# DVC Rent or Buy



## Stricky (Jun 16, 2009)

I am trying to educate myself on DVC.

The scenario is there are 5 of us (3 under 6) w/ a grandparent or two going every once in a while. I am thinking of doing the bank/use/borrow method. If I buy 150 points (minimum required right?) I would probably not need to and I would be able to go every 2 years. Using Boardwalk as an example 300 points gets us a 2 bedroom in most seasons. 

150 points will run about $80 a point or $12000.

Maintenance fees are around $5/point or $750 a year. If I can go every 2 years the week trip would cost me $1500 (in maintenance fee costs). I think you can rent points for about $5/point these days.

Buy or rent, what is the thought process these days?


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## DaveNV (Jun 16, 2009)

If I read your math right, that's $1500 every two years, PLUS $12K out of your pocket to get started.  If you spend a week every two years for twelve years (until the grandkids are too old to want to go to DVC that often), that $12K amortizes down to $2000 per trip plus maintenance fees of $1500.  So your week's vacation every two years will cost you $3500 in fees, more or less.  Factor in travel costs and whatever else, and your expense goes up.  Can you rent a week when you want, where you want, in the unit you want, for less than $3500 a week?  I'd sure think so.  

With all the rental options available right now, it sounds to me like renting would be less expensive than owning.  And if your circumstances change, you're not locked into owning a DVC week you don't want any longer.

Dave


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## Carl D (Jun 16, 2009)

Stricky said:


> I am trying to educate myself on DVC.
> 
> The scenario is there are 5 of us (3 under 6) w/ a grandparent or two going every once in a while. I am thinking of doing the bank/use/borrow method. If I buy 150 points (minimum required right?) I would probably not need to and I would be able to go every 2 years. Using Boardwalk as an example 300 points gets us a 2 bedroom in most seasons.
> 
> ...


Good luck trying to rent points for $5. It may happen on occasion, but those are most definitely expiring points. -- Selection will be extremely limited, probably no cancellation period, and just not that common to find points in such distress.
The norm is 10-12 bucks/pt.

If you plan to visit every three years (two in your case) for the foreseeable future, it makes sense to purchase IMO.


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## capjak (Jun 16, 2009)

If you go every other year I would purchase.  It will be worth it in more than just $$.  Ease of reserving the place you want when you want it.

For a rental price I would use $10 per point.


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## jamstew (Jun 16, 2009)

I don't think I've *ever* seen points rent for $5, even ones that were expiring within a very short time.


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## capjak (Jun 16, 2009)

Also if you are planning on going next year and stay at BWV or BCV, you should plan on 8-10 weeks to close the resale and would need to do it very soon to insure the home resort window.


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## moneyhappy (Jun 16, 2009)

It sound like you are purchasing the points in the resale market.  If you purchase through DVC the minimum first time purchase is 160 points.  When purchasing there are a number of things to think about:

1.*How often do you vacation?*  - for you it sounds like every other year.

2. *How much can you afford? *- 
*How are you paying for your points?  Cash or financing?
If you purchase through DVC with financing then the interest is tax deductible (like a home mortgage). Some people get a home equity loan - same tax advantages but lower interest rate.  If you are purchasing resale and you finance through the resale market the interest rate is normally higher.

3. *Where do you want to vacation?*  As the kids get older - you and your family may want to go to other places then just Disney World.

4. *What is your value-add?*  This will be different for different people. I know you listed some numbers, but think about this: in 2004 DVC was selling Saratoga Springs for $78 per point. In 2009 the last phase of SS is going for $112 per point (DVC just did a promotion and points were discounted from $14 - $23 off per point depending on how may points you purchase)

5. *How long will you have the points for?* Depending on which resort you purchase you will have a set number of years.  If you are paying $80 per point then you should have it until around 2057.

If you purchase, your price is locked in and you know you always have points every year. If you rent, you are hoping that the points will be available and you can expect that the price may change with each rental.


Having said all this; yes - I am a DVC owner and as the years have gone by we have added points. Here are some vacations we have taken with our DVC points 

7 nights Disney Grand Californian
7 day Western Caribbean cruise
7 day Alaskan Cruise
9 days at SS during Christmas (adventure session)
2 nights SS
2 nights BC
11 day Mediterranean Cruise (ok in 2010)


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## lily28 (Jun 16, 2009)

can you use DVC points in disneyland in other countries like hong kong disneyland? if yes, do you know where to find the point chart?


