DVC RESALES
DVC RESALES

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Old 04-09-2013, 10:02 AM   #31
ELMC
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Originally Posted by theguda View Post
My answer to that question is...probably. I would not be getting the "possibility" of saving money on my vacations in 7-9 years. Instead, the savings would be a certainty because there is no way maintenance fees will ever approach the cost of renting points. Also, I wouldn't be paying the $13,000...the people who rent my points would be paying it over the next 7-9 years (assuming i sold all my points).

I'm going to assume that over a long period of time the cost difference between maintenance fees and what you can get by renting your points will be about the same as today. So I expect that gap to average around $7 per point...which means maintenance fees are 60% cheaper than renting. So the real question is...is it worth to front $13,000 today...recoup that $13,000 via rental points over the next 7-9 years... to save 60% on my trips for the next 30 years? I think that's a smart financial move. My hesitation isn't the money...it's the time required to list and sell the points should I choose to do so. Thanks to everyone for all the comments. I really like to hear all te opinions.

Also, I view DVC as an investment because I see it as a vehicle to save money on my trips. To me, spending $500 on something that would otherwise cost me $1000 is the same as me buying a stock for $500 and selling it at $1000.
I get what you're saying and although I don't share your point of view, I do see it. One thing I would caution you on, however, is the assumptions you have made above that I have put in bold. First off, I completely disagree with your assertion that the savings are "a certainty" and that maintenance fees have no chance of eclipsing point rental prices. You have absolutely no way of knowing this and I think it's risky to make plans now based on this theory.

I would not be so sure that the gap between maintenance fees and point rental prices is as stable as you might think. Up until this year, point rental prices were fairly constant in the $10-11 range. Only recently have we seen renters able to get $12, and even that requires time and patience. However, that $10-11 price range was stable for a period of about five years; a period of time when maintenance fees were rising at an average rate of about 4%.

Remember, maintenance fee increases are exponential and increases in point rental prices are not. This means that the gap will close a lot faster than you think. What is happening with VB is a good predictor of what will likely happen with the other resorts, just further out in time.

As it was said earlier in the thread, we all talk about break even points and when we can vacation for just the maintenance fees, or whatever you want to call it, but that is not the goal. Instead it's a predicted benefit that might occur as we use our Disney Vacation Club for its intended purpose...taking vacations to Disney. Unless that is your main goal, I can think of many different ways to allocate your money that would have less risk, more liquidity and greater returns. The fact that we will "get our money back" is an ancillary benefit of ownership.
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Old 04-09-2013, 10:11 AM   #32
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Am I the only one who finds it crazy to spend thousands of dollars on DVC and not use it personally for almost a decade?
Then you're not reading my posts. I've said multiple times that I would never just sell all my points. I would probably use them to go once a year then sell the others to help recoup the upfront cost of the contract. The only reason I brought up selling all the points each year is show how the DVC could be viewed as an investment to save money in the future.

Again, I'd never just sell my points. But let's say that was the only way you could buy into DVC. You had to sell your points until your upfront cost was recouped. You wouldn't pay $13,000 today....let someone else pay back that $13,000 over the next 7-9 years by renting points...then save 60% for the rest of your life?
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Old 04-09-2013, 10:26 AM   #33
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Originally Posted by ELMC View Post
I get what you're saying and although I don't share your point of view, I do see it. One thing I would caution you on, however, is the assumptions you have made above that I have put in bold. First off, I completely disagree with your assertion that the savings are "a certainty" and that maintenance fees have no chance of eclipsing point rental prices. You have absolutely no way of knowing this and I think it's risky to make plans now based on this theory.

I would not be so sure that the gap between maintenance fees and point rental prices is as stable as you might think. Up until this year, point rental prices were fairly constant in the $10-11 range. Only recently have we seen renters able to get $12, and even that requires time and patience. However, that $10-11 price range was stable for a period of about five years; a period of time when maintenance fees were rising at an average rate of about 4%.

Remember, maintenance fee increases are exponential and increases in point rental prices are not. This means that the gap will close a lot faster than you think. What is happening with VB is a good predictor of what will likely happen with the other resorts, just further out in time.

