DVC "cost of room" math. Is this right?

[deerh]

There are MANY different ways to see if "DVC cost of room math"!!! LOL The way I look at it is- Cost of "Rack rates"and then take MAYBE 25% off of that rate PLUS tax. You always have to include taxes, as you don't pay taxes with DVC as you know. Add dues..

Ex: BWV 2BR- $1344/night x 7 nights. PLUS tax- 12%=10,526. With 25% off-$7902.. Now, points:280 points. Dues are $7.17/point x 280=$2007. Remember that points will never go up. Dues will go up. So, I bought BWV when it was $65/point. So, I have broken even and then some. I agree- it is all "Gravy" now.. The above example does not include prices going up 3-4-5%/year for the "rack rates". So, yeah, IF you keep DVC for 6-7 years, it is all "Gravy" from then on.. Does anyone on this board think Disney resort prices will go DOWN anytime soon?? Not me... I see a 2BR at BWV in 5 short years being $1579/night!!!!!! And that assumes 3.5% increase/year.. So, is DVC worth it? I would say Yes for sure!

 

[Wakey]

If dues continue to rise above inflation, compounded, your calculations go to pot because in 20 years the gap between a DVC night and a cash night may be very small. Yes rooms will go up, but they’ll come right back down in an inevitable recession, which will likely have no impact on dues inflation.
I believe DVC has seen its golden age of savings in its first 25 years, and they will not be as attractive for anyone buying in now.

 

[Dean]

The TVM is a core part of the LONG TERM cost of ownership, there's really no way to argue it's not even if one doesn't want to consider it or calculate it. If one assumes they would have went on a similar vacation anyway, pay dues and use those funds, it's not market rates though but roughly half as it'd take many years to use the entire amount of funds one would pay otherwise. One would not (or should not) have all of that sitting in a regular savings account or similar so the bank doesn't pay anything is a limited argument IMO. The other side of the equation is what does one compare it to, how much would it have cost to go on the vacation one would have paid for OOP, for DVC to makes sense one has to value staying on property enough to have done so OOP. Another variable is that when people to through all the calculations very few end up using it the way they calculate. They base their calculation on a studio or lower time or X number of days and rarely will they continue to use it that way. Part of that variable is life but part is that DVC changes how you approach such vacations. Often one just spends any savings elsewhere so in the end DVC essentially never saves money but it can add additional value which is more personal and difficult to calculate $$$ wise.

 

[E2ME2]

Yup - we wouldn't do that . The $1 listing was to drive home the concept of "break even", vs discounted rooms: Having paid off our initial investment + dues 2012 to 2018? We COULD, in theory, let everything go for $1, and be ahead by $1 .

Why drive that idea home so much? Well, a lot of folks avoid DVC thinking it's like a "timeshare trap": They will be stuck for 30 years. In fact, one is only "stuck" until all upfront costs + dues = what one would have paid for DISCOUNTED rooms, assuming you were GOING TO GO ANYWAY. For us? That period was 6 years, given OUR vacation habits. From here on out? As long as we still want to GO ANYWAY? It's all Gravy .

Now - FINANCE that up Front Cost? Oh, the time to hit "break even" extends a LOT .

Ahh - Got it
But while on the tangent of ROFR - using a hypothetical - If a seller lists at $100/PP, and Disney invokes ROFR, does that mean they pay the seller the $100PP, or do they pay a different "ROFR" rate ??

 

[zavandor]

Ahh - Got it
But while on the tangent of ROFR - using a hypothetical - If a seller lists at $100/PP, and Disney invokes ROFR, does that mean they pay the seller the $100PP, or do they pay a different "ROFR" rate ??

Exactly the same deal, including reimboursement of MF and closing costs.
However I'm wondering if including in the contract non monetary things like "and babysit the kids every thursday for a year" would be legal. It would be a way to sell the contract to a relative for a low price but still avoid Disney exercising ROFR.

 

[Dean Marino]

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[deerh]

If dues continue to rise above inflation, compounded, your calculations go to pot because in 20 years the gap between a DVC night and a cash night may be very small. Yes rooms will go up, but they’ll come right back down in an inevitable recession, which will likely have no impact on dues inflation.
I believe DVC has seen its golden age of savings in its first 25 years, and they will not be as attractive for anyone buying in now.

