Crunching the numbers...

[captainkidd]

I don't know why you are so hung up on these dues. They are about one night at an equivalent level room. And they don't radically change. Mine have gone from just under $4 a point to about $5.5 in more than 15 years. And it does matter that WDW can't profit from them. If they could use it as a revenue source it would be possible for them to just keep jacking them up, but since it is directly tied to the cost of upkeep it is more stable.

So essentially I get ten days to two weeks of vacations for the price of a single night every year, and that money is taken out of my account monthly instead of in a lump sum. I know this and I don't have to worry about it. That's stability. I can sit here and confidently write I will be going to WDW every year for the next thirty years barring family trauma, a major deployment, or the Florida peninsula falling into the ocean. Due to that stability I can buy my AP's and take advantage of other situations, discounts, and opportunities none of which would be possible, for me, if I weren't a DVC member.

This is what you're not understanding:

I said this earlier. I think, if you're a family that can stay in a studio, and/or go in the off-season for a specific amount of days, and don't have to finance the purchase, then DVC is for you.

For me, it's not that simple. We're a family of 5. We need at least a 1 bedroom. We can only go in July, and we choose to go for 11 nights, and we always end up staying on 4 weekend nights. We would need about 500 points for that. At the current cost of dues, that would run us about $2,800 per year. By renting points, I can stay about 10 nights per year for just a bit more than that in the EXACT same room, and I didn't have to lay out $60,000 (not including interest) to do that. Plus, I'm under absolutely no obligation to pay those dues every year. That's just the apples to apples comparison.

If you want to take it further you can start talking about the discounts we get on rooms, or staying at having the option to scale it back and stay in a studio when the kids are older, or even a moderate.

It's obviously just a different train of thought. If we have a bad year or something comes up, we simply don't go. And yes, DVC members can always sell their points and pay for their dues that way, but they've already made the initial purchase. There's no getting that back, unless you choose to sell, which kind of defeats the entire point.

 

[Phonedave]

This is what you're not understanding:

I said this earlier. I think, if you're a family that can stay in a studio, and/or go in the off-season for a specific amount of days, and don't have to finance the purchase, then DVC is for you.

For me, it's not that simple. We're a family of 5. We need at least a 1 bedroom. We can only go in July, and we choose to go for 11 nights, and we always end up staying on 4 weekend nights. We would need about 500 points for that. At the current cost of dues, that would run us about $2,800 per year. By renting points, I can stay about 10 nights per year for just a bit more than that in the EXACT same room, and I didn't have to lay out $60,000 (not including interest) to do that. Plus, I'm under absolutely no obligation to pay those dues every year. That's just the apples to apples comparison.

If you want to take it further you can start talking about the discounts we get on rooms, or staying at having the option to scale it back and stay in a studio when the kids are older, or even a moderate.

It's obviously just a different train of thought. If we have a bad year or something comes up, we simply don't go. And yes, DVC members can always sell their points and pay for their dues that way, but they've already made the initial purchase. There's no getting that back, unless you choose to sell, which kind of defeats the entire point.

And I think that will just about always be the case. DVC seems to have a pretty good handle on the restriction of not renting points as a business. That means the vast majority of points for rent are available from people who are occassional rentees. Most likely these people are renting their points out because they cannot use them that particular use year. In a competitive market, most people will be looking to get back their dues payment. This leads me to believe that there will be rental points available near the dues cost for many years to come. Of course those are for individual rental deals that have to be searched out. Going through a broker will be higher.

If I were to do it all over again, I am not sure what path I would take. I am happy with my DVC contract, and do not regret purchasing it. However I also think that if I had looked more closely into renting points, that I would have also considered that route.

In the future, if I start to use my points for other locations (RCI) then I may feel differntly again, but at this point I have not done so.

-dave

 

[Phonedave]

I'm confused. I thought you stay for 11 nights (4 weekends, 7 weekdays) in a Preferred View One-Bedroom Villa at the Boardwalk. If I have this right, this is 431 points (4 X 43 + 7 X 37). So if I subtract off one of the nights to get to 10 nights, this is 394 points (431 - 37). $2,800 / 394 = $7.11, which is a phenomenal DVC rental rate at any resort. If you are paying this amount, then purchasing a DVC is never going to make financial sense.

It all depends on your definition of "just a bit more".