As it was said earlier in the thread, we all talk about break even points and when we can vacation for just the maintenance fees, or whatever you want to call it, but that is not the goal. Instead it's a predicted benefit that might occur as we use our Disney Vacation Club for its intended purpose...taking vacations to Disney. Unless that is your main goal, I can think of many different ways to allocate your money that would have less risk, more liquidity and greater returns. The fact that we will "get our money back" is an ancillary benefit of ownership.
I'm sure you're right about the gap between maintenance fees and rental fees fluctuating. But I don't agree that they would ever be close to the same amount and historical numbers bear that out. You just said rental fees held steady for a while at $10-$11. Now people are having no problem selling for $12 and I've even seen private sales at $13. The average maintenance fee at SSR for the last 8 years is $4.28. So historically, over he past 8 years the gap has been more than $6 +/-. I think it's safe to assume $7 is more likely going forward since $12 sales are common now on disboards.
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Old 04-09-2013, 10:44 AM   #34
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Yes. Because someone who knows who he is spent a year on here talking about how loaded contracts were more valuable, so the demand for them is higher and any potential sellers who read that information then stripped their contracts before they sold.
I'm sure they were just trying to be helpful.
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Old 04-09-2013, 10:49 AM   #35
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I would probably use them to go once a year then sell the others to help recoup the upfront cost of the contract.
The ROI on DVC points is relatively low---even on resale purchases---and the payoff window is correspondingly long. That long window subjects you to too many downside risks, IMO, because it means you are depending on market conditions not changing. That's not just prevailing rental rates, etc., but all kinds of other factors as well. For example, if we see another spike in oil prices, and therefore jet fuel prices, leisure destinations like Orlando that depend heavily on folks outside driving distance get squeezed. A large recession or even a 9/11-style "black swan" event could also pop up.

Indeed, if you look at Disney's own behavior, they have very consciously moved away from building rental stock and towards fractional ownership---and that started right around the travel crash following 9/11. They mothballed the second half of POP for a full decade before finally completing it, while rapidly building DVC units and even converting some rental stock to fractional ownership (two floors at AKL-Jambo, the North Wing of CR). In effect, Disney has decided to give up a little long-term revenue in exchange for a short-term payoff and sharply reduced risk.

True, there are upside possibilities as well---travel demand could continue its upward slope, oil prices could remain low, etc. But, if you want to be a timeshare landlord, there are many better options out there. Usually, this is because the acquisition cost of the other option is near-zero, not because rental rates are so high. This has the added benefit of hedging risk---the payoff window can be as short as one year, or at worst two, per week owned. In other words, rather than spend 2x what you need for personal use, and rent out half, buy only the DVC points you think you want for personal use, and develop a lower-risk/lower-cost rental business on the side, for a total cost very close to your DVC points only.

Finally, do not discount the amount of work it takes to run even a modest timeshare rental business. The time you spend dealing with tire-kickers and looky-loos, educating potential clients on how timeshares differ from hotels, etc. is non-trivial. If you have a big enough market presence, you can charge a deposit just to check availability, as David does, but you need to be a real player to pull that off rather than have potential customers just go elsewhere.

