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Old 04-27-2013, 02:22 PM   #136
DougEMG
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I look at my investments as a way of funding my retirement (food, shelter, clothing, etc) while I look at owning and renting DVC points as a way of vacationing while I'm retired. So for me there is a definite difference on how I look at and treat the two.
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Old 04-27-2013, 02:40 PM   #137
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I look at my investments as a way of funding my retirement (food, shelter, clothing, etc) while I look at owning and renting DVC points as a way of vacationing while I'm retired. So for me there is a definite difference on how I look at and treat the two.
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Old 04-27-2013, 02:53 PM   #138
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Originally Posted by DougEMG
I look at my investments as a way of funding my retirement (food, shelter, clothing, etc) while I look at owning and renting DVC points as a way of vacationing while I'm retired. So for me there is a definite difference on how I look at and treat the two.
I'm with you Doug.
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Old 04-27-2013, 04:52 PM   #139
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Risks that could make DVC as costly or even more costly to own OR make it worth close to zero are numerous. Whether they'll happen, no one knows. Historically resales have been around 80% of retail but now that number has dropped to around 50% for most options. Specific risks would include declining interest in the parks, increasing maint fees, poor upkeep, special assessments (or threat's of them) as well as general economy issues which have had a fairly large impact on DVC in the past, esp following 9/11 and recently.

However, I don't think equating DVC with having value or no value in 10 years is the same as looking at it from an investment standpoint and expecting a ROP over that 10 year period. They are not one and the same. If any of us expected DVC to be worth nothing in 10 years, we wouldn't own or buy. However, for a high risk investment, you want anything after 10 years to be gravy. IMO the risk for DVC, and timeshares in general, isn't 10 years from now but 20-40. DVC is likely a little less than most but more than most people think it is. If one owns at 10 years, the likelihood is they'll continue to own whether they want to or now.
10 years is an arbitrary point in time. Why not pick 5? Or 15? Or 20?

When you look at any investment and want to calculate the return on investment, you evaluate your projected cash flow against your initial capital outlay and come up with a discount rate. That discount rate is your ROI. An ROI of mid to high teens is definitely indicative of a high risk investment. The question is whether you think the actual risk is higher or lower than the implied ROI. If it is, then you don't buy. If it is not, then you buy.
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Old 04-27-2013, 05:27 PM   #140
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Been members for a decade, and we are down money.

We have had wonderful vacations, stayed in nice accommodations, put our kids in a separate room and would be able to sell for what we bought. But without DVC we'd never vacation at Disney as often, wouldn't stay in a multi room unit when we did. We certainly wouldn't have paid lodging expenses for friends and family.

Its been a good value, but "break even" - no.
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Old 04-27-2013, 06:49 PM   #141
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Been members for a decade, and we are down money.

We have had wonderful vacations, stayed in nice accommodations, put our kids in a separate room and would be able to sell for what we bought. But without DVC we'd never vacation at Disney as often, wouldn't stay in a multi room unit when we did. We certainly wouldn't have paid lodging expenses for friends and family.

Its been a good value, but "break even" - no.
how 'down $' if 'would be able to sell for what bought' because to me that sounds like you've had 10 years of free accommodations.
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Old 04-27-2013, 09:15 PM   #142
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how 'down $' if 'would be able to sell for what bought' because to me that sounds like you've had 10 years of free accommodations.
In your scenario, the "accommodations" may be "free" (even though they're not because of MFs), but the plane tickets/park tickets/food bills cost a small fortune for all those Disney trips. So it's relatively easy to use formulas that combine upfront costs and MFs to produce some future "break-even" point. But even though you may break even or save money using DVC for accommodations, you've like dumped a good deal of those savings back into the rest of what goes into a Disney trip, or the more frequent Disney trips, or the longer Disney trips or even the Disney trips that use bigger villas than when you first did your cost analysis. So when people say DVC saves you money, what they actually mean is DVC gives you new ways to spend that money at Disney.
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Old 04-27-2013, 11:18 PM   #143
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10 years is an arbitrary point in time. Why not pick 5? Or 15? Or 20?

