confused on the draw to DVC

[Bing Showei]

Maybe people who have to analyze the cost so intensely shouldn't buy DVC, maybe they can't really afford it.

This is where I take exception to your comments and I do find them a bit controversial. Just because a person likes crunching numbers doesn't mean that they still can't afford Disney. Just because you feel that you might not have the interest doesn't mean that others can’t.

 

[RaymOOOnd]

This is where I take exception to your comments and I do find them a bit controversial. Just because a person likes crunching numbers doesn't mean that they still can't afford Disney. Just because you feel that you might not have the interest doesn't mean that others can’t.

On the contrary, people who crunch numbers in everyday life are usually among the wealthier ones (typically a window into how they became so well-off in the first place).

The huge exception around here is number crunching among those who have set out with a preconceived conclusion in mind, namely that the numbers are going to work out because they really really want them to.

 

[Sandisw]

This is where I take exception to your comments and I do find them a bit controversial. Just because a person likes crunching numbers doesn't mean that they still can't afford Disney. Just because you feel that you might not have the interest doesn't mean that others can’t.

I applaud those that go through it with that much number crunching. I choose not to do it because I dont want to know! I crunch them in other areas of my financial life, but for Disney...yeah..just keep telling DH we are saving tons!,

 

[bigredbeta]

So the market could tank so assume you won't make five percent despite the fact that historically that is a relatively conservative estimate over any 25 year period? You would be better off just saying you don't want to do the analysis because what you are saying makes no sense. Five percent would be a conservative estimate that actually considers the probability of having a recession during the period. Also 5 percent is after tax since I didn't adjust downward.

If we are in a recession so bad that you don't earn 5% cagr over 25 years then I am quite certain wages won't increase, and there would be some larger effect on your income, including potentially losing your job, house value plummeting etc. I'd focus much more on those since if you bought dvc with cash up front, I personally would much rather have it in my bank account than disneys if there is a huge depression where you potentially lose your job or 30 percent on your home.

Yes that is true but I am not stating you would be in a withdraw phase necessarily. I am assuming, although I suppose I didn't state it explicitly, that your money is sitting there since I am also assuming it is compounding. The difference between your dues and cost of renting points is being paid by disposable income, which in theory is increasing your cash cost annually, but when compared to what your money is earning you are net 0 (or better or worse off depending on the variables, including price and MF). Perhaps the $1200-$1400 difference in cash is just me assuming that won't cripple your finances, which is probably a fair assumption for a dvc cash payor.

I admit I am not going through actuarial charts to model out my likelihood of death during each year or trying to predict a recession; this does not factor in the probability of a recession on the date you are withdrawing just like no one assumes a recession when they have to sell their house. although paying dues and for a disney vacation apparently is not affected whatsoever if there is recession?

I would still posit in your suggested scenario of a 25% market drop you would much rather have your $22,500 that is much more liquid and available to convert to cash than have it spent on dvc which will be worth much less in your suggested scenario. Sure it blows up the assumptions but if your alternative is to buy dvc that to me is a head scratcher because you could sell your a portion of your stock and buy dvc for pennies the next year if you wanted to and be far better off; a 25% drop in the market would cripple people and decimate the dvc resale market.

Sorry I understand everyone has their own analysis, but the response to what is a pretty basic investment analysis of "well if there's a recession you are going to wish you had dumped all that money into dvc" is a bit nonsensical is it not?

Obviously the modelling is imperfect, but how would you factor in the recession scenario you suggested? It isn't really practical, as the best alternative in the original post I replied to would be to never spend cash on dvc and never invest either. The recession hits and you could stay in cash and buy dvc after the recession and pay 30-40 cents on the dollar for what you were going to buy a year before. My point being making that assumption of a potential recession should actually make someone less likely to buy dvc if you ran the numbers.

I don't disagree that in a long-term, buy and hold investment strategy, 5% is a reasonable rate of growth, and I completely understand the built in assumption of bear markets that goes in to such a long term assumption.

