Larger Contract than you intended

[rojen]

Hi, my wife and I recently came into a windfall. Wanted to use about $5k to purchase a 100 point contract at SSR or OKW. Looking at contracts on the ROFR page, and available resales, we're thinking that a 300 point contract might work better for us.

We have three girls all under the age of four. Right now we all fit happily into a studio. Obviously things will change. I don't want my girls to have to deal with their disgusting father (me) punishing the toilet every morning on vacation while they're getting ready. So a 1 or 2 bedroom is totally in our future. We'll also be taking a minimum of one trip per year for the foreseeable future.

So I'm looking at maybe buying a 300 point contract and renting out the extra 200 for the next four years or so. We'd come pretty close to even in the long run. We're liquid enough for it right now to purchase 300 points without borrowing money or putting ourselves into a pinch. I know the MF will be 3x higher per year, but I kinda consider that a wash when thinking about the money we'd save on the AP.

This seems like a no brainer to me, but am I missing something in my calculations or anything? Anyone else do the same, rent points to reimburse yourself for larger up front costs? I know the market for rentals could change, but I don't see anything crazy happening in the next four years, which is how long we would rent out the extra 200.

Have stayed at SSR, OKW, and BCV. I'm perfectly happy with SSR if we get 'stuck' there. Actually, I'm kinda confused why people have a problem with SSR, it was absolutely beautiful.
Thanks in advance for the help

[jimim]

Originally Posted by rojen

Hi, my wife and I recently came into a windfall. Wanted to use about $5k to purchase a 100 point contract at SSR or OKW. Looking at contracts on the ROFR page, and available resales, we're thinking that a 300 point contract might work better for us.

We have three girls all under the age of four. Right now we all fit happily into a studio. Obviously things will change. I don't want my girls to have to deal with their disgusting father (me) punishing the toilet every morning on vacation while they're getting ready. So a 1 or 2 bedroom is totally in our future. We'll also be taking a minimum of one trip per year for the foreseeable future.

So I'm looking at maybe buying a 300 point contract and renting out the extra 200 for the next four years or so. We'd come pretty close to even in the long run. We're liquid enough for it right now to purchase 300 points without borrowing money or putting ourselves into a pinch. I know the MF will be 3x higher per year, but I kinda consider that a wash when thinking about the money we'd save on the AP.

This seems like a no brainer to me, but am I missing something in my calculations or anything? Anyone else do the same, rent points to reimburse yourself for larger up front costs? I know the market for rentals could change, but I don't see anything crazy happening in the next four years, which is how long we would rent out the extra 200.

Have stayed at SSR, OKW, and BCV. I'm perfectly happy with SSR if we get 'stuck' there. Actually, I'm kinda confused why people have a problem with SSR, it was absolutely beautiful.
Thanks in advance for the help

I know a hundred people will have other comments for you re: the amount of points, but just to let you know once ur kids are paying age for disney (above 2) u won't be allowed to stay in a studio. you can't have that many people in them. they won't let u book. 4 is the max. u will be a 1 bedroom family prey much so I would be looking at more points even for just 1 trip per year.

jim

[BrerNashville]

I'd think seriously about just purchasing the 100 now, put the cash you would have spent on the other 200 in a safe account (I know, paltry interest) and buy the extra points when you need them.

Most people on these boards will predict to you that point prices will continue to drop year after year, so you should ask yourself whether the extra $$ you will net on rental over the dues for those extra 200 points will outweigh the sum of (i) the decrease in point price over the next two years, plus (ii) whatever headaches, risks, etc. you have to put up with to rent the points. Perhaps the latter is not so bad if you assign your points to someone else to rent for you, but there is no guarantee those extra points will actually get rented.

If prices fall by $5-$6 per year, you are awfully close to just break even.

[rojen]

Originally Posted by BrerNashville

I'd think seriously about just purchasing the 100 now, put the cash you would have spent on the other 200 in a safe account (I know, paltry interest) and buy the extra points when you need them.

Most people on these boards will predict to you that point prices will continue to drop year after year, so you should ask yourself whether the extra $$ you will net on rental over the dues for those extra 200 points will outweigh the sum of (i) the decrease in point price over the next two years, plus (ii) whatever headaches, risks, etc. you have to put up with to rent the points. Perhaps the latter is not so bad if you assign your points to someone else to rent for you, but there is no guarantee those extra points will actually get rented.

If prices fall by $5-$6 per year, you are awfully close to just break even.

Have prices been dropping that much? Also, what risk is there to renting points? I've rented and it seems like all the risk is on the person paying for the points as opposed to renting out the points. I figure a rental contract with an indemnity clause will protect from any shenanigans by the renter, and you usually get the money upfront.

[lilpooh108]

Originally Posted by rojen

I don't want my girls to have to deal with their disgusting father (me) punishing the toilet every morning on vacation while they're getting ready.