He may be able to get those rates if he searches. You need to find people who are in a bind, and are looking to just cover their dues. They are not easy to find, but they exist.

-dave

 

[captainkidd]

I'm confused. I thought you stay for 11 nights (4 weekends, 7 weekdays) in a Preferred View One-Bedroom Villa at the Boardwalk. If I have this right, this is 431 points (4 X 43 + 7 X 37). So if I subtract off one of the nights to get to 10 nights, this is 394 points (431 - 37). $2,800 / 394 = $7.11, which is a phenomenal DVC rental rate at any resort. If you are paying this amount, then purchasing a DVC is never going to make financial sense.

It all depends on your definition of "just a bit more".

We stayed in a preferred view this past year, but I would easily stay in a standard view. And 431 points was exactly right. It's my $2,800 that's a bit off. It would actually only be about $2,400 for yearly dues for that stay.

$7.11 - I wish!!! I actually paid $8.00 per point this past year, which is still an awesome rate. No doubt, it's not the norm.

 

[captainkidd]

He may be able to get those rates if he searches. You need to find people who are in a bind, and are looking to just cover their dues. They are not easy to find, but they exist.

-dave

And that's just the thing. I'm willing to put that effort in, and it always pays off. You won't find me renting points from any of the big brokers.

 

[GoofGoof]

I will make an attempt at trying to explain my rationale and why owning DVC is stable with numbers. This could get messy.

Let me start out by saying that DVC is a way to lock in a portion of your stay at a fixed price and a portion will go up based on fee increases. Here's my example:

Let's assume you bought 160 points at BLT for $90 a point so $14,400
Current fees = $4.22 so $675.20
Let's assume 20 years of use. Even though the contract lasts 48 years if you stretch it out that far DVC always comes out way ahead. I am ignoring any resale value at 20 years and assuming I sell it for $1.
Lets Assume $2,000 time value of money or finance costs. Equal to about 5% int over 5 years.

It has been stated that maintenance fees will go up every year and this is true (there have been some rare exceptions where they actually went down). The amount they go up has historically averaged to 3.2% per year over the life of all DVC resorts. 2012 was a particularly high year at an average of 5.6%. There are many factors as to why this happened. One of the big drivers is BLT and AK sold a lot of points and so had less cash guests. When a DVC first opens before all of the points are sold Disney will rent more rooms to cash guests. A portion of the cash paid offsets expenses that are typically covered by fees. When these cash guests go away the costs get spread to DVC owners. In any case 2012 was high, but the average of the previous 5 years was 2.8%. With that history behind us let's assume fees will go up somewhere between 3% and 6% per year. Here is the breakdown of costs:

If MF increase 3% per year that's $18,143 paid in fees over 20 years. The All-in cost (price for points, fees and int exp) is $34,543 or $1,727 per year or $10.79 per point
If MF up 3.2% then $18,517 = All-in cost $34,917 or $1,746 or $10.91 per point
If MF up 4% then $20,106 = All-in cost $36,506 or $1,825 or $11.41 per point
If MF up 5% then $22,326 = All-in cost $38,726 or $1,936 or $12.10 per point
If MF up 6% then $24,838 = All-in cost $41,238 or $2,062 or $12.89 per point

It is not realistic to assume fees will increase less than 2% or more than 6%. If you want to assume something like a 10% increase than you will never break even and DVC is not for you. Based on this reasonable range your average cost per year is between $1,746 and $2,062 or a range of about $300 per year. So to answer the question on stability, you are locking in a rate per year for the next 20 years that has a range of +or- $300. 80% of the cost is locked in.

How does this stack up vs cash rates? Cheapest room at CR – Garden wing during value season = $2,638 for a week after tax which equals $72,347 over 20 years assuming a 3.2% increase in room rates. Now as most people say, nobody pays rack rates so:
With 25% discount = $1,979 per year = $54,272
With 40% discount = $1,583 per year = $43,412
If you are regularly getting 50% or more off the rack rates then DVC is probably not for you.

For me – i cant go in Sept so I compare DVC to CR regular season with 25% discount = $3,122 and I go every other year. = $42,134 for 10 trips over 20 years. At worst if fees go up 6% I am paying $43,412 and most likely something less. The value comes in because I stay in either 1 or 2 BR villas and this is comparing to a studio hotel room. Dramatically larger and better accommodations for around the same or less money is where the value is for me.

