1/40), or say $4/pt discount on a $150/pt resale contract. There is something to the "replacement" argument as well (which I valued above at $10-$12/pt), certainly from a negotiating standpoint vs a seller, but since I don't usually need to actually replace stripped points with a rental, and definitely don't pay does on them, getting a $8+/pt discount for a stripped contract expiring in the 2060s usually sounds like a fair deal to me. Also, using that logic, 2042 resorts with stripped contracts would necessitate a greater percentage discount since getting 16 years instead of 17 is 6% less.

Incidentally, the "Instant Sale" tool on the board sponsor's website also seems to value stripped points at $8/pt.

 

[Chili327]

Yeah and people purchase 2042 resorts that are expiring in 17 years for the same price or more as one that expires 18 years later (BLT). To me, that's a bad deal, but for them maybe they only want it for 17 years and then they're done paying taxes or they love that resort and the extra cost is worth going to their favorite restaurant or walking to epcot. Everything is subjective, which is why it was pointless for me to ask this question anyways, but I did enjoy the conversation and I still like to *think* i got a good deal

I agree, we should look at this more closely, really need to figure out what each point is costing, it is a BIG difference, usually $3 to $9 per point spent! (total over the life of contract)
I hate doing the math on my BWV points. lol

Absolutely! That's why there is no one-size-fits-most approach to resale contracts. Home resort, size, expiration, stripped/loaded status, UY -- they all need to be factored in to a decision. Stripped contracts can be good deals. Loaded contracts can be good deals. VGF contracts can be good deals. OKW contracts can be good deals. A DEC UY can be perfect for some, like me, while others detest the awkwardness of them. Decisions decisions, but I'm glad OP is happy with their decision!

I wish there was a form to fill out that would give you the answers for best fit... Aggregators, are you listening?

 

[BlueGreen5]

Incidentally, the "Instant Sale" tool on the board sponsor's website also seems to value stripped points at $8/pt.

The value of something is the price at which it would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell and both having reasonable knowledge of relevant facts.

Loaded points can be rented, so their value - or, conversely, the cost of them being stripped - is pretty simple to back into.

Except for VGC, points commonly "change hands" on the rental market for somewhere between $18-20/pt. But, the owner pays the dues on those rented points, which are somewhere between $8-11/pt. So, the rental price, net of the cost of dues, is somewhere between $7-12. As long as the seller has paid the dues on the stripped points on a resale contract, the value of a stripped point on that contract should also be somewhere between $7-12. Where you fall on this scale depends on the resort demand and the dues cost The value of a stripped VGF point (high rental demand, low dues) is higher than the value of a VB stripped point (high dues, modest rental demand). But $8 probably isn't a bad rule of thumb. I would probably start at $9-10. Or, more accurately, check out average prices on the rental board and subtract the actual dues cost.

Essentially, what I'm suggesting is to price a stripped contract as you would if you bought it loaded and subtract from that price the amount it would cost for the seller to rent those points (acknowledging that the seller, not you, paid the dues on them). That's the fairest way to go about this issue.