Am I missing something or does the break even point come fast when factoring selling the contract?

[CoensFamily2009]

When we bought into DVC it was to save money. We were spending 10k+ a trip. One trip a year. Now our annual disney budget is 25k but we go 4+ times a year and were closing on our 3rd contract. When you think of DVC as an investment most people dont factor in you go more. I cant even take the time off to go with my family every trip.

 

[CarolMN]

When we bought into DVC it was to save money. We were spending 10k+ a trip. One trip a year. Now our annual disney budget is 25k but we go 4+ times a year and were closing on our 3rd contract. When you think of DVC as an investment most people dont factor in you go more. I cant even take the time off to go with my family every trip.

IMO, THIS is the best kept "secret" of DVC!

 

[Bobb_o]

Offer accepted, now I wait for the Mouse...

 

[Frederic Civish]

The biggest missing component is the time value of money. What would you have if you assumed the 11,810 is invested and withdrawn out for the explicit cost of covering some of your vacation expense. For my analysis I converted my upfront cost to an annuity payment assuming moderately higher returns then currently offered. I then used that payment as an annual offset to my non-DVC side of the spreadsheet so to speak.

Also my other issue with assuming DVC rental on the cash side is that it isn't a guarantee.

First of all, realistically, what is 'The Time Value of Money,' to most people? Zero. Because if people didn't take their money and put it on DVC points, they almost certainly WOULD NOT be investing it. Instead, they would be spending it on something else - a RV or motor home, a boat, an expensive trip to Europe, or whatever. We are talking here about the difference between Investment money, and Expendable money. The Expendable or discretionary money is what pays for DVC for most people, and it would not be for Investments. So, buying DVC and having some DVC points that DO have real value in the market place is perhaps one of the most cost effective things they could do.

It is true that there is no guarantee that DVC will keep going up. But it essentially HAS kept going up for 25 years, ON AN AVERAGE. At ANY point from about 5 years ago to 25 years ago, if I had bought DVC, I could sell it now for more than I spent on it. And that is at the Direct price. If you purchase at Resale, you could almost always get all your money back if you just wait 2 years or so to resell. (Vero Beach and HHI being possible exceptions, BUT, they are special cases.)

Recessions come and go. Yes, a recession WILL come. But then it will also go away again. If someone can hold their DVC points through the recession (and use them during the recession, or rent them out), then they could still get all of their money back, plus more, a year or two later.

The biggest fly in the ointment is whether people CAN depend on rental income. I'm not at all sure that Disney can retroactively deny all future rentals. In fact, I am pretty sure that they CANNOT. So, they might be able to put up some roadblocks, to make it a bit more difficult, but I think people will always find a way around that. And I think Disney knows that, so it probably isn't even a battle that they want to fight. After all, you can be darn sure that Disney is going to continue to raise their prices for their hotel rooms. And raise them, and raise them. As the cost of their hotel rooms goes up, DVC points also become worth more and more. And this rental market is a market that DISNEY is creating.

Lastly, don't confuse Disney with DVC. Disney essentially 'owns' DVC. Disney people RUN DVC. But DVC is a separate entity, and, though it might POSSIBLY cut into the profits of Disney's HOTEL DIVISION, when people rent out their points, it probably matters not a whit to DVC itself whether people rent out their points or not.

I do think it would be worthwhile if we could find some way to use the Owner Associations to put independent owners onto some of the boards at DVC. I don't know if this is possible, but it would be a good thing. And if we can't do that, then the next best thing is to try to find ways to make sure that the people who run DVC are running DVC, and not just working for Disney.

 

[zavandor]

Lately DVC has demostrated the will to do whatever it takes to increase their gains. It's a shift of behaviour from the first years when they felt they had to uphold the trust people put into the brand not behaving like other timeshares. That is now gone. We cannot put any trust into our contracts being worth anything on the resale market in the future.

 

[crvetter]

First of all, realistically, what is 'The Time Value of Money,' to most people? Zero. Because if people didn't take their money and put it on DVC points, they almost certainly WOULD NOT be investing it. Instead, they would be spending it on something else - a RV or motor home, a boat, an expensive trip to Europe, or whatever. We are talking here about the difference between Investment money, and Expendable money. The Expendable or discretionary money is what pays for DVC for most people, and it would not be for Investments. So, buying DVC and having some DVC points that DO have real value in the market place is perhaps one of the most cost effective things they could do.

