How do you make DVC make financial sense?

[ELMC]

I think it unreasonable to not consider the value along the way. For an owner, an easy way to value points on a periodic basis is the net rental possibilities. For break even, I'd only include the real value and also the earnings on the up front costs reduced by the yearly expenditures for what I would have spent otherwise. I haven't run the break even comparing to a cash rental or comparable discounted Disney hotel at the recent higher prices but it was getting up over 20 years for many situations before the latest increases.

True, but Doug is talking about a much different time. He was active at the same time I was, when prices were at record lows. I remember reading that this was his break even year, which means that he has all the money back that he spent in 2012 on DVC. So the real analysis is to compare the ROI of that money assuming something safe like 5% vs. the cash value of those contracts should he decide to sell them today. I think that's a no brainer, he is way ahead having purchased DVC. The real caveat is that I don't think that's repeatable in today's current market. So while that was true back in 2012, I do not think that people should rely on a similar experience going forward.

 

[Dean]

True, but Doug is talking about a much different time. He was active at the same time I was, when prices were at record lows. I remember reading that this was his break even year, which means that he has all the money back that he spent in 2012 on DVC. So the real analysis is to compare the ROI of that money assuming something safe like 5% vs. the cash value of those contracts should he decide to sell them today. I think that's a no brainer, he is way ahead having purchased DVC. The real caveat is that I don't think that's repeatable in today's current market. So while that was true back in 2012, I do not think that people should rely on a similar experience going forward.

Many of us are ahead and there are all types of variables but IMO, the break even in 5-7 years was never reality but fantasy at least post free pass days.

 

[4luv2cdisney]

My DH thinks I'm so "tough" when it comes to large purchases (he's a spender, I'm a saver) but reading all this makes me feel like.....!

I'm saving this thread (and a couple of other similar ones) to show him the next time he claims I'm giving him a hard time about buying a new car.

 

[Littlelulu01]

Purchase of direct points on a new resort made some sense to me till recently. I was all set to purchase CCV and get 2016 free points, 2017 points almost free if purchased end of November for December uy. But... I cannot make the numbers On ccv make financial sense. The break even point is just way too many years away. Investment returns had been very minimal so taking $ that could have been added to investments and spending on dvc didn’t seem such a bad choice. However in looking at investments this year the increased returns are staggering in comparison to years past. This alone makes shelling out a chunk of $ on a larger purchase not a good choice for me.

Smaller contracts aren’t tying up as much cash so I still see value for them. Like another poster mentioned- spending $ on a sofa or some more Dvc points and I still have a couple weeks left to debate that decision for CCV.

The contracts I’ve purchased in the past was able to get to break even over renting points within 4 years maximum. I can’t see that happening now.

The biggest issue I have is now that kids are adults the lodging needs are very different if we wish to bring them along. There’s really never enough to do the big family vacations in larger units but it’s either pay too much for a contract that I’m fairly certain will depreciate terribly when the market turns or wait till it does and I can justify the purchase. There’s just always another excuse for a family vacation and just when I think I’m going to have a year to bank, some great vacation ideas arise and I’m in borrowing mode instead or need to take a transfer. The only banked points I ever had were with contracts purchased with banked points that were immediately spent. I keep thinking that family vacations will dry up but still see our kids wanting to vacation with us at least until they become parents themselves and who knows- perhaps it’s really like the Dvc advertising and the grandparents are happily along for those trips too.

 

[DougEMG]

Many of us are ahead and there are all types of variables but IMO, the break even in 5-7 years was never reality but fantasy at least post free pass days.

A 5-7 year breakeven was not fantasy. That is what it worked out to for me and a few other people I know that were buying when I was. My average out of pocket buy in cost was ~$33/point. So I loaded up with a couple of thousand points at those prices. Where I was stupid was not buying even more and turning down contracts because they were $1-2 more than what I thought I could get them for.


That though was a once in a life time opportunity.

