Value of DVC points - 2023 case example

[Sandisw]

BLT could be bought for ~$101 (or even lower) in April through August 2009 and November 2010. Doesn't change the S&P growth too much, but no need to cast doubt on their BLT purchase.

Yeah, we only paid $92/point when we bought in 2009.

I think the whole TVM aspect is something only individuals can decide how important it is on calculations for things for DVC.

For us, it was not worth it to worry about. I value my time and enjoyment of owning and going to WDW with DVC more..with no regrets that my accounts are not as large as they could have been!! Lol

 

[TeamRiley]

Okay, haters win. I try about every 12-18 months to actually engage in fact-based discussion with fellow owners and am always surprised at the propensity for negative / contrarian responses. Even when I lead off by saying it is one example, which came to me completely by chance, but is REAL in that it is a booking I was paid to make by a renter who would rather pay the rental store than Disney given the REAL cost shown for the same reservation on Disney.com on the same day, the instinct is to attack and question rather than just say “yeah, that makes me feel better about being part of this group.”

I’ll go back in the groundhog hole and hopefully remember that this is a hopeless cause. Unfortunately, I’m a hopeless optimist, so I’ll likely fall for it again next year.
TTFN

Don't worry about what all the hard core number crunchers say. If you just sit in a tiny apartment, never eat anything but hot dogs and never go anywhere, you will have tons of money saved up when you die cold and alone.

Regardless of what anyone says or the numbers that they crunch, the truth is this:

If you plan on consistently going there, DVC gives you an awesome vacation and accommodations for the same price as other mediocre rack rate options.

You can time value Money all you want, but you also need to time value Fun and relaxation.

 

[Prince John Robin Hood]

If people are going to threadjack about investing DVC funds into the stock market, maybe they should take into account tax rates and the depletion of the portfolio to pay rack rates?

Had I invested into SPY index fund instead of buying VGF I'd be down currently. I'd also have drawn down on the falling investments to cover a cash room. I guess we could stay at roach motels to give my SPY index time to recover. I'd just explain to the kids that in the long term this strategy should pay off and bed bugs build character.

We bought DVC so we wouldn't have to pay rack rate at Poly and GF. The stock market would not have kept up.

 

[ehh]

While I track a lot of DVC things, I've never actually done the math of the "invest and withdraw" strategy to compare, thought I'd give it a try.

For simplicity, only going to look at my first contract and only rack rates.

Before anyone mentions cash rate discounts: I've also tracked published discounted rates for our exact stays and with an AP discount we would have only saved 7.5% compared to rack rate (with guaranteed availability, and we all know discount availability is never guaranteed and often non-existent), as we have often stayed at resorts or dates not included in discounts. Public discounts would have saved even less.

For the investment side, let's say my Dec 2016 purchase of $34,868 (after closing/contract prep, after 2016 dues, but ignoring CC cashback) was invested in an S&P500 index fund. If left untouched, this fund would have grown ~80% as of today. I'd also invest the dues annually on Jan 15 (ahead of the actual schedule I pay them on, as I pay monthly).

For deductions, I'd subtract the rack rate (which I've tracked for every stay) on the first day of the stay (or the first day the market was open during the stay if stays began when the market was closed).

All said and done, on December 27, 2022 my investment would have gone $106 into the red. Consumed in just over 6 years despite ~70% growth from the index fund (as of Dec 27, 2022), if untouched.

My combined rack rates were $57,689 and the combined contributions were $43,342, so it was definitely worth something (around 33%). But now I'd have no more future value in the hypothetical investment fund while my Poly contract definitely has future value (both in 'dividends', the stays, and resale).

I was actually really surprised by this considering the relative strength of the S&P 500 since Dec 2016, I would have guessed I'd drain the hypothetical investment in another 5-10 years, not a month ago.

 

[Prince John Robin Hood]

While I track a lot of DVC things, I've never actually done the math of the "invest and withdraw" strategy to compare, thought I'd give it a try.

For simplicity, only going to look at my first contract and only rack rates.

Before anyone mentions cash rate discounts: I've also tracked published discounted rates for our exact stays and with an AP discount we would have only saved 7.5% compared to rack rate (with guaranteed availability, and we all know discount availability is never guaranteed and often non-existent), as we have often stayed at resorts or dates not included in discounts. Public discounts would have saved even less.

For the investment side, let's say my Dec 2016 purchase of $34,868 (after closing/contract prep, after 2016 dues, but ignoring CC cashback) was invested in an S&P500 index fund. If left untouched, this fund would have grown ~80% as of today. I'd also invest the dues annually on Jan 15 (ahead of the actual schedule I pay them on, as I pay monthly).

For deductions, I'd subtract the rack rate (which I've tracked for every stay) on the first day of the stay (or the first day the market was open during the stay if stays began when the market was closed).

All said and done, on December 27, 2022 my investment would have gone $106 into the red. Consumed in just over 6 years despite ~70% growth from the index fund (as of Dec 27, 2022), if untouched.

