Whats wrong with my thinking - looking for opinions

[CanadaDisney05]

Sorry in advance. This may be more of a ramble of my thought process. Looking for critiques.

Looking at purchasing DVC. Would like to buy enough points for a once every other year trip (probably around 100). If we decide to go in-between years, we can always stay off property or at a value. Travel in the summer as my SO is a teacher. Young family (3 & infant). We are in our early 30's.

I've been looking at Saratoga as this is generally the most economical choice. Goal is to try the different resorts, so I'm not too concerned with 11-month booking window. Any DVC resort will be a big upgrade on our regular accommodations, so I'm not too concerned with Saratoga as a backup.

The "problem" with Saratoga to me is that the contract is too long (gasp!). I know we will like to travel regularly to Disney in the near future, but I have no idea if we will still like to travel in our 50's to Disney. In my head, I like the idea of this being a relatively short contract (22 to 23 years). If I still want to travel to Disney in retirement, we can reanalyze our plans then. I don't want to be stuck paying astronomically high maintenance fees at a point in my life when I'll likely be looking to do something new. I know I can always sell, but the resale landscape in 23 years is a mystery. As a Canadian, selling also includes additional challenges like US withholding taxes that I'd rather not deal with.

My other resorts I was thinking about are things like Vero Beach (If I can snag a real low ball offer - Disney doesn't seem to be exercising ROFR there), Boulder Ridge, or possibly even Boardwalk. My concern with these is that if I want to get out in about 10 years, these will likely be worth a lot less than a Saratoga given the remaining term on the contract.

I know most don't recommend Vero Beach because of the annual dues. My though process here is that if I can snag something around $40 less per point, the break-even would be around 15-18 years depending on the resort (assuming 4% annual inflation on dues). On a 23 year contract, that's not too bad.

Advice Please?

 

[JETSDAD]

Sorry in advance. This may be more of a ramble of my thought process. Looking for critiques.

Looking at purchasing DVC. Would like to buy enough points for a once every other year trip (probably around 100). If we decide to go in-between years, we can always stay off property or at a value. Travel in the summer as my SO is a teacher. Young family (3 & infant). We are in our early 30's.

I've been looking at Saratoga as this is generally the most economical choice. Goal is to try the different resorts, so I'm not too concerned with 11-month booking window. Any DVC resort will be a big upgrade on our regular accommodations, so I'm not too concerned with Saratoga as a backup.

The "problem" with Saratoga to me is that the contract is too long (gasp!). I know we will like to travel regularly to Disney in the near future, but I have no idea if we will still like to travel in our 50's to Disney. In my head, I like the idea of this being a relatively short contract (22 to 23 years). If I still want to travel to Disney in retirement, we can reanalyze our plans then. I don't want to be stuck paying astronomically high maintenance fees at a point in my life when I'll likely be looking to do something new. I know I can always sell, but the resale landscape in 23 years is a mystery. As a Canadian, selling also includes additional challenges like US withholding taxes that I'd rather not deal with.

My other resorts I was thinking about are things like Vero Beach (If I can snag a real low ball offer - Disney doesn't seem to be exercising ROFR there), Boulder Ridge, or possibly even Boardwalk. My concern with these is that if I want to get out in about 10 years, these will likely be worth a lot less than a Saratoga given the remaining term on the contract.

I know most don't recommend Vero Beach because of the annual dues. My though process here is that if I can snag something around $40 less per point, the break-even would be around 15-18 years depending on the resort (assuming 4% annual inflation on dues). On a 23 year contract, that's not too bad.

Advice Please?

If you don't plan on selling then you shouldn't be concerned with the value in 10 years....if you are concerned with selling then you shouldn't worry about a contract being too long. You've kind of got yourself stuck in a circle on that one.

 

[CanadaDisney05]

If you don't plan on selling then you shouldn't be concerned with the value in 10 years....if you are concerned with selling then you shouldn't worry about a contract being too long. You've kind of got yourself stuck in a circle on that one.

Let me clarify. My intention is not to sell. However, one of the main draws to DVC is that their is an exit strategy if I would like to get out. 10 - 15 years is a long time from now to be able to confidently know what our likes/dislikes will be as a family.

 

[Great3]

Your post make me chuckle. With all the post I read from you, I would have thought you are dead set against buying DVC ever. But since you are asking our opinions, I would just do SSR, and not think too much if you are going to buy DVC. I would never have thought you would even consider Vero Beach with all the analysis I seen you done. Good luck with whatever you decide to do.

Great3

 

[CanadaDisney05]

Your post make me chuckle. With all the post I read from you, I would have thought you are dead set against buying DVC ever. But since you are asking our opinions, I would just do SSR, and not think too much if you are going to buy DVC. I would never have thought you would even consider Vero Beach with all the analysis I seen you done. Good luck with whatever you decide to do.

