When is it worth getting a DVC contract with a 2042 expiration?

[havoc315]

I bet buying now and selling in 5 years is cheaper than renting for 5 years.
Prove me wrong maths wizards!

Depends on the value at resale.

But if the resale loses value, then it’s cheaper to rent.

Really depends on the gain or loss from resale. But if the resale value does not increase, then it’s cheaper to rent.

I’m happy to provide the math…

Buy 150 points at $140 per point, plus $1000 in closing costs. Total cost, $146 per point.

then pay dues of about $7.50 per year for 5 years. Now at $183 in costs.

Resale at $140 per point — minus commissions and closing costs, you recoup about $115 per point.
So in total, you spent $68 per point.

Now if you rented, you’d pay about $17 per year per point. But you wouldn’t lose the time value of money.
So you invest the $146 per point, and withdraw $17 per year. At the end of 5 years, depending in investment return, you’d have between $80 and $110 left in your investment account.
So total cost of renting for 5 years: $36 to $66.

As you can see, renting was potentially much much cheaper than buying. If your investments did poorly (only a 2% return), then about break even. If your investment did really well (9%), the buying was twice as expensive as renting.

 

[Brian Noble]

Prove me wrong maths wizards!

You don't need a math wizard. You need a clairvoyant or maybe a psychohistorian*. The answer to this hinges on whether and when the resale value for these start to meaningfully diverge from longer-expiration resorts. So far, the earlier expiration doesn't seem to be priced in, for the most part. As we get closer to expiration, the risk of that happening---and of resale values decaying---increases.

Many of us are surprised that it hasn't happened yet. Many others think it is still a decade into the future. That's why I said upthread that if you sell during the term, things get much more complicated.

I’m booking 1BR anyway.

The 1BRs are the hardest case to make for ownership---or, for that matter, even as a point rental. They are significantly over-pointed compared to studios when you consider the difference in rack rates.

--------------
*: With apologies to Hari Seldon and why yes, I am watching Foundation on Apple TV+, why do you ask?

 

[Ruttangel]

Depends on the value at resale.

But if the resale loses value, then it’s cheaper to rent.

Really depends on the gain or loss from resale. But if the resale value does not increase, then it’s cheaper to rent.

I’m happy to provide the math…

Buy 150 points at $140 per point, plus $1000 in closing costs. Total cost, $146 per point.

then pay dues of about $7.50 per year for 5 years. Now at $183 in costs.

Resale at $140 per point — minus commissions and closing costs, you recoup about $115 per point.
So in total, you spent $68 per point.

Now if you rented, you’d pay about $17 per year per point. But you wouldn’t lose the time value of money.
So you invest the $146 per point, and withdraw $17 per year. At the end of 5 years, depending in investment return, you’d have between $80 and $110 left in your investment account.
So total cost of renting for 5 years: $36 to $66.

As you can see, renting was potentially much much cheaper than buying. If your investments did poorly (only a 2% return), then about break even. If your investment did really well (9%), the buying was twice as expensive as renting.

A lot of those numbers are weighted in the renters favour. I bought BWV for $100pp last year, it's now up to $150.
By 2024 I can't see it being less than $150.

 

[Sandisw]

Depends on the value at resale.

But if the resale loses value, then it’s cheaper to rent.

Really depends on the gain or loss from resale. But if the resale value does not increase, then it’s cheaper to rent.

I’m happy to provide the math…

Buy 150 points at $140 per point, plus $1000 in closing costs. Total cost, $146 per point.

then pay dues of about $7.50 per year for 5 years. Now at $183 in costs.

Resale at $140 per point — minus commissions and closing costs, you recoup about $115 per point.
So in total, you spent $68 per point.

Now if you rented, you’d pay about $17 per year per point. But you wouldn’t lose the time value of money.
So you invest the $146 per point, and withdraw $17 per year. At the end of 5 years, depending in investment return, you’d have between $80 and $110 left in your investment account.
So total cost of renting for 5 years: $36 to $66.

As you can see, renting was potentially much much cheaper than buying. If your investments did poorly (only a 2% return), then about break even. If your investment did really well (9%), the buying was twice as expensive as renting.

In the end, renting is risky and a lot more hassle than owning, no way around that.

No way to put a financial value on that. So all those numbers for investment etc are great if one wants to be that hyper focused on those details.

IMO, it all comes down to what does it cost you to buy now and pay MFs for 20 years. Divide by trips you think you will take. If it seems like a good deal, then it is. If not, then you don’t and look at other options to stay at those resorts.

 

[havoc315]

A lot of those numbers are weighted in the renters favour. I bought BWV for $100pp last year, it's now up to $150.
By 2024 I can't see it being less than $150.

Yes, I said if resale value goes up, it's a different equation. But BWV will be worth $0 in January 2042. Thus, it won't increase forever, and will eventually decrease.