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## bnoble (Jun 16, 2009)

At 7% opportunity/amortization and $10/pt rental, it's pretty close to break-even on a BCV resale.  At that point, you're just deciding whether you want the flexibility of cash, or the peace of mind of being able to book where and when you want.  If you _know_ you are going to go every other year, buying is probably smart.  If you are not sure, renting is probably safer.


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## Carl D (Jun 16, 2009)

I don't figure opportunity.. Mostly because nobody does it correctly.
In other words, yes, you may lose some interest on the up front money. That said, after the break even point, you will lose interest on the money you spend every year for rentals. 
Most people also forget to deduct the price of rentals from that money as well. They think the entire chunk of money stays in some super money making investment, but in reality that money is constantly being drained.


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## Carl D (Jun 16, 2009)

lily28 said:


> can you use DVC points in disneyland in other countries like hong kong disneyland? if yes, do you know where to find the point chart?


Yes, DVC has what they call "The Disney Collection", which includes all the Disney Resorts & Cruise Line. It does NOT include the resorts which are host to a DVC Resort. Therefor, The Grand Californian will be taken out of the Disney Collection when the attached villas open. Disneyland Hotel and Paradise Pier will remain, as well as Hong Kong.
That said, the number of points required for the Disney Collection properties are usually hefty.

I'm sure a Google search will bring up the point charts you are looking for.


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## logan115 (Jun 17, 2009)

We recently bought into DVC and got a loaded 160 pt SSR contract with a March UY (contract has 160 2008 pts, and all 2009 and 2010) for $68 per point.  When I did my analysis on buy/keep renting I figured the break-even was somewhere in the 10-14 year range (depending on various assumptions of interest rates, increases in MFs, increases in rental costs, and what similar accomodations may cost thru CRO) .  I looked at two scenarios - buying DVC or putting the money in the bank and using it to pay for renting points for our trips.  In 10-14 years, that "rent" money (assuming a generous 10% post-tax return) was gone.  At the same time, by owning I will have paid an additional $7-$10K in MFs depending on the rate at which MFs increase.

Do I think my contract will be worth $7-$10K in 10-14 years ? Who knows, impossible to predict, but I think it's somewhat realistic.  I think that a modest increase in room rates will help keep the resale prices from falling into the abyss.  If I'm wrong, and in 10-14 years I can buy 160 points for under $7K (about $44/pt) I will not think twice about adding more as at that price I know I can easily recoup that value over the remainder of the life of the contract.

Chris


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## Stricky (Jun 17, 2009)

Good info everyone.

Thanks!


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## RahRah (Jun 18, 2009)

Stricky said:


> I am trying to educate myself on DVC.
> 
> The scenario is there are 5 of us (3 under 6) w/ a grandparent or two going every once in a while. I am thinking of doing the bank/use/borrow method. If I buy 150 points (minimum required right?) I would probably not need to and I would be able to go every 2 years. Using Boardwalk as an example 300 points gets us a 2 bedroom in most seasons.
> 
> ...




When we were making our decision about whether to buy DVC or not, and whether to buy direct through Disney or resale, I ran a number of scenarios to help us make that decision.

My advice, for what it's worth....

1.  Buy where you want to stay....especially if you're likely to vacation during peak seasons when DVC resorts tend to book up well in advance.  At your home resort you'll have a 4 month lead time priority for reservations ahead of those who own other resort points.

2. Use a true-cost basis for your numbers, not estimates....for example, at BWV, maintenance fees aren't "about $5/point" they are $5.2119 - that may not seem like a big difference, but with 160 points, it is $833.90, not $800...over time that $33.90 adds up.

3. Point rentals are typically $10-13 a point on the open market - you can definitely find points to rent at a lower per point cost, but those are usually distressed points (expiring and can't be banked, reservation points, developer points, etc.) and they typically rent for $6-8 per point.  To determine whether renting makes more sense, I'd use the average typical cost for non-distressed points - say $11 per point - as the basis to compare cost to own versus rent versus direct booking with Disney.

4.  Understand the value of a "loaded" contract versus a "stripped" contract if you buy resale....loaded contracts come with points already banked - but if you aren't planning to vacation within the current use year, that may not be a good deal for you, unless you can rent those points since they can't be banked by you.....in a stripped contract the owner has either fully exhausted the current year points or has so few remaining it's moot.  The loaded contracts tend to sell for a few more dollars per point than the stripped contracts.