Great3

lol, maybe you misinterpreted my posts. I am not against DVC (wouldn't bother on this forum if I was). I am against DVC without a thoughtful financial analysis.

 

[JETSDAD]

Let me clarify. My intention is not to sell. However, one of the main draws to DVC is that their is an exit strategy if I would like to get out. 10 - 15 years is a long time from now to be able to confidently know what our likes/dislikes will be as a family.

Then you shouldn't worry about a contract being too long. To maintain value a longer contract will, in most cases, hold value longer. Buy where you want to stay or at the very least where you don't mind staying. It sounds like SSR is likely a good option for you.

 

[jerseyduke]

Perhaps because of my lack of knowledge with Canadian Taxes, I can not understand your thinking re: against selling. So you might have to pay some taxes, is that a big deal in Canada?

And isn't that only if you sell it for a profit? Can you not always put it on the market for the same price that you paid for it - no profit - no taxes (let disney ROFR it)

You want an asset that depreciates to zero so you do not have to deal with some taxes?

Do you think the MFs are "astronomically high maintenance fees" now, because if you do not, they wont be that in the future without significantly outpacing inflation (which is possible)

I like paying taxes (it means i have made money)

I think your aversion to selling is too much! How do you will not need the liquidate the asset for some unknown reason?

DVC is not an investment, but it is an asset.

 

[ProfessorBC]

I'm certainly no expert, but would another way to think about not losing value over the course of a contract be to rent out your points, should you decide to visit less often? Then you are not concerned about selling your contract. It seems like the value of points generally increases with time.

Also, my wife and I are in our 50's and have a resale offer for BRV waiting to pass ROFR. We actually liked the fact that the contract there ends in 2042, when we will be in our late 70's, and also love Wilderness Lodge.

 

[crvetter]

Personally SSR resale value is going to drop as the 2042 resorts get closer to expiration. At that point more desirable properties disappear (BCV, BWV, BRV) making less availability for all those at SSR that buy to "sleep" around. With the resale restrictions SSR and future resale buyers won't be able to stay at the new DVC resorts coming online. Thus I think more people will start to see this and second guess that strategy, especially when new resorts are off limits. I think in 10-15 years buy where you want to stay pretty much will be the only choice for those buying resale. Now resale turn over has been much less than expected, I think BLT has 10% in it's 10 years, OKW is about 23% in it's 27ish years but at some point this will begin to affect SSR especially when resorts that are location advantages start disappearing.

I would likely consider BRV or an unextended OKW or even a loaded BLT, which is a very good buy too. I think with BLT your resale is probably the most protected simply because of location with the ability to walk to MK, which without an extensive change to the MK landscape should always be protected.

Have you spent much time touring the different resorts? Have you stayed onsite? I think walking around a resort, for me, makes it very clear if it is a hard no in my books, which SSR was. I wanted the transportation convenience which SSR lacks because of the multi-bus stop setup. Also I wanted closer to the action. Though OKW is appealing simply because of its super low point cost per night and large rooms. One thing to add is SSR will get much nicer with the refurb starting now as the rooms are very dated, perhaps the worst of all the DVC resorts.

 

[skippytx]

I wouldn't buy into DVC in your shoes. What do the accommodations cost for your EOY trip? What room size do you plan on booking?

I'd run the numbers on renting vs buying, and staying at value/moderates vs buying as well.

SSR is the most economical choice though. Trying different resorts is getting much tougher... especially for any sort of long stay over 5 days or so. You can find days here and there, but booking a week at 7 months can be tough.

 

[CanadaDisney05]

Perhaps because of my lack of knowledge with Canadian Taxes, I can not understand your thinking re: against selling. So you might have to pay some taxes, is that a big deal in Canada?

And isn't that only if you sell it for a profit? Can you not always put it on the market for the same price that you paid for it - no profit - no taxes (let disney ROFR it)

You want an asset that depreciates to zero so you do not have to deal with some taxes?

The taxes I'm referring to are US withholding taxes on foreign sellers. I can't remember how much it is, but I think it's 25% of the selling price. Basically, the buyer has to withhold this amount to the IRS. I can then file a return to get this amount back. This usually can be more hassle than it's worth, because as a Canadian, it is not usually wise to get into the IRS system.

Do you think the MFs are "astronomically high maintenance fees" now, because if you do not, they wont be that in the future without significantly outpacing inflation (which is possible)

Running the numbers, historically MF have outpaced inflation by about 2% on average. That creates a bit of a gap in about 20 to 25 years.

