Downside of hh or Vero ownership?

[Dean]

So you are aligned with my analysis? Or is there something I am missing?

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Let me give you an idea where I come from with DVC. I bought resale back in 1994 and by report was the first non family resale buyer when it was only OKW then simply called the DVC Vacation Club. I've probably bought and sold approaching 100 timeshare weeks/contracts over the years. I have been active on DVC BBS back to then starting before there was a true internet on the Prodigy Boards, boy those were brutal. The majority of my stays are actually exchanges which can be cheaper still and not that much more risky than your current thinking but not for the faint of heart. I do not automatically have a "Buy where you want to stay mentality" with DVC or otherwise, in fact I routinely tell people to underbuy the resort and give it a try basically taking the "Buy where you don't mind staying" approach. This basic issue has come up over and over again through the years whether it's off site at VB/HHI/Aulani or SSR trying to stay elsewhere at WDW. Those here that have known me for a long time on more active DVC boards can attest to these facts. If there was real savings to be had, I'd be recommending it, there simply isn't and the 7 month approach has been increasingly aggravating for many the last few years now frequently requiring use of the wait list to be successful. At this point a part of me is wanting you to try it simply to see for yourself what you're up against.

 

[littlestar]

I tried to find some ROFR records for Vero on various bbs sites, but apparently nobody submits info on Vero. I would love to know what has been passing. When I run my numbers, a Vero purchase would have to be really cheap for it to make sense. Sounds like CommishDVC bought his Vero points extremely cheap.

 

[Dean]

I tried to find some ROFR records for Vero on various bbs sites, but apparently nobody submits info on Vero. I would love to know what has been passing. When I run my numbers, a Vero purchase would have to be really cheap for it to make sense. Sounds like CommishDVC bought his Vero points extremely cheap.

$57 & $58 passed in Feb, I could not find any that were taken this calendar year. SSR down to $91 in the last couple of months passed. SSR taken under ROFR at $89 & $90.

 

[Jason245]

Let me give you an idea where I come from with DVC. I bought resale back in 1994 and by report was the first non family resale buyer when it was only OKW then simply called the DVC Vacation Club. I've probably bought and sold approaching 100 timeshare weeks/contracts over the years. I have been active on DVC BBS back to then starting before there was a true internet on the Prodigy Boards, boy those were brutal. The majority of my stays are actually exchanges which can be cheaper still and not that much more risky than your current thinking but not for the faint of heart. I do not automatically have a "Buy where you want to stay mentality" with DVC or otherwise, in fact I routinely tell people to underbuy the resort and give it a try basically taking the "Buy where you don't mind staying" approach. This basic issue has come up over and over again through the years whether it's off site at VB/HHI/Aulani or SSR trying to stay elsewhere at WDW. Those here that have known me for a long time on more active DVC boards can attest to these facts. If there was real savings to be had, I'd be recommending it, there simply isn't and the 7 month approach has been increasingly aggravating for many the last few years now frequently requiring use of the wait list to be successful. At this point a part of me is wanting you to try it simply to see for yourself what you're up against.

I guess my question is. When you say cheaper I want to understand how much cheaper.

My father used to drive half way across town to save 2 cents a gallon on gas, by the time he drove there and home I was pretty sure the gas burnt on the drive ate up any savings. ..and the value of his time made it negative.

As of now I am not purchasing because the economics of dvc still confuse me (resale prices going up more than inflation as rtu remaining declines )..

I am preparing for this bull market to end and to goble up opportunities..

That being said, I still need help seeing the math that says that ssr is cheaper than Vero and by how much. Am I running around town chasing after 2 cents or am is there a meaningful savings (by meaningful I mean 5k plus through the 24 years left in contract ).











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[ljmiii]

My problem is that dw doesn't want to stay at okw or ssr.. which is where this comes in...
...Am I running around town chasing after 2 cents?

As of now I am not purchasing because the economics of dvc still confuse me (resale prices going up more than inflation as rtu remaining declines )..