It is true that there is no guarantee that DVC will keep going up. But it essentially HAS kept going up for 25 years, ON AN AVERAGE. At ANY point from about 5 years ago to 25 years ago, if I had bought DVC, I could sell it now for more than I spent on it. And that is at the Direct price. If you purchase at Resale, you could almost always get all your money back if you just wait 2 years or so to resell. (Vero Beach and HHI being possible exceptions, BUT, they are special cases.)

Recessions come and go. Yes, a recession WILL come. But then it will also go away again. If someone can hold their DVC points through the recession (and use them during the recession, or rent them out), then they could still get all of their money back, plus more, a year or two later.

The biggest fly in the ointment is whether people CAN depend on rental income. I'm not at all sure that Disney can retroactively deny all future rentals. In fact, I am pretty sure that they CANNOT. So, they might be able to put up some roadblocks, to make it a bit more difficult, but I think people will always find a way around that. And I think Disney knows that, so it probably isn't even a battle that they want to fight. After all, you can be darn sure that Disney is going to continue to raise their prices for their hotel rooms. And raise them, and raise them. As the cost of their hotel rooms goes up, DVC points also become worth more and more. And this rental market is a market that DISNEY is creating.

Lastly, don't confuse Disney with DVC. Disney essentially 'owns' DVC. Disney people RUN DVC. But DVC is a separate entity, and, though it might POSSIBLY cut into the profits of Disney's HOTEL DIVISION, when people rent out their points, it probably matters not a whit to DVC itself whether people rent out their points or not.

I do think it would be worthwhile if we could find some way to use the Owner Associations to put independent owners onto some of the boards at DVC. I don't know if this is possible, but it would be a good thing. And if we can't do that, then the next best thing is to try to find ways to make sure that the people who run DVC are running DVC, and not just working for Disney.

While I agree the money, and I stated this, will be spent on vacation there is still a time value of money still because if they don’t spend it to buy DVC upfront they can invest it, as I stated, and withdrawal x% a year for their vacation. This is essentially converting to an annuity which is the most analogous to purchasing DVC (since the upfront cost of DVC is unlikely to spent on a single vacation). Since a simple savings account in the US is now 2%+ now that return can be obtained without any risk and there are some other options that would easily push that higher.

Also my statement on the DVC rental was saying assuming you may not always find a renter for many reasons. Some of which you highlighted.

As for Disney being able to deny Renting outright, I personally don’t necessarily see them doing this. Your right to rent is in the DVC Membership Agreement which can be amended and Disney has shown a desire lately to amend sections of the contracts pretty heavily. Though Florida law may prevent them from denying renting the points out I’m not sure, and I don’t think an outright denial of renting, if they could, is likely. But I wouldn’t assume Disney has no desire to increase its bottom line across all divisions. So I could see (the more likely scenario) is to make it onerous to increase that bottom line, less people renting, more breakage. As stated right above Disney has done changes to DVC to increase their bottom line with no real direct benefit to members as a whole. They have already shown a desire to do so in the original 2020 point charts. Also many direct buyers (I think renting serves a great purpose) seem to think the consistent renters are responsible for availability issues. So enough complaining it could drive Disney to do something, exactly like the new resale restrictions, which relies on what many viewed Disney couldn’t do but has done. But as you alluded to, each contract has a bottom line price which is correlated to the cash rates Disney is renting, and even stronger for those with a sister cash resort.

Though overall I was offering advice to the OP as asked for them to consider. It seems they have and decided it either was less conservative (cash rooms vs DVC rentals) or didn’t effect the numbers in a meaningful matter. DVC was a great decision for myself and still is despite the changes made by DVC lately, and I think can still be a great choice for others.

 

[Bobb_o]

I'm just kicking (stupid auto correct) myself for not doing this in 2016 after my first rental. Back then I never considered the actual value of the contract and that it was an asset.

Hopefully in 3 years so be looking at current prices and thinking in glad I bought in 2019.

 

[crvetter]

I'm just kidding myself for not doing this in 2016 after my first rental. Back then I never considered the actual value of the contract and that it was an asset.

Hopefully in 3 years so be looking at current prices and thinking in glad I bought in 2019.

You’ll probably be happy at least because you have the vacation memories. As long as you have the money to spend on it and okay with it being a sunk cost as worst case I can imagine you’ll ever be upset.