I like paying taxes (it means i have made money)

So do I. I just don't like paying withholding taxes on a loss.

I think your aversion to selling is too much! How do you will not need the liquidate the asset for some unknown reason?

My concern is less about selling for cash needs, and more selling because my family no longer wants to travel to WDW regularly in the future. I'd like to say right now that this would not be the case, but it can be hard to predict your future wants.

Thanks

 

[MICKIMINI]

As a long time DVC member (1996) we have bought and sold when timing is right. Death and Taxes are inevitable so enjoy your life now and pay taxes when you sell for a profit (we've done it many times)! Forget Vero, buy on property to stay on property...$40 a point is less than we paid in 1996 (I think $62) and I haven't seen anything close to that. BWV is a very desirable resort so it is unlikely you will get what you consider a great deal, however look at it that staying near the International Gate saves time which = money. BRV are a steal right now with little chance of ROFR.

Diversify and buy two smaller, loaded contracts and alternate resorts each year. You can sell one off if you need to and smaller contracts sell within days. My DH is in his 60's and we still go every year though our trips are different for sure. Sometimes you have to step off the cliff IMHO.

 

[CarolMN]

DVC is a luxury purchase. Respectfully, my opinion is that you shouldn't buy at all unless you are willing to consider the purchase price as a sunk cost. Yes, so far, the DVC timeshares have held value and many of us could sell for more than we initially paid. However, there is no guarantee that will continue to be the case. If/When the economy experiences another downturn, the current "values" will go down - maybe a lot.

You and your spouse also have a young family to support and protect. I would only buy if you are on track with all the expenses that will entail - life & health insurance, education, emergency fund, retirement savings, etc.

IMO, you are a good candidate to be a renter, not an owner.

 

[SL6827]

Personally SSR resale value is going to drop as the 2042 resorts get closer to expiration. At that point more desirable properties disappear (BCV, BWV, BRV) making less availability for all those at SSR that buy to "sleep" around.

Very good point. Never really thought of that before. Very important note for the younger crowd wanting to get into DVC and who likes to sleep around.

 

[CanadaDisney05]

DVC is a luxury purchase. Respectfully, my opinion is that you shouldn't buy at all unless you are willing to consider the purchase price as a sunk cost. Yes, so far, the DVC timeshares have held value and many of us could sell for more than we initially paid. However, there is no guarantee that will continue to be the case. If/When the economy experiences another downturn, the current "values" will go down - maybe a lot.

You and your spouse also have a young family to support and protect. I would only buy if you are on track with all the expenses that will entail - life & health insurance, education, emergency fund, retirement savings, etc.

Got all of that well taken care of (health insurance & education are not as monumental here in Canada ). I still don't like the idea of dropping $15,000 CAD without an escape plan.

 

[SL6827]

I stayed at SSR this past April and loved it. Now I will admit I hit the SSR location lottery with that stay, but I still loved the resort, the grounds, the whole area. Now it was huge, so my lottery location did make my opinion a little bias. But I think it is a wonderful resort, and after the room refurbs, man that will just be icing on the cake.

 

[Matty B13]

I think you are better off renting DVC points out, if you plan on getting out in 10 years, really not worth the hassle to go through the buying process, to only go 5 times over 10 years if your only going every other year. Or just stick to hotel rooms, depending on how big your family is.

What "crvetter" said is spot on with the way DVC management is a handling things right now, this could change in the future, but I wouldn't count on it.

 

[jerseyduke]

Another option if you dont want to sell is dont sell. Just stop paying the dues. Who cares. I doubt disney even reports it.

My concern with VB or HHI is the seemingly increasing tropical storm activity.

This usually can be more hassle than it's worth, because as a Canadian, it is not usually wise to get into the IRS system.

Not questioning the validity of this statement, but am curious as to why? Should I have an aversion to being in Canada's equivalent of the IRS?

 

[Katy G.]

Have you ever considered renting DVC points for each trip and avoiding annual dues? When I did our math a couple years ago, it was hands down the best financial option for us to just keep renting points for DVC resorts. Just thought I would throw that out in case you hadn't considered the option yet.

 

[CanadaDisney05]

Another option if you dont want to sell is dont sell. Just stop paying the dues. Who cares. I doubt disney even reports it.

My concern with VB or HHI is the seemingly increasing tropical storm activity.


Not questioning the validity of this statement, but am curious as to why? Should I have an aversion to being in Canada's equivalent of the IRS?

From my understanding, once your in the IRS system, they almost require you to file a return annually whether you had income or not. In Canada, CRA only requires returns to be completed if their is taxable income to report. From all my understanding is that there is a lot of grey in the US tax system, and I don't want to have trouble crossing the border in the future, nor do I want to file returns forever.