What happens at the end of the contract period??

[wishiwasatdiz]

Newbie post: I understand that Disney is offering interest in SSR for a minimum investment of $14700, plus renewal fees, for ??30 years??. I understand that the $ per point renewal fees will continue to rise each year, affecting me annually, as does the $ per point initial purchase cost, affecting future purchasers. But what happens to the INITIAL investment AFTER the 30 year period lapses? Does my $14700 vanish? If I set parameters correctly on my finance software, that $14700 would be worth nearly $27K after 30 years, assuming only a 2% return, not factoring in taxes. Do I just "give" this money to Walt?

I can see that Disney can keep the value of resales up through the ROFR provision, which works to my advantage at the point I want to sell, but is even THAT enough of a stimulus to maintain a purchase's value toward the end of its 30-year life??

This does seem to be some form of an ASSET that I am purchasing, but I have a hard time calling it an INVESTMENT. Right?!?!?! Like the difference between a new/used car and an Auburn. Even discounting the annual maintenance fees as money we would be spending every year or so at Disney anyway, it seems that the $14700 upfront should be classified more as money stuck in an envelope between the mattresses; not earning value, but not losing it either.

I LOVE Disney and I am interested in this concept of vacation ownership, but I don't want to throw away a year of college education$ because I am missing a critical point.

Any insight??

 

[tmt martins]

You are prepaying for future vacations at today prices.

The price pre point is at 50 years or 49 now.

The annual dues do increase but not at the rate of CRO on most occasions.

Asset NO savings YES

 

[bom_noite]

No, you at the end of the contract - Uncle Walt gets it!

You are pretty astute in that you picked up on the fact that the ROFR does keep the value up! As I have stated on other posts - after 4 years I could sell our interest and be at break even (after my investment and dues). And, I will have enjoyed 4 fantastic vacations in the best rooms at WDW!

Obviously - we got very lucky and bought in to BCV at the right time. Since our purchase it has gained in popularity and I can resell at $14 more then I bought in at! That is very good fortune - and - I do not think that if you bought in today you would be as lucky.

It is possible that DVC could extend the contracts - but - if they did that it would certainly come at some cost! I am not sure if even Disney understand the end game at this point!

So, is it an investment? No. Will it lose me money? Based on past results - No. Of course that can change in a heartbeat depending upon world events (but so would your money in the stock market).

We have two kids - 15 and 12. If push comes to shove we have already discussed that we may need to rent our points out for a few years to help with the College costs. It certainly will not fund college - but - if we need it that bad it will take priority over a WDW vacation.

But, if you put the question to my kids: DVC or College - I think DVC is gonna win!

 

[Dizzy4Dizney]

What happens at the end of the contract???????
80,000 crying Disney fans!

 

[Poohs Pal]

Dizzy4Disney, Or 80,000 disney fans relative's because in my case I probably won't be around by then . Or as my oldest DS said As Long As I Own A Piece Of Disney mom will still be AROUND. I don't think he said this with a smile either . Just get me a hover round and i'm there . Susan

 

[holcomb-mania]

At 12:01am on February 1, 2054 I'll be gripping the door frame as the DVC stormtroopers try to drag me out! I'll be 85, but I'll be FEISTY!

 

[Poohs Pal]

Well i'll be 99.5 years young. I'll probably have to lock myself in the bathroom as i'll be to weak to hang to the door frame for to long. Plus if i'm not wearing depends i'll be glad to be in the bathroom . Susan

 

[Boston5602]

Ppsssssttttt DVC told me if we play REALLY nice with each other and behave they'll let us extend our contract by 25 years for only $75,000.00 by then it will be worth it

 

[RoyalCanadian]

By that time we'll all be scrambling to get those Handicapped Accessible villas we all avoid right now.

 

[magicmama]

I'll be 101 in 2042 and cruising around Disney on a scooter!!!

 

[twinklebug]

Just adding 2 cents in answer to OPs question ...

Try thinking of DVC as a car purchase.

1st question before buying: Do you NEED your car? Do you NEED your annual, bi-annual or every other annual Disney Fix? If this answer is No, stop here. DVC probably does not make sense for you.

