Whats wrong with my thinking - looking for opinions

[crvetter]

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

They eventually file an official judgement against you in the courts in Orange County. In the USA some credit agencies show this, I know Experian doesn't report civil Judgement anymore. DVC also has a collection agency arm, Palm Financial, so I suspect they are members of the Credit Agencies thus could report if they wanted to (assuming they don't know).

 

[rg35]

VB is a bad idea because of high dues and assessments from severe weather. You don't save money in the long run even though your upfront costs are lower.

 

[dceagle01]

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.

You hit the nail on the head with that strategy in my family's case. We have a 5 year old and I have looked into DVC a lot, especially with reading all the posts on the DISboards with how active and helpful everyone is with posting. Our house will be paid off in about 12 years or less so we're hoping to look at DVC then when we don't have as many expenses and rent points until then.

 

[CanadaDisney05]

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.

Considered it, but for me it was a no. Here are my reasons (you can use in your own analysis).

1) Cost is actually really high. Generally it's about $15 to $17 per point for a rental.
2) Maintenance fees are for the most part in the $7.50 area. Purchase price will equate to about half of that amortized over the duration of the contract. If you factor in opportunity cost, it gets a bit closer depending on your expected rate of return.
3) I don't like the lack of flexibility. With DVC as an owner, you may book 11 months in advance, but you can always cancel your reservation, or move it around. Have to be careful with use years, but you can usually rent your points for something if need be.

Edit: I forgot the most important part..... Rental rates will inflate over time. Maintenance fees likely will too, but the purchase price is locked in. Assuming 4% rental rate inflation, and 2% US inflation, rental rates will be about $24.50 in today's dollars in 20 years.

 

[crvetter]

From my understanding, once your in the IRS system, they almost require you to file a return annually whether you had income or not

My understanding is that you are required to file if you exceed the threshold, for US citizens it is based on the standard deduction level, essentially guaranteeing you don't owe taxes. Any year a US citizen exceeds the threshold they are required to file a tax return if you exceed these; however, IRS only can issue any penalty if you owe taxes. Essentially the IRS will "file" a return for you assuming standard deduction only to make sure you don't owe taxes.

I would assume foreigners don't have to file if they have 0 income.. But I don't actually know about that.

 

[jerseyduke]

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.

Interesting. Not saying you are right or wrong as I honestly do not know. But I do not think expats have to file a return. And its nice that you think our government has it together enough to communicate between divisions like the IRS and Customs

Of course you have to do what you are comfortable with

 

[CanadaDisney05]

My understanding is that you are required to file if you exceed the threshold, for US citizens it is based on the standard deduction level, essentially guaranteeing you don't owe taxes. Any year a US citizen exceeds the threshold they are required to file a tax return if you exceed these; however, IRS only can issue any penalty if you owe taxes. Essentially the IRS will "file" a return for you assuming standard deduction only to make sure you don't owe taxes.

I would assume foreigners don't have to file if they have 0 income.. But I don't actually know about that.

I'm not an expert on this, but I believe you have to declare world-wide income (not just US based income). You then get a deduction for the taxes you pay elsewhere (taxes I pay in Canada) which would mean the taxes owed will likely be zero. My taxable income would exceed the threshold. For the probably couple thousand dollars at the end (if I'm lucky), not worth the hassle. It would also require hiring a US specialized tax accountant to help with the paperwork which costs as well.

 

[CanadaDisney05]

And its nice that you think are government has it together enough to communicate between divisions like the IRS and Customs

Ours is starting to. And you guys are usually only about a decade behind. So probably just in time for me to sell

 

[DougEMG]

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.

Canadians have to pay a 15% withholding tax on the sale price. Then you have to apply for a tax number and file an income tax form to try and get any money back. I have done it twice and found the process a little confusing. In short it was a total pain.

 

[jerseyduke]

You could also just rent out your points once the MFs get too high, then you would not have to sell.

Canadians have to pay a 15% withholding tax on the sale price. Then you have to apply for a tax number and file an income tax form to try and get any money back. I have done it twice and found the process a little confusing. It short was a total pain.

well that (it being a pain) is not surprising at all!

@DougEMG But, do you now file a tax return in the US every year? That is what the OP is concerned with. I would be blown away by this, although it doesnt mean its wrong.

Also, what if you dont file it, you just dont get your 15% back right?

If that is the case, I would rather have an asset (SSR) worth something that I could sell than an asset VB that is worthless (in 2042). Sell SSR. Dont file, lose the 15%. you still have money in your pocket. With VB your pockets are empty.

 

[Oozma_Kappa]

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?

You should not buy and keep staying at the values. If you'd like to splurge, then stay cash at a deluxe. This would save you money and worry. Buying a timeshare is a bit of a risk and it seems you are not ready to take on that risk. Put the money in an index fund and stay with cash. This would make more sense since you seem to be more risk adverse.

 

[jlb727]

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?