BWV is not currently "worth" $150. Most re-sale listing prices I see are $140 to $150, and that's listing prices. In September 2021, ROFR was exercised at $123.
So we know that re-sale prices as of September 2021 were as low as $123, with an average selling price somewhere between $123 and $140-$150.
I'm guessing most re-sellers actually are getting about $130....

And at some point, price will stop increasing, and then at some point it will start decreasing, until it hits $0 in 2042. That's the danger of the contracts with only 20 years left.

 

[cruisehopeful]

I think it's worth it if that's where you want to stay and you look at it as a sunk cost, fulfilling a need vs. what is the best financial choice. I chose to pay a few thousand more for my car because it has a trim that I liked. I could have had exact same car with basic trim for less money, but when I thought about looking at my car and driving my car for the next 10 years, I knew I'd spend the next 10 years thinking it would have been nice to have the special trim if I decided to go the financial route. It would have been nice to save a few thousand dollars, but looking at my car brings me joy. Comparing it to other cars makes me feel like I got what I wanted. Timeshares are the same to me. Do what will bring you joy and not have you wishing you had something else.

 

[Brian Noble]

renting is risky and a lot more hassle than owning, no way around that.

I'm not sure all the risk is on the renting side. Owning also carries risk: the risk that your vacation habits change. Cash is great for changing habits, because nothing is as flexible as cash--you just spend on on what you want, when you want. That could be DVC lodging. It could be beachfront on the Florida gulf coast. It could be a new corvette. A lot of us here in the DVC corner of DIS don't think about that, because we can't imagine a world where we don't go back every year, and sometimes more often.

And, even here, there are plenty of "breaking up with Disney" threads from owners who always assumed until-death-do-us-part.

It all comes back to the basic value proposition of any timeshare: The developer offers you a (presumed) discount on lodging, in exchange for your long-term commitment to keep coming back.

 

[RoseGold]

I thought of a good 2042 contract, mathematically. OKW 2042 for GVs.

OKW GVs are ridiculously underpriced on the chart, which makes them tough, even at 11 months. Even with 2042 points, that's a heck of a deal. Ownership is required to book here, and it might even be hard to rent and require walking and tricky booking. This room is a steal compared to cash and difficult to rent because of the volume of OKW points you need and the difficulty booking it.

 

[havoc315]

IMO, it all comes down to what does it cost you to buy now and pay MFs for 20 years. Divide by trips you think you will take. If it seems like a good deal, then it is. If not, then you don’t and look at other options to stay at those resorts.

Depends how much value you put on hassle. If renting is half the price of owning, and 99% of the time, it results in the exact same trips...

But there is a critical point in your statement -- 20 years. 20 years involves very different math than 5 years. When you're dividing your one-time closing costs, sales commissions, etc... over 20 years instead of over 5 years, that makes a big difference in the end.

Let's put it in the extreme:
If I told you that you could buy 150 points for $140 per point right now, for a total of $22,000 (including closing costs). You would then pay another $1,000 in annual dues.
And you intended to only take 1 trip and then re-sell -- And at re-sale, you would be able to recoup $19,000. (need to deduct commissions and closing costs).
So your 1 trip of 150 points ended up costing you $4,000 -- Or $27 per point. Would you go through all that, just so you could own points instead of renting them? Probably not. For 2 trips? Still, probably not.

So the question was 5 years. Mathematically, for 5 years, certainly in a 2042 resort, you can save significantly by renting instead of owning. Yes, at some point, the convenience and value of owning may be greater than renting. Over 20 years in a 2070 resort, you'll almost certainly get there.

It's very different math for a 20 year contract in a 2042 resort. (where the losses may be even greater since you never recoup re-sale value). And it's very very different in a 2060-2070 resort, where you'll still have 20-30 years left, in 20 years, and can recoup with resale.

 

[RoseGold]

I'm not sure all the risk is on the renting side. Owning also carries risk: the risk that your vacation habits change. Cash is great for changing habits, because nothing is as flexible as cash--you just spend on on what you want, when you want.

As an owner, the risk isn't huge. As an owner, you'd need Disney or Florida as a whole to suffer, or some other large risk, like covid. Even in the depths of Covid, points were able to be rented out without huge loss. If you bought resale, even selling isn't that big of a deal. I bought VGF in the big 2020 slump, and the seller of my contract made money, or maybe broke even if they financed. That's buying the record-expensive property at the time, only holding a few years, and selling in the middle of a pandemic. The risks I'm worried about as an owner are large, systemic risks, like theme parks in general going out of style or Disney letting WDW slip. If my family changes its mind, no big deal, I'll cash out.

Renting points carries obvious risk as a renter. I've done it many times without issue, but the risk is real. As an owner, I plan to offer something like escrow.com to help the imbalance.

 

[TCRAIG]

Ok, that's true. Easier to modify a trip if you own.
But she said there are other perks besides control and flexibility. Wondering what perks she is referring to.



Not true at all. You can always rent the points 11 months in advance from a Beach Club owner.
My friends rented a Beach Club Studio for this coming Christmas.
It's not that hard to find someone renting their points. Worst case scenario, you go through the agencies.

