The large number of new Aulani resale contracts??

[VGCgroupie]

I'm saying I've seen individuals with several dozen contracts at a single resort bow out all at once, so I don't find it one bit surprising that a broker or other individual who owns dozens of contracts for rental income might strip them all before bowing out of the game. If an individual can have dozens of contracts at one resort, a broker could have multiple times that.

Now, the REASON for getting out, and out of one resort in particular, is certainly curious.

I wish someone who bought one of these was on the boards so we could get some details.

 

[disneylandtour]

For what it's worth, I reached to two brokers I've worked with (neither related to the dump of Aulani). Both said it was a broker dumping ex-rental contracts. Both were surprised as to how large the dump was.

 

[davidhr]

I’m at Aulani (first trip, awesome BTW) right now and out of curiosity have been following this thread. I’m also in the market for a non-Aulani contract and have noticed the massive influx of AUL contracts lately.

I know people have different risk profiles, but I personally can’t imagine taking the risk of owning 8k points of a timeshare and all the work required to rent those points for that after-taxes-after-dues profit. It’s something that I can’t comprehend. But maybe that’s why I’m not rich

 

[VGCgroupie]

I’m at Aulani (first trip, awesome BTW) right now and out of curiosity have been following this thread. I’m also in the market for a non-Aulani contract and have noticed the massive influx of AUL contracts lately.

I know people have different risk profiles, but I personally can’t imagine taking the risk of owning 8k points of a timeshare and all the work required to rent those points for that after-taxes-after-dues profit. It’s something that I can’t comprehend. But maybe that’s why I’m not rich

Isnt Aulani amazing?? Aside from the whole soda fountain refillable mug fiasco I have heard about right now.

 

[davidhr]

Isnt Aulani amazing?? Aside from the whole soda fountain refillable mug fiasco I have heard about right now.

Oh yeah, that was a not so nice surprise. And those prices for soda bottles are outrageous. Even at the ABC they’re on the expensive side. Supposedly the new machines/mugs are coming this week. With my luck probably the day I leave.

 

[disneylandtour]

I know people have different risk profiles, but I personally can’t imagine taking the risk of owning 8k points of a timeshare and all the work required to rent those points for that after-taxes-after-dues profit. It’s something that I can’t comprehend. But maybe that’s why I’m not rich

I do not know the person with 8k points. But I imagine it's different than renting out extra points through David's. I would assume this person created an LLC. The purchase price of points are depreciated every year as they lose value. This person then is also (likely) not being 1099-ed for rental income, but instead that is funneled into (likely) a home business. Perhaps a bedroom is being rented as an office to this business. And the person (likely sole owner) is being paid a salary, which means lower taxes.

So anyway, let's say this person bought points carefully. And "maybe" has had them for a while. Likely a LOT came from large and cheap resale contracts. So let's guess that the average cost per point per use is around $10 (amortized purchase price plus yearly MF). (My per point use with my SSR points is just a hair over $10 right now, but yes, I bought them cheap.) Let's say this person is renting them between $20 and $22. If they're able to snag some VGC or similar reservation, they can rent those as confirmed reservations for more. But let's average this at $21. Minus out the $10 per use value. That leaves an income of $88k for simply renting points, some of which income can be sheltered, from bedroom room rental, etc. And there you go--for a stay-at-home, part-time business, it's not bad. Plus at least some of your trips to Orlando can be viewed as a business expense.

 

[AstroBlasters]

I do not know the person with 8k points. But I imagine it's different than renting out extra points through David's. I would assume this person created an LLC. The purchase price of points are depreciated every year as they lose value. This person then is also (likely) not being 1099-ed for rental income, but instead that is funneled into (likely) a home business. Perhaps a bedroom is being rented as an office to this business. And the person (likely sole owner) is being paid a salary, which means lower taxes.

So anyway, let's say this person bought points carefully. And "maybe" has had them for a while. Likely a LOT came from large and cheap resale contracts. So let's guess that the average cost per point per use is around $10 (amortized purchase price plus yearly MF). (My per point use with my SSR points is just a hair over $10 right now, but yes, I bought them cheap.) Let's say this person is renting them between $20 and $22. If they're able to snag some VGC or similar reservation, they can rent those as confirmed reservations for more. But let's average this at $21. Minus out the $10 per use value. That leaves an income of $88k for simply renting points, some of which income can be sheltered, from bedroom room rental, etc. And there you go--for a stay-at-home, part-time business, it's not bad. Plus at least some of your trips to Orlando can be viewed as a business expense.

So 88k in cash flow off of a $720k asset (8,000 points at $90pp) that will go to $0 in about 36 years.

NPV -$720,000
PMT 88,000
FV 0
N 36

I/YR 12%

Yeah, I’d invest in that…

 

[VGCgroupie]

So 88k in cash flow off of a $720k asset (8,000 points at $90pp) that will go to $0 in about 36 years.

NPV -$720,000
PMT 88,000
FV 0
N 36

I/YR 12%

Yeah, I’d invest in that…

Actually enticing if it were just an investment since I love the thrill of the chase of resales. But, 88k per year here comes with work so more like a job that pays 88k per year rather than just getting a return on investment.

I assume with such a volume of renting you are bound to get a large share of people who really make you work for your money. ie: people can be real jerks.

 

[AstroBlasters]

Actually enticing if it were just an investment since I love the thrill of the chase of resales. But, 88k per year here comes with work so more like a job that pays 88k per year rather than just getting a return on investment.