Even when the next crash happens and people are forced to sell their DVC because they can't afford to keep it, resale prices will not drop that low again. The reasons for that (1) the starting prices for DVC are so much higher now and (2) there are a lot more knowledgeable people who will be looking to buy distressed contracts, thus keeping a higher floor on prices.

 

[Cyberc1978]

So I loaded up with a couple of thousand points at those prices.

Wow thats a lot of points

Even when the next crash happens and people are forced to sell their DVC because they can't afford to keep it, resale prices will not drop that low again.

Dont know if we for sure can say that the economy will tank but it will eventually turn but that doesn't mean it will tank. I see the prices going up and down following the economy.

 

[Dean]

A 5-7 year breakeven was not fantasy. That is what it worked out to for me and a few other people I know that were buying when I was. My average out of pocket buy in cost was ~$33/point. So I loaded up with a couple of thousand points at those prices. Where I was stupid was not buying even more and turning down contracts because they were $1-2 more than what I thought I could get them for.


That though was a once in a life time opportunity.

Even when the next crash happens and people are forced to sell their DVC because they can't afford to keep it, resale prices will not drop that low again. The reasons for that (1) the starting prices for DVC are so much higher now and (2) there are a lot more knowledgeable people who will be looking to buy distressed contracts, thus keeping a higher floor on prices.

Without having the intricacies of the deals it's difficult to say much either way. As a general rules when someone says they're breaking even in 5-7 years they're using both inflated comparisons and ignoring the TMV/Opportunity costs. Even at the bottom at $33 per point by buying fully loaded and renting, this would have been a difficult task. In that scenario, the proper way to judge break even would be by renting and considering dues and TMV (I'd use 8% in that situation), even at $33 per point getting to 7 years would be almost impossible but it would certainly be less than it would be today by far. You gambled on DVC financially and so far it's worked out but it was a gamble. Whether the market will prop up prices with any future event is unknown and a risk and depends on the specifics of the time. I think a 50% reduction is not unlikely at some point.

 

[crisi]

DVC resale market is really a seller market with prices we've never seen before. People who bough during the last recession could now sell for a profit, sometimes even for twice what they paid for. This is not going to happen to someone buying now. When (not if) the next recession will hit, prices will fall. And people not hit by the recession will be able to score new bargains.
Also, people who bought direct long time ago could sell now for more than they paid for. But since then, DVC has nearly doubled the buy in price, the starting point is much much higher, I don't think someone buying direct now will be able to sell in 20 years for double the price.

But I really didn't think SSR could sell for $100pp or rental prices go up to $17pp, so who knows, I may be wrong again.

So much right now feels like a bubble - not just DVC prices. I started a job downtown, and for the first time in a long time, downtown feels like the late 1990s with a lot of money going into restaurants and bars and shops. I'm starting to get stock tips from the shoeshine boy. I could be wrong - like you I've been wrong before, but I know that economies are cyclical, and this one is due.

So if I were in the market for DVC right now, I'd be extra cautious about buying only what I could afford - if it were worth half of what its worth tomorrow and I were to lose my job, would I regret it. I moved more than a year of spending from the stock market into cash

 

[crisi]

So much right now feels like a bubble - not just DVC prices. I started a job downtown, and for the first time in a long time, downtown feels like the late 1990s with a lot of money going into restaurants and bars and shops. I'm starting to get stock tips from the shoeshine boy. I could be wrong - like you I've been wrong before, but I know that economies are cyclical, and this one is due.

So if I were in the market for DVC right now, I'd be extra cautious about buying only what I could afford - if it were worth half of what its worth tomorrow and I were to lose my job, would I regret it. I moved more than a year of spending from the stock market into cash

I posted this two days ago. Yesterday I got a fortune cookie "your future will be made in the stock market" - I think stock advice from fortune cookies trumps the shoeshine boy for bubble indicators.