So you are aligned with my analysis? Or is there something I am missing?

The easy answer is that you are running around town chasing after 2 cents. If your DW isn't interested in OKW or SSR then VB is a waste of money. Why would you want to have to tell your wife that even though you spent $XX,000 on DVC you are once again vacationing in a resort she doesn't like? The trends that have led to the dramatic change in 7-month availability - increasing awareness of the importance of 11-month bookings and the hard 7 month window, walking reservations, Aulani/Bungalow/Cabin points, etc. - aren't going away. If you truly want to stay on property, find the best happiness/$$ of the resorts and buy it. Or rent on-property stays until your situation changes.

The economics of DVC are ridiculously simple - demand is substantially outstripping supply. Part of that is because of macro economic trends. Part of that is because WDW has become a worldwide phenomenon. And part of that is because Disney has made staying on-property increasingly more important - the issues of fastpasses, dining reservations, and transportation have all increased the 'enjoyability' spread between on and off property stays.

Lastly, Dean's analysis is highly accurate. What it can't account for is the value to you of net present dollars. If you can realistically predict your income will rise dramatically over the next 20 years as your career progresses then backloading your payments makes complete sense.

 

[Panina]

My problem is that dw doesn't want to stay at okw or ssr.. which is where this comes in..

Otherwise I would trade my hgvc..

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Then you will have to put more money up front to make you DW happy. As okw and ssr are not acceptable I would not buy VB.

 

[littlestar]

The folks over at Mouseowners had a good discussion on a Vero purchase a few months ago:

http://www.mouseowners.com/forums/showthread.php?t=128329&highlight=vero

They talk about the hold time and the buy-in price, too.

 

[Dean]

I guess my question is. When you say cheaper I want to understand how much cheaper.

My father used to drive half way across town to save 2 cents a gallon on gas, by the time he drove there and home I was pretty sure the gas burnt on the drive ate up any savings. ..and the value of his time made it negative.

As of now I am not purchasing because the economics of dvc still confuse me (resale prices going up more than inflation as rtu remaining declines )..

I am preparing for this bull market to end and to goble up opportunities..

That being said, I still need help seeing the math that says that ssr is cheaper than Vero and by how much. Am I running around town chasing after 2 cents or am is there a meaningful savings (by meaningful I mean 5k plus through the 24 years left in contract ).
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I'd say you are your father if you do this deal with the stated goals, it's often referred to as "penny wise and pound foolish". Exchanging isn't normally a good plan for most people even though it's been great for me, that has changed with escalating costs and less choices, just like VB. And you have to be OK with SSR/OKW doing so but you're saying that you are if you buy VB because at times that will be your only choices or at least that's what you can get often times then use the wait list, which is limiting. As I noted, I've participated in DVC BBS for years including likely the longest active and largest volume and I don't think I've ever seen anyone ever argue it was a good idea to buy VB JUST for WDW because it was "cheaper" because it really isn't.

As I see it, the 3 main issues for VB are the 7 month window, long term cost and the 2042 expiration in the order of importance IMO. I can easily accept the 7 month window or a higher cost if there were an upside in another area and the 2042 expiration doesn't bother but it is a factor in the value. And that VB will be worth less and more difficult to sell if you needed to isn't a big deterrent to me either because I don't think one should buy planning to sell but it's good to have choices and you'd be boxing yourself in in a number of areas where if anything went wrong in even one area it could pose a problem. My view of buying DVC is you need to have real savings, be OK with the compromises of a timeshare, feel staying on property is worth paying a premium and be able to afford it. The latter to me is pay cash. Owning at OKW, SSR or VB/HH/Aulani for WDW is essentially the same as saying I'm OK with staying at SSR/OKW at least part of the time and only having the 7 mo window is saying that I'm OK with not being able to get anything part of the time and move to another time.

