Contract value?

While you are mathematically correct in that compared to the value of all the points over the entire contract one year's points is but a small fraction. But that sort of thinking can be applied to all areas but it doesn't necessarily make sense. Theoretically you can burn one week's paycheck instead of cashing it because in the grand scheme of things, it's only 1/52 of your annual pay. Doesn't mean it would be a good idea.
You're equating money to points. Thus you're reaching this conclusion. Again. Most buyers do not buy in, intending to liquidate the first year's points. They really are "just points" to most buyers. They fully intend to spend them on vacations over the life of the contract.
I had 400 distressed points that I had to rent out myself at $10 per point, the entire process took about 6 hours. By your assertion, I just earned $2,000 for that 6 hours of work. In which case I say...sign me up!
400 points at $10... You didn't say the resort, so figure $6 maint. $6 of them was for the maint, around $1 for the point, and around $3 for your time, risk, and investment smarts. $3x400 is $1200, yes you made about $1200 for 6 hours of work. But you also had to lay out a lot of capital some years ago to be able to earn that money now.
 
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Dean I have to totally agree and wish I knew as much when buying my first contract. My first contract was a 250 point June AKV contract. I thought I was getting such a deal when my offer was accepted (8/2015) because the price was around $6 less per point than the going rate. The contract had 0 2015, 31 2016 and all points forward.

My mentality at the time was I wasn't going to use it until September of 2016 so why would I want to pay more for earlier points? I further justified this as a good deal because the seller gave me a credit for MF's on the used 2016 points at closing. I can laugh at my mentality now for 2 reasons. The obvious first is because I set myself up for a borrowing pattern (of course at the time I didn't realize how having a membership would result in so many more trips) and the second is for only a couple bucks more per point, I could've gotten so much more.

Fast forward to Oct of 2016. I get my first case of addonitis (and have much more knowledge of the system, prices, basically everything) and paid a great price (so good in fact that everyone on the ROFR boards, myself included, thought for sure it was going to get taken), even relative to current trends for a 220 point BLT June contract. This contract wasn't fully loaded but did have 206 2016 points (seller pays MF) and all points forward. I closed late November, banked the 2016 points and rented the excess that I didn't need (not going back until Dec 2017) for enough to cover 2017 maintenance fees on both contracts.

As someone else mentioned this rental process (through a broker) was beyond easy. My points were added to my account by DVC on a Sunday. That same day I claimed a listing and booked the stay. The next day, 75% of the rental proceeds were in my account. The whole thing took 15 minutes.

I'm not saying that those on here who feel otherwise are uneducated by any means, I'm just sharing my own experiences. If I had it to do over though I definitely would've bought a more loaded contract. Even if someone didn't want to rent, one could still get a nicer room for that next vacation or extend the trip, take another, etc.
 
Mr Infinity, I understand where you're coming from but whether most buyers would rent out excess points has no bearing on whether they could. And the truth is that for only a few dollars pp more, a buyer could get a loaded contract and rent the excess and cover 2 years worth of MF's. I'm not trying to suggest that that makes a loaded contract worth $15 more pp (and the market agrees because the prices between them are not that drastic). However, to suggest that a loaded contract isn't a better deal than a stripped one (for the same price, no less) is just incorrect.
 
for only a couple bucks more per point, I could've gotten so much more.

Right. Loaded's are a good deal if you will rent them... but the spread is, in your words, only a couple bucks more. What if the spread was $15? Would you have opted for those extra points then just to rent them out if they cost you $15 up front?

And the truth is that for only a few dollars pp more, a buyer could get a loaded contract and rent the excess and cover 2 years worth of MF's.

I think you missed the point of this discussion. Someone earlier, maybe Dean, made the case that the sale price of contracts should vary by $15 for next years points, $15 for this years points, and $7 for banked points. So $37 spread from loaded to stripped. I made that case that that is an ok theory, but it does not happen in actual sales.