 

[.landry]

We looked at it a little differently. We looked at how it amortized over 20 years (even when the deed has a much longer than 20 year life) because that would be our major use years. We will use it for that long unless something wild happens. If we decide not to go to Disney anymore we can sell it, if the market is down for selling we can rent the points until we can at least break even for the cash outlay. If its something worse, then well, we have other bigger concerns.

All of our financial ducks are in a well-funded row and the money that we'd be spending on DVC would be what we now spend for 3-4 years of vacations anyway. We travel a ton and disney is one of a few places that we end up spending a lot of money. DW is starting to get pickier about where she wants to stay which then becomes more expensive and then she complains more about how expensive it is. Its a cycle and she's infinitely happier when we are staying in a nicer place. And HEY! who am i to argue?!?!?!?

She was far more receptive to the idea once i told her emphatically to stop thinking of it as an investment. That it would just be an upgrade for less per trip than it would cost to do the same accommodations for cash.
I added the upfront cash outlay to 20 years worth of maintenance (in some of the math i did a guesstimate of MF increases but that became really tedious) then divided it by 20 then divided it by how much it would be per night for the most point-heavy trips we would take.
This was really just an exercise, and i think it was a really good one for me. DW is very practical (which is how we are so conservatively set up financially) so i had to show her a good use case for the purchase not necessarily that it "made financial sense". the exercise made it less emotional for me and made me feel less impulsive about my desire to do it. But it wasnt necessary for us to have to convince ourselves that we could afford it.

 

[pineapplepalms]

We know break even will take longer for us as new DVC buyers than people who bought years ago, but we still think it makes sense for our family. Here are some of our main considerations in buying DVC in the near future:

1) Frequency: We've already been vacationing at WDW around once or twice a year for several years and want to continue to do so. Hoping for another DVC property at DLR since we live in California and it'd be nice to own there too.

2) Resort preference: We typically stay in deluxe resorts and as our family grows we will definitely be taking advantage of the larger villa types available through DVC. We currently have a toddler and plan to stay in 1-2BR villas down the road. Also, the non-daily mousekeeping doesn't bother us since we typically put up the DND sign during hotel stays anyway.

3) Cost: We feel like DVC will save us money compared to the way we would otherwise vacation at WDW, since we are already going 1-2x a year staying at deluxe resorts and paying for cash rooms. We are going to buy without financing and plan to buy a combination of direct and resale to get the total number of points we would want. While we feel like it will likely save us money, we're not too hung up on it since we view DVC as a luxury purchase that will add value by allowing us to stay in larger accommodations. We like to control our own reservations and would rather not go the renting route. Also, we live in a very high cost of living area and the term "Disney prices" doesn't really mean much to us since everything at home is so expensive already.

4) Length of contract: We are big Disney people regardless of whether we had kids, and we are looking forward to many years of Disney trips both with and without kids. Since we're in our 30s, the ~50 year contracts on the newer resorts are very appealing (particularly CCV - not interested in Poly since we want more options besides studios and we enjoy going in December). We don't plan to sell or try to make a profit from selling.

5) Planning: I'm big on trip planning and am fine with the need to plan 11 months in advance (or more, since we will probably roughly plan out years of trips in order to best utilize our points).

 

[bakerworld]

We figured that we'd continue to vacation the same amount of times annually so our costs of transportation, tickets and food would remain the same which made joining DVC only about the room. So we went from 3 trips annually staying in Deluxe locations at 35% rate discounts for 3Ns to 3 trips annually for 6Ns at the same dollar amount of a 3N Deluxe stay - based on 2008 costs - comparing Dues + Initial purchase divided by 20 years. As the deluxe accommodations have risen I think we're saying $$.

 

[ScubaCat]

I posted this two days ago. Yesterday I got a fortune cookie "your future will be made in the stock market" - I think stock advice from fortune cookies trumps the shoeshine boy for bubble indicators.

I got one that said "gambling is the root of all evil" with my lucky lotto numbers on the back, so I'd probably go with the shoeshine guy. But to each his or her own!

