Financial Analysis: Buying & Holding vs Buying & Selling

[kidren21]

Hello all,
I'd like for others to confirm my thoughts and number crunching below:

Summary/Conclusion:
If you are considering buying resale, and are thinking of either buying and holding a short term contract (OKW, BCV, BWV, etc) or buying and eventually reselling a long term contract (AKV, BLT, CCV), the better financial option is to buy and resale the long term contract.


Details:
I've been crunching some numbers to look at the differences between buying BCV and holding it until it expires (2042) vs buying AKV and reselling it in 2042. (I don't plan on holding any DVC resort past 2042 as my child will be into his mid 20s by then).

For the purpose of this discussion, I am using:

• 100 points resale at each resort,
• $600 closing costs,
• 145 price/point at BCV and 105 price/point at AKV,
• Maintenance fees increasing 4% each year
• Assuming AKV will be sold at 105 pp in 2042 when there is still 15 years left on contract
• Ignoring time value of $ since I do not plan on investing these funds, and this is really a comparison between two DVC alternatives

I know we are not comparing apples to apples (BCV is more expensive than AKV in general) but there is significant savings to be had if you resell a long term contact in 2042 rather than let a short term contract expire.

If you resell at the same price as you bought, it means that the only costs you had during the time you held it was just the maintenance fees. If instead you hold, the you paid the maintenance fees and you never recoup the initial purchase funds. (Of course, this assumes you can get the same price, though given that there should still be 15-18 years left on the long term contract and that the resell prices are somewhat dependent on direct prices, this is not an unreasonable assumption).

You can see in the table below, that for a Buy and Hold at BCV, your 2019 price per point is $13.23, which the annual dues per point ($6.94) + the initial price divided by years of contract divided by points ($6.29).

Now if you compare that to AKV, your 2019 price per point ($7.44) ends up being equivalent to your only your 2019 annual due because you end up recouping your initial funds in 2042.

Also reran the numbers using similarly priced resort WL/BRV to better illustrate the savings per a request below:

There is a 25% savings in this example if you simply choice a longer term resort and then resell in 2042 vs holding a 2042 contract until expiration!

So given two resorts that you like equally and do not plan on holding past 2042, the better choice is to take the longer term contract.
Do you agree?

 

[RaymOOOnd]

I agree, but it's not all dollars and cents.

When I want to invest I buy index funds. Or perhaps DIS individual shares

 

[Bing Showei]

Can’t stay at BCV in October for F&W on AKV points.

To make any comparison of these two purchases from a financial sense, there would need to be a common baseline for determining value. And as it is these two resorts are very different animals, the only common denominator that can equalize an apples to apples analysis would be 7-month bookings when a point is really just a point; an agnostic common value.

The financial point isn’t lost on me; only pointing out that most people who buy into BCV at $145/point are not looking to sleep around on those points. They’re looking to stay at BCV whenever they want, 12 months out of the year. How do you assign value to that? And how does substituting out the most expensive 2042 resort for $85 BRV factor into that equation?

 

[kidren21]

Can’t stay at BCV in October for F&W on AKV points.

To make any comparison of these two purchases from a financial sense, there would need to be a common baseline for determining value. And as it is these two resorts are very different animals, the only common denominator that can equalize an apples to apples analysis would be 7-month bookings when a point is really just a point; an agnostic common value.

The financial point isn’t lost on me; only pointing out that most people who buy into BCV at $145/point are not looking to sleep around on those points. They’re looking to stay at BCV whenever they want, 12 months out of the year. How do you assign value to that? And how does substituting out the most expensive 2042 resort for $85 BRV factor into that equation?

Point well taken about comparing apples to apples.
I reran the numbers using WL/BRV at $105 pp (based on Jan-Mar ROFL listings) and got the following:

About 25% cheaper to get AKV even though initial buying costs are the same and maintenance fees are similar.

 

[Bing Showei]

Point well taken about comparing apples to apples.
I reran the numbers using WL/BRV at $105 pp (based on Jan-Mar ROFL listings) and got the following:

About 25% cheaper to get AKV even though initial buying costs are the same and maintenance fees are similar.

