DVC Membership used strictly as an investment

rpl47

Earning My Ears
Joined
Oct 24, 2009
It seems like I see the same people on different sites and forums renting our their points, which begs the question. Do people use their existing DVC contracts or purchase resales with the strict intention of using it as a way to generate income? Based on the average going rate of what renters are asking for per point, it seems as if would take over 15 years on average to recoup the cost of the contract (incl paying for dues), not calculating the point price to increase from year to year. Of course, after 15 years or so, the rest is gravy. Thoughts?
 
This has been discussed many times and the numbers just don't support the activity. The only way it would is if you are a real estate broker, you buy from distressed owners, strip the points, rent them, then sell the contract.

:earsboy: Bill

 
I'd say there's a tiny number who might be doing do this and they are not buying at today's prices. The one's I'm aware of from the boards use their membership too though.
 


I'm not a DVC owner yet. But once I buy in, I will definitely be renting out points every other year or so since I only plan on going to WDW every 3 years or so. Of course, plans could change. My daughter is only 7 months old right now, so I will be going with just my husband if things turn out as planned next year. After that, we may end up going more or less often depending on how much my daughter enjoys it. I would be a little heartbroken if she doesn't turn out to be a Disney fan though....
 
I'm not a DVC owner yet. But once I buy in, I will definitely be renting out points every other year or so since I only plan on going to WDW every 3 years or so. Of course, plans could change. My daughter is only 7 months old right now, so I will be going with just my husband if things turn out as planned next year. After that, we may end up going more or less often depending on how much my daughter enjoys it. I would be a little heartbroken if she doesn't turn out to be a Disney fan though....

HAHAHAHA... Look at my signature... After I became an adult, I went every 10 years. After I had a kid, once a year, and sometimes twice a year after the 2nd one was born. If you are a Disney fan, she will end up being a Disney fan. We kept our ODD unaware of princesses until she was 2. Last few trips were ALL about meeting princesses and princess meals, no thanks to us trying to keep her in the dark. We just decided to embrace it all rather than fighting it. :)
 
It seems like I see the same people on different sites and forums renting our their points, which begs the question. Do people use their existing DVC contracts or purchase resales with the strict intention of using it as a way to generate income? Based on the average going rate of what renters are asking for per point, it seems as if would take over 15 years on average to recoup the cost of the contract (incl paying for dues), not calculating the point price to increase from year to year. Of course, after 15 years or so, the rest is gravy. Thoughts?
$$$ wise it'd be a poor choice as a true high risk investment. But it can be a good way to own multiple resorts for home resort priority. It can also be a good option for years one doesn't go or if there are other issues including financial.
 


The last time I looked at this, the ROI for e.g. a BLT resale was around 7% pre-tax. That's close to the average rate of return of a passive index fund, a lot more work, and a lot less diversified.

Buying DVC as an investment strategy for rental just doesn't make sense, IMO. Renting from time to time? Sure. But as a "this is my plan for these points for the long term?" Nope.
 
I can see where families might be in between children and grandchildren would rent out their points for a few years. For instance, their children are in college and haven't yet married. There might be a period of time where they don't want to sell because they know that grandchildren will come eventually, so they rent out their points for a few years. It may look like they are in the "rental business", but in reality, they are just waiting it out.
 
HAHAHAHA... Look at my signature... After I became an adult, I went every 10 years. After I had a kid, once a year, and sometimes twice a year after the 2nd one was born. If you are a Disney fan, she will end up being a Disney fan. We kept our ODD unaware of princesses until she was 2. Last few trips were ALL about meeting princesses and princess meals, no thanks to us trying to keep her in the dark. We just decided to embrace it all rather than fighting it. :)

If everything turns out for me like it did for you, I guess buying DVC now would totally make sense then! Thanks for helping me justify this "investment" further :teeth:. Congrats on being new DVC owners!
 
This has been discussed many times and the numbers just don't support the activity. The only way it would is if you are a real estate broker, you buy from distressed owners, strip the points, rent them, then sell the contract.

:earsboy: Bill

Very true....also buying during a recession helps too as the current prices are WAY too high to try to make this work now.

On the other hand, if you rent every third year or every other, then that may be an acceptable way to help drive down your purchase costs, but in no way would be an exclusive good investment business model
 
Many bought DVC for $50-$75 per point during the Great Recession. Currently these people have unrealized cap appreciation of 60 - 100 percent. On top of the cap apprec, they are making $8 to $11 profit per point by renting them yearly.

So if you bought 100 AK points for $5000 You can now sell for $10000.

You can rent those points out $10 above what you pay for maint fees every year.

I'd say it worked out well for those folks and they are quite happy making $1,000 yearly on an investment that cost them 5k. Also, I'm not including closing costs because back then many sellers paid for closing costs.

Today, the numbers look very different. Might be too risky to try. But, those hauling in 20 percent a year before taxes by buying on the cheap are very happy renting their points at the moment.
 
I just don't see how it can be considered an "investment" when there is an end date where you get nothing back.
 
I just don't see how it can be considered an "investment" when there is an end date where you get nothing back.

It's all just numbers. If you make enough renting to pay for the points plus MF's plus have earning on top then your ahead. It doesn't have to be something that continues on if the numbers work out that way.
 
I can see where families might be in between children and grandchildren would rent out their points for a few years. For instance, their children are in college and haven't yet married. There might be a period of time where they don't want to sell because they know that grandchildren will come eventually, so they rent out their points for a few years. It may look like they are in the "rental business", but in reality, they are just waiting it out.
 
If you had bought back in 2011-2012, it was possible to get contracts for $50/point with 3 years of points on them and not having to pay for all the MF or closing costs. This brought the real price of those points down to into the mid $30/point range. Renting out for $14/point less MF of $6.50/point gives you a profit of $7.50/point. This is a pretty good return even with the contract value going to $0 eventually. Think of this as an annuity.

The problem of course is will the spread between MF and rental rates stay this high or will the gap start to close. The other problem is that at today's rates of $100-$175 (resale and direct) the numbers too not make sense at all to consider it an investment.

The other way some people were making money was on flipping contracts. Buy a loaded contract, rent out the points and the sell it stripped with no points. This of course only works if there are loaded contract available and if prices are rising. These days too many contracts are already stripped of points, making it hard to find a loaded contract.

So realistically there are a very small number of people only that bought at the right time for it to have turned into an investment for them.
 
As others have said, I think it depends when you purchased points and how much they currently can be rented for. Friends of ours, purchased a lot of points years ago. They rent enough points to cover their airfare and meals for 2 trips a year and cover their yearly dues. At todays purchase prices (direct and resale), I don't think the math works out. Of course you can always try it and if it doesn't work, you can sell or decide you want it for vacation and not an investment.
 
The problem of course is will the spread between MF and rental rates stay this high or will the gap start to close.

As social media has caught wind of "renting points", demand has spiked. At this point, prices demanded by David and other rental brokers haven't moved (except for the $1 per point premium for certain resorts beyond 7 months). I predict you'll see an increase in rental prices that moves independently of the increase in maintenance fees. Rental prices are limited by the price of a hotel room through CRO. With current rentals costing about 45-65% of full rack rate at places like the Poly, and Disney only offering 5-20% discounts at the Poly, there is significant room to increase the price for rentals. Some resorts are even more extreme in the spread between rack rate and rental price.

But, the math doesn't work for DVC as an investment. Consider the time value of money, the amount of effort to rent the points, and the length of time to break even, you'd be better off putting your cash into other investments. If you have to borrow money to buy into DVC, you're deluding yourself by thinking it's an "investment".
 

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