Your case is a perfect example that supports my point. You got extra points for only a few dollars more. But would you have paid $15, $30 or $37 more? You got a nice BLT deal for $110 with 2016 points. :) The same contract w/o those points might go for $105. Would you have paid $120 for it instead? i.e. $15 spread? You got them for around $5. Perfect. Worth it. I also would have paid the price you did ($5 upcharge) but I would not have paid a $15 upcharge.

I never said extra points are bad. I just said they do not translate point-for-point into $15 pp/year on a sale. So the point of this discussion was to explore why. That points rent for $15pp, but on the sale side they don't command the same price.

We should conclude that the extra value of points is more in the realm of $6-$9, not $15. You got them for less than $6-$9. Others get them for a little more. But on average, I think $6-$9 is a much more accurate assessment of the value of extra points on a contract than the $15 that was put forth by others.
 
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The true value is what people are willing to pay for them and sell them for. Over and over again the market has shown the value of available points is rather low - generally a few dollars per point at the most. And while you might be able to shop until you find someone willing to sell a stripped contract for an amount of money close to the mathematical value of the points, or charging significantly more for a loaded contract, generally speaking, unless you have time to do a lot of shopping, make a lot of offers, and face a lot of counteroffers or refusals at your price point - while offering for contracts that are not at your ideal resort, for your ideal number of points, or in your ideal use year - you aren't likely to find a bargain because a contract is stripped. Likewise, if you are trying to sell a loaded contract for $30 more than stripped are going for, its likely to sit on the market with no offers at list price.
 
I think you missed the point of this discussion. Someone earlier, maybe Dean, made the case that the sale price of contracts should vary by $15 for next years points, $15 for this years points, and $7 for banked points. So $37 spread from loaded to stripped. I made that case that that does not happen.

I didn't realize that Dean was saying that the contract price should have that much of a spread. I thought he was saying that's the value he places on the extra points. Like potential value, to a buyer of said contract who rents them out.

And you're correct, I did misread your previous statements about fluctuation in price for loaded vs stripped. My first impression of your 150 point example was that they were both essentially the same deal, as in worth the same. But in reality you were talking about the likelihood that they would have the same sale price, and they I totally agree with that. My apologies.
 
Even if you wouldn't rent them the points have clear value that does not typically match the difference in resale price on stripped vs loaded. Assuming a contract is enough points for a vacation each year (and of course, this varies depending on size of contract), a loaded contract includes three additional vacations versus a stripped one. Rental price is just a simple to assign value to the annual points, but there can be no equivocation that for the same price, a loaded contract is much more valuable than a striped contract.

I would say that if the right contract comes along (use year, number of pts) that it may be worth sacrificing some points (i.e, partially stripped or what not), but the available points must be part of the value analysis.
 


I didn't realize that Dean was saying that the contract price should have that much of a spread. I thought he was saying that's the value he places on the extra points. Like potential value, to a buyer of said contract who rents them out.
Dean is correct, the contract price should have that much of a spread. However, the DVC resale market is highly inefficient, and as such the true value of those points is not reflected in the price. That opens the door for people to buy loaded contracts, rent out the points, and sell them stripped for a price very close to the gross cost of the original contract. Now that may be unappetizing to some, or too much hassle, or a stressful experience. And that's fine, that's the argument to be made. But to try to play with the numbers to try to suggest that the value of loaded contracts is not there is fallacious.
 
You're equating money to points. Thus you're reaching this conclusion. Again. Most buyers do not buy in, intending to liquidate the first year's points. They really are "just points" to most buyers. They fully intend to spend them on vacations over the life of the contract.

Possibly true, but having not spoken to "most buyers" I find it hard to generalize their motives. That being said, just because the owner won't use or rent them does not mean that they do not have a value.

400 points at $10... You didn't say the resort, so figure $6 maint. $6 of them was for the maint, around $1 for the point, and around $3 for your time, risk, and investment smarts. $3x400 is $1200, yes you made about $1200 for 6 hours of work. But you also had to lay out a lot of capital some years ago to be able to earn that money now.