When you look at any investment and want to calculate the return on investment, you evaluate your projected cash flow against your initial capital outlay and come up with a discount rate. That discount rate is your ROI. An ROI of mid to high teens is definitely indicative of a high risk investment. The question is whether you think the actual risk is higher or lower than the implied ROI. If it is, then you don't buy. If it is not, then you buy.
Ten years out isn't an arbitrary number. It is right around the point where many resale contract owners would have earned back their initial cash outlay had they decided to rent out the points every year. At that point, the value of the contract is the "profit" of the "investment" should the owner decide to sell. That is why I used that as the length of time to discuss DVC as an investment.
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Old 04-28-2013, 12:07 AM   #144
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Ten years out isn't an arbitrary number. It is right around the point where many resale contract owners would have earned back their initial cash outlay had they decided to rent out the points every year. At that point, the value of the contract is the "profit" of the "investment" should the owner decide to sell. That is why I used that as the length of time to discuss DVC as an investment.
I should clarify. Ten years is an arbitrary number to pick for the contract to be worth zero. The only time where the contract will be worth zero for certain is at the end of the contract. The risks that many here had outlined can materialize in 5 years, or 15, or never. That's what I mean by 10 years being an arbitrary number. The length of time it takes for the owner to break even is irrelevant to the ROI calculation.
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Old 04-28-2013, 09:39 AM   #145
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In your scenario, the "accommodations" may be "free" (even though they're not because of MFs), but the plane tickets/park tickets/food bills cost a small fortune for all those Disney trips. So it's relatively easy to use formulas that combine upfront costs and MFs to produce some future "break-even" point. But even though you may break even or save money using DVC for accommodations, you've like dumped a good deal of those savings back into the rest of what goes into a Disney trip, or the more frequent Disney trips, or the longer Disney trips or even the Disney trips that use bigger villas than when you first did your cost analysis. So when people say DVC saves you money, what they actually mean is DVC gives you new ways to spend that money at Disney.
We are also missing gains on the "investment" - the $10k we put in in 2002 was when the market was down - we'd have lost those gains again in 2009, but the market has more than recovered. And I have a balanced portfolio, I never lost all my gains anyway, because I had bonds that went up when stocks went down. That increases the amount of money we'd need to "save" by about 40% if compared against the portfolio I have retained since 2002.

DVC CAN save you money (you can recoup your costs) IF your travel habits don't change. We willingly changed our travel habits, but that means that we won't ever "recoup" our money - we spent it.
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Old 04-28-2013, 02:53 PM   #146
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I'm just asking for some examples. And just approximate the likelihood, everyone knows predicting the future is difficult and I said that in the post. Personally I think the chances of DVC points being worth zero in ten years are vanishingly small. I'd be interested in hearing the rationale from those who have a different point of view on that.
As I tried to convey, I think the likelihood of DVC being worth zero is very small, however, I think the risk of DVC costing more to use than OOP between year 10 & 20 is between 10-25% if I had to put a number on it but it's guaranteed to be worth zero at some point and there's a great likelihood it'll cost more to own than it's worth at some point as well. As you note, it's simply a guess but I believe I have more info and experience than most in this area. IMO one should look at the worst case scenario, basically the parks closing and you losing your job the same week and consider where you'd be. One of the problems with timeshares is it could put you in a position to have to feed it so in essence it could be worth less than zero at some point and this is a fact I think most people miss.

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Originally Posted by DougEMG View Post
I look at my investments as a way of funding my retirement (food, shelter, clothing, etc) while I look at owning and renting DVC points as a way of vacationing while I'm retired. So for me there is a definite difference on how I look at and treat the two.
Anyone who doesn't agree should likely take another look at their assumptions. However, I think there's more to it than that. IMO DVC, or any timeshare, should make sense financially first and foremost given reasonable and appropriate assumptions. I also feel one needs to seriously consider risk in the equation as well as one's financial situation. I'd further add, borrowing from other thread's on the subject, that being able to make the payments is not the same as being able to afford DVC or any other luxury purchases.

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Originally Posted by Galun View Post
10 years is an arbitrary point in time. Why not pick 5? Or 15? Or 20?

When you look at any investment and want to calculate the return on investment, you evaluate your projected cash flow against your initial capital outlay and come up with a discount rate. That discount rate is your ROI. An ROI of mid to high teens is definitely indicative of a high risk investment. The question is whether you think the actual risk is higher or lower than the implied ROI. If it is, then you don't buy. If it is not, then you buy.
To a degree it is arbitrary but it's borrowed from a frequently used timeline related to high risk investments. I'd say less if reasonable, longer is not. Part of the issue is the scenario that most look at is the best case scenario and any variations from there are almost certainly going to be worse than the assumptions.