If compared to renting points the math is fuzzy since there is very little history on rental point increases. If you assume you will be renting for something like $8 a point for the next 20 years then it's unlikely DVC ownership is a good value. If you look at the big rental brokers the prices went from $11 in 2007 to $13 in 2012 or an annualized increase of about 3.6% per year. I have been told by people on other boards that the price has never been over $10 and will not go up. If that is your assumption than again, owning probably doesn't work out as a better value. If you assume even a modest increase (say 1% a year) then DVC ownership is a better deal than renting points.

 

[GoofGoof]

Yeah, that was something I've never been crazy about, but to be fair, since I started renting points, we haven't seen much of any difference and we always go the same time of year.

But in all honesty, the bigger question to me is who cares why they can or can't raise dues? The fact is they do raise dues, every year. So they can't do it for profit. Still doesn't change the fact that dues increase, on average the same amount as hotel rates, sometimes more, sometimes less. Difference is hotel rates almost always have discounts available on them. I've never paid rack rate in my life for any hotel. Dues will never be discounted.

If you own DVC you should care a lot about why they raise fees.

 

[GoofGoof]

For me, it's not that simple. We're a family of 5. .

I know you probably already know this, but you would save $750 on APs for 5 with the $150 DVC discount. If you reduce your $2,400 in fees by $750 then you are paying a net $1,650 per year. The $60K upfront Is still a huge number.

 

[captainkidd]

I know you probably already know this, but you would save $750 on APs for 5 with the $150 DVC discount. If you reduce your $2,400 in fees by $750 then you are paying a net $1,650 per year. The $60K upfront Is still a huge number.

I only buy 1 AP. We prefer to take 1 long trip per year as opposed to a couple of shorter ones. The rest of the family only needs park hoppers.

Here's the point I'm trying to make - We could go around forever on whether or not the numbers work out better for DVC or not. I can come up with variables for why it may be less expensive just as easily as I can come up with variables for why it may not be less expensive. I think everyone is aware of that. If people can't acknowledge this, I think they're in denial, one way or the other. There is no definite answer across the board. And THAT'S where I have a bit of a pet peeve. Most members (Parentsof4 and Phonedave are perfect examples) recognize this fact. But there are some that refuse to acknowledge this, thus basically coming off that anyone that doesn't join DVC but goes to Disney regularly is doing it the wrong way.

Disney has been selling the whole flexibility and go whenever you want angle for DVC for as long as I can remember. Is it true? Sure it is. But I find it silly to say that DVC makes going to Disney EASIER or MORE FLEXIBLE than going without DVC. Maybe some feel more comfortable knowing that they have their rooms set at a pretty consistent rate for the next 30 years. Others, myself included, feel comfortable in knowing that if times get tough, I don't have to worry about paying my dues one year, or knowing that I laid out all the money up front but didn't get to take advantage of it every year.

The bottom line is, if DVC didn't work for some people, nobody would belong. And if DVC DID work for all the people, then we'd all belong.

 

[GoofGoof]

I only buy 1 AP. We prefer to take 1 long trip per year as opposed to a couple of shorter ones. The rest of the family only needs park hoppers.

Here's the point I'm trying to make - We could go around forever on whether or not the numbers work out better for DVC or not. I can come up with variables for why it may be less expensive just as easily as I can come up with variables for why it may not be less expensive. I think everyone is aware of that. If people can't acknowledge this, I think they're in denial, one way or the other. There is no definite answer across the board. And THAT'S where I have a bit of a pet peeve. Most members (Parentsof4 and Phonedave are perfect examples) recognize this fact. But there are some that refuse to acknowledge this, thus basically coming off that anyone that doesn't join DVC but goes to Disney regularly is doing it the wrong way.

I agree there are a million ways to spin it. Here's my original post on that:

At the end of the day if you are crunching the numbers you can tweak the inputs based on your assumptions to get whatever outcome you desire. There is no clear bright line answer when you are projecting fees and cash room rates 40 years from now.

I am in no way attempting to sell anyone on DVC. I could care less if anyone else buys in. It works for me and that's all that matters to me. I definitely did not intend to come off as suggesting that not joining DVC is the wrong way. My long winded example above is my personal situation. Based on my assumptions that I laid out above owning DVC works for me over the alternatives.