I interpreted your strategy as one in which your investment account gains were financing your annual vacation and so you were withdrawing annually. Which in that case, I believe, changes the analysis significantly, making that 5% number is less reliably achievable (due to sequence of returns risk) and requires a greater consideration of taxes and fees.

It seems like instead you actually mean a much more simplified plan of buying and holding and assuming that long term market growth essentially means your net worth is unimpacted from the annual cash vacation outlays. In which case, then yes, your assumptions and general modeling are absolutely correct.

The question then becomes goals, priorities, spending behavior and market discipline, along with overall assessment of career and financial stability. The manner in which those variables intertwine creates a huge spectrum in which a DVC purchase may or may not be wise.

 

[Wakey]

This is where I take exception to your comments and I do find them a bit controversial. Just because a person likes crunching numbers doesn't mean that they still can't afford Disney. Just because you feel that you might not have the interest doesn't mean that others can’t.

My pal sold his company for $25m.

He crunches the numbers on everything.

His wife was in 2 minds when they were offered a suite upgrade at a hotel last year for $100 a night.

There's a saying : ' A fool and his money are easily parted'. He's no fool. Since selling his business he's started another which is growing even bigger.

I told my pal about the prices of WDW 1 and 2 beds if paying cash. He almost spluttered on the steak he was eating at the time.He then this year brought his family over to Florida- he booked a villa offsite.

He doesn't want a DVC (he has houses in Europe, Dubai and SA) but if he did, he would be crunching the numbers.

 

[CanadaDisney05]

Yes that is true but I am not stating you would be in a withdraw phase necessarily. I am assuming, although I suppose I didn't state it explicitly, that your money is sitting there since I am also assuming it is compounding. The difference between your dues and cost of renting points is being paid by disposable income, which in theory is increasing your cash cost annually, but when compared to what your money is earning you are net 0 (or better or worse off depending on the variables, including price and MF). Perhaps the $1200-$1400 difference in cash is just me assuming that won't cripple your finances, which is probably a fair assumption for a dvc cash payor.

See the bolded quoted above. This is where the analysis falls apart. By paying for your vacations without withdrawing from "the fund", your now adding a new source of money into the equation. Its not comparing apples to apples. The reason the "investment" option is working out more favourably is not due to market return, but because your now taking more more money out of your daily budget and including it into the vacation budget.

The only way to make it a fair scenario comparison, would be if you took the difference between rack rate and maintenance fees and invested that difference every year too in the DVC scenario.

 

[Ms.Minnie]

Maybe people who have to analyze the cost so intensely shouldn't buy DVC, maybe they can't really afford it.

This is where I take exception to your comments and I do find them a bit controversial. Just because a person likes crunching numbers doesn't mean that they still can't afford Disney. Just because you feel that you might not have the interest doesn't mean that others can’t.

I didn't say that definitively you couldn't afford DVC but that "MAYBE" you couldn't. There is a difference and based on other comments I have read by you I'm sure are able to see that. It's simple my observation and opinion based on comments I have read in this thread and others.

When I bought DVC I did my share of number crunching. The end result for me is that no mater how you slice or dice it, it was still a good deal for me. I'm glad I bought when I did, I wouldn't at this point in my life buy at current rack rates. It wouldn't make good economical sense for me but that's not to say that for others it's not a good deal. Each one of us has to determine that for ourselves by gathering as much information as possible, slice and dice it and make an educated decision. Simple as that.

 

[Bing Showei]

Maybe people who have to analyze the cost so intensely shouldn't buy DVC, maybe they can't really afford it.



I didn't say that definitively you couldn't afford DVC but that "MAYBE" you couldn't. There is a difference and based on other comments I have read by you I'm sure are able to see that. It's simple my observation and opinion based on comments I have read in this thread and others.

When I bought DVC I did my share of number crunching. The end result for me is that no mater how you slice or dice it, it was still a good deal for me. I'm glad I bought when I did, I wouldn't at this point in my life buy at current rack rates. It wouldn't make good economical sense for me but that's not to say that for others it's not a good deal. Each one of us has to determine that for ourselves by gathering as much information as possible, slice and dice it and make an educated decision. Simple as that.