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Been members for a decade, and we are down money.

We have had wonderful vacations, stayed in nice accommodations, put our kids in a separate room and would be able to sell for what we bought. But without DVC we'd never vacation at Disney as often, wouldn't stay in a multi room unit when we did. We certainly wouldn't have paid lodging expenses for friends and family.

Its been a good value, but "break even" - no.
I think this is true for most people partly because of the psychology involved. Many do the math on a studio then end up using larger units. Many also just spend the other money elsewhere. Of course there is the value that extends beyond the financials but that is so variable that it's impossible to compare one person to another.

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I should clarify. Ten years is an arbitrary number to pick for the contract to be worth zero. The only time where the contract will be worth zero for certain is at the end of the contract. The risks that many here had outlined can materialize in 5 years, or 15, or never. That's what I mean by 10 years being an arbitrary number. The length of time it takes for the owner to break even is irrelevant to the ROI calculation.
See above, to me the question isn't when the contract will be worth zero but rather what time frame am I comfortable I should use to minimize the risk appropriately. The OP was about buying and renting and how long it'd take to recoup the investment. The 10 years value really only has meaning if one sells or plans to at that point. I've seen a lot of things in timeshares over the past almost 20 years, both DVC and otherwise, including special assessments, values plummet almost overnight, downgraded facilities, resorts leave systems (there are 9 FORMER Marriott resorts), even timeshares closed. Some would say "it'll never happen to DVC" and that may be true but there are no guarantees and I believe one should consider worst case scenarios then compare to reasonable assumptions. Even for DVC we saw values go from around 80% of retail to closer to 50% in a very short period of time.
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Old 04-28-2013, 06:06 PM   #147
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I think this is true for most people partly because of the psychology involved. Many do the math on a studio then end up using larger units. Many also just spend the other money elsewhere. Of course there is the value that extends beyond the financials but that is so variable that it's impossible to compare one person to another.
As long as the decisions are made self aware and its affordable, it isn't a big deal. When we bought, we CHOSE to buy to go more often, bring friends, and stay in a multi room unit.
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Old 04-28-2013, 06:52 PM   #148
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As long as the decisions are made self aware and its affordable, it isn't a big deal. When we bought, we CHOSE to buy to go more often, bring friends, and stay in a multi room unit.
Agreed, but that's different than the issue of whether it makes sense financially in any regard, ultimately anyone can make their own decision as long as it's legal. I know many want to believe that if one looked at the info and made a decision, it was a good one and I believe that's often not the case (not referring to you but in general). IMO many buy when DVC doesn't make sense for them and many buy when they couldn't truly afford it. Making poor choices isn't illegal in these type situations.
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Old 04-29-2013, 09:50 PM   #149
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I juThis year the maintenance fees are $4.81 per point. So if someone paid $4.81 per point and sold them for $12...they'd realize a $7.19 profit per point.

Assuming a $11,000 cost to buy the contract....if I sold all 200 points each year and got a similar $7.19 per point profit...it would take me basically 7.6 years to recoup the contract cost. Am I looking at that correctly? Would anyone else like to share how long it took you to recoup the initial investment? I realize I didn't factor in what I'd lose by taking that $13,000 and investing it instead. I'm just curious to know if having that initital investment recouped in 7 years is a good deal...bad deal...or great deal.
This is assuming 1) cost of rentals will go up equal to cost of my increase. It is a bad assumption due to mf are based on costs ( and have significant inflation). And rental rates are based on supply/ demand. So 5 yrs from now mf could be 8$ and rents could be the same. Rents have only home up about 2$ since about 2008, and really that is very recent. Mf on every resort increase every yr.

And 2 you are assuming it is worth 0 in the end. Use it for 7 yrs, it's resale price might be 1/2 what you paid .. Or double for that matter. but neither will be worth zero.

And though you stated it time value of $$ is being ignored.

Resale ssr and. Akv are both a steal and IMO a good investment if you don't care where you stay. IMO a. Direct Blt or Akv contract would be a lot harder to justify. ( add in financed interest and even worse)
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Old 04-30-2013, 08:26 AM   #150
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The good thing is 'supply and demand' is controlled by only a few people. If Dave, Disboards, and another Mouse forum decide to rent at $14 per point then the non-member will have no choice. The rental rate will have to go up. With resale rate up by 10% since 2013, I expect people will ask for more money for rent soon.
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