I don’t think anyone would argue that buying something that you can recover some cost from is not preferable buying the same exact thing but with zero value at the end of use. My bigger point is that until you're comparing apples to apples, looking at the points as valued on a 7-month booking, there's little value in making this financial comparison.

Buying and then reselling a timeshare with retained value may yield a greater financial benefit than buying to just use. The question is what risks do you assume by going this route? The person who bought their Disney timeshare just 6 months ago, bought in thinking they were going to be able to sell their timeshare as the same product they bought. Disney adversely affected that resale value by way of the new restrictions post 1/19.

In light of what Disney has shown they are willing to do to move direct sales, I would rather be the person who bought BCV at $17.59/point with plans to keep it until end of RTU, expecting I would get zero dollars back but stay where I love for 24 years, than be someone buying in somewhere else because the points are cheaper, hoping the other shoe doesn't drop before I can sell my points back to recoup a cost which I factored into buying a Disney timeshare in the first place.

6-months-ago-me would agree with your financial analysis. Today-me thinks buying a timeshare (Disney or otherwise) should be a buy-to-use decision only.

 

[Jason@dvcstore]

The financial point isn’t lost on me; only pointing out that most people who buy into BCV at $145/point are not looking to sleep around on those points. They’re looking to stay at BCV whenever they want, 12 months out of the year. How do you assign value to that?

Exactly. The Beach Club Villa purchaser who buys their points and makes reservations at the Beach Club 7 to 11 months in advance are happy with their choice. I cannot argue with someone's choice if they are happy.

 

[sndral]

AKV in 2042 will have 14 years left. BCV currently has 23 years left. The assumption that AKV will still be worth current value has no basis in fact since we have no data for the resale value of a resort with just over a dozen years left. In about 10 years we’ll have an idea as we see whether the price of the 2042 resorts have started to fall due to resale purchasers factoring in the end date.
As mentioned, DVC direct sales is currently focused on devaluing resale, what impact that has on resale prices going forward is a big unknown.
MF in the past have gone up at fairly reasonable rates, but the max increase is set at 15% per year not including property taxes or special assessments - so your 4% per year MF number is probably too low, but since you’re applying the same % to both resorts that shouldn’t impact your comparison. AKV MFs have historically been higher than BCs, but BC and BWV could see an increase if part of the operating cost of the Skyliner is allocated to them.
Finally, realize that although your child will be in his mid twenties by 2042, you may not want to sell - there may be grandchildren you want to take to WDW, or your child may still want to visit WDW (I take my adult DS and his gf annually.)
My purchase comparison was how much my annual stay in a deluxe resort cost v. the price of DVC resale + MFs -given how we were vacationing pre DVC it didn’t take long to recoup the buy in for me.

 

[WhitneyMB]

I'm not going to get into the dollars and cents, but I want to point out another factor to consider. The OP mentioned that in 2042 their kids would be in their 20s so they wouldn't need DVC anymore. This is actually while we're getting serious now about buying! One's ideas about how (long) they might use the points may change.

We have a 23 and a 14 year old, who prefer heading to Disney then other family trips. We've gotten to the point where our kids need more space in a hotel, and our older son now wants to bring along a significant other. Getting 2BR and grand villas with points is way cheaper than paying cash!

 

[Jack_Sparrow_NJ]

I'm not going to get into the dollars and cents, but I want to point out another factor to consider. The OP mentioned that in 2042 their kids would be in their 20s so they wouldn't need DVC anymore. This is actually while we're getting serious now about buying! One's ideas about how (long) they might use the points may change.

We have a 23 and a 14 year old, who prefer heading to Disney then other family trips. We've gotten to the point where our kids need more space in a hotel, and our older son now wants to bring along a significant other. Getting 2BR and grand villas with points is way cheaper than paying cash!

My three kids are in there 20s and love going to Disney. You will also find that as your family gets older you will have more disposable income, mortgage paid off, kids education completed.