My combined rack rates were $57,689 and the combined contributions were $43,342, so it was definitely worth something (around 33%). But now I'd have no more future value in the hypothetical investment fund while my Poly contract definitely has future value (both in 'dividends', the stays, and resale).

I was actually really surprised by this considering the relative strength of the S&P 500 since Dec 2016, I would have guessed I'd drain the hypothetical investment in another 5-10 years, not a month ago.

The numbers for me were even worse as I bought in 2021. If we were to use the cost of renting DVC points instead of rack rate it would help the invest strategy but I'd still be way underwater.

 

[happythoughts & pixiedust]

The easy solution to the time value of money question is to perform a present value analysis. How much money would you need today to fund the purchase of your contract and all future dues payments assuming a reasonable return on your initial lump sum and a reasonable rate of inflation for dues.

Then you take that present value amount that will cover all the costs of buying and owning your contract for its remaining life and use it to calculate the annually inflating payment it could generate each year. Again, you have to assume a reasonable rate of return on the lump sum and a reasonable inflation rate for alternate accommodations.

This calculation produces your “alternate payment” that the same lump sum that would cover DVC contract and all future dues would produce each year until depleted at the same date as the contract expiration.

In other words, if you didn’t trade this money for your DVC contract you could have $X a year to use for alternate lodging instead.

Divide this payment by the number of points in your contract and you get today’s cost per point if you hold your contract to expiration.

Most people will be surprised that this number doesn’t work out to be all that different than the quick divide purchase price by years remaining and add current year dues calculation that most people make. It does always work out to be more - about 10 to 20% on average depending on assumptions for average return and inflation rates. But that’s only around $2 per point more than the quick math and in OPs example doesn’t make much of a difference.

That also doesn’t take into consideration any resale value which would further decrease the total lifetime per point cost. You could add this into your present value analysis by assuming you’d be left with a certain amount of money at a certain future date. This would correspondingly reduce the amount of the alternative inflating payment because you couldn’t spend the original lump sum down to zero.

My own PV analyses usually show the most economical contracts to own cost roughly $12-13 per point if held to expiration (in todays dollars). Next year the PV will show they cost a little more because contracts and dues will have gone up - but so will everything else (including alternate accommodations). This usually puts an average studio at around $250/nt. - in other words, the money used to buy and maintain one night in a DVC studio room could today produce a payment of around $250. Next year it would produce a payment slightly higher - around $260.

So you decide - would you rather get the room at Cooper Creek, Bay Lake, or Poly for the $250, or draw the $250 from your cash pile and go buy a room for cash? The people who say it’s break even aren’t doing the math right. You’ll never break even by investing your cash and paying cash rates at deluxe Disney rooms - even if you only buy discounted rooms (which often is t possible or convenient). You might break even buying discounted moderates.

OP is absolutely correct - there are definitely instances in which you can save 80% off the cash rate. OP is not saying this occurs every time, nor over time should you expect the savings to come out this well when averaged. But my personal experience is that I’ve typically saved around 70% off the trips I’ve taken because when I chose to go discounts were not available. Sometimes it’s only 40%. Sometimes it’s better than 80%. All depends on room and specific timing.

There is no arguing that for a vast many DVC owners, their contracts have given them immense savings over their ownership period.

 

[BeachClub2014]

The value of DVC points in 2023 is the same as always: did you use them the way you wanted to use them? If so, then those points have a lot of value. For us, its a really simple calculation. The initial buy in is a sunk cost, the annual dues are what they are, and the time spent with family and friends at wdw is what it's all about. We have 27 nights booked in 2023, including being at OKW now. Without our buy in to DVC, that never happens for us. The commitment to family vacations is the true value, not theoretical returns on money over time.

 

[Bearval]

Same reply as to other poster:
The present value of the $29,700 spent (what the 294 points actually cost 12 year ago) is $55,000. Using that as the cost basis for the 294 points only increases the 2023 price per point by $1.72. So, you now get a cost with MF of $3,282.66 vs the $15,468.75, so 79% savings off booking today or, in my case, $2,009 in cash realized by renting at ($18/pt * 294 = $5,292) for a profit margin on my $3,282.66 cost of 61%.

$29,700 invested for 12 years at an annual return of 9% is $83,536.14 (9% is the long term average of the stock market the past 10 year average is 8.91%) so it would depend on if you want to use the value of money spent going by the inflation rate or if it was invested in an index fund would determine your savings.

 

[WilsonFlyer]

Y'all don't have nearly enough to worry about.

 

[mort1331]

You all are missing the one main cost. Keeping my wife happy in a 1bdrm and not a hotel room with the kids. Priceless. And keeps everyone happy.

 

[DonMacGregor]

You all are missing the one main cost. Keeping my wife happy in a 1bdrm and not a hotel room with the kids. Priceless. And keeps everyone happy.

Happy wife, happy life.

 

[BeachClub2014]

Happy wife, happy life.