As for cost, I've already laid out my view but since you asked directly, I'll go back through my thoughts an the math. For some reason the short term costs is far more important to you than the overall costs. To me if I'm going to put up with the aggravation of owning at VB (7 month window only), I want other benefits and/or significant savings, I want VB to be both cheaper up front AND long term by a good margin. Presumably you don't want to stay at VB routinely which could alter the answers in many cases so the only issue is whether it's cheaper, it's not but let me try again to help you see it.

Initially the buy in is cheaper but the dues are higher. If you run projections on the dues with inflation you can see at what point you "break even". If you do that at 3.5% inflation, it's during the 8th year of ownership, if you use different numbers the timing changes. But it's not that you're kicking the can down the road very far, certainly not 20 years. Let's say you bought today with 100 points and paid $3500 less than SSR in terms of purchase price. Normally you'll reimburse for fees if you get the points so if you take that and just look at paying dues the next 2 years, much of the savings is already gone. In less than 2 years you've paid 3 years of dues which equates to $800 extra even without an inflation factor so you're already down to a savings of only $2700/100 points. Since this trend will continue you can't even invest the difference for long term investing AND pay the higher fees out of the proceeds because you'll burn through it so quickly. You can run those numbers for yourself, I've done it at 3.5% inflation on 100 points and dues on VB cost as much as the SSR buy in plus the dues there by 2041, the last real year of ownership for the 2042 resorts. If you look back historically over the last 8-10 years you get exactly the same answer as the projections, you can look at that yourself as well. If it wasn't until the very end I still wouldn't suggest it but it'd be more of a consideration and more understandable why someone might risk it. Those are facts, the question is how you personally weigh them in your decision.

As you get near the end VB will have no resale value and many others should (no guarantees), I don't think one can make a legitimate case for an extension making sense or adding $$$ value even if it's offered. Then every time you try to make a reservation at WDW you'll be sweating it, esp if you're not OK with SSR/OKW at your house and you may get nothing which could be even worse. As I noted, I do believe the 7 month window is workable for some (less so now than in the past) but not if you're not OK with SSR/OKW. But then SSR may not be a good choice there either and you're going to spend even more money in one way or another for a different resort whether it be around the same or slightly more for AKV with higher dues also or significantly more for BLT with roughly the same dues as SSR.

There's nothing about this that sounds fun to me and I'm routinely telling people to consider SSR hoping to try everything over time but they need to be OK with SSR to make that workable. If the reason you're looking at this is simply to get into the system with what you can afford and you couldn't for something else, you really can't afford it anyway and should wait. If you're looking for the best value, VB isn't cost wise. While SSR is the best dollar value, it still may not be a good choice for you depending on how set your wife is on avoiding SSR/OKW. Since you own HGVC I'd liken it to buying at Tuscany expecting to stay at HHI every July.

 

[Lisa P]

From a strictly $-to-$ comparison:

Pro to SSR: Confidence in making early reservations on-property at WDW.
Pro to SSR: Relative ease in reselling later at a WDW property with more years left on the contract.
Pro to SSR: Lower cost overall if planning to keep it for more than 10 years.
Pro to SSR: In 2042, there are still 12 years left on the contract so it's still worth something.

Pro to VB: Lower cost upfront if later cash flow is expected to be much better, or you could avoid financing.
Pro to VB: Lower cost overall if only planning to keep it for fewer than 10 years and don't want to rent.
Pro to VB: Beachfront home resort advantage is wanted for some or most of the points usage and don't want to rent.

For someone hoping to vacation onsite at WDW for 10-25+ years, it looks like an SSR purchase might be at least $7,000 less per 100 points purchased. This doesn't count the residual value of the contract if resold before its expiration date in 2054. Granted, this is a very basic ledger from excel. Hope it helps someone.

 

[ljmiii]

This doesn't count the residual value of the contract if resold before its expiration date...

As I said before, I fear we're not helping OP at this point...but he does seem to continue to have interest. The $64,000 question for any 2042 contract at this point is "What will the residual value be at (or around) the contract end?"

