Actual Re-sale Savings

[BamaGuy44]

Interesting but these kinds of calculations require so many assumptions I'm not sure how much value they have. And it always just devolves into a theoretical accounting discussion about opportunity cost and how to calculate inflation that has little to do with DVC. Thanks for doing it, it's a good reminder that dues are a crucial factor in any cost comparison

 

[MickeyMice]

What we know is that you can fairly easily get $18 per point:
https://dvcrequest.com/

You also have to pay rental income on that.
https://dvcfan.com/2022/01/21/do-i-have-to-pay-taxes-when-renting-my-dvc-points/
You're paying dues of almost $8 per point.

In the end, maybe you're clearing $7 to $8 per point by renting out.
So 10 years left in the contract -- If you rented out your points every year, maybe you'd clear $70 to $80.
Beach Club is currently $150 to $160 per point on the resale market.
So yeah, prices will plummet over the next 10 years at some point.
If you bought Beach Club right now, and rented out your points every year, then you'd break even at best.

yes, i could rent out for $18/pt for no effort (and deal with possible taxes etc) today. but:

1. i expect the rental cost/pt to rise through the years with inflation, rising WDW cash rates
2. i could rent my points out for more (and arguably avoid the tax hit) directly to an individual

but, i agree that this is also true for other 11 month in-demand DVCs, and maybe some of those expire in 2057+ so they would hold value better. but i'm not sure any contract in WDW DVC is as exclusive as BCV. maybe poly (pre-tower)? CCV?

 

[havoc315]

yes, i could rent out for $18/pt for no effort (and deal with possible taxes etc) today. but:

1. i expect the rental cost/pt to rise through the years with inflation,

If it rises with inflation, then it would still be $18 in 2022 dollars. In fact, rental rates have been pretty stagnant the last 2-3 years, despite inflation.

rising WDW cash rates
2. i could rent my points out for more (and arguably avoid the tax hit) directly to an individual

You can't avoid dues. But I think you just proved my point...

"In 10 years, Beach Club can maintain value similar to today, by cheating on taxes, by going out of your way to find the highest paying renters at 11 months..."
Of course, if you rent yourself instead of using a broker, then you're using your own time -- isn't your time worth any money? I'd rather get $18 from a broker than $20 doing the work myself, as my time is worth more than that.

But put that aside, put aside the value of your time.... And you'll cheat on your taxes, and you'll get $22 per point which is the highest anybody is listing for BCV on the first four pages of the rental board. (Several are $20 or less).

So, you get $22 per point, you pay your dues, you clear $14.50 per point. You go and cheat on your taxes.
So under this best case scenario, over 10 years --- Those BCV points give you a value of $145.

BCV re-sale is currently $160 to $170...

So yes, even under your ideal situation, maximizing rental return, cheating on your taxes, you still wouldn't be able to justify the current BCV resale price in 10 years.

but, i agree that this is also true for other 11 month in-demand DVCs, and maybe some of those expire in 2057+ so they would hold value better. but i'm not sure any contract in WDW DVC is as exclusive as BCV. maybe poly (pre-tower)? CCV?

 

[DonMacGregor]

Interesting but these kinds of calculations require so many assumptions I'm not sure how much value they have. And it always just devolves into a theoretical accounting discussion about opportunity cost and how to calculate inflation that has little to do with DVC. Thanks for doing it, it's a good reminder that dues are a crucial factor in any cost comparison

This is why I never, ever partake in any of these discussions. My thought "process" (a loose definition if ever there was one) when purchasing DVC would make the number-crunchers heads explode.

 

[Louis morrell]

My layman's analysis based on my resale purchase of SSR at 90 and later direct purchase of SSR at 165 is I have enjoyed all of the time I have been able to spend with my wife my son and now my daughter in law and those times are priceless. By my calculations I have no idea what it cost me and I'm ok with that.
Life is just too short to care. Live well and be happy.

 

[Sandisw]

My layman's analysis based on my resale purchase of SSR at 90 and later direct purchase of SSR at 165 is I have enjoyed all of the time I have been able to spend with my wife my son and now my daughter in law and those times are priceless. By my calculations I have no idea what it cost me and I'm ok with that.
Life is just too short to care. Live well and be happy.

This is me!

