History and projections for point rental prices? (for break-even comparison)

[MamaBear12]

Still year 10 (DVC is $20707 vs rental $21011)

Thank you! Not that we would rent long-term if we didn't buy (probably a mix of renting and moderate resorts), but it does give me some perspective.

 

[Dean]

No. At 4% interest, it takes about 3 years longer.

Edit to add: FWIW, under these specific conditions, by the time the contract expires, this investment angle actually favors DVC ownership. Most people don't consider that if you are allowed to invest your initial buy in, then you are also allowed to invest your "savings" from owning DVC at some point. If the spread between cost of ownership and cost of cash rental is large enough, DVC ownership will eventually overcome the initial deficit and become positive in that regard as well.

This makes sense. I personally use 4.5% earnings on the entire purchase amount (figuring half at short term and half at long term) but I also wouldn't use a different increase for rental vs dues. I doubt any of those changes would affect the term significantly and they likely would even out (didn't run the numbers today). That assumes one made the same exact choices owning vs renting. A studio or 2 BR comparison will often be far more favorable than a 1 BR or 3 BR comparison and is one of the situations where one likely needs to look at it both from the direction of what they would have spent without looking at DVC rooms.

As noted, there are other issues to owning, some good and some bad. Control and a more intricate knowledge of the workings (and changes) of the system can be good but the risk of the long term commitment can be bad. Where the numbers AND the personal situation BOTH clearly make sense to own, I'd likely buy. As you get up the ladder to VGF & Poly, the numbers will stretch out somewhat and there will be those where owning is not reasonable that would be reasonable for a lower cost resale resort. Unfortunately some of those will talk themselves into the higher cost (both up front and long term) item that shouldn't. The other thing and it likely nears 100%, is that one doesn't make the same choices consistently long term owning as renting, some may save money (value AKV?) but most will lose money like comparing to a studio and moving to 1 BR. Not wrong, just something one needs to consider and is often the difference in the value vs cost comparison. Value is far more personal.

 

[crisi]

Or to put it another way:

DVC has not saved me a dime. The mouse has very efficiently removed more of my money out of my pocket with DVC than he would have without it. But I feel like I've gotten good value for those dollars. We've had to make vacations a priority. We've been able to stay in multi room units instead of cramming our family into a single hotel room. We've been able to treat friends and family to a room.

I do miss daily housekeeping (Most people here don't), but not enough to pay for it. I do miss the flexibility of cancelling. But for us, the losses are small, the value gains are pretty significant and that makes me glad I bought - even if I did end up a little poorer.

 

[disneynutz]

Same here, while owning DVC has saved us some money on our room of equal accommodations, it has caused us to take more Disney vacations and spend much more money overall then prior to our DVC ownership. That can be a good thing or a bad thing depending on the individual.

Bill

 

[ElizabethCB]

Same here, while owning DVC has saved us some money on our room of equal accommodations, it has caused us to take more Disney vacations and spend much more money overall then prior to our DVC ownership. That can be a good thing or a bad thing depending on the individual.

Bill

This was actually one of the big motivators for me to do DVC. In 2014, I had a run of a bunch of extra freelance income, and made about $20,000 of "extra" money. My husband is a major saver, and I am too -- but not to his degree. I decided to use the $ for vacations, because prior to that, he wasn't willing to pay for them.

We did 2 Disney trips in 2 years costing around $5,000 each. On our last one, we discussed the fact that we could use the remaining $10k for 2 more trips, or we could buy in to DVC and come on many more trips.

For us, it was definitely the right financial decision because he now feels like the $ has been spent and the time should be used. And just paying for airfare, tickets, and food is a lighter hit than adding in the Disney room cost -- and it's easier to space out those expenses across a few months so that he doesn't panic with one big hit in a month. We pay off our credit cards every month, so those big bills really do cause a problem.

 

[MamaBear12]

Thank you for all the input! I spent last night building my very own spread sheet to see when we would break even based on changes to purchase price, MF rate of increase, renting rate increase, and lost interest from investing the money (I did account for spending a percent of the invested principal each year on vacations though, because we're going to vacation annually so the money is going to come from somewhere...if not from that pot then from other money that would have been invested if not spent on vacations).

So next step, building a comparison to WDW hotel accommodations into my spreadsheet. What are reasonable room rates for a standard moderate hotel room (sleeps 4) and moderate or deluxe that would sleep 8-9 (comparable to dvc 2 bedroom)? Does anyone have this information handy from their own spread sheets, or is there a particular site that would give me a good general idea? What's a reasonable assumption for hotel price increase over time? Thanks again!