I'm sorry, but much of what you are assuming here is not true, and that's why I disagree with your premise.

I purposely did not specify the resort because it is not relevant to the discussion. These were banked 2015 points so there was a $0 maintenance fee cost to me. Same with the 400 2016 points that were rented at $14 per point (I did not reimburse maintenance fees on those points). So assuming a very generous $2 cost per point, the "profit" vs. a contract with only 2017 points was 400x$8 + $400x12 which is $8,000. So that is the real mathematical difference between a contract with banked 2015 and 2016 vs. a contract with only 2017 points coming up.

Again, you can say that it's not worth the stress, hassle, or inconvenience, and I won't argue that point. To each his own. But when you start to manipulate the numbers to try to make a mathematical argument, you've going to be met with disagreement.

As for laying out the capital, that is irrelevant as well because we are comparing the purchase of a loaded contract vs. the purchase of a stripped one. The capital layout is a given and relatively equal in both cases.
 
Possibly true, but having not spoken to "most buyers" I find it hard to generalize their motives.
Well, we don't have to speak to most buyers to look at data and attempt to make sense of it...
Again, you can say that it's not worth the stress, hassle, or inconvenience, and I won't argue that point. To each his own. But when you start to manipulate the numbers to try to make a mathematical argument, you've going to be met with disagreement.
Huh? If one makes a mathematical argument it will be met with disagreement? What part of the math do you disagree with? Points rent for $15pp/yr. Points sell for considerably less. There is a gap here. Several buyers above confirmed that they got points for much less than their rental value. You can do the math. Given this, we can attempt to explain the gap, or do we conclude it's a mystery and has no explanation because we cannot talk to everyone?
That being said, just because the owner won't use or rent them does not mean that they do not have a value.
They do have a value. It's just much less than $15. For many reasons that have been discussed.
I'm sorry, but much of what you are assuming here is not true, and that's why I disagree with your premise.
I enjoy discussing with you, but I'm not quite getting what it is you're saying is not true. Or just generally "what I'm saying"? Can you be any more specific?

My premise is: Points sell on the resale market for much less than their rental value. You disagree with that?

A discussion then ensued as to reasons for why this happens. You disagree with the fundamental, or you disagree w the reasons, or you have your own reasons that you aren't saying, are the cause? I guess I'm not seeing your point other than you seem to disagree with me. (?) Maybe state your premise and how it differs from mine.

But to try to play with the numbers to try to suggest that the value of loaded contracts is not there is fallacious.
No one has made this argument. The value is clearly there. However the value is not $15. This is proven by the fact that loaded contracts do not sell for $15 or $30 more. Two people above agreed they only sell for a few dollars more. This is empirically proven to be true by the ROFR data. Spartan made a good point originally that it is because getting more points up front is not a big deal to anyone except the small set of people who might rent them out. To everyone else, they are just extra points that will not affect short-term plans. Extra points to be used over the life of an ownership do not command the $15pp, thus, we see contracts (loaded) sell for significantly less than a stripped contract plus the rentable value of extra points.
 
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Right. But you're saying because you can rent them out, they're worth that much in a sale right now. That's a fallacy. It'd be like saying... Buying a car, I could rent it out for $100/week for 10 years. Therefore, $100x52x10. That's $52,000 profit. Well the car only costs $40,000, so I earn $12,000 free and clear by buying this car. That's faulty logic. You would earn that money only if you forewent using it yourself, paid the maintenance and liability, and worked less at your other job for the time spent renting it plus endured a lot of risk. Even if you just look at renting it for the first year, it still doesn't work the way you're thinking.

The loaded contract is a "much better deal" to you, if you are someone who wants to buy it and rent out the points. Yes. But that is not the norm. To most, the loaded contract is only a "little better deal". Thus, you do not see the $15 price gap.