 

[E2ME2]

Obviously, a lot of people go to the re-sale market under the promise of savings. The more lengthy purchase process, the loss of blue card benefits, and what restrictions are in place, are seen as small costs when you can save 25-40%....
But what are the savings actually?
I'm going to explore 3 resorts -- Riviera, Polynesian and Beach Club. I'm going to assume 20 years of DVC ownership. I'm using 2022 dollars, which means that I'll use the 2022 MFs. (yes, they go up overtime, but the value of the dollar changes accordingly, sticking to 2022 dollars means using 2022 MFs). I'm also going to assume that Beach Club is worthless in 20 years, as the contract expires. I'll assume that Poly and RIV re-sale value will be similar to what it is today -- as they will both have over 20 years left.

200 points of each:
Direct pricing:
Beach Club: $265 per point, with closing costs -- $54,000
Riviera with current incentives -- $191 per point, with closing costs, $39,000
Poly -- $250 per point , with closing costs $51,000

Resale pricing:
Beach Club at $170 per point - $35000 with closing costs
Riviera at $145 per point - $30,000 with closing costs
Poly at $170 per point - $35,000 with closing costs

But now, let's add 20 years of MFs --
Beach Club - Direct - $84,000. Beach Club re-sale: $65,000
Riviera direct: $72,500 - Riviera re-sale: $63,500
Poly direct: $80,500 -- Poly re-sale -- $64,500

Ahhh, but now let's look at total cost after 20 years, where we re-sell Poly or Riv:
Beach Club -- Total cost, direct -- $84,000. Beach Club, total cost re-sale: $65,000 -- 22% savings.
Riviera -- Total cost direct -- $43,500. Riviera total cost re-sale -- $34,500 -- 21% savings
Poly - total cost direct: $46,500. Poly total cost re-sale: $30,500 - 34% savings.

So, savings vary largely. The biggest savings are at the sold-out resorts that you can still later re-sell.
But we see another interesting tidbit....
The total cost of buying Riviera direct is actually 35% cheaper than buying Beach Club re-sale.
The total cost of buying Poly re-sale is 53% cheaper than Beach Club re-sale!

So lessons:
Within a given resort, re-sale may save 20-30% over the long term...
But...
Buying a incentivized resort direct is significantly cheaper than buying a 2042 resort re-sale..
And buying a long-contract on the re-sale market is what actually gives you the lowest possible price, best savings.

While not calculated -- If you hold a long contract for it's full 35-50 years, then the re-sale savings would be much smaller.

Timing also has a huge impact on this analysis.
I bought 225 SSR points & 160 AKL points, during COVID, and saved greater that 50%/$37K
I paid $88.89/Pt for SSR - total $20,000
AND $125/Point for AKL - total $20,000
So for I paid $40K Resale for what would have been ~ $77,000 Direct.
So, I saved $37K NET-OOP $$ (greater than 40% savings)
I already owned 210 Direct at SSR, so the Blue Card benefits were not a concern.
I'm waiting for another DIP in the market to try to get some more BCV Points via resale. i agree that it's less of a savings on the 2042 resorts, but for the right price it can be well worth it.

 

[Spivey378]

Complicated issue. Lotta ins, lotta outs, lotta what-have-yous.

 

[havoc315]

This is why I never, ever partake in any of these discussions. My thought "process" (a loose definition if ever there was one) when purchasing DVC would make the number-crunchers heads explode.

All of us, or almost all of us, make these calculations. Often not on a spreadsheet, it's often instinctual.
But almost all of us would appreciate that paying $1,000 per year for 20 years is not the same thing as paying $20,000 all at once up front.
We all give some thought to what the cost would be compared to what we might otherwise spend on accommodations.
For those that have considered re-sale as an option, we consider the degree of savings and whether it's "worth it."

What this thread does, is simply try to make some of those calculations more explicit. But even if you never pull out a calculator, you are likely running roughly through the same process in your head. Numbers to compare to the process already going on inside our minds.

 

[Shelly F - Ohio]

But dont forget to factor that it appreciates over time. What will it be worth in 15-20 years from now. What we paid 20 year ago was $70 a point now its going for $145. So if we sold plus the amount of money we have made renting out our points means we have vacationed for free for the past 20 years.

 

[TinkB278]

I think the biggest value in buying direct is the fact that resale owners will be limited in their booking options beginning in 2042, and it will only get worse from there. I’m not sure how you put a dollar value on that but to me it isn’t worth saving a few thousand to face those limited resort options.

 

[havoc315]

But dont forget to factor that it appreciates over time. What will it be worth in 15-20 years from now. What we paid 20 year ago was $70 a point now its going for $145. So if we sold plus the amount of money we have made renting out our points means we have vacationed for free for the past 20 years.