I assume with such a volume of renting you are bound to get a large share of people who really make you work for your money. ie: people can be real jerks.

You are also taking a concentrated risk since DVC could make commercial renting more difficult. That in and of itself could have been a reason this entity chose to sell.

Especially if an entity is booking up a lot of the hotel room and standard view studio inventory and then renting them out…..

 

[Massachusetts]

I have been following this thread and trying to wrap my head around it. I think there are a two likely explanations. Short term rental law changes or very strong dollar vs. Yen or Yuan.

 

[AstroBlasters]

I have been following this thread and trying to wrap my head around it. I think there are a two likely explanations. Short term rental law changes or very strong dollar vs. Yen or Yuan.

The current working thesis of the group is a single large commercial broker/renter.

 

[Massachusetts]

The current working thesis of the group is a single large commercial broker/renter.

I saw that, the group is leaning towards old/dead/tired? Humans don't give up money streams unless they have a better money stream or they are scared of a major threat to their stream.

 

[VGCgroupie]

I saw that, the group is leaning towards old/dead/tired? Humans don't give up money streams unless they have a better money stream or they are scared of a major threat to their stream.

Yeah there's got to be a reason, thats likely not a personal one.

 

[AstroBlasters]

I saw that, the group is leaning towards old/dead/tired? Humans don't give up money streams unless they have a better money stream or they are scared of a major threat to their stream.

Agreed

 

[CastAStone]

I saw that, the group is leaning towards old/dead/tired? Humans don't give up money streams unless they have a better money stream or they are scared of a major threat to their stream.

Or they’re old and just want a really nice boat and so they sell their remaining shares in the Home Depot and buy their dreAMBoat.

 

[Massachusetts]

Or they’re old and just want a really nice boat and so they sell their remaining shares in the Home Depot and buy their

So it is only Auani? Does not add up for me.

 

[Massachusetts]

If you are hard core dvc investor/believer why choose to flood the market with Aulani? If this is an Estate thing the settlement agent should be drawn and quartered.

 

[AstroBlasters]

If you are hard core dvc investor/believer why choose to flood the market with Aulani? If this is an Estate thing the settlement agent should be drawn and quartered.

Now pair that with the fact that almost all of the contracts are stripped and selling at high prices….. not priced to sell…

 

[ocdb8r1]

I do not know the person with 8k points. But I imagine it's different than renting out extra points through David's. I would assume this person created an LLC. The purchase price of points are depreciated every year as they lose value. This person then is also (likely) not being 1099-ed for rental income, but instead that is funneled into (likely) a home business. Perhaps a bedroom is being rented as an office to this business. And the person (likely sole owner) is being paid a salary, which means lower taxes.

So anyway, let's say this person bought points carefully. And "maybe" has had them for a while. Likely a LOT came from large and cheap resale contracts. So let's guess that the average cost per point per use is around $10 (amortized purchase price plus yearly MF). (My per point use with my SSR points is just a hair over $10 right now, but yes, I bought them cheap.) Let's say this person is renting them between $20 and $22. If they're able to snag some VGC or similar reservation, they can rent those as confirmed reservations for more. But let's average this at $21. Minus out the $10 per use value. That leaves an income of $88k for simply renting points, some of which income can be sheltered, from bedroom room rental, etc. And there you go--for a stay-at-home, part-time business, it's not bad. Plus at least some of your trips to Orlando can be viewed as a business expense.

So 88k in cash flow off of a $720k asset (8,000 points at $90pp) that will go to $0 in about 36 years.

NPV -$720,000
PMT 88,000
FV 0
N 36

I/YR 12%

Yeah, I’d invest in that…

I think this is incredibly over-optimistic.

1) Cost per point per use of $10 is very unlikely. Even Aulani subsidized contracts are closer to $11 and absent a small dip during COVID they are cheaper than ever;

2) "Likely a LOT came from large and cheap resale contracts." - this is clearly not the case as nearly all the listings being discussed are 250 or lower sized contracts;

3) There's no accounting for the transaction/acquisition costs in the above cost per point. While they could have minimized this as a buyer, it's not zero;

4) The above assumptions are based on point rental prices going up at the same rate as annual dues. They have not thus far tracked that trajectory;

5) I think an average of $21/point is generous even if you might be "running" the business and renting direct (so you're not paying any commission). There will inevitably be breakage that will bring that down. Heck, the site with the largest number of these new Aulani listings is renting points for more than 10% below that for a glut of available reservations during the next 4 months;

6) Any benefit you gain from deducting "business" expenses is swamped by the fact you're not paying yourself any salary in the above model.

All things considered, maybe you're making a 9-10% return each year with your principle going to zero in year 36. Not something I'd personally be interested in compared to other passive investment alternatives. Now, if you could also perfectly time an exit from the market such that you recouped a decent portion of that initial capital (rather than holding to year 36 and taking zero), perhaps there is something there....and perhaps that's exactly what we're seeing.

 

[BrianLo]

My new running conspiracy theory is I accidentally called out a major commercial holding rental operator by name… then they are panic liquidating 48 hours later. Or Disney was put on their track.

That said, I doubt this is an ominous sign. It’s a single person mass liquidating. Which means they are in financial trouble or actually got in trouble from Disney. Based on the volume, it very well could be the latter. We don’t know what Disney line in the sand on commercial renting is, but if there is one, this should be over it.