 

[NY Pirate Princess]

We just got back from our first deluxe stay and I dove headfirst into the DVC resale market. I was looking for a 160 point contract at AKL. We travel once every 18 months on average and stay a week. I decided that point level would get us there once every two years with our traveling companions in a 2 bedroom suite. My first pause was that the contract would run until I am 88. Second, I found a calculator that showed the dues over the life of the contract, and came up with over $100,000. Full stop.

I will stash cash and see what happens with the inevitable economic downturn. Until then, it's Davids or cash at Port Orleans Riverside. I appreciate all of you talking here, as it helps me make sense of my decision historically, as I have no knowledge of the past prices of DVC.

 

[Dean]

We just got back from our first deluxe stay and I dove headfirst into the DVC resale market. I was looking for a 160 point contract at AKL. We travel once every 18 months on average and stay a week. I decided that point level would get us there once every two years with our traveling companions in a 2 bedroom suite. My first pause was that the contract would run until I am 88. Second, I found a calculator that showed the dues over the life of the contract, and came up with over $100,000. Full stop.

I will stash cash and see what happens with the inevitable economic downturn. Until then, it's Davids or cash at Port Orleans Riverside. I appreciate all of you talking here, as it helps me make sense of my decision historically, as I have no knowledge of the past prices of DVC.

It sounds like you need additional time to soak in more DVC information and perspective anyway so the pause is a good thing even if you decide to proceed. I presume you're comparing to 2 deluxe rooms since you're looking at a 2 BR at AKV. I wouldn't let the RTU expiration deter you on either side. It will likely have value and can be sold later if it does and family doesn't want to use it. You mentioned traveling companions, I certainly wouldn't buy expecting others traveling with you to reimburse you appropriately and buying to pay for others would put DVC in a situation that it'd cost you more than you could ever save otherwise.

The true value of the up front costs is actually more than the dues amount you quoted. $16K for 40 years would be worth around $150K to $200K at the end. However, assuming one is going on vacation to WDW anyway, you'd spend a portion of both the up front amount and the dues so the real cost is less with those assumptions. A studio should be roughly the same long term cost as a moderate if you use realistic assumptions and comparisons. My personal assumptions are 3-4% on inflation, 4.5% on investments for money I'd' use for vacations anyway, and return of principle over 10 years and my comparison is either what I would have spent cash or a private rental rate. Using DVC rack rate, even a discounted one, is a fools comparison IMO. The last time I did this calculation was before the last escalation in prices and it gave a true break even of just over 20 years

If you truly plan to go every 18 months in a moderate or above, can afford it (to me that's pay cash) and are stable enough financially job and health wise; I'd seriously consider it. But it is a long term commitment with risk but IF the other qualifications hold true, it will likely save you some AND give you an upgrade on your vacations. Maybe you could go for a smaller contract, say 100, and just cover your personal accommodations.

 

[Deb & Bill]

We just got back from our first deluxe stay and I dove headfirst into the DVC resale market. I was looking for a 160 point contract at AKL. We travel once every 18 months on average and stay a week. I decided that point level would get us there once every two years with our traveling companions in a 2 bedroom suite. My first pause was that the contract would run until I am 88. Second, I found a calculator that showed the dues over the life of the contract, and came up with over $100,000. Full stop.

I will stash cash and see what happens with the inevitable economic downturn. Until then, it's Davids or cash at Port Orleans Riverside. I appreciate all of you talking here, as it helps me make sense of my decision historically, as I have no knowledge of the past prices of DVC.

If you check each of the DVC Boards, there is a thread at the top of each board called the DVC Resource Center. It has original selling prices through DVC of each resort plus information on annual dues since the resort first opened.

 

[Orsino]

I've been keeping a running total of the amount of money we spend on DVC (upfront cost with interest plus annual dues) and compare that to what it would have cost as rack rate with a 40% discount. DVC is winning so I'm happy.
And on top of that there was a DVC discount on Fantasy Cruises that happened to hit a cruise I was already planning on going on, so that was a big savings. Disney actually sent money back to me on that one, which still amazes me.