My quote above was lifted word for word from your perspective on how Soap_1984 generalized about 70+ year olds. I just swapped out the 70-year-olds for number crunchers to address your sweeping generalization. “Maybe” doesn’t absolve you from what you are suggesting. If you’re going to you say what you did, you should own it.

“Maybe timeshare owners are too stupid to understand how personal finances and growing individual wealth works.”

The insinuation is there whether I include “maybe” or not.

It doesn’t matter that I may share your philosophy of not checking the math all the time. Or that I personally perceive value differently than those that crunch the numbers, suggesting what you did is as insulting to others as anyone suggesting you can’t effectively own DVC because you’re 70+.

 

[Ms.Minnie]

My quote above was lifted word for word from your perspective on how Soap_1984 generalized about 70+ year olds. I just swapped out the 70-year-olds for number crunchers to address your sweeping generalization. “Maybe” doesn’t absolve you from what you are suggesting. If you’re going to you say what you did, you should own it.

“Maybe timeshare owners are too stupid to understand how personal finances and growing individual wealth works.”

The insinuation is there whether I include “maybe” or not.

It doesn’t matter that I may share your philosophy of not checking the math all the time. Or that I personally perceive value differently than those that crunch the numbers, suggesting what you did is as insulting to others as anyone suggesting you can’t effectively own DVC because you’re 70+.

First of all I do "own my comment" that's why I included in my reply to you.

Second, absolve me? I don't need any absolution from you or anybody else. If you don't like what I wrote that is your problem not mine. I didn't say anything that isn't true. Some can afford some can not.

Third, I am a DVC owner that also makes me a timeshare owner. I know I'm not stupid and I don't think you are either. What YOU are suggesting is NOT what I was suggesting. I never said that people who own timeshares are stupid, that's not what I think or said. You are trying to twist my words to fit you argument. As far as I can see there is no argument, some people just can afford DVC, plain and simply.

I think there is a huge difference in saying that people in there 70+ can't effectively own DVC and saying that some people can't afford to own DVC. If you can't or don't want to see that then I don't know what else to say to you.

Have fun number crunching.

 

[Bing Showei]

First of all I do "own my comment" that's why I included in my reply to you.

Second, absolve me? I don't need any absolution from you or anybody else. If you don't like what I wrote that is your problem not mine. I didn't say anything that isn't true. Some can afford some can not.

Third, I am a DVC owner that also makes me a timeshare owner. I know I'm not stupid and I don't think you are either. What YOU are suggesting is NOT what I was suggesting. I never said that people who own timeshares are stupid, that's not what I think or said. You are trying to twist my words to fit you argument. As far as I can see there is no argument, some people just can afford DVC, plain and simply.

I think there is a huge difference in saying that people in there 70+ can't effectively own DVC and saying that some people can't afford to own DVC. If you can't or don't want to see that then I don't know what else to say to you.

Have fun number crunching.

Sigh. I suspect my inflammatory example threw you off.

I wasn’t suggesting you said anything along those lines, nor do I believe the contents of that statement. I’m sorry that wasn’t as clear as I intended it to be.

My point was that whether I include the word “maybe” or not, when making such an inflammatory statement, it doesn’t make a difference.

When the position one assumes, by virtue of positing a “possibility” that an opposing position is motivated by “X” the intent is to suggest that the opposing position is “X.” It’s the character of that framework of choice.

“Maybe” has no value because it is automatically inclusive of the converse, “maybe not.” As it is the two jointly covers all possibilities, the only purpose in suggesting “maybe ‘X’” is to state simply: “X.” Your choice to argue that it is anything less than that is either disingenuous, or a failure to own it.

 

[CanadaDisney05]

I think there is a huge difference in saying that people in there 70+ can't effectively own DVC

I really don't think @Soap_1984 at any point those 70+ can't effectively own DVC. They simply implied that the likelihood of enjoying DVC as you age goes down, and I don't think they are wrong. As one ages, the odds of something happening (health, loss of interest, stamina, and simply the likelihood of dying) increases every day. You can argue that all you want, but the actuaries at all the major life, disability and health insurance companies agree with that premise. Of course, this doesn't mean that it never happens. It just means statistical odds don't favour it. If your 70+, and still enjoying DVC as much as ever, thats awesome! Good on you. But I don't think someone who is in their 20's or 30's should place the odds on them getting the same type of intangible value in their 70's as they get in their 30's.