 

[Disney Dad ADL]

Thank you for all the input! I spent last night building my very own spread sheet to see when we would break even based on changes to purchase price, MF rate of increase, renting rate increase, and lost interest from investing the money (I did account for spending a percent of the invested principal each year on vacations though, because we're going to vacation annually so the money is going to come from somewhere...if not from that pot then from other money that would have been invested if not spent on vacations).

So next step, building a comparison to WDW hotel accommodations into my spreadsheet. What are reasonable room rates for a standard moderate hotel room (sleeps 4) and moderate or deluxe that would sleep 8-9 (comparable to dvc 2 bedroom)? Does anyone have this information handy from their own spread sheets, or is there a particular site that would give me a good general idea? What's a reasonable assumption for hotel price increase over time? Thanks again!

What I did for that was just go to the Disney website and price out a vacation, then compare it with the appropriate number of points based on the points chart based on the date. If you want to be super hardcore about it, you can do several different times throughout the year..

Also consider that you can usually find a discount on rooms, so I would probably discount whatever price you find by 20 or 30%. But I think the initial price on the website also doesn't include the tax until you actually try to check out, so that's a consideration as well. So pay attention to whether the price includes tax or not.

You can also sometimes book DVC villas on the Disney website as well depending on inventory, so that's another thing to look at (except VGC you cannot).

I'll save you some work and tell you that you not to bother with the deluxes at first. DVC will win easily. Focus more on the values and moderates first, then if you're not burnt out on DVC research, do the deluxes. (pricing out the deluxes vs DVC makes you feel great as a DVC owner though, lol).

Edit to add: For the investing the principal thing, the way I did it is to take the DVC buy in as the initial principal. Then each year I added the interest at whatever % you choose, added the annual dues for that year, then subtracted the cash cost of the vacation for the year, which gives you the new principal for the following year. This does what you mentioned by taking into account that I'm spending some of my principal each year on a vacation.

 

[MamaBear12]

Edit to add: For the investing the principal thing, the way I did it is to take the DVC buy in as the initial principal. Then each year I added the interest at whatever % you choose, added the annual dues for that year, then subtracted the cash cost of the vacation for the year, which gives you the new principal for the following year. This does what you mentioned by taking into account that I'm spending some of my principal each year on a vacation.

That's exactly what I did as well! With that, my principal/investment is running out between 13 and 16 years (depending on where I set purchase price and rental per point cost). I used the cash cost of dvc rental for vacation cost, but I'll probably do another where I subtract the hotel cost once I have that all figured out.

Is it reasonable to factor selling into the equation? I know there's uncertainty, but it seems like DVC resale has a history of being quite stable (except the recent recession..which even then it was still selling, just for less per point). With that, even if we sold after 10 years, we would still break even, correct? (assuming we can get at least half of our initial investment back...though with inflation and rising direct prices, we would likely get more and come out with more than our initial investment back). I can certainly see us owning beyond the 10-year mark, but I can't say with certainty whether our kids will still like going in their late teens/early 20s.

 

[Disney Dad ADL]

That's exactly what I did as well! With that, my principal/investment is running out between 13 and 16 years (depending on where I set purchase price and rental per point cost). I used the cash cost of dvc rental for vacation cost, but I'll probably do another where I subtract the hotel cost once I have that all figured out.

Is it reasonable to factor selling into the equation? I know there's uncertainty, but it seems like DVC resale has a history of being quite stable (except the recent recession..which even then it was still selling, just for less per point). With that, even if we sold after 10 years, we would still break even, correct? (assuming we can get at least half of our initial investment back...though with inflation and rising direct prices, we would likely get more and come out with more than our initial investment back). I can certainly see us owning beyond the 10-year mark, but I can't say with certainty whether our kids will still like going in their late teens/early 20s.

Yeah, it's really hard to know what the value of DVC contracts will be in the future and it's sort of interesting to speculate. Many timeshares are essentially worthless and are given away (or sometimes people will even pay others to take them), so the fact that DVC has actually increased in value is sort of an anomaly, especially since in theory DVC contracts *should* lose value every year due to the expiration date.

The reason (IMO)why DVC has been able to maintain its value is because Disney has been able to drastically increase hotel prices, and has been relatively successful at it. Some feel that resale values of DVC are dependent on direct prices, but I actually disagree with that. My feeling is that the value of DVC hinges on the cost of Disney hotels (and their ability to fill the hotels at that price).

Ultimately, I think DVC contracts will be worth *something* 15 years from now, though I would be surprised if they can maintain their current prices.

My calculations don't consider any residual value of the DVC contract (though I have a place for it I don't usually use it). When I say break even is 10 years, then whatever you can sell the contract for is gravy. I think it's very dangerous to assume a particular value to DVC contracts 10 or 15 years from now. It's much better if you can find value in DVC even if the resale prices drops to $0.