5.  If you're going resale - KNOW the latest ROFR numbers - that is, what contracts, at what price, at what point level is Disney waiving ROFR and make your offer based on the low-end range of success.

On one of the resale sites right now, there are two BWV contracts I see that are good examples to use for a quick analysis.  Each are 200 point contracts and each are February UY.

Contract A is "loaded" - that is it has points to use now - 336 points currently available (200 + 62 banked points from 2008 + 74 points in "Reservation Status", both the banked and Reservations points need to be used by 2/1/10) and 200 points coming on 2/1/10. Priced at $78 per point.

So, contract A will cost $15,600.00

Contract B isn't "stripped" but it's certainly not loaded - 169 points currently available (163 + 6 banked points from 2008) and 200 points coming on 2/1/10. Priced at $78 per point.

So, contract B will also cost $15,600

Contract A is, IMO, a better deal if you ask the owner to bank the 200 points for 2009 into 2010 now as part of your offer to purchase.

They're asking $78 a point though and that's in the low-end of price-per-point that pass ROFR ($76 to $78).....so if it were me, I'd offer the $78 and push closing onto the seller along with 2009 MF's as my first offer.

BWV has 32 years left on the RTU contract, so if you pay $15,600 for the points, you're looking at an opportunity cost of $487.50 per year, or $2.44 per point you need to add to your MF's each year to know your "true cost" to own.

BWV 200 points will cost $1042.38 in MF's for 2009 - and that combined with the $487.50 means your cost is $1529.88 for 2009, or $7.65 per point....less than renting points and significantly less than booking through Disney for the same unit you'd want/use.  But, it does come with the obligations of owning the contract.....

If you'll use 300 points to get yourself into a 2-bedroom unit at BWV, then that will cost you $2,295 for the points you use to stay.  Using banking-borrowing and such you could potentially rent some of your points to off-set your MF's too.....but you can't count on that happening.

Anyway, I hope this helps!


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## Stricky (Jun 18, 2009)

Sure does! That is great info. Thanks


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## luvsvacation22 (Jun 18, 2009)

RahRah said:


> When we were making our decision about whether to buy DVC or not, and whether to buy direct through Disney or resale, I ran a number of scenarios to help us make that decision.
> 
> My advice, for what it's worth....
> 
> ...



Great information RahRah!


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## RahRah (Jun 18, 2009)

lily28 said:


> can you use DVC points in disneyland in other countries like hong kong disneyland? if yes, do you know where to find the point chart?



You can....links to point charts below:

http://dvcnews.com/content/view/149/135/


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## bnoble (Jun 18, 2009)

> BWV has 32 years left on the RTU contract, so if you pay $15,600 for the points, you're looking at an opportunity cost of $487.50 per year, or $2.44 per point you need to add to your MF's each year to know your "true cost" to own.



This is not "opportunity cost".  This is "amortization" of the capital.  Opportunity cost would also include the lost long-term investment income you _would have gotten_ had you invested the capital and used the proceeds to rent future lodging.

Mary Waring has an excellent treatment of this at her site.  She explains it better than I can.
http://www.mousesavers.com/dvc.html#dvc


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## tombo (Jun 18, 2009)

Here is another idea to consider. If you don't have to have a Disney resort, buy an every year resort (resale) that trades well near your home in a place that you would like to vacation every other year and that you can drive to. You can easily trade for really nice Orlando resorts near Disney (depending on your trade you might get Disney too) every other year and use the resort you own near your home for the off years when you don't go to Disney. I can currently choose from over 4700 Orlando area resorts using a Silver Crown one bed room beach week deposited 6 months in advance which has annual MF's of $525. None of the available trades  are Disney at the moment (I have seen Disneys with this deposit) but there are 170 HGVC choices, over 600 Orange Lake Choices, 289 choices at the Sheraton Vistana, 168 at Summer Bay, 389 at Vacation Village at Parkway, 27 at Bonnet Creek, etc (and yes I can see a lot of 2 bed room June, July, and August weeks). The MF's will be lower, the purchase price will be lower, and when your kids grow up and no longer want to go to Disney you can use the week you purchased close to home every year or trade it every other year for new destinations other than Disney.