Disney has been selling the whole flexibility and go whenever you want angle for DVC for as long as I can remember. Is it true? Sure it is. But I find it silly to say that DVC makes going to Disney EASIER or MORE FLEXIBLE than going without DVC. Maybe some feel more comfortable knowing that they have their rooms set at a pretty consistent rate for the next 30 years. Others, myself included, feel comfortable in knowing that if times get tough, I don't have to worry about paying my dues one year, or knowing that I laid out all the money up front but didn't get to take advantage of it each year.

I don't really know how DVC is more flexible. Cash stays are the most flexible. Any room you want as long as its not sold out. As far as easier, it is not easier or harder to book through DVC than making a cash reservation. Both are very easy. However, owning is much easier than renting points for making reservations. Just go online and book your room with DVC vs searching through DIS boards for rental opportunities and signing contracts.

In the end you are right that DVC is a calculated risk. Nobody knows for sure what the future will bring. There are probably numerous stories of people who lost their jobs, got divorced or simply got sick of WDW and sold their DVC for a loss. If you don't buy in you have no obligation to spend any money beyond your current trip.

 

[captainkidd]

GoofGoof - That's an excellent post.

Believe it or not, I'm in no way trying to scare anyone away from buying into DVC. Quite the opposite. As I've said, if the way you vacation and the time of year you go all jives with the best way to use DVC, then I almost think it's a no-brainer.
Not trying to be a martyr, but if I can save someone the time and frustration that I have gone through over the past 10 years researching and learning about DVC, then I like to. Again, for some it can be a no-brainer to join. But for others, it truly is in their best interest not to join.

I agree 100% - Owning would be easier than what I go through with renting points. However, I don't mind. It's actually become sort of a challenge for me. I use MANY different websites that rent points to find the best possible deal, and I think I've actually gotten pretty good at it. The one thing I look for is someone who is willing to negotiate price. And as a buyer with plenty of references and as someone who always pays in full immediately upon booking, it certainly helps me out.

I also agree that DVC is a calculated risk, but I wouldn't have that stop someone from buying. WDW isn't going anywhere, and DVC, more than likely will continue to grow. But you're definitely right about the number of people who have sold for a loss, and that is something everyone should consider. All you need to do is look at the resale market to prove that.

 

[ParentsOf4]

Believe it or not, I'm in no way trying to scare anyone away from buying into DVC. Quite the opposite. As I've said, if the way you vacation and the time of year you go all jives with the best way to use DVC, then I almost think it's a no-brainer.

I don't know. Knowing that you've been able to rent DVC at $8/point has me financially questioning my decision to purchase DVC.

Oh well, DW and I had been talking about DVC for at least 10 years. We've already taken the plunge so there's no use trying to put the cork back on that bottle.

 

[captainkidd]

I don't know. Knowing that you've been able to rent DVC at $8/point has me financially questioning my decision to purchase DVC.

Oh well, DW and I had been talking about DVC for at least 10 years. We've already taken the plunge so there's no use trying to put the cork back on that bottle.

Nor should you. You did the research, it works for you, and that's all that matters. Trust me - It was work getting those points for $8, and I'd be shocked if I could work it out again. Like Phonedave said, you gamble going that way. It was for a trip last January and I held out as long as I could. I got lucky.

 

[GoofGoof]

Nor should you. You did the research, it works for you, and that's all that matters. Trust me - It was work getting those points for $8, and I'd be shocked if I could work it out again. Like Phonedave said, you gamble going that way. It was for a trip last January and I held out as long as I could. I got lucky.

If you think about it you should really discourage people from renting. Less interest equals better deals for you . As owners we should encourage renting to boost demand in case we ever choose to rent our points in the future.

Seriously, I wonder what will happen to the DVC rental market as more and more units are built. Seems like the supply will just keep going up but who knows what will happen to demand. It really is a hidden little secret.

 

[Phonedave]

I know you probably already know this, but you would save $750 on APs for 5 with the $150 DVC discount. If you reduce your $2,400 in fees by $750 then you are paying a net $1,650 per year. The $60K upfront Is still a huge number.

At this point in time he can. AP Discounts are perks, and perks can go away (or be added) at any time. When somone is considering DVC the value of the current perks should not enter the equation.

-dave

 

[ParentsOf4]

Seriously, I wonder what will happen to the DVC rental market as more and more units are built. Seems like the supply will just keep going up but who knows what will happen to demand. It really is a hidden little secret.