This. 100%

 

[dwg]

The value of DVC points in 2023 is the same as always: did you use them the way you wanted to use them? If so, then those points have a lot of value. For us, its a really simple calculation. The initial buy in is a sunk cost, the annual dues are what they are, and the time spent with family and friends at wdw is what it's all about. We have 27 nights booked in 2023, including being at OKW now. Without our buy in to DVC, that never happens for us. The commitment to family vacations is the true value, not theoretical returns on money over time.

Totally agree! We have been members since 1999. Early on I tried to keep track unscientifically as far as when we "broke even" just using the initial purchase price and not the dues as they were much cheaper. Actually we went into DVC with the knowledge that this is not an investment, we are buying in because we liked the idea of being able to take a vacation every year where without DVC that would have probably not happened. Also DVC allowed us to have a 1 bedroom villa when we stay vs a more moderate Disney hotel if we didn't have DVC.

 

[Spivey378]

I would have spent all my DVC money at the casino so I saved a lot by buying.

 

[crisi]

My reality - if I didn't own DVC there is no way I'd be staying in a two bedroom on site. I'd stay off site (I used to be an onsite snob, but that changed about fifteen years ago). DVC has changed the behavior and therefore does not save money, since if I were staying offsite, I'd be saving a bundle OVER owning DVC. We'd also have taken a lot fewer Disney based trips over the past twenty years, which likely would have saved even more money as even WITH DVC Disney is an expensive vacation. So it doesn't make any difference what the TVM calculation is, or what I'm using for rack rate, or what the salvage value of my points are, because my behavior is sufficiently altered by owning that any other variable works at the level of noise. And I think that for the vast majority of DVC owners, behavior is altered enough that savings calculations are worthless.

That doesn't mean DVC hasn't been a good VALUE. We've really enjoyed staying in big units, sharing with friends and relatives, having a washer and dryer in the room, and getting a good breakfast each morning. But save money? LMAO.

 

[Jayunit09]

Personally I compared what we paid to what it would cost us to rent. Comparing to rack rate is silly, i would never have spend that $$. I also factor in buying dvc ensures we will back back every other year unless we rent out the points. I like knowing we will be back.

 

[Bearval]

My reality - if I didn't own DVC there is no way I'd be staying in a two bedroom on site. I'd stay off site (I used to be an onsite snob, but that changed about fifteen years ago). DVC has changed the behavior and therefore does not save money, since if I were staying offsite, I'd be saving a bundle OVER owning DVC. We'd also have taken a lot fewer Disney based trips over the past twenty years, which likely would have saved even more money as even WITH DVC Disney is an expensive vacation. So it doesn't make any difference what the TVM calculation is, or what I'm using for rack rate, or what the salvage value of my points are, because my behavior is sufficiently altered by owning that any other variable works at the level of noise. And I think that for the vast majority of DVC owners, behavior is altered enough that savings calculations are worthless.

That doesn't mean DVC hasn't been a good VALUE. We've really enjoyed staying in big units, sharing with friends and relatives, having a washer and dryer in the room, and getting a good breakfast each morning. But save money? LMAO.

DVC doesn't save me any money, it just allows me to stay in a nicer room for the same price.

 

[croissant de triomphe]

You all are missing the one main cost. Keeping my wife happy in a 1bdrm and not a hotel room with the kids. Priceless. And keeps everyone happy.

My wife's face after we bought our first DVC contract ! And after I told her I bought more SPY S&P Index funds
Not much time-value appreciation going on there. Simple math is usually the correct math

 

[Sandisw]

Personally I compared what we paid to what it would cost us to rent. Comparing to rack rate is silly, i would never have spend that $$. I also factor in buying dvc ensures we will back back every other year unless we rent out the points. I like knowing we will be back.

We did use cash rates, but with a discount that was common around the time we bought...it was an average of 35% at the time. We didn't consider rental rates because that was something we would have never done.

 

[robinb]

If people are going to threadjack about investing DVC funds into the stock market, maybe they should take into account tax rates and the depletion of the portfolio to pay rack rates?

Had I invested into SPY index fund instead of buying VGF I'd be down currently. I'd also have drawn down on the falling investments to cover a cash room. I guess we could stay at roach motels to give my SPY index time to recover.

This.

If you're going to account for the Time Value of Money, then you also need to account for drawing down your initial investment to cover yearly trips. Each of those draw downs reduces the principal and therefor the interest. Touring Plans has an article that shows that a BLT 2BR was $900 a night back in 2012, or $7112.70 with tax for a week. @wrigleyville 's (LOVE the name!) original investment was $29,000. If they spent $7100 in 2012 instead of their DVC points they would have a remaining investment of $21,900. Now, they can invest the 2012 dues back into the picture and that was $4.22 per point, so they paid $1240.68 in dues. Add that back into the TVM investment and now they're up to $23,140 as a basis for interest in the first year. Rinse and repeat. Even if you keep the deposits at $1240 and the withdrawals at $7100, you get a negative balance at about Year 9.