They're not paying in the range of $30 more. They're paying a little more, but getting extra points they'll spend over the next 40 years. You're saying exactly what I said is not realistic, above... That is, that most buyers would exercise option 2) but rent out the extra 100 points. They are *not* getting $30 that they will monetize. They are getting approx. $6-$9 pp/yr, which is the value of the maint & taxes plus a couple $$.
We'll have to disagree, the points have real value and can be rented in the situations we've discussed. One should look at all of the factors but they could simply rent them out. Not getting them means they've lost that money. It is as simple as getting the extra points and renting them down to the level of the stripped contract and taking into account any fees paid on both sides. That's not something that's run over the lifetime of the contract but is a short term issue. Those points won't be good after the initial period of a couple of years.
 
We'll have to disagree, the points have real value and can be rented in the situations we've discussed. One should look at all of the factors but they could simply rent them out. Not getting them means they've lost that money. It is as simple as getting the extra points and renting them down to the level of the stripped contract and taking into account any fees paid on both sides. That's not something that's run over the lifetime of the contract but is a short term issue. Those points won't be good after the initial period of a couple of years.

Agreed! You still won't see me offering a premium of $15, $30, or $37 on contracts I buy.
 
Agreed! You still won't see me offering a premium of $15, $30, or $37 on contracts I buy.
But if you buy a stripped contract, you are paying a premium over a fully loaded contract, that's the point. Obviously there are other factors, maybe on 25 points it's negligible or maybe it's VGC or a subsidized VB or HI contract and it's worth paying the price. In reality it's not usually $30 because one likely would be paying dues on the initial points but one would also pay dues on unavailable points for a fully stripped contract. The price usually is somewhat less and most contracts aren't fully loaded or fully stripped. One just has to look at specifics and compare. But to ignore the short term real $$$ value of lost points on a stripped contract is simply ignoring the facts.
 
But if you buy a stripped contract, you are paying a premium over a fully loaded contract, that's the point. Obviously there are other factors, maybe on 25 points it's negligible or maybe it's VGC or a subsidized VB or HI contract and it's worth paying the price. In reality it's not usually $30 because one likely would be paying dues on the initial points but one would also pay dues on unavailable points for a fully stripped contract. The price usually is somewhat less and most contracts aren't fully loaded or fully stripped. One just has to look at specifics and compare. But to ignore the short term real $$$ value of lost points on a stripped contract is simply ignoring the facts.
I agree completely. The interesting thing is that while the points have a fixed value, it is only the buyer who can capitalize on the full value. The seller will not be able to increase their asking price by the value of the points, because as Crisi said earlier, nobody will bid on that contract. They'll likely get $5-10 a point more for a contract that is "worth" between $15 and $45 a point more than a fully stripped contract. That is the inefficiency of the marketplace that allows for the flipping activity that is being discussed in another thread here on the DIS.
 
In general DVC buyers over value stripped contracts and under value loaded contracts. This has not changed in the entire time I've owned DVC. What has changed is that there are now enough people out there that do realize that this pricing anomaly exists and take advantage of it by buying loaded contracts, renting/ transferring those points and then selling the stripped contract. If I was in the US, I would be doing this right now. As a Canadian having to deal with the withholding taxes is a huge pain and makes it not worth the effort.

When I was buying most of my contracts (I made offers on 200+ contracts) I had a system of comparing different contracts based on who was paying closing, MF and how many points the contracts came with. The formula I used was:

Costs = # of points * costs per point + closing costs + MF - year1 points * rental rate - year2 points * rental rate - year3 points * rental rate

So looking at 2 examples:

(1) AKV 200 points, $80/point, buyer pays closing $500, seller pays MF, 0 points yr1, 0 points yr2 and 0 points yr3
Costs = $80*200 + $500 + 0 - 0 - 0 - 0 = $16,500
Cost/point = $82.50

(2) AKV 200 points, $85/point, buyer pays closing $500, buyer pays $1317 MF, 200 banked yr1 points, 200 yr2 points, 200 yr3 prints
Costs = $85*200 + $500 + $1317 - $14*200 - $14*200 - $14*200 = $10,417
Cost/point = $52.085


Note: At year 4 both contracts have the same points going forward because 3 years worth of points is the most you can use at one time with banking and borrowing. Also MF in year 3 are the same for both contracts so they don't need to be included either.

