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Value of aging DVC contracts?

Discussion in 'DVC Buying & Financial Discussions' started by WDWNole, Mar 19, 2017.

  1. WDWNole

    WDWNole Active Member

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    Has anyone considered what the resale value of a contract terminating in 2042 will be in 10 years? With only 15 years left will the price per point drop considerably?
     
  2. Dan68

    Dan68 New Member

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    I would look at it another way. Right now you can rent your points out for $12-$14 per point, and the dues and taxes are around $6/pt. If you assume both of these will go up with inflation (they'll go up more probably, which makes the investment worth more, but let's just assume inflation for the sake of simplicity), then with 25 years left, the current value is $150-$200 per point. Why the discrepancy with the resale of around $90? Risk. It's a risky investment. My 2 cents? I'd assume a modest 2% increase above inflation. Therefore, value on the rental minus cost of dues and taxes will roughly be $8.50/pt in today's dollars. That yields a value of $128 (15 x $8.50) in 10 years. Discount for risk about 50% and you have a value of $64/pt in 10 years in today's dollars. So, bottom line: look at value on rental market and assume an increase rate with respect to inflation, add in a risk premium and you can arrive at some type of value 10 years out.

    If you want to get cute and add back in an inflation rate of 2%, then it will be worth around $78/pt. in 2027.
     
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  3. Dan68

    Dan68 New Member

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    I was curious so I looked up the avg. price of OKW, as they have both 40 and 25-year contracts (so you're comparing apples to apples). Amazingly, the 40 year is worth only 10% more ($81 vs. $74) than the 25 year, even though it is 40% more in duration. The economics of this makes my head spin. You are getting, then, if you buy the 40 year, the final 15 years (2042-2057) for $7. That's around 50 cents per year per point! The first 25 years is then $3 per year per point.

    There are a number of reasons this could be the case, but one is that when you extend a contract from 50 to 75 years on a building, the costs of maintenance will be much higher for those last 25 years. So increasing cost of maintenance is probably a factor, too. Another reason is simply the risk is higher the longer-term the contract. Who knows what economic conditions will be in 2042?
     
  4. Russ

    Russ Staff Member Site Owner

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    Welcome to DVCinfo Dan :tu:!

    :welcome3:
     
  5. Russ

    Russ Staff Member Site Owner

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    The spot resale price over time go up or down, but eventually will depreciate to $0 by the end of the contract, no matter what. If you plan on using it through the end of the contract, the price doesn't really matter. That's how I feel about our SSR - yes, I could sell it for 40% profit in 3 years - but we still want to stay at Disney and it's still the most cost effective way to do so. We own more than we need right now, so I could trim back, but I also think we'll make the jump to 2 Bedrooms at some point, so will need the points eventually.
     
  6. papaspride

    papaspride Member

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    Can an Owner pay to extend an Old Key West contract?
     
  7. DVC Mike

    DVC Mike Founder

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    No. It was a one-time offer.

    The Year 2007 - DVCinfo.com
     
    Last edited by a moderator: Nov 10, 2017
  8. Russ

    Russ Staff Member Site Owner

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    However, you can still purchase new extended contracts from DVC.
     
  9. wdrl2

    wdrl2 Well-Known Member

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    Actually, Disney might still let you pay to extend an OKW deed from 2042 to 2057.

    On September 8, 2016, Disney filed an "Extension Deed - Ownership Interest from February 1, 2042 to January 31, 2057" for an OKW owner who owned 240 points. Based on the Deed Document Tax paid on the filing, it appears the consideration amount was $6,000, which comes to $25 a point.

    This was the first and only Extension Deed I have noticed in the several years I have been working with the OCC website.

    If an OKW owner is interested in extending their deed to 2057, it would not hurt to call DVC and inquire about your options.
     
    Last edited by a moderator: Nov 10, 2017
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  10. Lori L

    Lori L Staff Member Administrator

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    That's very interesting. I wonder if there are some stipulations on that. Did it have to be an original direct purchase? Could someone buy resale right now and then extend it?
     
    Last edited by a moderator: Nov 10, 2017
  11. wdrl2

    wdrl2 Well-Known Member

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    The owners originally bought direct from Disney in March 1996 and in March 2010 refused the extension by filing a quitclaim, which returned the period from 2042 to 2057 to Disney. I guess by 2016 the owners had changed their minds and decided to extend their deed.

    I know nothing about Disney's policy on extending OKW deeds that are due to expire in 2042. Offhand, I assume Disney would gladly extend any owner who wishes to do so, whether they bought directly or from the resale market. Getting $25 a point would give Disney a small source of revenue and would mean that a bit more of OKW would be owned by the general public come February 1, 2042. I don't see any downsides for Disney in extending every OKW owner who requests it.
     
    Last edited by a moderator: Nov 11, 2017
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  12. DVC Mike

    DVC Mike Founder

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    This is the first I recall hearing about this, although even if Disney allowed it, I would question the logic in doing so (by the member, not Disney). If you compare the resale prices between OKW-2042 contracts and OKW-2057 contracts, you'll see the difference is nowhere near $25 per point.
     
    Last edited by a moderator: Nov 10, 2017
  13. BalooTwo

    BalooTwo Well-Known Member

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    You can still buy the extension for an okw contract. It is $25 pp and extends the contract for 15 years. I had bought my OKW contract direct so it was automatically extended, but I asked if I bought an unextended contract could I still buy the extension and was told yes, and the price has not changed in a very long time. At a $1.67 a year it is the best deal going, although I doubt it would qualify you as a direct buyer :sad:.
     
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  14. KingOMiami

    KingOMiami Member

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    Would that work if you bought a contract via resale and then wen through Disney direct to extend to 2054?
     
  15. Granny

    Granny Elite Member

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    That's an interesting question. And a follow up question would be to ask if that extension would reclassify the contract from resale to direct in terms of member benefits?

    My guess, based on no knowledge, is that Disney wouldn't extend a resale contract. They seem quite intent on making resale contracts as unattractive as legally possible.
     
    Last edited by a moderator: Nov 10, 2017
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  16. wdrl2

    wdrl2 Well-Known Member

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    The only one who knows for sure what Disney would do is Disney. I suggest calling Disney and asking it what your options are.

    I would think Disney would gladly take an OKW's money if they wanted to extend. What has Disney got to lose? Come February 1, 2042, Disney would probably like the general public to own as many points as possible at OKW. The more points Disney owns at the resort, the more cash reservations it has to sell.
     
  17. BalooTwo

    BalooTwo Well-Known Member

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    While I asked about upgrading OKW contracts before the last rules change, they at the time would gladly extend resale contracts. I don't expect that that position would have changed, although as I said above I doubt that purchasing an extension would reclassify a resale to a direct purchase. I could see at some point Disney requiring all okw resales to be upgraded to extended contracts just as their direct sales do. In the end, I doubt DVM will be crying if in 2042 they have a bunch of new okw points to resell with 15 years left, and I bet they will be asking much more than $25 pp.
     

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