Doubt that will happen... In 1999, BWV dues were 3.04/point. Now $7.17/point. If you own 250 points, it would have gone up an avg of $1032/19 years.. That would be $54.34/year.. I think "Rack rates" have gone up a LOT more than that... Don't see that happening....
So... If a 2BR is $1200/night now, and goes up 3.5% inflation in one year, that is $42/night... Almost the cost of dues over the lifetime of 19 years of owning BWV... NOW, IF dues go up 9-10-11%/year for the foreseeable future, that might be a different story....... So, that 7 night stay in a 2BR villa would be $294 more every year.. If inflation increases the "rack rates" 3.5%/year..

 

[Dean]

Doubt that will happen... In 1999, BWV dues were 3.04/point. Now $7.17/point. If you own 250 points, it would have gone up an avg of $1032/19 years.. That would be $54.34/year.. I think "Rack rates" have gone up a LOT more than that... Don't see that happening....
So... If a 2BR is $1200/night now, and goes up 3.5% inflation in one year, that is $42/night... Almost the cost of dues over the lifetime of 19 years of owning BWV... NOW, IF dues go up 9-10-11%/year for the foreseeable future, that might be a different story....... So, that 7 night stay in a 2BR villa would be $294 more every year.. If inflation increases the "rack rates" 3.5%/year..

It could happen but it'd likely occur in the presence of economic downturn which makes it more difficult to travel for many and makes the ownership much less valuable financially. Basically a 2008 type process. Costs have to be paid regardless, market forces won't help much to control dues. If it does happen enough over time you start to get defaults and the value goes down further.

 

[crisi]

It could happen but it'd likely occur in the presence of economic downturn which makes it more difficult to travel for many and makes the ownership much less valuable financially. Basically a 2008 type process. Costs have to be paid regardless, market forces won't help much to control dues. If it does happen enough over time you start to get defaults and the value goes down further.

Or, to be more blunt "if that ever happens, you have bigger problems to worry about."

 

[GrumpyInPhilly]

Or, to be more blunt "if that ever happens, you have bigger problems to worry about."

I say this to my family members all the time.

 

[deerh]

If economic downturn happens, it will be just like 2008... We will survive it, and 10 years later, DVC will be worth almost double what you paid.... I think it is nothing to worry about.. Just my .02.....

 

[Dean]

Or, to be more blunt "if that ever happens, you have bigger problems to worry about."

Partly but it's more than that. Costs have to be paid regardless so dues will be whatever it costs to run the resort is what dues will be even if there are other economic challenges. A recession will do little to limit those costs and if there are a lot of defaults, dues may rise much higher than inflation. This is part of the risks associated with a timeshare.

If economic downturn happens, it will be just like 2008... We will survive it, and 10 years later, DVC will be worth almost double what you paid.... I think it is nothing to worry about.. Just my .02.....

I wouldn't worry about it but DVC will be worth nothing at some point and possibly worse than nothing, it could be a liability costing more than it's worth in some scenarios. The thought it'll be worth double 10 years later and closer to the end of the RTU is extremely unrealistic IMO. Ultimately it shouldn't matter as long as it's affordable for the individual since it'd be a poor choice to buy as an investment anyway, it should be looked at as lost money as part of the purchase process.

 

[zavandor]

Partly but it's more than that. Costs have to be paid regardless so dues will be whatever it costs to run the resort is what dues will be even if there are other economic challenges. A recession will do little to limit those costs and if there are a lot of defaults, dues may rise much higher than inflation. This is part of the risks associated with a timeshare.

Why? If people default, points go back to Disney who has to pay MF on them. This will encourage them to keep costs down if they have too many. This might worry us on how our resorts will be operated and maintained, but MF shouldn't increase.

 

[Dean]

Why? If people default, points go back to Disney who has to pay MF on them. This will encourage them to keep costs down if they have too many. This might worry us on how our resorts will be operated and maintained, but MF shouldn't increase.