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## littlestar (Jun 18, 2009)

Tombo, I still like owning some DVC points even though we own other timeshares and trade into Orlando frequently at some of the resorts you mentioned. I like being able to treat ourselves to 3 or 4 days on site after a week long stay on an exchange.

We also enjoy treating family and friends to a few days in a Disney resort here and there. We've done this for honeymoons, birthdays, anniversary trips, etc. Owning some DVC points allows me to call DVC up and book a few days for my family and friends for a special treat.


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## tombo (Jun 18, 2009)

littlestar said:


> Tombo, I still like owning some DVC points even though we own other timeshares and trade into Orlando frequently at some of the resorts you mentioned. I like being able to treat ourselves to 3 or 4 days on site after a week long stay on an exchange.
> 
> We also enjoy treating family and friends to a few days in a Disney resort here and there. We've done this for honeymoons, birthdays, anniversary trips, etc. Owning some DVC points allows me to call DVC up and book a few days for my family and friends for a special treat.



That's great if it is what works best for you, but you can rent 3 or 4 days from Disney even if you aren't an owner for about $400 a night in a one bed room Old Key west and Saratoga and about $450 a night in Boardwalk and Animal Kingdom.   I know it feels good to give family and friends something that seems free, but to give 3 or 4 days costs you $800 or more that you pay annually for those points not even taking into consideration the fact that you are on a limited number of years membership and you are using up your high dollar purchase giving points away. Would you call one of those friends up and say I am going to give you $800 for your birthday?   That is in reality what you are doing when you give away points you have paid for. If you gave those friends and family the choice I bet that many would take $800 cash over 3 or 4 days in Disney.

If MF's are $530 a year at another resort, you can stay a week in orlando in a nice resort with 2 bed 2 baths on trade for $800 (including exchange fee) and the next year in your home resort for $530 for a total of $1330 for 2 weeks vacation in 2 years. You will pay more than that in MF's for owning an every other year Disney not even taking into account the $16000 or more purchase price. 

As I said if the OP doesn't have to have Disney they are much cheaper ways to have a great vacation in Orlando and still stay in nice resorts. If nothing but Disney will do then they will have to pay a lot more.


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## refumpcpa (Jun 19, 2009)

*Every other year, better off renting*



Stricky said:


> I am trying to educate myself on DVC.
> 
> The scenario is there are 5 of us (3 under 6) w/ a grandparent or two going every once in a while. I am thinking of doing the bank/use/borrow method. If I buy 150 points (minimum required right?) I would probably not need to and I would be able to go every 2 years. Using Boardwalk as an example 300 points gets us a 2 bedroom in most seasons.
> 
> ...



If you only plan to go every other year, you will pay $8 - $10 in maintenance fees each trip ($4 - $5 per point per year).  You can rent points conservatively for $13 per point.  This means at best you save $5 per point each trip that you go ($13-$8).  Cheap contracts for Orlando DVC's go for about $70 per point.  This means, going every other year, you will have to make 14 trips just to break even (28 years).

IMHO, it doesn't make sense to buy if you are only going to go every other year.  If you are going once or twice each year, it makes more sense to buy.

BTW, minimum number of points to buy in only applies if you buy Directly from Disney (160 points @ approximately $96 per point with the current incentives).  If you find a willing seller on the resale market, you can buy as few as 25 points.


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## logan115 (Jun 19, 2009)

refumpcpa said:


> If you only plan to go every other year, you will pay $8 - $10 in maintenance fees each trip ($4 - $5 per point per year).  You can rent points conservatively for $13 per point.  This means at best you save $5 per point each trip that you go ($13-$8).  Cheap contracts for Orlando DVC's go for about $70 per point.  This means, going every other year, you will have to make 14 trips just to break even (28 years).
> 
> IMHO, it doesn't make sense to buy if you are only going to go every other year.  If you are going once or twice each year, it makes more sense to buy.
> 
> BTW, minimum number of points to buy in only applies if you buy Directly from Disney (160 points @ approximately $96 per point with the current incentives).  If you find a willing seller on the resale market, you can buy as few as 25 points.



