Tell me how crazy my logic is

[kmfdm]

I have been coming to this site for years and have receive a ton of amazing advice. Every time someone asks my question before I get the chance, so this is my first post.

I am a DVC member, we have enough points for a vacation 2 out of every 3 years. We want to go this year but do not have the points. If I rent points it will cost me $3000 for the room we want (rack rates are $4200), if I buy a 200 point contract to get the room we want it will cost $15780 including 1 extra year of annual dues. From what I have seen prices have been very stable, so if I sell a year later and get $3 less per point I am only down $1500. Compared to an investment, that means I made 10% off of my money, which in one years time is really good given current bank rates. I know DVC is not comparable to a standard investment, but if a I can save $1500 on money which is currently only making me 1.5%, isn't that a good move?

 

[disneynutz]

Don't forget to include the sales commission.

Bill

 

[MountainMouse]

Don't forget to include the sales commission. Bill

Exactly, it's around 8-10% commission to the broker paid by the seller. Also, how long would it take to close? Can you get your preferred room if you wait?

 

[kmfdm]

Is sales commission the same as closing costs? Or is it a separate fee? I did include closing costs.

 

[supersnoop]

Is sales commission the same as closing costs? Or is it a separate fee? I did include closing costs.

Commission s separate and comes out of the sellers proceeds.

 

[LisaS]

When you buy a resale contract, the buyer usually pays the closing costs and sometimes also a partial dues reimbursement to the seller. You can try negotiating with the seller to have him/her pay them but you may not be successful so you need to factor those into your purchase costs.

When you later sell that contract there will be a 10% commission due to the broker so you need to subtract that amount from your projected proceeds from the sale.

 

[dvcdream4fld]

If your Assumption is DVC resale prices are stable (I believe this true in the short term window 3-5 years because of poly and other future planned new dvc) then wait another year or two and sell your points for a profit to cover your closing costs.

 

[dvcdream4fld]

Meant rent your points for a year or two.

 

[kmfdm]

Thanks for all the information. I knew I was asking the right people.

 

[Dean]

I have been coming to this site for years and have receive a ton of amazing advice. Every time someone asks my question before I get the chance, so this is my first post.

I am a DVC member, we have enough points for a vacation 2 out of every 3 years. We want to go this year but do not have the points. If I rent points it will cost me $3000 for the room we want (rack rates are $4200), if I buy a 200 point contract to get the room we want it will cost $15780 including 1 extra year of annual dues. From what I have seen prices have been very stable, so if I sell a year later and get $3 less per point I am only down $1500. Compared to an investment, that means I made 10% off of my money, which in one years time is really good given current bank rates. I know DVC is not comparable to a standard investment, but if a I can save $1500 on money which is currently only making me 1.5%, isn't that a good move?

It makes no sense to buy to sell again in a year or 2. IMO it never makes sense to buy with specific plans to resale later in any circumstance. If it's just one extra trip I'd pay cash in some way or stay off property. It might be a good chance to try something different. If one were looking to go slightly more often than previously then a smaller contract that was enough to get the points together for the extra trip with banking/borrowing and wouldn't give a large long term surplus might be best.

 

[djohn06]

"
The only scenario I can see this working for you is if you bought a fully loaded contract with a different use year. You could then Book all banked points for a trip and then transfer all points to your other contract and then turn around and sell it.

Example 100 point AKV contract for $80 plus closing $500. Total $8,500. Seller pays all maint fees. You also have 200 points left that you transfer to your other UY.

You then sell those 200 points at $14 per point for a total of 2,800. Net effect of your purchase plus your points sold is you paid out $5,700.00.

End of year you now sell a stripped contract for $74 on 100 points. Subtotal $7400. Minus 10 percent commission and other seller related fees of $100. That would put you around $840 in fees. Your sell would net you $6560.

You would actually make $860. I'd say if this scenario presents itself, GO FOR IT!

 

[bakerworld]

Dolphin - love that place

 

[HokieGCC]

So, you can probably make it work to save a few hundred dollars. However, you are risking ~$15K if the market crashed. So, I wouldn't do it....not to mention all the work it takes to buy and then sell a contract.

 

[djohn06]

If the WDW market crashed in 9 to 12 months, it would be indicative of much larger issues like higher interest rates, unemployment and real investment losses to deal with. DVC would be the least of your worries. Also, in the scenario I presented, the OP retained 100 points and $800. The combined value is probably more like $2,200. Since the OP was looking for 200 points, it's more like $4,400.