Funny, but ewh.

I'd go for something between 100 and 300. 200 points per year to rent out is alot, and gets rather annoying. An indemnity clause will help you only if you're willing to sue your renter in his home state...unless you put other things in the contract but what a PITA.

Or, buy a few smaller contracts. They're easier to sell. You "overpay" for them initially, but if/when you need to sell your 300 pt-er will be sitting on the shelf for LONG time.

We have 400+ points made up of various contracts, and just sold one to bring us down to 350+. That contract sold in less than a day. Something to think about.

[bumbershoot]

I know the MF will be 3x higher per year, but I kinda consider that a wash when thinking about the money we'd save on the AP.

The AP discount is a perk that *could* go away at any time. I would be careful using that as a reason to deal with the MFs.


We're a family of 3 and only reluctantly book a studio, by the way. It's just too much fun to have lots of space in the 1 bedroom! If I were thinking of buying lots of points, I would just start off by booking the 1 bedroom instead of the studio.

[Mtnman44]

I would definately want to own several contracts in smaller chunks. While 300 points total is not a huge amount of points for many people, a 300 point contract is on the large side. As such, there are fewer buyers if you ever wanted to get rid of it. They also sell at a lower per point price.

Having smaller contracts is desireable. As long as they are all the same UY and same resort, there is functionally no difference in their use. However, you get the added benefits of flexibility and to some degree, liquidity as smaller contracts can sell very fast, and a per point premuim.

[rojen]

Thanks for the replies, definitely have more to think about now. We've been doing well financially recently, and just came into a large windfall. I just worry that we'll never be so flush with cash as to be able to add on more in the future. I'd just kick myself if we spend the next decade renting hundreds of points a year and have nothing to show for it. Kinda like the rent vs buy thing for buying a house.

When buying multiple contracts through a broker, I assume you have to pay multiple closing costs too? Unless they're from the same seller?

[johnsbelt]

Originally Posted by rojen

Thanks for the replies, definitely have more to think about now. We've been doing well financially recently, and just came into a large windfall. I just worry that we'll never be so flush with cash as to be able to add on more in the future. I'd just kick myself if we spend the next decade renting hundreds of points a year and have nothing to show for it. Kinda like the rent vs buy thing for buying a house.

When buying multiple contracts through a broker, I assume you have to pay multiple closing costs too? Unless they're from the same seller?

You are correct on the closing costs.

That said, I agree with several PPs. Purchase a little smaller contract now (say about 150 points) and start by going every other year in a 1 bedroom. This way you can take other annual vacations. Put the extra funds in a CD (yes I know rates stink) to see if you really want to go every year. If you are in a bind for more points, you can always find a member to transfer you the points to use for one of the trips. The sponsor of this board provides this service.

I have done the transfer route a couple of times now. I purchased 50 points at BLT a couple of years ago and the DD and future DSIL went last year while I wanted more points to suprise my wife this year with a 1 Bedroom for our 25th anniv. While my resale saved me a little, it was also the only way to get a smaller contract as we only want to go every other to every third year.

While nothing is guarenteed, the best part is the flexibility.

Hope the board input isn't overwhelming you.

John

[Caren90]

Originally Posted by rojen

Thanks for the replies, definitely have more to think about now. We've been doing well financially recently, and just came into a large windfall. I just worry that we'll never be so flush with cash as to be able to add on more in the future. I'd just kick myself if we spend the next decade renting hundreds of points a year and have nothing to show for it. Kinda like the rent vs buy thing for buying a house.

When buying multiple contracts through a broker, I assume you have to pay multiple closing costs too? Unless they're from the same seller?

Each contract you purchase will require separate closing costs.

My two cents: Buy what you will use now and when you need to purchase more, the points may end up being less expensive on the resale market, especially a few years down the road.
Good luck.
Stephen

[DougEMG]

Originally Posted by rojen

Hi, my wife and I recently came into a windfall. Wanted to use about $5k to purchase a 100 point contract at SSR or OKW. Looking at contracts on the ROFR page, and available resales, we're thinking that a 300 point contract might work better for us.

We have three girls all under the age of four. Right now we all fit happily into a studio. Obviously things will change. I don't want my girls to have to deal with their disgusting father (me) punishing the toilet every morning on vacation while they're getting ready. So a 1 or 2 bedroom is totally in our future. We'll also be taking a minimum of one trip per year for the foreseeable future.

So I'm looking at maybe buying a 300 point contract and renting out the extra 200 for the next four years or so. We'd come pretty close to even in the long run. We're liquid enough for it right now to purchase 300 points without borrowing money or putting ourselves into a pinch. I know the MF will be 3x higher per year, but I kinda consider that a wash when thinking about the money we'd save on the AP.

