Fun Speculation on DVC as Investment

[ZekeKelso]

Hi folks - I've gotten a ton of good info from you guys over the past year. So I am well aware of the general consensus that DVC should not be considered an investment - that it is an expense - etc. But if we can ignore the big picture for a minute, investment is still at least a part of the DVC equation. Or if you don't like the word "investment" - how about lifetime cost?

So, if you looked at the "total lifetime cost" of DVC, where do you think the current sweet spot lies?

To give a specific question - assume you are going to (1) buy 200 points, (2) rent up to 1/3 of them each year, (3) pay maintenance costs each year and then (4) sell the points in 10-15 years. Ignoring everything but these costs, what factors would influence which resort to buy, when and how?

My thoughts:

Buying SSR through resale - perhaps waiting until AKLV opens when there might be decrease in resale prices - is the sweet spot right now. This is mostly due to the extra 12 years, which will be a bigger deal when it's time to sell in 10-15 years than it is today. This is somewhat offset by the lower rental fees that SSR will likely generate. Not sure what to think about maintenance costs - other than to reject VB/HH. Is there any reason to think there will be noticeable differences down the road at SSR vs VWL/BCV/BWV? (I'm guessing lifetime maintenance costs at AKLV will be higher, but AKLV is already ruled out by high purchase costs.)

So, what do you guys think? I know nobody knows for sure - and I know lifetime-cost isn't the only factor. But I find it one factor worth thinking about and wonder what your opinions/speculations are.

Thanks,
Zeke

 

[Anthony1971]

DVC is not an investment and can not be viewed as one as you are signing a contract that states this. No point is going to rent higher than another point as you would need to rent them at the 11 month window and recieve payment to have an advantage as this would likely be cancelled. If you were to make a reservation for a popular time at a poular resort you may be able to rent a reservation for a higher price in which case you could use your 11 month advantage but Disney is making this unlikely as they require names when you make a reservation and you may likely loose the reservation if you change all the names. if your are planning on buying points with the intentions of renting some I would say this is not a good idea as you may not be able to rent them or rent them for a profit so you can not predict how many points you need to rent to cover to your MF it can vary greatly for year to year... However I have seen posts from people who do this but they phrase it as I rent enough to cover MF and the rest I use for my vacation.... Most here purchased as a vacation and some will rent and some will not.. the majority who rent do so on occasion when they are not able to use some points...You seem to want to know how to beat the system so to say.. Disney is making this harder as this is not how DVC was intended to be used that being said you can be successful at this but it will not be 100% by far and you will be using a great deal of time and energy as well as the risk of not being able to rent so if you are thinking of buying with the intention of renting I would say not to because you can end up loosing over the 35-50 years and the risk is higher in the start as you do not have the experience of the people who bought DVC to rent which again DVC is aware of and enforcing rules to make this more difficult.
But DVC is great investment in memories and family

 

[Mtnman44]

Renting is an interesting option for those situations where you might have extra, unusable, or leftover points but I, myself, would never buy more than I needed with the intention of renting them each year. I also think that this plan violates the spirit if not the letter of the DVC use contract.

That being said, I think you are right that buying one of the newer resorts and selling in 15 to 20 years will "probably" result in the lowest total cost. However, I'm not sure I'll be done with Disney vacations in 20 years and it will sure cost a lot more to buy a new contract then, so I think I'll keep mine. However, it is nice to have options.

 

[ZekeKelso]

Anthony,

Thank you for your reply. But you misunderstand me. I am not asking about beating the system. I am not asking how to make money being a commercial point renter. I merely wanted to start a conversation about minimizing total cost of ownership. For reasons of practicality, people will sometimes buy more points than they need for personal use. One of the nice things about DVC is the ability to rent those points in a year when they won't use them. I see that as working within the system - do you really think it cheating?

As for one of your other points, I do believe that making a reservation "on spec" would be both inappropriate, and difficult with the rules Disney is putting in place. However, if you look at rent boards, people who understand the system understand the value of the 11-month window and will offer more per point to get someone to make a reservation for them at one of the smaller resorts outside the 7-month window.

 

[Plutofan]

Remember there are several risks in renting - a renter may pull out and your points will not be as valuable depending on how close you are to the expirartion date, Disney can change the rules on renting and if you do not pay the use taxes on your rentals you take the chance that you may owe significant interest and penalties in the future. There are a lot of risks with renting that should factor into the equation.

 

[mochabean]

Zeke,
I have thought about this myself at times, not as a for-profit renter but just to try and figure out what is the best way financial-wise to buy DVC, and because I like to cruise and renting points which I'm not using makes it very easy to pay cash for my cruise and is a much better deal than paying points for the cruise. I don't rent 1/3 of my points every year but one year I rented all of them to take a cruise.

Although I don't intend to sell, one never knows what will happen 10-15 years in the future. I might very well sell some of my existing points to buy CRV when it becomes available.

Disney is restricting some freedoms with regard to point transfers to deter commercial renting but IMO that's not what we're doing. I don't think Disney can change the rules restricting us from renting altogether, as Anthony seems to imply.

All that being said, I don't know that SSR through resale is necessarily the best buy. SSR gets you no benefits with the 11-month window as far as renting is concerned. If you rent 11 months out you can likely charge a premium for BCV or VWL points due to demand. After 10 years, this premium, charged year after year, may indeed cover not only the higher initial cost but also the lower value at resale. I don't really have firm numbers to talk about but it's something to consider.

I don't really worry about renters pulling out, as I always sign a contract and make all payments be non-refundable. Renters can pull out but I'll have at least half of their money if they do. Renting is inherently much more risky for the renter than the owner. My biggest concern in this area is that, with Disney building more hotels there will be more competition, theoretically driving down prices. We may be seeing some of this already with the free upgrades from POP to SSR that Disney is giving. And we always have to worry abou the supply of renters - at any time, more publicity of the risks to the renter may convince more people to decide not to rent.

In any case my plan going forward is to buy CRV points when they become available, hopefully with a members-only special pre-sale discount. With two small kids I will stay there frequently, and it's my prediction that these points will be in demand more than any existing resort to date, making them worth more in the rental world.