Last edited by Brian Noble; 04-09-2013 at 10:55 AM.
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Old 04-09-2013, 10:53 AM   #36
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Given that two different point rental brokers are currently paying $11 per point, I don't think it's an unreasonable expectation.
I agree. If someone is wanting to rent their points (for whatever reason) as long as they are not distressed points about to expire they can easily get $11/point right now.
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Old 04-09-2013, 10:53 AM   #37
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PS: I'm not sure if it has come up in this thread yet---I haven't read all of it---but you also need to account for the opportunity cost on the purchase cost for the "rental half" of your points purchase vs. just parking that amount in some investment vehicle that you judge to have comparable risk to the rental business. Your original post doesn't factor this in, and it makes the DVC payoff window even longer.
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Old 04-09-2013, 11:14 AM   #38
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I'm sure you're right about the gap between maintenance fees and rental fees fluctuating. But I don't agree that they would ever be close to the same amount and historical numbers bear that out. You just said rental fees held steady for a while at $10-$11. Now people are having no problem selling for $12 and I've even seen private sales at $13. The average maintenance fee at SSR for the last 8 years is $4.28. So historically, over he past 8 years the gap has been more than $6 +/-. I think it's safe to assume $7 is more likely going forward since $12 sales are common now on disboards.
True, but you do understand that point rental prices increase on a straight line basis whereas maintenance fee increases go up on a curve, right? So the gap between the two will be less and less each year until one point where they eventually intersect.
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Old 04-09-2013, 11:17 AM   #39
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Originally Posted by Brian Noble View Post
PS: I'm not sure if it has come up in this thread yet---I haven't read all of it---but you also need to account for the opportunity cost on the purchase cost for the "rental half" of your points purchase vs. just parking that amount in some investment vehicle that you judge to have comparable risk to the rental business. Your original post doesn't factor this in, and it makes the DVC payoff window even longer.
Great point. I've always said that the "opportunity cost" argument does not apply to DVC purchases because if one doesn't buy DVC they will most likely spend that money on something else. However, if you are treating it as a pure investment, you do need to consider this in order to have a viable comparison.
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Old 04-09-2013, 11:19 AM   #40
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I bought my DVC (resale) not as an investment but as a means of vacationing onsite at WDW. I looked at multiple senarios to see if within each senario it still made sense to buy DVC. One of the senarios I used is exactly what the OP is talking about, how long to get my money back/ breakeven if I 'have to, need to or want to' rent out the points every year. I wanted that time period to be short enough that I would be reasonably confident about the relationship between rental rates and MF.

Once I was confident that under each of my different senarios it made sense to own DVC, I bought in.

And yes, when I vacation using my DVC points, I mentally (really I store it all in a multi page excel spreadsheet) charge myself the going rental rate just to make sure my senarios are working as I expected them to.

Just remember that the long term value of your DVC contract is $0.
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Old 04-09-2013, 12:19 PM   #41
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I'm sure they were just trying to be helpful.
Hahaha. I'm sure that was the case.
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Old 04-09-2013, 12:27 PM   #42
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I recently purchased a resale of 190 points of SSR at $50 net for $9500 out of pocket. It came with 190 banked and 190 current use year. I rented the 190 banked for $2200 which now dropped my cost from $9500 to $7300. In June I'm staying 9 days at Aulani in a 1 Br which has a cash value of $12500. So in essence I have not only recouped my initial investment but I'm up $5200 in less then 5 months.

Just my 2 cents
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Old 04-09-2013, 12:30 PM   #43
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Originally Posted by ELMC View Post
Great point. I've always said that the "opportunity cost" argument does not apply to DVC purchases because if one doesn't buy DVC they will most likely spend that money on something else. However, if you are treating it as a pure investment, you do need to consider this in order to have a viable comparison.
I don't think the originator of this thread is thinking of using DVC as a pure investment. I think he just used "the I word", and that almost always provokes the response we've seen here.
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Old 04-09-2013, 01:00 PM   #44
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If the OP is proposing to over-buy beyond what they would use for personal vacations, and rent the "extra" out routinely, those "extra" points are absolutely an investment.

My point is that there are much better investments out there---even just limiting yourself to the timeshare rental market.
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Old 04-09-2013, 01:27 PM   #45
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I recently purchased a resale of 190 points of SSR at $50 net for $9500 out of pocket. It came with 190 banked and 190 current use year. I rented the 190 banked for $2200 which now dropped my cost from $9500 to $7300. In June I'm staying 9 days at Aulani in a 1 Br which has a cash value of $12500. So in essence I have not only recouped my initial investment but I'm up $5200 in less then 5 months.

Just my 2 cents
In my opinion this is a weak comparison unless you were actually planning on spending $12,500 for that room. Quite frankly, I don't know why you would as you could rent points from an owner and get that same room for about $4,000.

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I don't think the originator of this thread is thinking of using DVC as a pure investment. I think he just used "the I word", and that almost always provokes the response we've seen here.
Have you read the thread? In no less than three separate posts the OP stated that it was indeed an investment.
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