Now if you want to pay more because a stripped contract is the perfect size and UY for you and renting points is too big of a hassle, that is your choice. Just make sure that you understand what you are doing and are okay with it.

Anyone though that is trying to show that a stripped contract is worth anything close to a loaded contract is using bad math or has other motives, like selling you a stripped contract!
 
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I agree completely. The interesting thing is that while the points have a fixed value, it is only the buyer who can capitalize on the full value. The seller will not be able to increase their asking price by the value of the points, because as Crisi said earlier, nobody will bid on that contract. They'll likely get $5-10 a point more for a contract that is "worth" between $15 and $45 a point more than a fully stripped contract. That is the inefficiency of the marketplace that allows for the flipping activity that is being discussed in another thread here on the DIS.

And the buyer can only capitalize on the full value if s/he is willing to wait for a loaded contract to show up on the market - they aren't as common as stripped contracts. If you are going to flip them, as Doug says, then you aren't caring about which use year/home resort, number of points - you are looking for loaded contracts at a good price that you can strip via rental, then sell for a few dollars less per point than you bought it for - and then this matters. But I suspect most people are looking for contracts for their own use. And once you decide to buy, you are usually on a timeline for your next trip. I don't think its a pragmatic question for the majority of use cases.
 
And the buyer can only capitalize on the full value if s/he is willing to wait for a loaded contract to show up on the market - they aren't as common as stripped contracts. If you are going to flip them, as Doug says, then you aren't caring about which use year/home resort, number of points - you are looking for loaded contracts at a good price that you can strip via rental, then sell for a few dollars less per point than you bought it for - and then this matters. But I suspect most people are looking for contracts for their own use. And once you decide to buy, you are usually on a timeline for your next trip. I don't think its a pragmatic question for the majority of use cases.
I think you're right on point here. You're making all the cases why it makes sense to buy a contract that happens not to be fully loaded despite the extra cost relative to a loaded contract. What you didn't do is use fuzzy math to narrow the gap between the two as far as net cost to the buyer is concerned, and I appreciate that.

This brings me back to something I've said often. Only one person can get the best deal. Everyone else overpaid. But that's ok. There's value to getting the contract you want at the time you want with the number of points and UY you want, etc. etc. That in of itself is the justification for not getting the "best deal" or "overpaying" as some like to put it. It's ok to pay a little more to get what you want, and I think people should feel more comfortable just saying that. What bothers me is when I see false justifications using bad math, inaccurate assumptions, and exaggerated descriptions of the "hassles" of the point rental process. I think this provides misleading information to those who come to these boards to learn about the resale process.
 
Costs = # of points * costs per point + closing costs + MF - year1 points * rental rate - year2 points * rental rate - year3 points * rental rate
This formula is a good theory, but it does not stand the test of reality. In reality...
Costs = # of points * costs per point + closing costs + MF - year1 points * an amount less than rental rate - year2 points * an amount less than rental rate - year3 points * an amount less than rental rate
The cost of buying year 1, 2, and 3 points is not the rental rate. It is much lower. When buying resale, the cost of getting extra points is not $15, $30, and $37. It is closer to half that. Otherwise you would see $100 stripped contracts valued at $137 loaded, which is simply not the real world case.

I just don't get why the assertion that something is worth in a sale now, what you could rent it out for over time. As if to say... I could rent out a house for $2000/mo/30 years. That is $720,000. But that's not what the house sells for. In actuality the house sells for $300,000 -- much less than it's rental equivalent. It is foolish to say that something should sell now -- for it's full rental value up front without having to rent it out.

Why would ANYONE pay $15pp to get extra points? The BEST you can do is get your money back after putting forth the capital and time! Points are simply not worth $15pp on the sale side.

I would pay $5 for extra points. Like Phatscott did. Or maybe $6-$9 max. Never $15.
 