2nd question: Do you expect the value of your car to go up as you use it through the years? No (If you do you need to invest in a collectors piece) If you expect to get more money out than you put into DVC you need to invest elsewhere.

3rd question: Do you need to maintain your car? Tires, registration, insurance, oil, engine tuneups, AC.... Yes. Just like with a car, expect to spend $ on your MF just to keep it running well.

4th Q, & getting to the main point: After using the car for 40/50 years would you expect to be able to get any money back out of it? Well, perhaps as raw materials, but in reality No. The car served it's purpose well and was worth the money spent. Time to buy a new one! (If you still have that driver's licence at 95 years old!)

Just my 2 cents plus some.

 

[Doctor P]

One of the errors in the original analysis is that the amount of your original deposit will keep decreasing since you will be taking vacations. That is, each year the value of the vacation you take will be more than the maintenance fees. Thus, to make the analysis fair and accurate, you need to subtract the difference from your original investment each year (as if you were paying cash for your vacation). This reduces the interest you could plan on getting from the investment each year. That's why it is a prepaid vacation plan for analysis purposes.

 

[Dean]

One of the errors in the original analysis is that the amount of your original deposit will keep decreasing since you will be taking vacations. That is, each year the value of the vacation you take will be more than the maintenance fees. Thus, to make the analysis fair and accurate, you need to subtract the difference from your original investment each year (as if you were paying cash for your vacation). This reduces the interest you could plan on getting from the investment each year. That's why it is a prepaid vacation plan for analysis purposes.

Agreed, as long as one spends more than the yearly maint fees. However, a 2% return after taxes is a very low assumption and should be more in the 5-8% range depending on the type of "investment" used.

 

[Doctor P]

Agreed, as long as one spends more than the yearly maint fees. However, a 2% return after taxes is a very low assumption and should be more in the 5-8% range depending on the type of "investment" used.

Agreed, although a 2% REAL return after taxes is a pretty solid return.

 

[Dean]

Agreed, although a 2% REAL return after taxes is a pretty solid return.

I wouldn't agree. One can get 4.25% easily on a CD, that is closer to a 3% after tax return even at the highest tax bracket. One can easily get 3.5% on very secure tax free bonds and essentially 5% of long term treasuries. And if one is willing to do a long term CD, in the 20 year range, one can get upwards of 6%. If one deposits in a very conservative Mutual fund there are no guarantees but expectations should be in the 8% long term range, 5-6% after taxes depending on the state. But even if one simply keeps up with inflation and allots the amount of dues for yearly vacations, one could be ahead depending on specifics. This is esp true for someone who doesn't use DVC to a reasonable advantage.

 

[Doctor P]

I wouldn't agree. One can get 4.25% easily on a CD, that is closer to a 3% after tax return even at the highest tax bracket. One can easily get 3.5% on very secure tax free bonds and essentially 5% of long term treasuries. And if one is willing to do a long term CD, in the 20 year range, one can get upwards of 6%. If one deposits in a very conservative Mutual fund there are no guarantees but expectations should be in the 8% long term range, 5-6% after taxes depending on the state. But even if one simply keeps up with inflation and allots the amount of dues for yearly vacations, one could be ahead depending on specifics. This is esp true for someone who doesn't use DVC to a reasonable advantage.

None of those are REAL returns, Dean. We are on the same page. The real return on the CD would be negative under most circumstances. The real return subtracts off a percentage for expected inflation, riskiness of the asset, and the time value of money. Right now, a real return of 2% would require on most assets a nominal return of 7-8%, IMHO.

 

[Dean]

None of those are REAL returns, Dean. We are on the same page. The real return on the CD would be negative under most circumstances. The real return subtracts off a percentage for expected inflation, riskiness of the asset, and the time value of money. Right now, a real return of 2% would require on most assets a nominal return of 7-8%, IMHO.

That is a different ballgame. One only has to keep up with inflation at around 3-4% and spend the yearly amount of the dues to come out way ahead since DVC will be worth zero at the end and be a depreciating asset WELL ahead of that time. And that assumes you didn't finance which would shift the curve dramatically away from buying. NO question DVC is a great option for certain situations, but far too many buy emotionally with NO idea of whether it truly will work for them over the long haul.