Would you do this?

[Mom B]

I've been tossing around this idea and don't know if it would be worth thinking seriously about or not. So I will put it out for discussion. (Please be kind!)

I have about 200 shares of stock that I inherited, currently selling at about $38 per share. The stock is a relatively stable one and does pay $50 - $60 per quarter in dividends.

The thought occurs that the stock could be sold to purchase an add-on at resale, approximately 100 points, probably at either OKW or AK (OKW would probably be the better deal). We already have 160 pts (30 OKW, 30 AKV, and 100 VB) and there's a good chance that we would rent out the extra 100 points most years and this would probably pay for a good share of our annual maintenance fees.

Just estimating, very roughly, I think we'd be paying about $1300 per year in dues, renting about $1000 out in points, so our out of pocket would be abt $300 per year for the 160 DVC points we'd actually be using. If we kept the stock, we'd be earning $200-$240 per year but we'd still have to pay abt $800 in maintenance fees (okay, probably a bit more since most of our points are at VB, but you get the general idea).

So, that's not taking into account any changes or effects on our income taxes,etc., but just in general, do you think it would be a "good" switch or not? Maybe I'm just too lazy to do any detailed figuring on the options here, but if anyone else would enjoy playing with the figures...feel free! Am I just crazy for even thinking it? Would it make much difference if we added on at a DVC that has the 2057 expiration rather than the 2042?

Let me know what you think! Thanks!!!

 

[toniosmom]

I'm not a number-cruncher, so I'm only going to give my opinion.

I think you need to ask yourself how attached you are to that stock. It is bringing you income and will hopefully continue to do so in the future.

Owning additional points at DVC is additional expense. Offsetting the cost by renting is certainly nice, but will you always be renting? If so, why would you buy additional points? I mean, if you are not buying the points to use them, it's not really a good use of your money. It looks to me like you would be forfeiting the stock income for DVC expense for vacations you won't be taking.

Looking at the income you would be forfeiting from the stock sale, if you break down a $50-60/quarter dividend, it works out to be about $20/month or about 65 cents per day. Will you miss it? Probably not. Then if you buy the 100 points, the MFs would be about $500/year or $42/month. Add on the $20/month loss in income from the stock, your additional expense will be about $62+ per month. Can you handle that? Doesn't sound like much, but these days every dollar counts.

I don't look at DVC as an investment. To me, and to many others who have posted the same, it is a form of pre-paying for luxury vacations at WDW or DL.

In the end, only YOU can answer your question. Is it worth forfeiting the dividend income? Can you afford the additional MFs for the years that you don't rent out some of your points?

Having said all of that, if it were me (given the financial position I am in right now), I would sell the stock and buy the additional points. The additional vacation time that it gives me would be worth its weight in gold.

I hope I didn't confuse you further. Good luck!

 

[mikeandkarla]

How would you pay for the additional 100 points? If you would finance, it would cause an extra monthly paymeny on top of loosing your quarterly dividends. 100 pts at OKW would roughly be $6,500.(resale).

Have you ever rented points before? It can be tideous and time consuming at times.

An extra 100 pts is nice, don't assume you would always rent them. Upgrading to a 1 BR can be habit forming.

 

[Quilter007]

1) Do you have an emergency fund?
2) No other debt?
3) Are you going to owe any taxes if you sell the stock?

Assuming you get satisfactory answers to 1 - 3, then I would clear you to do whatever you want with the cash from the sale of the stock. However, I would caution you to please take a very close look at your retirement portfolio as most everyone's is hosed and perhaps it could be put to better use there right now. But, I don't know what that looks like either!

K

 

[DenLo]

.....
3) Are you going to owe any taxes if you sell the stock? .....K

And after you pay the taxes will you have enough money to buy the 100 points?

If you do buy the points, I would buy 50 points at OKW and 50 points at AKV. That way if you do decide to use the points yourself you could easily hook on reservation dates from the new contracts to the ones you currently own.