Direct points are currently $182. Compounded annually at 5% (IMHO a conservative number given Disney's history of price increases) that puts the estimated price for a 50 year contract sold in 2042 at $587/pt. So the question is, "What will Disney do for/to current owners and thus what will the value be?" They could do nothing for existing owners and the value could be $0. But it could easily be $50+/pt or $100+/pt in 2042 dollars if a 10% or 20% discount is offered to current owners. And any discount could only be valid at the owner's resort...or only at new resorts...or across the DVC system...or only to DVC 'members' but not all 'owners'.

So will 300 VB points more valuable than 200 SSR points? Who knows. But I do know that I would be very happy to buy the post-2042 'rights' to any contract for $1 a point (assuming this gave me the to right to buy into extensions/future purchases). Probably any WDW resort for $10/pt for that matter.

 

[Dean]

Lisa I used a $30 spread and 3.5% inflation when I did it a few months ago and the crossover was 8 years. Obviously every variable will change the numbers slightly but I don't think it possible to use reasonable numbers that give a different ultimate answer. Certainly the quality of the contract will have an affect as well in terms of loaded vs not but for SSR or AKV it shouldn't be too difficult to find a good contract, for some resorts that can be more of an issue.

ljmiii, I don't think the total points matter because you still have the higher fees no matter how many points unlike say Bluegreen where there is an economy of scale in some situations with more points being cheaper per point. And it did seem like they had their mind made up until the last round of posts. And I'm curious as to their underlying motivation to save a relatively small amount up front but pay more long term for something that doesn't sound like it would work for them anyway.

 

[Jason245]

From a strictly $-to-$ comparison:

View attachment 7720

Pro to SSR: Confidence in making early reservations on-property at WDW.
Pro to SSR: Relative ease in reselling later at a WDW property with more years left on the contract.
Pro to SSR: Lower cost overall if planning to keep it for more than 10 years.
Pro to SSR: In 2042, there are still 12 years left on the contract so it's still worth something.

Pro to VB: Lower cost upfront if later cash flow is expected to be much better, or you could avoid financing.
Pro to VB: Lower cost overall if only planning to keep it for fewer than 10 years and don't want to rent.
Pro to VB: Beachfront home resort advantage is wanted for some or most of the points usage and don't want to rent.

For someone hoping to vacation onsite at WDW for 10-25+ years, it looks like an SSR purchase might be at least $7,000 less per 100 points purchased. This doesn't count the residual value of the contract if resold before its expiration date in 2054. Granted, this is a very basic ledger from excel. Hope it helps someone.

This is exactly what I was looking for. You are my new hero.

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[ljmiii]

This is exactly what I was looking for.

I hate to rain on your parade but the chart is only so useful in that it assumes an inflation rate of 0%. And so while it accounts for a 3.5% annual increase in dues it is showing those payments in today's dollars. A more accurate comparison results if you use your best guesstimate of the spread between DVC dues and inflation for the annual increase. Or if you think inflation will match DVC dues increases (which has not been true over time) you could just use constant dollars - breakeven at 12 years and over the length of the total contract - SSR is $9,100.00 + 12,937.25 = $22,037.25 and VB is $5,700 + $20,150 = $25,850.00 for a difference of $3,812.75.

But if you are looking at a 8 or 10 or 12 year timeframe the minor differences that result from picking a different inflation number will be dwarfed by potential changes in the value of the contracts. If resale prices double because direct prices have gone through the roof then SSR is $3,400 more 'right'. Or if they plummet by half because there are only 14 or so years left then VB was a $1,700 better buy. Or economic turmoil or Disney direct vs resale policy changes or hurricanes or taxes or any other number of events might affect prices and some of them will affect SSR and VB differently.

Lastly, if you are intent on buying one of SSR or VB and not a more favored resort I would suggest buying VB. That way if something goes wrong - either you find yourself unable to book a resort you want at the dates you need or something else - you can get in and out more inexpensively.