That was factored in to the calculations. We used 2022 dollars, and assumed that any "appreciation" matched inflation.
The adjusted value of $70 from 2002 would be approximately $120 today. Thus, you didn't actually gain appreciation of $75 over 20 years, you gained about $25.
So you were fortunate -- You did slightly better than flat. For my assumptions, I assumed flat.
And you didn't vacation for free --- It's a question of opportunity cost. If you sold now, you might get back $145 (or more like $135 after commissions).
Your opportunity cost was in the range of $150 to $200 per point. (In other words, if you never spent that $70 on DVC, you'd have an extra $150 to $200 today).
So if you sold today, got back about $135 after commissions.... Then you certainly have vacationed at a discount, but far less than free. You've effectively paid $15 to $65 plus 20 years of dues.
So that comes out to a really nice discount --- You have vacationed for 20 years, just paying dues plus $1 to $5 per year per point, on top of that. So you effectively have been paying about $8 to $14 per point, per year. A nice discount compared to cash rooms or renting points.

It's a very good example of how you can save money over the long term over a long contract. But still no where near "free."

 

[FlynnRiderSwitch]

The opportunity cost absolutely should be factored in for the most accurate appraisal. And that does increase the savings.
But a 5% return, after inflation, is very very optimistic.
A very conservative investment barely matches inflation.
A conservative investment (bonds, etc) can basically match inflation to a 1% return after inflation.
A balanced approach may get you about 3% better than inflation -- This is the number I use when calculating lost opportunity cost.
5% would require an aggressive approach -- Which could be much higher than 5%, but also much much lower. My aggressive investment account is down nearly 13% this year. (but over 10 years, has been getting an annual return of about 7%... so even my aggressive accounts are only about 3-4% better than inflation currently.
Then you have to take taxes out of that income growth.

Now, most people aren't aggressively investing their savings. They may not invest it at all. Of course, even if they go and spend the savings on a $16,000 bottle of wine that they drink on New Year's Eve, proper economics still requires calculation of lost opportunity cost.

Running my own calculations, I'd put the opportunity cost/savings on that $16k as about $4,500k. Admittedly, that does increase the re-sale savings on Poly to about 40%. Bumps Riviera up to 26%. Bumps Beach Club up to 27%.
So revised numbers -- Poly, 40%, Beach Club 27%, Riviera 26%.
That's now accounting for the lost opportunity cost of buying direct.
And now comparing Riviera direct to Beach Club resale: Riviera direct is 26% cheaper than Beach Club resale.

Beach Club resale, and all WDW resales are cheaper than RIV direct.

 

[havoc315]

Beach Club resale, and all WDW resales are cheaper than RIV direct.

Only in upfront costs. In a full calculation of value, redemption value, lost opportunity cost, etc... Beach Club re-sale is far more expensive than Riviera.

This is oversimplification, but very very generally... Imagine you're buying 200 points, to use for 19 years (until 2042 expiration):
At incentivized 188 per point, plus closing, you would pay about $39,000 for Riviera.
August 2022 re-sale of Beach Club was reported at $174 per point. With closing costs, about $36,000.

Now, let's do 19 years of ownership, using 2022 dollars:

Beach Club: $28,637 in dues
Riviera: $31,859 in dues

Now, let's do redeemed value in 2042 (re-sale value):
Beach Club -- $0 return
Riviera (using current 2022 dollars): Approximate $28,000 return

Total cost through 2042: Beach Club: $64,637
Riviera: $42,859

Thus, over the same period of time, Riviera works out to be $20,000 cheaper than Beach Club. It isn't even close.

This is why the 2042 resorts tend to be such bad value, and so overpriced.

(The least overpriced is Boulder Ridge, but even Boulder Ridge works out to about $14,000 more expensive than Riviera).

Now, this is a bit of oversimplification. If we add in lost opportunity costs, it narrows the difference slightly, but not nearly enough to wipe it out. Then there are unknowns. But this is really the best estimate based on known factors. (unknown, a tornado could hit Beach Club wiping out its value... global warming could make Orlando unlivable, destroying all DVC value starting in 2035, etc).

 

[Paul Stupin]

Only in upfront costs. In a full calculation of value, redemption value, lost opportunity cost, etc... Beach Club re-sale is far more expensive than Riviera.

This is oversimplification, but very very generally... Imagine you're buying 200 points, to use for 19 years (until 2042 expiration):
At incentivized 188 per point, plus closing, you would pay about $39,000 for Riviera.
August 2022 re-sale of Beach Club was reported at $174 per point. With closing costs, about $36,000.