At the same time, it's nice to take into account the possibility you might need to sell one day and what that might look like, which is why I included it in my spreadsheets as sort of a worst case scenario (I.e. I decide I hate Disney World 8 years from now, how does that affect the numbers?).

 

[MamaBear12]

What I did for that was just go to the Disney website and price out a vacation, then compare it with the appropriate number of points based on the points chart based on the date. If you want to be super hardcore about it, you can do several different times throughout the year.

So, I already have a spreadsheet with likely WDW vacations we would take and DVC points needed for each trip over the next 12 years. I found the current discounted prices of Port Orleans- Riverside for June and Dec when we would likely travel, and discounted room prices for Ft. Wilderness cabins (where we would probably stay if bringing family...only sleeps 6 compared to 8-9 with villas, but if only my parents travel with us, that would be our moderate). So, to calculate future room costs for each vacation, by how much would you increase hotel prices annually? 3%? 4%? More? Less?

Thanks so much!

 

[miTnosnhoJ]

Thank you for all the input! I spent last night building my very own spread sheet to see when we would break even based on changes to purchase price, MF rate of increase, renting rate increase, and lost interest from investing the money (I did account for spending a percent of the invested principal each year on vacations though, because we're going to vacation annually so the money is going to come from somewhere...if not from that pot then from other money that would have been invested if not spent on vacations).

So next step, building a comparison to WDW hotel accommodations into my spreadsheet. What are reasonable room rates for a standard moderate hotel room (sleeps 4) and moderate or deluxe that would sleep 8-9 (comparable to dvc 2 bedroom)? Does anyone have this information handy from their own spread sheets, or is there a particular site that would give me a good general idea? What's a reasonable assumption for hotel price increase over time? Thanks again!

This site is a good source for room rates at Disney.
https://www.mousesavers.com/latest-disney-world-room-rates-season-dates/

 

[Disney Dad ADL]

So, I already have a spreadsheet with likely WDW vacations we would take and DVC points needed for each trip over the next 12 years. I found the current discounted prices of Port Orleans- Riverside for June and Dec when we would likely travel, and discounted room prices for Ft. Wilderness cabins (where we would probably stay if bringing family...only sleeps 6 compared to 8-9 with villas, but if only my parents travel with us, that would be our moderate). So, to calculate future room costs for each vacation, by how much would you increase hotel prices annually? 3%? 4%? More? Less?

Thanks so much!

I don't recall what I used exactly when I was buying, I think either 3 or 4% will work, not sure it will make that much difference.

As I said before, I preferred to be on the more pessimistic side when it came to evaluating DVC, so I generally made the increase in MFs at least the same or higher than increase in cash rates. I know I used lots of different numbers, but probably started with 4% increases in MFs and 3% in cash rates, then increasing the MF% and/or decreasing the cash rate % and see how that affected the result.

 

[mustinjourney]

So, I already have a spreadsheet with likely WDW vacations we would take and DVC points needed for each trip over the next 12 years. I found the current discounted prices of Port Orleans- Riverside for June and Dec when we would likely travel, and discounted room prices for Ft. Wilderness cabins (where we would probably stay if bringing family...only sleeps 6 compared to 8-9 with villas, but if only my parents travel with us, that would be our moderate). So, to calculate future room costs for each vacation, by how much would you increase hotel prices annually? 3%? 4%? More? Less?

Thanks so much!

Using moderates as a comparison is not even close to fair though. That's like comparing economy class to first class on airfare. Two completely different service levels and amenities.

Last year I did a split stay in regular hotel rooms at POR and the grand Floridian. POR was around $230 a night with taxes and GF ran about $600 with taxes (it was club level, which was about $80 more a night).

The difference between the two resorts was massive. Everything about GF is nicer. It's the reason we joined DVC.

Rooms at BCV and BWV typically go for around $450 a night.

 

[Dean]

Using moderates as a comparison is not even close to fair though. That's like comparing economy class to first class on airfare. Two completely different service levels and amenities.

Last year I did a split stay in regular hotel rooms at POR and the grand Floridian. POR was around $230 a night with taxes and GF ran about $600 with taxes (it was club level, which was about $80 more a night).

The difference between the two resorts was massive. Everything about GF is nicer. It's the reason we joined DVC.

Rooms at BCV and BWV typically go for around $450 a night.

It depends. DVC rooms and resorts are nicer but not that much nicer, certainly compared from to to bottom. As for a valid comparison, IMO there are only 2, what one would have paid without owning and renting points and one should consider both IMO.

Comparing to rack rates of DVC rooms, even using a discount, is a fools comparison unless that's what one would have paid on cash. Certainly owning DVC represents an increased value over a moderate in most cases but it also represents additional risk and potential cost.