This formula is a good theory, but it does not stand the test of reality. In reality...
Costs = # of points * costs per point + closing costs + MF - year1 points * an amount less than rental rate - year2 points * an amount less than rental rate - year3 points * an amount less than rental rate
The cost of buying year 1, 2, and 3 points is not the rental rate. It is much lower. When buying resale, the cost of getting extra points is not $15, $30, and $37. It is closer to half that. Otherwise you would see $100 stripped contracts valued at $137 loaded, which is simply not the real world case.

I just don't get why the assertion that something is worth in a sale now, what you could rent it out for over time. As if to say... I could rent out a house for $2000/mo/30 years. That is $720,000. But that's not what the house sells for. In actuality the house sells for $300,000 -- much less than it's rental equivalent. It is foolish to say that something should sell now -- for it's full rental value up front without having to rent it out.

Why would ANYONE pay $15pp to get extra points? The BEST you can do is get your money back after putting forth the capital and time! Points are simply not worth $15pp on the sale side.

I would pay $5 for extra points. Like Phatscott did. Or maybe $6-$9 max. Never $15.

The original question was "how you all value similar contracts but with differing available points", the question is not how much you would pay for them. As a buyer I always want to pay as little as possible.

The formula I presented does show how to compare contracts that have different cost/point, MF, closing costs and available points. I valued the available points at rental rates because that is what I did with the majority of them on the contracts I bought. I rented them out within days of getting the points loaded into my membership. So in reality, not just theory, the formula works exactly as stated. Feel free to come up with your own mathematical formula and we can then argue over which makes more sense.

Disney rents out one time use points for $15/points, brokers are around $16-$17/point and private rentals are around $14-$17/point. The rental market is saying that points are worth around $15/point on the rental side, so that seems like a reasonable number to use to value the available points on contract since that is what one can get with about 60 minutes effort.

4-5 years ago there were lots of loaded contracts and very few stripped contracts for sale. Now there are a lot of stripped contracts for sale and not that many loaded contracts. Why do you think that is?
 
This formula is a good theory, but it does not stand the test of reality. In reality...
Costs = # of points * costs per point + closing costs + MF - year1 points * an amount less than rental rate - year2 points * an amount less than rental rate - year3 points * an amount less than rental rate
The cost of buying year 1, 2, and 3 points is not the rental rate. It is much lower. When buying resale, the cost of getting extra points is not $15, $30, and $37. It is closer to half that. Otherwise you would see $100 stripped contracts valued at $137 loaded, which is simply not the real world case.

I just don't get why the assertion that something is worth in a sale now, what you could rent it out for over time. As if to say... I could rent out a house for $2000/mo/30 years. That is $720,000. But that's not what the house sells for. In actuality the house sells for $300,000 -- much less than it's rental equivalent. It is foolish to say that something should sell now -- for it's full rental value up front without having to rent it out.

Why would ANYONE pay $15pp to get extra points? The BEST you can do is get your money back after putting forth the capital and time! Points are simply not worth $15pp on the sale side.

I would pay $5 for extra points. Like Phatscott did. Or maybe $6-$9 max. Never $15.
The issue isn't the rental over time but the ability to rent the points in a given contract but the ability to rent the extra points in the comparison. Since that's an easily quantifiable $$$ amount, it's predictable around $15 for unrestricted points and variable for restricted points depending on lead time and availability. There are some other costs that one must consider in terms of dues but these too are easily quantifiable. Thus this is not a theoretical discussion of what one might rent for but a factual discussion of what one could rent the extra points for in the short term. For a fully loaded vs a fully stripped contract, that's 3 years worth of points with one year restricted. Obviously most contracts aren't fully loaded with enough lead time to rent the points and most aren't fully stripped but this gives one the method to compare the difference between contracts and the REAL cost of one vs the other. IF you paid the same for a fully stripped contract vs what you could get a fully loaded contract, you did pay extra. The real difference isn't quite $15 per point because of the other costs, it is closer the $10 per point but depends on how dues on extra or missing points are handled as part of the contract.
 

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