But it is true that you lose the ability to walk the reservation, you lose the ability to modify it.

So renting gives you a ton of additional flexibility -- only rent what you need, where you need, when you need. But you do lose the flexibility of modifying the reservation once you book.

I disagree - it’s not always been historically that easy to get an owner for BC at 11 months - either individually or thru an agency…

 

[havoc315]

I'm not sure all the risk is on the renting side. Owning also carries risk: the risk that your vacation habits change. Cash is great for changing habits, because nothing is as flexible as cash--you just spend on on what you want, when you want. That could be DVC lodging. It could be beachfront on the Florida gulf coast. It could be a new corvette. A lot of us here in the DVC corner of DIS don't think about that, because we can't imagine a world where we don't go back every year, and sometimes more often.

And, even here, there are plenty of "breaking up with Disney" threads from owners who always assumed until-death-do-us-part.

It all comes back to the basic value proposition of any timeshare: The developer offers you a (presumed) discount on lodging, in exchange for your long-term commitment to keep coming back.

Agree 100%.... just to echo 2 points...

First -- It's not just "breaking up with Disney." It's pandemics where you can't use the resort. Family illness or other misfortune. Your kids not loving Disney as much as you do. Climate change potentially destroying the desirability of an Orlando vacation, with hurricanes a weekly occurrence. Vacation may change for foreseeable as well as unforeseeable reasons.

Second -- To emphasize the presumed discount. It's obviously in Disney's interest to exaggerate the discount in marketing, as much as they can while still offering "truthful" advertising. So they market the discount compared to full rack rate rooms. They don't factor in the time value of money. They don't factor in renting points instead of paying rack rate, etc. So it's buyer beware. Yes, a discount is indeed possible when buying DVC. But that discount is much smaller than Disney would have you believe.

 

[Mai Ku Tiki]

Well, I’m a little on the younger side (46) so we own SSR and OKWE (2057). If we stop going ( who am I fooling) our DD and DDG will use the points till they expire. But BWV and BCV at this point in time cost per point per length are usually the highest at WDW, but if you want to stay there in a studio most of the year, you have to own there. At some point in the future the resale prices of the 2042 resorts will plummet.

Maybe. Or DVD will again offer the option to extend.
Otherwise, all those 2057 contracts would soon plummet as well.
And then 2066 contracts...
Point is... Who knows what magic the future holds?

 

[havoc315]

I disagree - it’s not always been historically that easy to get an owner for BC at 11 months - either individually or thru an agency…

I can only speak from experience. Never had any trouble. On the first page of the rental forum right now, there are at least 2-3 BCV owners renting out their points.

 

[TCRAIG]

I can only speak from experience. Never had any trouble. On the first page of the rental forum right now, there are at least 2-3 BCV owners renting out their points.

Can’t really use the ‘Covid’ years as the norm…and popular F&W October window isn’t open yet…

 

[Ruttangel]

Yes, I said if resale value goes up, it's a different equation. But BWV will be worth $0 in January 2042. Thus, it won't increase forever, and will eventually decrease.

BWV is not currently "worth" $150. Most re-sale listing prices I see are $140 to $150, and that's listing prices. In September 2021, ROFR was exercised at $123.
So we know that re-sale prices as of September 2021 were as low as $123, with an average selling price somewhere between $123 and $140-$150.
I'm guessing most re-sellers actually are getting about $130....

And at some point, price will stop increasing, and then at some point it will start decreasing, until it hits $0 in 2042. That's the danger of the contracts with only 20 years left.

Instant sale on DVC resale market $137 with advice to list at $161, 70pt contract

 

[TCRAIG]

I’m also hoping that…come 2042…DVC will offer BC direct owners a discount if they want to re-purchase their points- I do not believe they will offer an extension

 

[RoseGold]

Instant sale on DVC resale market $137 with advice to list at $161, 70pt contract

BYE! Nice knowing ya!

 

[havoc315]

Can’t really use the ‘Covid’ years as the norm…and popular F&W October window isn’t open yet…

F&W window is irrelevant. Someone who is currently willing to rent points, would certainly be willing to rent them for a reservation window that starts in a couple of weeks.

That’s how I always rented in the past — find someone prior to the 11 month window, and reach agreement that they will book when the window opens.

I’m not using Covid years as the norm. I’m talking about my pre-covid experiences when had no trouble.

 

[havoc315]

Instant sale on DVC resale market $137 with advice to list at $161, 70pt contract

Think you just proved my point. Said I’m guessing average around $130. Smaller contracts always sell higher than the average, larger contracts below that average.
so if a small contract is only selling for $137… suggests the average resale is actually under $130.

From DVC shop… CURRENT:

So actual selling prices of $120-$125 per point, listing prices of $135-144 for larger contracts.

What’s interesting… 2 years ago, pre-covid, Sept 2019 resale report, average price at BWV was $134.

So if you bought in 2019 at BWV, you have since lost about $10 per point.