 

[MamaBear12]

From my rough calculations (20% off rack with 3% annual increase in hotel price), break-even point if we stay in the "cheap moderates" (Caribbean Beach/Coronado when it's just the 4 of us and Ft. Wilderness Cabins with 6) is like 18/20 years...I didn't get that far. But if I swap out Ft. Wilderness Cabins for a Jr. Suite at the Coronado, break-even is more like 10-12 years. Does that seem about right?

 

[crisi]

From my rough calculations (20% off rack with 3% annual increase in hotel price), break-even point if we stay in the "cheap moderates" (Caribbean Beach/Coronado when it's just the 4 of us and Ft. Wilderness Cabins with 6) is like 18/20 years...I didn't get that far. But if I swap out Ft. Wilderness Cabins for a Jr. Suite at the Coronado, break-even is more like 10-12 years. Does that seem about right?

If you are using rough calculations, then you probably aren't factoring time value of money - the amount of money you'd make putting your initial investment in DVC into a S&P 500 fund and letting it sit there. And if you are getting 20 without using that, I'd guess you'd never break even if you did. But DVC isn't about breaking even - if you need to break even in order for it to make sense, it isn't a good move - the slightest change - a last minute vacation cancelled where points are wasted, the temptation to book a bigger unit, the logic which encourages people to spend more since they won't have a bill for the room (the dues are out of sight/out of mind - and the purchase price is long gone), the year you would have skipped because the house needed an unexpected new furnace, but since you have the points, you decide to drive down and take a "cheap trip") - will quickly move you into the "it cost us money" category.

DVC can be a great value - but I suspect that in a full accounting, very few people who enjoy moderates (and even most who are staying in Deluxes) "break even."

 

[Dean]

From my rough calculations (20% off rack with 3% annual increase in hotel price), break-even point if we stay in the "cheap moderates" (Caribbean Beach/Coronado when it's just the 4 of us and Ft. Wilderness Cabins with 6) is like 18/20 years...I didn't get that far. But if I swap out Ft. Wilderness Cabins for a Jr. Suite at the Coronado, break-even is more like 10-12 years. Does that seem about right?

That sounds long, are you comparing a studio to a regular room?

 

[Disney Dad ADL]

If you are using rough calculations, then you probably aren't factoring time value of money - the amount of money you'd make putting your initial investment in DVC into a S&P 500 fund and letting it sit there. g

Although I'm not that big a believer in adjusting for this for various reasons, but she did take this into account on her spreadsheet.

 

[Disney Dad ADL]

From my rough calculations (20% off rack with 3% annual increase in hotel price), break-even point if we stay in the "cheap moderates" (Caribbean Beach/Coronado when it's just the 4 of us and Ft. Wilderness Cabins with 6) is like 18/20 years...I didn't get that far. But if I swap out Ft. Wilderness Cabins for a Jr. Suite at the Coronado, break-even is more like 10-12 years. Does that seem about right?

I'm not sure which dates you used exactly or how many points. I poked around a bit to try to find an available reservation for a Junior suite at Coronado. The only one I could find was a King suite October, which $3802 after taxes. For a 1 bedroom standard at AKV in October x 1 week would be 181 points.

So with the following assumptions:
1. AKV
2. 181 points per year (to cover a 1 bedroom standard villa at AKV in October for 1 week)
3. $85 per point purchase price
4. $645 closing costs
5. 3% increase in both rental rates and DVC MFs per year
6. $3802 - 20% = $3041 per year cash price Coronado Jr. Suite

Breakeven is year 8 (DVC $26,630 vs Hotel $27,042).

If you include lost interest at 4%, you get

Breakeven year 10: DVC $29,695 + lost interest $3688 = $33,383 vs Hotel $34,862)

Again, long term by the end of the contract, lost interest is above $92,000 IN FAVOR of DVC ownership, for the reasons I described previously.


This may or may not be exactly what you got. It depends on what dates you use, etc. But in general, the cost of a junior suite at Coronado Springs appears to cost more than renting DVC points for a 1 bedroom standard at AKV, so it should be shorter than whatever number you got when comparing DVC ownership to DVC rental.

Edit to add:

If you buy a 200 point contract (since it's usually good to have a few extra points if you can) and keep the cash price the same, break even becomes year 10 without interest, year 12 including lost interest.

 

[MamaBear12]

That sounds long, are you comparing a studio to a regular room?

Yes. Studio to regular room. Jr suite or ft. Wilderness cabin for when we would travel with 6. I realize it's not an equal comparison, but I wanted to see how the "deluxe for the price of a moderate" DVC claim bore out. If you stay at the lower end of moderates (hotel rooms and ft. Wilderness cabins), DVC definitely costs more. But if you switch every second or third trip to a jr. Suite (sleeps 6 with 2 baths), it appears you can come out ahead with DVC (at least by my calculations).