This seems like a no brainer to me, but am I missing something in my calculations or anything? Anyone else do the same, rent points to reimburse yourself for larger up front costs? I know the market for rentals could change, but I don't see anything crazy happening in the next four years, which is how long we would rent out the extra 200.

Have stayed at SSR, OKW, and BCV. I'm perfectly happy with SSR if we get 'stuck' there. Actually, I'm kinda confused why people have a problem with SSR, it was absolutely beautiful.
Thanks in advance for the help

Compare the two situations for the total costs:

Case 1: Buy 300 points now, use 100 points a year and then rent out 200 points a year for 4 years. After that use all 300 points every year.

Case 2: Buy 100 points now and 200 points in 4 years.


So the only difference is it better to buy the extra 200 points now or later. Assuming MF of $5/point and rental income of $10/point (renting through a broker) that gives you $5/point extra for each of 4 years. Or a total of $20/point over the 4 years.

Will resale prices drop by more than $20/point over 4 years? Will MF rise faster? Will rental rates change? Will you be able to rent out your points?

I personally bought more points than I can use right now because I bought for what I wanted to do in retirement (4-5 years away) and am renting out the extra points.

[Dean]

Originally Posted by rojen

Hi, my wife and I recently came into a windfall. Wanted to use about $5k to purchase a 100 point contract at SSR or OKW. Looking at contracts on the ROFR page, and available resales, we're thinking that a 300 point contract might work better for us.

We have three girls all under the age of four. Right now we all fit happily into a studio. Obviously things will change. I don't want my girls to have to deal with their disgusting father (me) punishing the toilet every morning on vacation while they're getting ready. So a 1 or 2 bedroom is totally in our future. We'll also be taking a minimum of one trip per year for the foreseeable future.

So I'm looking at maybe buying a 300 point contract and renting out the extra 200 for the next four years or so. We'd come pretty close to even in the long run. We're liquid enough for it right now to purchase 300 points without borrowing money or putting ourselves into a pinch. I know the MF will be 3x higher per year, but I kinda consider that a wash when thinking about the money we'd save on the AP.

This seems like a no brainer to me, but am I missing something in my calculations or anything? Anyone else do the same, rent points to reimburse yourself for larger up front costs? I know the market for rentals could change, but I don't see anything crazy happening in the next four years, which is how long we would rent out the extra 200.

Have stayed at SSR, OKW, and BCV. I'm perfectly happy with SSR if we get 'stuck' there. Actually, I'm kinda confused why people have a problem with SSR, it was absolutely beautiful.
Thanks in advance for the help

Going from the current need of 100 pts to a 300 point contract is a large jump both in total price and in yearly dues. While you'll get a better pp price, I don't believe it'll be enough to justify the extra costs and risks. I do agree with going larger than 100 assuming your planning on using them at DVC resorts only. I would not go all the way to 300, I'd look at 150-200, basically few enough that you can bank for a couple of years then get a 1 BR. If you aim for places like OKW, AKV and BLT for the 1 BR, that should be a good options and point of reference. Even a 100 pt contract at SSR that is loaded will get you pretty far for a while.

I don't think many people have a problem with SSR, however, the reality is that it has a lower demand compared to all other on property resorts and that has an effect on the system, esp the 7 month reservation window.

[zavandor]

If you buy 3 contracts for 100 points each, you'll be able to gift one each to your daugthers, if you'll want in the future. So you could buy one now and buy the others when you'll find them.

[Deb & Bill]

Originally Posted by zavandor

If you buy 3 contracts for 100 points each, you'll be able to gift one each to your daugthers, if you'll want in the future. So you could buy one now and buy the others when you'll find them.

Not a good thing to even consider. By the time your three, all under four, daughters are old enough to pay DVC dues on their own, the dues will be horrible. Don't even consider buying to leave to your prodigy at this point.

Buy for yourself and your family. And go from there if you want to buy. But don't saddle your babies with future DVC dues when they haven't even started kindergarten.

[joelp]

Originally Posted by Deb & Bill

Not a good thing to even consider. By the time your three, all under four, daughters are old enough to pay DVC dues on their own, the dues will be horrible. Don't even consider buying to leave to your prodigy at this point.

Buy for yourself and your family. And go from there if you want to buy. But don't saddle your babies with future DVC dues when they haven't even started kindergarten.

While the DVC MF may be "horrible" down the road a bit, just imagine what room rack rates will be!!

Break out an Excel spreadsheet and do the math (using - say - a 3.5% inflation rate) ... it get's scary real fast ...

As a personal example, I used 2012 AKL rack rates this past summer when trying to decide if buying into DVC was "worth" it ... The AKV MF went up about 4% in 2013, but the comparable AKL rack rate went up about 10% for the same trip!

One of the main reasons we bought DVC is that it's one of the few ways (short of winning the lottery ) I figure we'll be able to afford to visit WDW and stay in a Deluxe room - and to pass that ability onto the DD ...