Now, let's do 19 years of ownership, using 2022 dollars:

Beach Club: $28,637 in dues
Riviera: $31,859 in dues

Now, let's do redeemed value in 2042 (re-sale value):
Beach Club -- $0 return
Riviera (using current 2022 dollars): Approximate $28,000 return

Total cost through 2042: Beach Club: $64,637
Riviera: $42,859

Thus, over the same period of time, Riviera works out to be $20,000 cheaper than Beach Club. It isn't even close.

This is why the 2042 resorts tend to be such bad value, and so overpriced.

(The least overpriced is Boulder Ridge, but even Boulder Ridge works out to about $14,000 more expensive than Riviera).

Now, this is a bit of oversimplification. If we add in lost opportunity costs, it narrows the difference slightly, but not nearly enough to wipe it out. Then there are unknowns. But this is really the best estimate based on known factors. (unknown, a tornado could hit Beach Club wiping out its value... global warming could make Orlando unlivable, destroying all DVC value starting in 2035, etc).

This is super interesting. Thanks for thinking this through!

 

[Jlo85]

Now, let's do redeemed value in 2042 (re-sale value):
Beach Club -- $0 return
Riviera (using current 2022 dollars): Approximate $28,000 return

I think this math is a little faulty since it assumes a sale of RIV but not BCV. Current trends tend to indicate that 1) DVC resorts appreciate over time and 2) that appreciation accelerates towards the end of the contract. So at least based on current trends, it's likely that you could sell BCV close to expiration for a profit over what you paid (>$36K in your example).

 

[CarolynFH]

I think this math is a little faulty since it assumes a sale of RIV but not BCV. Current trends tend to indicate that 1) DVC resorts appreciate over time and 2) that appreciation accelerates towards the end of the contract. So at least based on current trends, it's likely that you could sell BCV close to expiration for a profit over what you paid (>$36K in your example).

The BCV Condominium Association ends on January 31, 2042. So there are no BCV contracts to sell in 2042. In 2041, yes, BCV contracts could be sold, but do you really think anyone is going to pay a significant amount of money for a few months’ ownership?

 

[pianomanzano]

I think this math is a little faulty since it assumes a sale of RIV but not BCV. Current trends tend to indicate that 1) DVC resorts appreciate over time and 2) that appreciation accelerates towards the end of the contract. So at least based on current trends, it's likely that you could sell BCV close to expiration for a profit over what you paid (>$36K in your example).

I think some of those assumptions are faulty. There are no trends to show acceleration of appreciation towards the end of a contract since no resort is near the end of their contract. No one’s gonna pay over the original paid amount with only 2 or 3 years left, that’s like paying 60 to 90 dollars for each individual point left and I don’t think rental rates are going to get that high by then.

 

[Paul Stupin]

I think this math is a little faulty since it assumes a sale of RIV but not BCV. Current trends tend to indicate that 1) DVC resorts appreciate over time and 2) that appreciation accelerates towards the end of the contract. So at least based on current trends, it's likely that you could sell BCV close to expiration for a profit over what you paid (>$36K in your example).

Not sure I understand the reasoning. I don’t think it’s likely anyone could sell a 2042 resort contract close to expiration and make anywhere near a profit. Let’s say you sold 5 years before expiration. Maybe a potential buyer who loves BCV would add up how many vacations they plan to take, and how many days, and come up with a heavily discounted offer as a starter contract. Not likely they’d overpay.

But they’d have to really love BCV, since the non 2042 resorts that will still provide decades of vacations will probably be a far better deal. Maybe I’m missing some crucial piece of financial reasoning, not an expert! I would also bet that any substantial refurbishment of the property would not happen 5 or less years before expiration, so BCV will just get increasingly rundown.

 

[Jlo85]

Not sure I understand the reasoning. I don’t think it’s likely anyone could sell a 2042 resort contract close to expiration and make anywhere near a profit. Let’s say you sold 5 years before expiration. Maybe a potential buyer who loves BCV would add up how many vacations they plan to take, and how many days, and come up with a heavily discounted offer as a starter contract. Not likely they’d overpay.

So, I calculated the CAGR per point per year for each resort based on Fidelity's resale data for 2017-2021 to extrapolate the projected price per point. These definitely aren't exact (if anything BWV and BCV are growing faster than projected), but they kind of show the theory about when we could maybe expect an actual decrease in prices. Red highlights are when the price per point actually should start decreasing based on current trends. So, in theory, if you sell before the red, you may make a profit.

I understand the logic is that contract should lose value as they lose years, but that hasn't really borne out. DVC doesn't really appreciate/depreciate like a lot of other traditional investments.