 

[CarolAnnC]

I think you need to consider that purchasing DVC is not truly an investment but a timeshare - a way to prepurchase vacation.

Recent times have shown that renting out points is not a given, and sometimes not so easily accomplished in a downside economy.

Plus, there is always the possibility that down the road renting may be frowned upon by DVC themselves thereby negating the whole reliance on income rental. Not to mention that rental income may be required to be claimed to the IRS...lots to consider for sure.

 

[Mom B]

You've all brought up good points, some that I hadn't thought about. Which is why I posted the question in the first place, I guess. I'm still just thinking on it, and probably will for a while. We would be paying cash if we did buy additional points, not financing. There are a few other things "in the works" that could influence a decision to buy or not to buy, too. Mostly I'm just dreaming and trying to deal with a mild case of addonitis...but those extra points sure would be nice to have! And I think I'm trying to convince myself it would be "okay" as long as we would rent them to cover some of our expenses but I know in reality I'm just looking for an excuse to buy because I want MORE MORE MORE. Oh well, good things come to those who wait...Guess I'll just wait and see what happens for now.

 

[Dizny Dad]

I certainly don't disagree with all of the comments here so far, but . . .

We sold stock and turned it into DVC memories. Sure, you can rattle all the numbers, look fearful into the future, second guess your every financial move, be fiscally responsible, look for rain ahead.

I asked myself - when lying on my death bed, will I say I wish I still had the stock?

 

[Mom B]

Dizny Dad, I think yours is the BEST perspective of all. That's why we bought DVC in the first place. Thanks for the reminder!

 

[nunzia]

I certainly don't disagree with all of the comments here so far, but . . .

We sold stock and turned it into DVC memories. Sure, you can rattle all the numbers, look fearful into the future, second guess your every financial move, be fiscally responsible, look for rain ahead.

I asked myself - when lying on my death bed, will I say I wish I still had the stock?

I like how you think. When I bought my OKW resale to get in the DVC system, I sold some Ebay stock to do so. Since I did this pretty much right before the crash, I feel like buying DVC savedme money..funky logic yes, but works for me.

 

[Dizny Dad]

I like how you think. When I bought my OKW resale to get in the DVC system, I sold some Ebay stock to do so. Since I did this pretty much right before the crash, I feel like buying DVC savedme money..funky logic yes, but works for me.

WOW! That is the same story we have to tell! DW sold Ebay stock just before the crash. It has made us feel like we gained stability with that move, with respect to the $ value. (don't let me fool anybody, the rest of the empire was reduced to a small back yard )

But for those that can't tell that kind of a story, go with making memories. Of the ships we will find important in the end, it is the memories of the relationships we had, not the treasure ships we had, that will make the difference.

 

[bobbiwoz]

Mom B, I would not sell stock to buy DVC points that I would primarily rent out. I would keep the stock and sell at a time when my family would benefit from the points.

Bobbi

 

[dis-happy]

Stock is a long term asset. DVC is an expense. Personally I wouldn't sell stock just to buy DVC. Also, don't forget the tax implications of selling the stock.

 

[Doctor P]

I don't think it would be hard to make a case that this is commercial renting. You might not get caught, but it wouldn't be hard to determine both a pattern of renting and renting for profit the way you have outlined the situation.

 

[robertdangelo]

I agree... DVC and time spent with family is priceless! If I only had a week to live I would spend it at WDW with my family!

Bob

 

[dmoore22]

I like how you think. When I bought my OKW resale to get in the DVC system, I sold some Ebay stock to do so. Since I did this pretty much right before the crash, I feel like buying DVC savedme money..funky logic yes, but works for me.

Ditto here, except it was right before the internet bubble burst. You could keep the stock and pull out the certificates every once in a while to stare at or you could sell them, buy points, and enjoy the magic and memories. Life is too, too short.