 

[MrInfinity]

I have been coming to this site for years and have receive a ton of amazing advice. Every time someone asks my question before I get the chance, so this is my first post.

I am a DVC member, we have enough points for a vacation 2 out of every 3 years. We want to go this year but do not have the points. If I rent points it will cost me $3000 for the room we want (rack rates are $4200), if I buy a 200 point contract to get the room we want it will cost $15780 including 1 extra year of annual dues. From what I have seen prices have been very stable, so if I sell a year later and get $3 less per point I am only down $1500. Compared to an investment, that means I made 10% off of my money, which in one years time is really good given current bank rates. I know DVC is not comparable to a standard investment, but if a I can save $1500 on money which is currently only making me 1.5%, isn't that a good move?

Hi,
I guess the first question is why your money is only making you 1.5%. That's horrible. If you have $16k sitting in a bank you really should talk to an advisor. Or just open an etrade account and pick a stock you like and buy some of that. You should be earning 5%-6% on cash.

Your math sounds okay. But buy at $79, sell a year later at $76? Is that really realistic? Don't forget you'll pay some fees, and selling might be rough.

So no, I wouldn't do this just for the flip. There's too many variables. You have to tie up too much money. You could be earning 5% on more liquid assets instead. You don't have to try to sell them later.

Don't get me wrong I don't feel DVC is a bad investment. Rather it can be good, but only if you want to expand your ownership for a longer while.

That's just my take.
-mike

 

[dvcdream4fld]

We keeping back to this. DVC is not an investment it is a contract that has a fixed amount of points worth a certain amount of nights at a deluxe hotel. Historical data has shown that unlike other timeshares, because disney rofr, and rising prices of similar disney accommodations, the prices have generally increased. I don't recommend dvc as an investment, but if you can afford it and you enjoy disney, history data supports that you can sell your dvc for more than you purchased. The alternate which includes keeping your dvc and renting your points for much more than your annual dues is also ok with me.

 

[disneynutz]

We keeping back to this. DVC is not an investment it is a contract that has a fixed amount of points worth a certain amount of nights at a deluxe hotel. Historical data has shown that unlike other timeshares, because disney rofr, and rising prices of similar disney accommodations, the prices have generally increased. I don't recommend dvc as an investment, but if you can afford it and you enjoy disney, history data supports that you can sell your dvc for more than you purchased. The alternate which includes keeping your dvc and renting your points for much more than your annual dues is also ok with me.

We sold a few contracts just a couple of years ago and took a hit of $10,000. It all depends on timing, ROFR, the economy and how many owners are selling at the time.

Bill

 

[MountainMouse]

I just can't see how buying for a year can be a good idea. My guess is that there won't be a profit, most likely case is that prices remain stable and you lose a few bucks in broker fees. More work than reward. Now if you've been wanting enough points to go yearly and you're spending on the rent anyway then you could factor the rent cost savings in to the point purchase, probably saving $8/point on the purchase. This would be if you had to pay $14/point to rent versus maintenance fees $6/point--AKL is a little over this.

 

[Dean]

I just can't see how buying for a year can be a good idea.

That's because it's not, there's no way to justify it. Personally even if one plans to sell in 10 yrs it's likely not a good choice but at least it's understandable in that situation.

While DVC isn't an investment per se, I think it's still reasonable to talk in terms of DVC vs an investment. It's a large chunk of change that would/should be invested otherwise in most cases and one still needs to consider the cost to be reasonable. I think one of the issues for many is that it's an incremental decision. First one decides to buy in, then they talk themselves into more points, then they talk themselves into a higher cost resort. All of a sudden a $10K cost turns into $30K up front then many compound the issue by financing. Very much like buying a car only worse in many aspects including the actual choice, financing, overextending, etc.

 

[dvcdream4fld]

The same statements can be said for any purchase. If you can't afford to buy something and finance it and then your forced to sell low, you are likely to "lose" money. Ok so if you call it investment and you spend $15k ( no financing) 200 points/yr for a period of 40 years. Let's just assume you rent your points for an average profit of $5/point, you would have $40,000 and now subtract ur initial investment then you have $25,000. Let's say instead, you rented half your points to cover your annual fee and used your points to stay 5-days per year in a studio, which has the going rate of $300/night. Essential this $1500 per year gain and for 40 years this amounts to $60,000 worth of hotel stays. Subtract your initial investment and this a gain of $45000.