DVC was doing so well comparatively, that we bought a new DVC contact (resale) and DVC is still winning (barely). Though now we plan to say in 1BR, so comparing to hotel rooms gets harder.
But I don't really care anymore

 

[NY Pirate Princess]

It sounds like you need additional time to soak in more DVC information and perspective anyway so the pause is a good thing even if you decide to proceed. I presume you're comparing to 2 deluxe rooms since you're looking at a 2 BR at AKV. I wouldn't let the RTU expiration deter you on either side. It will likely have value and can be sold later if it does and family doesn't want to use it. You mentioned traveling companions, I certainly wouldn't buy expecting others traveling with you to reimburse you appropriately and buying to pay for others would put DVC in a situation that it'd cost you more than you could ever save otherwise.

The true value of the up front costs is actually more than the dues amount you quoted. $16K for 40 years would be worth around $150K to $200K at the end. However, assuming one is going on vacation to WDW anyway, you'd spend a portion of both the up front amount and the dues so the real cost is less with those assumptions. A studio should be roughly the same long term cost as a moderate if you use realistic assumptions and comparisons..

We were going to buy a contract together. We travel together annually and have for many years. Do you think that is not possible? Would separate contracts make more sense? I would only buy a contract with cash, so I have at least a year before I would be ready to consider a purchase. Thank you for your lengthy and well thought out response!

 

[crisi]

We were going to buy a contract together. We travel together annually and have for many years. Do you think that is not possible? Would separate contracts make more sense? I would only buy a contract with cash, so I have at least a year before I would be ready to consider a purchase. Thank you for your lengthy and well thought out response!

When we first bought, our first offer was for a contract held by two parties. One party needed and wanted to sell, the other party didn't. But the people who wanted to keep DVC couldn't afford to buy out the people who needed to get their money out. According to the broker, the whole thing was a mess that was straining a friendship.

Buy your own points. The time may come where your friends want to do something with "your" points that you don't want to do, and it might cause friction. Or when you want to do something with "your" points that they don't want to do. You are in DVC for the long haul - and while many years of vacationing together is a good sign, if they need to sell due to illness or divorce, will you be in a place to buy out their contract, will you find yourself with too many points, or will you end up selling the whole thing when you don't really want to?

 

[Keels]

I just closed on a resale contract (FINALLY!!) at BCV and I am thrilled. It cost more than I was hoping to spend per point, but I got the amount of points I was really hoping for and the UY that I wasn't willing to budge on.

My parents still live in Orlando, so I have a free place to stay when I visit - but when I took a look at my travel habits, for the past four years I've always taken time (and money) to either rent points or pay rack rate at BC every time I'm in Florida (four times a year, roughly) - even if it's just for a night.

It's just my husband and I (no kiddos), but we do have a slew of littles in our life - from the age of 2-10 - that we'd love to spend time with at Disney, and if I'm taking them to Disney without their parents ... well, I'm staying where there is Stormalong Bay and everyone at Hurricane Hannah's knows my name. Plain and simple. My husband and I love New Year's Eve at Epcot, so owning DVC at BCV is already a "savings" for us to stay there.

I also have lots of friends that travel to Disney, so "renting" my points to them at a discussed price will make using 340 points a year no problem. My husband was kind of against the idea ... but he's adamant that we stay at all of the DVC resorts at least one night in our first year so he can experience all of them - he didn't have to twist my arm too hard for that!

Also, I know that in a couple of years I will no longer have a house in Orlando to stay at for the bulk of my visits, so my travel habits will change. I'm REALLY excited about the new Riviera resort and have already planned to buy another large contract there - direct from Disney so I can have whatever "perks" may still be offered. Really, the only thing that will keep me from buying another 300+ points at Riviera will be the pool scene or distance to the existing CB pool area.