 

[RamblinWreck]

Point well taken about comparing apples to apples.
I reran the numbers using WL/BRV at $105 pp (based on Jan-Mar ROFL listings) and got the following:

About 25% cheaper to get AKV even though initial buying costs are the same and maintenance fees are similar.

I know it’s not a tremendous amount, but you should factor in a 7-10% cut on your sell price going to a broker.

 

[DarkSideDad]

As others have said to many unknowns about resale to really factor it in my opinion. It’s taken me some time to understand this as well because when I first thought about this I did the exact same math as you. The reality is this isn’t an investment it is a luxury so to me getting points where I want to stay is the most important thing.

If all things are equal with resort preference by all means take the one with the longer deed and lower price it’s a no brainer.

If you really want to do this with the thought of recouping the smart play in my opinion is to buy two contracts. One at the 2042 resort you want to stay at. Then another one that you can rent out with a long deed and potentially some resale value at 2042. Assuming you can make at least enough to cover MFs, which I think is a safer bet than a full recoup of purchase price, you can effectively eliminate MF from your total. That’s a huge savings! Run those numbers and see what i mean.

 

[Frederic Civish]

Hello all,
I'd like for others to confirm my thoughts and number crunching below:

Summary/Conclusion:
If you are considering buying resale, and are thinking of either buying and holding a short term contract (OKW, BCV, BWV, etc) or buying and eventually reselling a long term contract (AKV, BLT, CCV), the better financial option is to buy and resale the long term contract.


Details:
I've been crunching some numbers to look at the differences between buying BCV and holding it until it expires (2042) vs buying AKV and reselling it in 2042. (I don't plan on holding any DVC resort past 2042 as my child will be into his mid 20s by then).

For the purpose of this discussion, I am using:

• 100 points resale at each resort,
• $600 closing costs,
• 145 price/point at BCV and 105 price/point at AKV,
• Maintenance fees increasing 4% each year
• Assuming AKV will be sold at 105 pp in 2042 when there is still 15 years left on contract
• Ignoring time value of $ since I do not plan on investing these funds, and this is really a comparison between two DVC alternatives

I know we are not comparing apples to apples (BCV is more expensive than AKV in general) but there is significant savings to be had if you resell a long term contact in 2042 rather than let a short term contract expire.

If you resell at the same price as you bought, it means that the only costs you had during the time you held it was just the maintenance fees. If instead you hold, the you paid the maintenance fees and you never recoup the initial purchase funds. (Of course, this assumes you can get the same price, though given that there should still be 15-18 years left on the long term contract and that the resell prices are somewhat dependent on direct prices, this is not an unreasonable assumption).

You can see in the table below, that for a Buy and Hold at BCV, your 2019 price per point is $13.23, which the annual dues per point ($6.94) + the initial price divided by years of contract divided by points ($6.29).

Now if you compare that to AKV, your 2019 price per point ($7.44) ends up being equivalent to your only your 2019 annual due because you end up recouping your initial funds in 2042.

Also reran the numbers using similarly priced resort WL/BRV to better illustrate the savings per a request below:

There is a 25% savings in this example if you simply choice a longer term resort and then resell in 2042 vs holding a 2042 contract until expiration!

So given two resorts that you like equally and do not plan on holding past 2042, the better choice is to take the longer term contract.
Do you agree?

I completely agree with your analysis and your math. I went through exactly the same process you have, and I came to the same conclusions. I bought Poly, Direct, because, at the time, it was the closest to 50 years, and I wanted the Direct benefits. I also assumed it would hold its value. I paid Direct price, but I could sell it on the resale market now, and get my full price back. Then I bought 270 points resale at BLT, because I wanted to stay there, it had a long period of time remaining on its contract, and I thought it would have good resale. I have used it several times, I plan to use it a lot more, and I could sell it right now for what I paid resale. Then I bought 2 contracts at Animal Kingdom. Partly because I love that resort, but also because it had a good balance between a VERY low price (for what it is worth), excellent resale potential, and a long contract. Any add ons I do in the future are likely to be resale purchases at AKL. I just think it is the best overall value.