 

[montreid]

For older owners, they could have this in the estate planning that's prepaid for future generations too. One doesn't know. To each their own whether they are young/old, trust babies/three job earners, calculating spendthrifts/YOLO.

Common denominator - we all love house of the mouse enough to put down greenbacks for the rodent. Let's celebrate that.

 

[Heather07438]

Making a determination requires number crunching for both cost and contract length.
How much will it likely cost us divided by how long we will likely use it.

 

[Ms.Minnie]

Sigh. I suspect my inflammatory example threw you off.

I wasn’t suggesting you said anything along those lines, nor do I believe the contents of that statement. I’m sorry that wasn’t as clear as I intended it to be.

My point was that whether I include the word “maybe” or not, when making such an inflammatory statement, it doesn’t make a difference.

When the position one assumes, by virtue of positing a “possibility” that an opposing position is motivated by “X” the intent is to suggest that the opposing position is “X.” It’s the character of that framework of choice.

“Maybe” has no value because it is automatically inclusive of the converse, “maybe not.” As it is the two jointly covers all possibilities, the only purpose in suggesting “maybe ‘X’” is to state simply: “X.” Your choice to argue that it is anything less than that is either disingenuous, or a failure to own it.

Sounds like double talk to me. You certainly aren't making yourself clear, not sure what your point really is.

I think we need to agree to disagree.

Also, you used the word stupid not me. I think smart would be someone who does their research, crunches their numbers and sees that they can afford DVC and does would be smart or if they see they can not and they don't that also would be smart. On the other hand stupid would be someone who does the homework, crunches all the numbers and decides they can't afford DVC but does it anyway. That would be a bad decision or a stupid decision, you can choose the word you want.

 

[Heather07438]

I applaud those that go through it with that much number crunching. I choose not to do it because I dont want to know! I crunch them in other areas of my financial life, but for Disney...yeah..just keep telling DH we are saving tons!,

Haha It's the other way for me. DH is trying to persuade me to make the jump and he's doing a good job. Mostly on the point that it will make him and us happy.

 

[Ms.Minnie]

I really don't think @Soap_1984 at any point those 70+ can't effectively own DVC. They simply implied that the likelihood of enjoying DVC as you age goes down, and I don't think they are wrong. As one ages, the odds of something happening (health, loss of interest, stamina, and simply the likelihood of dying) increases every day. You can argue that all you want, but the actuaries at all the major life, disability and health insurance companies agree with that premise. Of course, this doesn't mean that it never happens. It just means statistical odds don't favour it. If your 70+, and still enjoying DVC as much as ever, thats awesome! Good on you. But I don't think someone who is in their 20's or 30's should place the odds on them getting the same type of intangible value in their 70's as they get in their 30's.

Not sure how old you are and it doesn't really matter. I think you might be surprised by the number of older people who enjoy WDW/DVC. There are many people on these boards who are retired and active WDW/DVC goers. Just saying there is plenty to do for all age groups, maybe when your younger traveling with your children you are doing different things then someone older with no children. Trust me, those vacations without children can and are very enjoyable. Disney wasn't build for only the young in mind.

Happy travels, enjoy your voyage through time, I hope we all enjoy each phase of our WDW journey.

 

[Momtomouselover]

This is where I take exception to your comments and I do find them a bit controversial. Just because a person likes crunching numbers doesn't mean that they still can't afford Disney. Just because you feel that you might not have the interest doesn't mean that others can’t.