Demand for DVC is mostly driven by overall WDW attendance. TWDC knows they need to do "something" to maintain WDW attendance. For the last 10 years or so, this "something" mostly has been "discounts". (I put this is quotes because this really involves raising ticket & food prices on people who visit during popular times and then offering room & food discounts to those who visit during less popular times.) As these discounts become the new norm and don't have the same effect they had 5 years ago, I believe WDW management understands that they need to do other things to maintain attendance. I believe this is why there has been so much recent discussion about Avatar land, Carsland, etc. TWDC management is slowly accepting that the traditional method of improving amusement park attendance (i.e. adding new attractions) also applies to WDW. Therefore, WDW should be able to maintain or improve attendance (which translates into onsite resort demand) as long as TWDC invests in the theme parks.

Long-term, DVC membership should continue to retain some value as long as WDW maintains its current pricing structure at the onsite resorts. I'll use an example.

Historically DVC Maintenance Fees (MF) and direct room rentals from Disney have been increasing by about 3% per annum. 2012 room rates for 1 Bedroom villa at SSR in early July are $551/night (including tax). With an annual increase of 3%, this might be $741/night in 10 years or $5187/week. 2012 MF at SSR are $4.7309/point. In 10 years, this might be $6.36/point. It takes 241 points to stay at a 1 Bedroom villa at SSR for one week in July, or $1533/week in MF. In 10 years, the difference between renting and using DVC points might be about $3654 ($5187 – $1533) per year.

Let’s assume a person wants to commit to a WDW vacation for only 3 years, a very pessimistic duration given DVC's current pricing structure. Theoretically, this person would be willing to pay up to $10,962 ($3654/yr X 3 yrs) for a 241-point DVC membership at SSR. Beyond the ancillary benefits of DVC membership, let’s assume they need a real financial incentive to purchase a DVC so they’d only be willing to pay $9000. At 241 points, this comes out to $37/pt ($9000 / 241).

As long at TWDC does a competent job of maintaining demand for WDW and doesn't drastically change the way it prices its onsite resorts, there will always be a percentage of the population that will view DVC as a viable economic option.

 

[captainkidd]

If you think about it you should really discourage people from renting. Less interest equals better deals for you . As owners we should encourage renting to boost demand in case we ever choose to rent our points in the future.

Seriously, I wonder what will happen to the DVC rental market as more and more units are built. Seems like the supply will just keep going up but who knows what will happen to demand. It really is a hidden little secret.

Many people don't feel comfortable giving money to strangers, which is exactly what you're doing when renting points. I just take all the proper precautions available to me before making a purchase. There are many people who buy DVC as an investment just to rent the points out. There are others who don't want the hassle of trying to sell their contract, but just want to sell their points to get enough money to pay their dues. These are the people you want to seek out. Let's say they have 450 points at BLT. Their dues for the year are about $1,900. Think of the deal you can get if that person just wants to make a quick sale to get some immediate cash.

 

[Disneykidder]

I was under the impression that you cannot continuously rent out your points, so it cannot be viewed as an investment in that aspect. A more seasoned DVC Member can add to that.

As I stated many pages ago...DVC is right for some families and for some it's not. I have a family of five and it works out for us. For some, maybe not. If someone is happy with their purchase, then so be it. I am a happy camper.

Peace and love!!

 

[captainkidd]

I was under the impression that you cannot continuously rent out your points, so it cannot be viewed as an investment in that aspect. A more seasoned DVC Member can add to that.

As I stated many pages ago...DVC is right for some families and for some it's not. I have a family of five and it works out for us. For some, maybe not. If someone is happy with their purchase, then so be it. I am a happy camper.

Peace and love!!

I don't for certain, but there are many people (even companies) that own DVC and do nothing but rent it out. I could be mistaken, but I believe Disney has no legal right to stop people from renting their points out.

 

[hiptwinmama]

We looked at buying a DVC, but it didn't make sense for our family. We have 1 particular owner that we rent from every year for one week. For families that go once a year, it's a great option.

We have a family of 4 and we are fine in a studio or 1 bedroom for a week. We do the dining plan, so we don't need the full kitchen. So you can see how it makes sense for us. A studio for a week, when rented is usually between $800-$1500 depending on the DVC and the view. That being said, if we still lived in Florida we might consider buying .