It would be possible to buy Beach Club or Boardwalk Villas now, and use them for somewhere between 5 and 10 years, then sell them before the price starts to drop (I am predicting it won't start to drop until about 2027, but we will see). This would still give you good value, but would also 'get you out of the game' sooner. On the other hand, holding it until it expires, or holding ANY DVC contract until it expires, is probably the lowest value way you can go.

Now, I also recognize that NONE of this is guaranteed, but I think that these values and resale prices will continue, based on demonstrated historical trends.

 

[emchen]

It would be possible to buy Beach Club or Boardwalk Villas now, and use them for somewhere between 5 and 10 years, then sell them before the price starts to drop (I am predicting it won't start to drop until about 2027, but we will see). This would still give you good value, but would also 'get you out of the game' sooner. On the other hand, holding it until it expires, or holding ANY DVC contract until it expires, is probably the lowest value way you can go.

Piggy-backing on this paragraph, what do people think will happen if OKW-type extension is thrown into the mix? Interested in how that played out historically... did resale prices go up, dip, or stay the same because of it?

 

[jerseyduke]

The only valid comparison is a DVC room to a Cash room at the same resort if its a resort where 11 months is important like BCV.

If you want to stay at BCV during F&W and you have AKV points you got nothing of any use - you will be paying cash for a room at the beach club hotel.

 

[rg35]

I didn't buy DVC ever expecting to make any money back. I bought it to vacation at WDW. Whatever I paid for my contract in 2012 is a sunk cost. For all intents and purposes, that money is gone. Being able to potentially recoup it doesn't factor into my financial planning at all.

Yesterday we my wife heard from her friend that they tried to book a trip for four (2 adults, 2 kids) in September and Animal Kingdom Lodge would have cost them over six grand just for the room. That's something like 2 grand more than what the same room cost them last year. They decided to go to Aruba instead - all in (flight, hotel, etc.) was half the price of just a room at AKV. So that's where I look to see the value of buying DVC. I paid $16,000 for 250 points in 2012. That's less than 3 trips at these kinds of room rates (yes, I know this is a simplistic calculation excluding MFs, but it illustrates the general point). I guess it's good for Disney - they're getting more of our cash than they would have if we didn't buy DVC, but it's also good for us b/c we really like Disney and there's no way I'd be paying these room rates to go there.

 

[Jason@dvcstore]

I guess it's good for Disney - they're getting more of our cash than they would have if we didn't buy DVC, but it's also good for us b/c we really like Disney and there's no way I'd be paying these room rates to go there.

I feel as if this sums up the benefits of Disney Vacation Club for Disney and for the owners perfectly.

 

[chalee94]

Piggy-backing on this paragraph, what do people think will happen if OKW-type extension is thrown into the mix? Interested in how that played out historically... did resale prices go up, dip, or stay the same because of it?

It was bad. Legally questionable. Overpriced and way too far out.

Owners at OKW paid $15 to $25 per point to extend. If they went to sell, they found that OKW-2057 was only worth $6-8 per point more than an unextended contract.

Disney will not extend BWV - they need to redo the contracts and get rid of the cheaper standard view rates. I don't believe that they will extend any other 2042 resort either (most would be subject to some of the legal challenges that hit OKW late in that process) but if they found a way, you'd better believe that the extension will be priced very aggressively.

 

[mustinjourney]

I'm having a very hard time trying to back calculate how you got your numbers.

Also -- I'm not sure why you need to make a spreadsheet to figure any of this out.

If you're looking at the same initial cost and comparing MFs -- and you make the assumption that the MFs will increase at the same rate -- then you just need to find out the relative difference in MFs between two resorts (AKV is about 2.5% less than BRV right now). Therefore, the difference between BRV and AKV is that you'll pay about 2.5% less in MFs every year and at the end of the term, and you'll get $11,000 back in 2042 dollars if you own AKV.

At this point though -- you really do need to factor in time value of money b/c while $11000 sounds like a good chunk of change -- inflation is going to cut that value by about 50%.