I have to agree with Bing here. Number crunching to some degree is both being cautious but also a reflection of what you value and a personality type. One can afford to buy the contract and even pay the entire life of the contract outright but yet don't see the value in it when crunching numbers. In part it depends on inflation rates, length of contract, and what you are putting a dollar value on that determines if you see a 'worth' to purchasing a contract. While you were implying that if you have to or enjoy crunching the numbers to see the value then you can't afford it. The inclusion of "maybe" doesn't really change that statement. Regardless, I'm sure you weren't intending to sound insulting to those that like to number crunch (so I'm going to let it go in the wise words of Elsa, haha!).

Personally, I have been crunching numbers for about half a year and emotionally I really want to own DVC but I'm having a tough time with the value proposition part and am fairly risk adverse. It has nothing to do at all with what I can afford. Matter of fact I would love someone to show me how they make the numbers work and that is why I keep watching these threads and number crunching. LOL.

 

[Soap_1984]

See the bolded quoted above. This is where the analysis falls apart. By paying for your vacations without withdrawing from "the fund", your now adding a new source of money into the equation. Its not comparing apples to apples. The reason the "investment" option is working out more favourably is not due to market return, but because your now taking more more money out of your daily budget and including it into the vacation budget.

The only way to make it a fair scenario comparison, would be if you took the difference between rack rate and maintenance fees and invested that difference every year too in the DVC scenario.

I did do this. Again without taking the thread down a path that only 4 people care about, if you want to see my calcs shoot me a pm (I am not going to assume you want to see them).

I basically set up outflows for direct buy as up front cost then dues at 4% increase after year 2, then difference between the two invested at the same 5% return. I also factored in the incentive at the time which I think was 245 points for the cost of 230.and increases of renting points starting at $17pp going up 3% per year; this last one I am not sure about I did look back but didn't notice a 1:1 correlation between dues increases and point rental increases but I have no hard data. This is the real flaw in the model because I have no idea what will happen to rental prices or if they will even be around in 20 years; with the decisions being made recently I wouldn't be surprised if that was the next target for Disney to get rid of.

Anyway my finding was that, after year 20, solving for equivalent IRR, you need your riv contract to be worth $82.29/point to be in the exact same position. With AKV for example, assuming $0 terminal value, you are still better off vs renting points.

 

[CanadaDisney05]

I did do this. Again without taking the thread down a path that only 4 people care about, if you want to see my calcs shoot me a pm (I am not going to assume you want to see them).

I basically set up outflows for direct buy as up front cost then dues at 4% increase after year 2, then difference between the two invested at the same 5% return. I also factored in the incentive at the time which I think was 245 points for the cost of 230.and increases of renting points starting at $17pp going up 3% per year; this last one I am not sure about I did look back but didn't notice a 1:1 correlation between dues increases and point rental increases but I have no hard data. This is the real flaw in the model because I have no idea what will happen to rental prices or if they will even be around in 20 years; with the decisions being made recently I wouldn't be surprised if that was the next target for Disney to get rid of.

Anyway my finding was that, after year 20, solving for equivalent IRR, you need your riv contract to be worth $82.29/point to be in the exact same position. With AKV for example, assuming $0 terminal value, you still are better off than renting points.

Ya as I said originally, I actually agree with your original premise being THE alternative to DVC. The general argument people say when you bring up investing as an alternative is that they want to vacation so investing isn't really an option for them (this creates a justification for some). They want to spend their money, not just accumulate. But the idea of using the money you would have spent on DVC (purchase price and future maintenance fees) and investing it instead and using the proceeds to cover the hotel costs is really the true alternative.

My only arguement was in your previous post, you said that you were going to use other cash flow to supplement the difference between MF and cash rates. My point was that wasn't a fair comparison. The real argument is what provides a higher ROI, DVC or traditional index fund type investments. By bringing extra cash into one scenario, your changing two variables instead of one. And IMO, the "PMT" has a much larger impact than the rate.

 

[Heather07438]

This is the real flaw in the model because I have no idea what will happen to rental prices or if they will even be around in 20 years; with the decisions being made recently I wouldn't be surprised if that was the next target for Disney to get rid of.

Me either! $17pp rental with 3% over 20yrs. $30.70
This aspect concerns me when considering options other than buying DVC. Renting doesn't look bad at all, but nothing is guaranteed. Especially in 10+ years.