 

[Dean]

I hate to rain on your parade but the chart is only so useful in that it assumes an inflation rate of 0%. And so while it accounts for a 3.5% annual increase in dues it is showing those payments in today's dollars. A more accurate comparison results if you use your best guesstimate of the spread between DVC dues and inflation for the annual increase. Or if you think inflation will match DVC dues increases (which has not been true over time) you could just use constant dollars - breakeven at 12 years and over the length of the total contract - SSR is $9,100.00 + 12,937.25 = $22,037.25 and VB is $5,700 + $20,150 = $25,850.00 for a difference of $3,812.75.

But if you are looking at a 8 or 10 or 12 year timeframe the minor differences that result from picking a different inflation number will be dwarfed by potential changes in the value of the contracts. If resale prices double because direct prices have gone through the roof then SSR is $3,400 more 'right'. Or if they plummet by half because there are only 14 or so years left then VB was a $1,700 better buy. Or economic turmoil or Disney direct vs resale policy changes or hurricanes or taxes or any other number of events might affect prices and some of them will affect SSR and VB differently.

Lastly, if you are intent on buying one of SSR or VB and not a more favored resort I would suggest buying VB. That way if something goes wrong - either you find yourself unable to book a resort you want at the dates you need or something else - you can get in and out more inexpensively.

Don't you think he'll have a more difficult time reselling VB than SSR, I do by far.

 

[ljmiii]

Don't you think he'll have a more difficult time reselling VB than SSR, I do by far.

I'm sure VB is less liquid than SSR...but I doubt OP would care if it sells in 3 months instead of 3 weeks.

Somewhat off topic...I'm in the process of selling about a third of my BCV points and got grumpy that it took 3 weeks to get a signed contract. Other contracts around the same size and price came up and disappeared in less than a week but my poor Dec use year contract had three nibbles but no bites. So yes...it might be an annoying 3 months ;-). But you never know.

 

[Dean]

I'm sure VB is less liquid than SSR...but I doubt OP would care if it sells in 3 months instead of 3 weeks.

Somewhat off topic...I'm in the process of selling about a third of my BCV points and got grumpy that it took 3 weeks to get a signed contract. Other contracts around the same size and price came up and disappeared in less than a week but my poor Dec use year contract had three nibbles but no bites. So yes...it WOULD be an annoying 3 months ;-).

IMO it could easily be many months and a larger discount than they got buying in even allotting for time and other variables.

 

[Jason245]

This chart is a good starting point. When I make the buy decision I also layer on expected room cost for what I would pay if I didn't own. I own the vb of hgvc. . And everyone constantly tells me that in 12 years their 5k purchase will save them money compared to what I basically took over.. that being said I use it in such a way that I get about 2x my mf in value from it... am I saving as much as they are and missing out on the cheapest option.. yup.. am I happy with my purchase you bet.. no matter what I will always be way ahead of a retail purchase. . Dvc is a whole different animal however with its own ecosystem and seems to defy most economic principles. .

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[djohn06]

If you feel comfortable renting some of your points, the maintenance fees won't matter. The simple facts are this.

1- You can buy twice as many points at VB for (possibly HHI) for half the amount of monorail resorts/ BWV.

2- You can rent your points out for at least twice or 2.5X the amount of the maint fee of VB or HHI by targeting specific high demand weeks outside the Thanksgiving/ Christmas window.

3- By buying twice as many points and renting them out, you will pay zero maint fees.

If you are comfortable doing this, you will have no maint fee concerns.

As far as booking, studios are tough at times, but Jan, late April, May, June and September are low travel months. At 7 months window you have a good shot at an Epcot or monorail resort.

Feb, March, July and Aug are high point months. You have a good shot at booking a prime studio by booking right at 7 months and using the wait list.

Most DVCers want Oct - December, so you may be limited with a studio search, but you can certainly find AKL, OKW and SSR rooms at 7-6 months with little issues. Again, the waitlist process is great if you work it properly. I have successfully used my HHI or AK points to get monorail or Epcot resorts to cobble together reservation during this time frame.