There's really only so much they can do to control costs and most of those options will have a negative effect on resort operations and member usage. As for who pays the dues with default, it depends. If DVD forecloses then they are the owners and are responsible, which only happens if there is a mortgage. If the forecloses is due to failure to pay maintenance fees and there is no mortgage, DVCMC is the owner and the members are responsible for the total maintenance until that responsibility is transferred to a new owner. I'm pretty sure they have an agreement for DVD to handle those points currently but if things go south, they will not carry that responsibility going forward and ROFR will also stop almost completely. Therefore the risk I mentioned is still front and center. I've seen it happen. There was an article about a resort in CAN in timesharing today a couple of years ago where members only paid dues if they used the week and basically no one was using it so the per week cost was astronomical. During the downturn of 2008/2009 there were a lot of resorts in seasonal areas that struggled mightily with this issue.

 

[MooseBucks]

Partly but it's more than that. Costs have to be paid regardless so dues will be whatever it costs to run the resort is what dues will be even if there are other economic challenges. A recession will do little to limit those costs and if there are a lot of defaults, dues may rise much higher than inflation. This is part of the risks associated with a timeshare.

I wouldn't worry about it but DVC will be worth nothing at some point and possibly worse than nothing, it could be a liability costing more than it's worth in some scenarios. The thought it'll be worth double 10 years later and closer to the end of the RTU is extremely unrealistic IMO. Ultimately it shouldn't matter as long as it's affordable for the individual since it'd be a poor choice to buy as an investment anyway, it should be looked at as lost money as part of the purchase process.

Many timeshares have seen their value be worthless due to MFs and booking restrictions. I wouldn’t be surprised if some point this happened to DVC. The difference is Disney has some levers they can pull in order to bring back some value to re-sale owners as perks if they saw a large sustained increase in people letting their contracts go.

 

[luckyman_apd]

I always love math arguments here as is all so subjective unless you actually can be sure you know what you would have done with the money. Let's not forget the cost of financing. Many people didn't have the $ to purchase and financed the purchase making it even more expensive.
Me? I got lucky. My grandfather gave his 4 grandsons $12k each with the instructions to SPEND IT NOW on our families. My one cousin was buying a house so it went towards that. Another was getting married so it went to that. Me? My wife and I bought DVC resale. So I can't factor in "return on investment" costs. So we bought 125 BLT points in late 2011 closed in 2012. I took my purchase price and divided it by 6000+ points the contract has until its end date (we had some banked points included in that first year). It came out to roughly $2.05 per point. So I figure EVERY point I'll ever own cost me $2.05 plus whatever the dues fee on those point per year. When figuring out cost of room each reservation...i take $2.05 plus the dues... And then multiply by the points use. I do take into consideration that this fall I'll be using banked points so this point I calculate with last year's dues... And the rest with this year's dues.

While I'm not thrilled in how much dues have risen for my resort in recent years.... It's still working out to me paying pretty much a value room rate for DVC studios. I can assure you that my wife would NEVER take a value room accommodation We would be staying at moderates.

Would we have gone to Disney as much as we have if not for DVC? Doubtful. But I've also found some cheap deals on flights to make it work I wouldn't normally have found .....and we no longer travel without an annual pass. We book all our points usage into a Callander year to make the price per day in the parks as cheap as they can... Then take a year or so off from travel to the mouse. Disney is something we would have down as a family... Dvc allowed us to do it more for similar or much less cost. I know others who if I actually broke it down for them... Dvc costs them far more than they would have ever spent (airfare, park tickets, etc). We have definitely maximized its value.

Ps...i could sell it today for easily $40 a point more than I paid That's not a bad "investment" 6 years later.

 

[Dean Marino]

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[MooseBucks]

Like this....

CASH, a good $28,000 direct from WDW for BRV....
But wait! This was in 2012 - close to 0.1% bank interest. Cash was there.... here is what happened .

Because we were GOING TO GO ANYWAY? SIX years to hit "break even", vs DISCOUNTED hotel rooms. Yup, we tracked all REAL rack, 2012 to present. Our investment cleared FAR more than 0.1%, because WE WERE GOING TO GO ANYWAY.

Alternatively if you invested in an index fund you’d have earned an additional 36k. I don’t think using .1% as interest lost is realistic.

 

[Chilbert]

Alternatively if you invested in an index fund you’d have earned an additional 36k. I don’t think using .1% as interest lost is realistic.

After tax ???

 

[MooseBucks]

After tax ???

Nope, but depending on your individual situation and even if you had a 33% effective tax rate the money would have still doubled.