Buying Direct Strategy - current vs future?

[CanadaDisney05]

Thanks for the clarification. I should have been clear in that it wasn't just your time frame I was using, but the generally accepted breakeven analyses we have been seeing on here with similar time frames.

I'm assuming you're talking about resale for that time frame? I think that even with resale I would disagree with you on the 5-7 years as well as using cash rates as the basis of comparison. The generally accepted calculation on here has been to use a 25% discount on rack rates, as that is available for most times of the year in one form or another. While I acknowledge that hotel room rates have gone up, they haven't done so at the rate that DVC prices and dues have, and I would be curious to see the numbers supporting a 5-7 year breakeven analysis of today's DVC.

your right. Its probably closer to 8 to 10 years breakeven.

 

[Yinn]

Looked at a few examples....

Magic Season - Studios. BLT - standard view, vs Lake View.

Standard view = 139 points/week @ 160 = 22,240
Lake View = 153 points/week @ 110 (SSR) = 16,830

SSR vs BLT almost identical MF.

SSR points win.

Magic Season - Studios. BWV - Standard View vs Preferred View

Standard View = 108 points/week @ 135 = $14,580
Preferred View = 132 points/week @ 110 = $14,520

2019 SSR maintenance fees = 6.40 vs $7.17 @ BWV. SSR also has the much longer contract

SSR points win

These are two specific examples, so you'd have to run the numbers for exactly what your looking for. Also keep in mind, that at certain times of the year, you may not be able to get those higher end rooms at 7 months. Your buying security for that higher price. However, paying less for upgraded views is not a bad thing in my books if your willing to live with disappointments every once in a while.

Right, always trade offs and dependent on the person/party. I'm just trying to make sure I'm not taking a one dimensional view to the data and probably geeking out a little. To accompany your examples...

Magic Season - Studios. BLT - standard view, vs Lake View.

So for the studio, there's actually more availability using/buying SSR @ 7mo upgraded vs BLT @ 11mo in this specific example.

Your second..
Magic Season - Studios. BWV - Standard View vs Preferred View

So for this one, it gets tighter. While mostly available, having home resort is still worthwhile when comparing 11 mo standard vs 7 mo preferred. BUT, I do think the availability is comparable to say a 1 BR Standard.

So then we just need to run the calculation with the points required for a 1 BR.

Magic Season - Studios. BWV - Studio Standard View vs 1 BR Standard View

Standard View = 108 points/week @ 135 = $14,580
Preferred View = 132 points/week @ 110 = $14,520

1 BR Standard = 220 points/week @ 57 = $12,540.

So while your example is SSR specific - VB would actually work for this scenario. Dues would eventually catch up, but as per my previous post this should still be a true statement for the first 5 years.

 

[Maistre Gracey]

Just curious.... When you guys figure your head to head break even, are you factoring in investing the saved initial cost of the VB contract? Seems like that could really offset most, if not all, of the dues. Plus you likely won’t lose the initial outlay in 30 years like you will at SSR.

 

[Yinn]

Oh, one big exception though. This does NOT work for Oct - Dec. If you’re a traveler in that time frame, buy where you want to stay rings true. Regardless of view and size.

I suppose a 3BR GV is possible, but I don't think anyone is selling points for any resort at $0.05 per point.

 

[CanadaDisney05]

Just curious.... When you guys figure your head to head break even, are you factoring in investing the saved initial cost of the VB contract? Seems like that could really offset most, if not all, of the dues. Plus you likely won’t lose the initial outlay in 30 years like you will at SSR.

My assumptions were:

Buy 200 @ VB @ $65 PP
Buy 200 @ SSR @ $100 PP

MF raise by 4.5% annually
Invest the initial capital outlay difference and earn 5%.
I then discounted any savings by 2% inflation. Savings on maintenance fees in 15 years from now isn't the same as saving that same amount today.

Break even was between 18 and 19 years. Over the 23 years of ownership, the difference was only about $,2300 of today's dollars. However, keep in mind in 23 years that VB contract is done. That SSR will either have value or be a liability.

 

[Yinn]

Just curious.... When you guys figure your head to head break even, are you factoring in investing the saved initial cost of the VB contract? Seems like that could really offset most, if not all, of the dues. Plus you likely won’t lose the initial outlay in 30 years like you will at SSR.

For the ones I've posted in this thread, I have not due to time as it was just a general analysis to see if it's even worth exploring; and it seems it is.

For the ones I performed prior to my initial purchase, yes opportunity cost was factored in. As well as inflation, historical price increases on DVC, resorts, dues, etc. Not only from an initial perspective, but yearly ongoing as $1000/diff per year in dues would eventually compound as well.

I'll summarize it as this, there's a lot of potential. When you get into potential I have 5 different spreadsheets that say 5 different resorts are a better buy financially based on different scenarios. There's potential for dues to skyrocket. There's potential for the investment market to tank. So potential isn't always realized, and I acknowledge that too. I did analysis on average investment returns as well as standard CD & bond rates. The only guaranteed thing is the initial buy in price, and in that situation the cheap buy in contracts can not be ignored. I also acknowledge I'm going overboard, heck for
CanadaDisney05 you could even go into historical foreign exchange rates. Imagine forecasting dues 30 years from now based on that!

Overall I just find it interesting to look at from multiple perspectives. Despite the numbers and examples, the reality is that these are still generalizations that can be changed when the market - any market - changes. It was tough for me to say I was specifically looking for X resort because the calculations changed based on the market. So sometimes this is all just dependent on the current market price point and how we feel about the different potentials. I made an offer for $128 PVB @ $6.76 dues when the market for PVB is around $145. Compared to SSRs hitting $110 this summer, it was worth the risk to me to spend the extra $18/ppt ($3600 total) for a resort that is in my Top 5 while getting an additional 12 years and having dues increase at 0.5% slower historically compared to really not wanting to stay at SSR at all. If I rent out year 1, I'm even with SSR. But at $93 SSR currently and cheaper dues, a $128 PVB would be a $7,000 premium that would be more difficult to justify and I would readily admit that if this was the situation presented to me 2 months ago, I would have jumped on the SSR instead and rolled the availability dice.

 

[Can_Dannn]

All, I am seeking advice on potentially buying direct at current costs (and receiving 2019 points to bank) vs the future cost in 2-3 years of buying direct.

Background: we are a family of 5 with 3 young children under the age of 3. We are in the market for our first DVC contract and have an offer pending ROFR at AKL.

Our initial strategy was to buy resale and then add on direct in a few years. However, the new direct point increase to 100 min. for benefits occurred during the time period we were waiting on ROFR so purchasing the 75 points wasn’t an option for us. Because of the increase, my mindset has shifted about whether it is best to go ahead and buy direct at current costs vs what buying direct will cost in 2-3 years. Note: this is a contingency in case our AKL contract is taken back which based on the contract I believe is more likely to happen ($103 ppt for 250 pts. December use year and all 19-no dues, 20 , 21 pts available).

The main factors for wanting to purchase direct are:
1.) AP discounts (especially once all 3 kids require tickets and we do plan on visiting WDW at least once per year for 7ish days)
2.) Dining discounts
3.) Ability and desire to stay at multiple resorts, including Riviera and future resorts.
4.) Concerns about future restrictions on resale contracts.

If we did purchase direct I would only purchase the 100 min for benefits then add on resale.

Again, this all may be a moot point if our AKL contract goes through. But assuming we have to hit reset which strategy would you recommend?

Thanks!

*****REMEMBER- If you buy any resale points, you CANNOT use them at any new resorts... so your 100 direct points can be used at RIV, but any resale points cannot