One bedrooms are the last to go. If you like these, you will be able to get into a lot of resorts at 7 months. Late April, May, June and July I have been able to book BLT, BWV, AK and BCV one bedrooms inside of 5 months.

I've made an average of 3 trips a year for the past 3 years.

Good luck!

 

[frank808]

This chart is a good starting point. When I make the buy decision I also layer on expected room cost for what I would pay if I didn't own. I own the vb of hgvc. . And everyone constantly tells me that in 12 years their 5k purchase will save them money compared to what I basically took over.. that being said I use it in such a way that I get about 2x my mf in value from it... am I saving as much as they are and missing out on the cheapest option.. yup.. am I happy with my purchase you bet.. no matter what I will always be way ahead of a retail purchase. . Dvc is a whole different animal however with its own ecosystem and seems to defy most economic principles. .

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I bought into bay club over 10 years ago. Do not regret that decision one bit considering hgvc plat units were about $2-$3 a point for 2br unit in Vegas. It would take me 30 years of the higher maintenance fee vs lower purchase price of bay club to break even with a Vegas purchase.

I also own dvc and I would not buy vero to replicate my hgvc bay club purchase. The break even cost on higher maintenance fee for vero is way to short for me.

To this day I still hold onto my multiple bay club units as they offer great value in hgvc. Nowadays, I would not buy bay club because the purchase price of vegas plat units is $1 or less.

Just my thoughts as a hgvc, dvc and mvc owner.

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[MK15]

I hate to rain on your parade but the chart is only so useful in that it assumes an inflation rate of 0%. And so while it accounts for a 3.5% annual increase in dues it is showing those payments in today's dollars. A more accurate comparison results if you use your best guesstimate of the spread between DVC dues and inflation for the annual increase. Or if you think inflation will match DVC dues increases (which has not been true over time) you could just use constant dollars - breakeven at 12 years and over the length of the total contract - SSR is $9,100.00 + 12,937.25 = $22,037.25 and VB is $5,700 + $20,150 = $25,850.00 for a difference of $3,812.75.

But if you are looking at a 8 or 10 or 12 year timeframe the minor differences that result from picking a different inflation number will be dwarfed by potential changes in the value of the contracts. If resale prices double because direct prices have gone through the roof then SSR is $3,400 more 'right'. Or if they plummet by half because there are only 14 or so years left then VB was a $1,700 better buy. Or economic turmoil or Disney direct vs resale policy changes or hurricanes or taxes or any other number of events might affect prices and some of them will affect SSR and VB differently.

Lastly, if you are intent on buying one of SSR or VB and not a more favored resort I would suggest buying VB. That way if something goes wrong - either you find yourself unable to book a resort you want at the dates you need or something else - you can get in and out more inexpensively.

So Inflation = 0% is a 10 year breakeven (actually sooner, you're $15 behind in 2027, $392 ahead in 2028). Constant dollars (or incr. = inflation) is 11 years ($62 ahead, 2029). Let's look at other inflation scenarios.

If nominal annual increases are 3.5% and long-term inflation averages 2% (net 1.5%), breakeven in 2018 dollars is 10 years ($18 ahead, 2028). Low inflation (1%) shortens the breakeven (~9.5 years). High inflation (4%) increases it (~11.25 years). But all of these scenarios break even because VB MF's are so much higher than SSR. Even 10% annual inflation (unheard of in the US in the 21st century) still breaks even in 2037. Since realistically inflation is going to be somewhere in the low single digits, it's realistic to assume somewhere between 10 and 12 years.

 

[Lisa P]

Pro to SSR: In 2042, there are still 12 years left on the contract so it's still worth something.
....
This doesn't count the residual value of the contract if resold before its expiration date in 2054.

The $64,000 question for any 2042 contract at this point is "What will the residual value be at (or around) the contract end?"

Not suggesting a specific value of a DVC contract near its end nor of an SSR contract when it only has 12 years left on it but just acknowledging that it will have some value in 2042 while the Vero contract will have expired.