Lol We just bought SSR and we had almost the exact same thoughts as you. We will probably go every other year. We plan to “sleep around” for a while until the refurb is done. We were originally looking at HHI for low point costs, but the dues were off-putting. We originally looked at 2042 resorts because we will be in our early 60s then and that sounded good to us. We might want to do something different.

However, we settled on SSR because it’s a medium-length expiration, we like the look (especially after the renovation), and it’s economical. Finally, we determined that in 2043 if we could only stay at SSR, we would be happy. Hubby likes to golf, I like Disney Springs (assuming it’s still there). We might go and not even do the parks at that point. I don’t know. If something happens where we don’t want to go anymore, we can rent the points. Starting 2042, there will could less places from which to rent points so renting could be lucrative. Possibly.

At the end of the day, it’s all a gamble. Do what you need to do to help you sleep at night! Good luck!

 

[DougEMG]

You could also just rent out your points once the MFs get too high, then you would not have to sell.


well that (it being a pain) is not surprising at all!

@DougEMG But, do you know file a tax return in the US every year? That is what the OP is concerned with. I would be blown away by this, although it doesnt mean its wrong.

Also, what if you dont file it, you just dont get your 15% back right?

If that is the case, I would rather have an asset (SSR) worth something that I could sell than an asset VB that is worthless. Sell SSR. Dont file, lose the 15%. you still money in your pocket. with VB your pockets are empty.

I have not file a tax return with the US since i had the sales and have never had problems at the border.

 

[jerseyduke]

I have not file a tax return with the US since i had the sales and have never had problems at the border.

there ya go @CanadaDisney05

I think you are way too worried about the IRS if and when you sell.

But, you have to live life without added worries, so what I think is not relevant.

All that being said, if I were in your shoes, based on my understanding of things, I would buy SSR.

 

[DougEMG]

For myself I just assume that the withholding tax is another cost to selling and assume I get nothing back. I do it is just a bonus.

A big consideration is the exchange rate. Most of my contracts I picked up when our dollar was around 92-95 cents US. The last one I bought was at 72 cents US, not as nice.

Buying those early contracts provided me some nice protection against our falling dollar.

 

[Mikamarii]

I did a bunch of FIRPTA research prior to listing our contract and spoke with a FIRPTA specialist.

When selling a US property you need to pay a foreign investment in real property (FIRPTA). The actual firpta fee is 20% of the capital gain. When you make a sale the us govt holds 15% of the gross sale. You then apply for a refund by getting a taxpayer ID number. The us govt then refunds the difference taken out of the15% of the gross sale. You can then file a us tax return and get the remaining balance back if that was your only income.

You do not need to file a us tax return every year if you have no us income.

Then back in Canada you also need to pay capital gains tax based on your income. However, you can us whatever us taxes you paid as a credit towards your Canadian taxes.

Using a FIRPTA specialist runs about 500. They do all the paperwork and apply for a firpta exemption which basically shows the us govt you aren’t going to make as much as the firpta with holding tax. The us govt still takes money. Just not as much and you would file a us tax return to get the difference back.

Renting points runs into similar problems as you have to file US tax returns for the income in both us and Canada.

One other thing to keep in mind is you need to know what the us/cdn exchange rate is when you make a profit. There are websites that provide this but that’s what determines your capital gains

It took me many nights to wrap my head around this as it is complicated. One thing I do not want to do is piss off the CRA....OR IRS.... but especially not both.

 

[Craig Williams]

OP - It seems your two biggest issues with purchasing DVC is (1) the foreign investment tax, and (2) the fact that you do not want to have a contract outlasting your perceived use (because you'll have to continue paying annual maintenance fees for the life of the contract).

As to your first issue, that obviously is a cost that you will have to consider in the financial analysis of your DVC purchase. And to this point, it seems like you have done that already, and no one here will be able to provide you with tax advise (certainly the wrong forum).

It seems, really your biggest issue is the length of the contract and the annual MF. But as other have mentioned, you can always rent out your points (and receive more for them, than what you pay in MF) if you no longer wish to use your DVC.

VB & HH are some of the least economical DVC contracts out there. Ultimately it seems you need to decide whether your willing to rent out those points and some time in the future when you no longer want to do DVC anymore.

Good luck

 

[bumbershoot]

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.

Buy if you wish. Take amazing family vacations for years, always figuring out the cash value of those vacations. If you grow tired of the vacations after hitting the point where it’s worth it, sell, and whatever you get is gravy. Or maybe poutine?

So few ever put a value on what they got out of it. IMO they should.

Canadians have to pay a 15% withholding tax on the sale price. Then you have to apply for a tax number and file an income tax form to try and get any money back. I have done it twice and found the process a little confusing. In short it was a total pain.

Glad you didn’t have to keep doing taxes for the US.

 

[igrsod]

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.

Where did you end up staying at SSR? We are staying there in a few weeks for the first time, and I can't seem to figure out where I would like to request.

 

[CanadaDisney05]

Renting points runs into similar problems as you have to file US tax returns for the income in both us and Canada.

One thing I did hear (which could be wrong) is that if you use David's (which is located in Ontario), there is no need to file a US tax return as the sale was done in Canada.