Believe you're double-counting the MFs.  Let's say that the OP plans on going every other year, and their average trip is 200 pts.  They would be best served by buying a 100 pt contract, and let's assume they pay $70 and the MFs are $5.  If they buy, each trip they are effectively paying $1000 in MFs ($500/yr).  Renting 200 pts at $10 = $2000 each trip, so they are "saving" $1000 by owning over renting EXCLUDING the initial buy-in.  They are effectively "making" $5/yr over pointing.  Depending on the rate of return that you assume your cash (that you'd use to buy DVC) would be earning, the break-even is probably closer to 15 years than 28.

Chris


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## refumpcpa (Jun 19, 2009)

I see your point, but I still think that unless you are going to go at least yearly, you are not going to get enough "extra" trips to justify the initial cash outlay.  The children are <6 right now, meaning that by the time he breaks even, those kids will be 17-20.  Unless he and his wife like it enough to make it their vacation spot without the kids, it doesn't make sense.  Now if you go 1-2 times each year, it makes much more sense to buy then to rent.


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## GadgetRick (Jun 19, 2009)

logan115 said:


> Renting 200 pts at $10 = $2000 each trip, so they are "saving" $1000 by owning over renting EXCLUDING the initial buy-in.  They are effectively "making" $5/yr over pointing.



Doesn't make sense to exclude the buyin price. They're either going to pay out of pocket for that (plus closing fees, etc.) or going to borrow it in some way, shape or form. So that is a very real and tangible cost which has to be factored in if you're looking t the dollars and cents of the decision.

I think it's extremely difficult to break down the, "buy vs. rent," argument to dollars and cents. Obviously, there is a major dollars and cents component but it's extremely difficult to quantify it for EVERYONE as we all are VERY different in how we buy things, what we do with money we haven't spent, etc.

I don't think there's any way to break down the dollars and cents argument to show it's actually cheaper to buy vs. rent _unless_, someone plans on going quite often (more than 1 time per year). Even in this case it's difficult to actually prove this is the case as the buyin price is always changing as are MFs while, it seems, the rental prices seem to be relatively stable. (The changing buyin price matters if you're not planning on buying today but months down the road. Many people make these types of decisions this way.)

The harder part to argue is whether it just makes sense to do it from a convenience point of view. I can understand both sides of the argument on this part and that's a personal view so what may be right for one person may be totally wrong for another.

So what is the best answer? Well, I don't know or it depends might be a better answer. Everyone is in a different situation (and they're also changing) so it's difficult to look at what someone else decided and base a decision on that alone.


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## logan115 (Jun 19, 2009)

refumpcpa said:


> I see your point, but I still think that unless you are going to go at least yearly, you are not going to get enough "extra" trips to justify the initial cash outlay.  The children are <6 right now, meaning that by the time he breaks even, those kids will be 17-20.  Unless he and his wife like it enough to make it their vacation spot without the kids, it doesn't make sense.  Now if you go 1-2 times each year, it makes much more sense to buy then to rent.



If you're only going every two years you just buy 1/2 as many points as you need for your average trip.  Even going every other year it can be worth it depending on what types of accomodations you choose and if you have to stay on-site or not.  In our case we plan on going 2 out of every 3 years, bought 160 points as our average trip is about 240 points.  The 160 pts annually gives us 480 every 3 years, and that's perfect for our 2 trips during that time period.

Break-even can be viewed in several different ways and makes various assumptions that are impossible to predict.  Here are two examples :

I could argue that given the roughly $5/pt different in cost (MFs + interest lost/paid on initial cash outlay vs renting points), that each year you're lowering your cost basis by $5.  So if I pay $70, use it for just two years and sell it for a net $60 I'm technically still "even," while a net sale above $60 would be a win.  So you don't have to necessarily hold this TS for that long to break-even.

The 15ish year figure I mentioned above refers to when you've essentially brought your cost basis down to zero (by net saving $5/pt/yr).  This alone does NOT mean that you're even by any stretch as you've been paying MFs annually over that time period.  However if the amount (plus interest) that you've paid in MFs is less than the market value of your points you're "ahead."



Chris


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## logan115 (Jun 19, 2009)

GadgetRick said:


> Doesn't make sense to exclude the buyin price. They're either going to pay out of pocket for that (plus closing fees, etc.) or going to borrow it in some way, shape or form. So that is a very real and tangible cost which has to be factored in if you're looking t the dollars and cents of the decision.
> 
> I think it's extremely difficult to break down the, "buy vs. rent," argument to dollars and cents. Obviously, there is a major dollars and cents component but it's extremely difficult to quantify it for EVERYONE as we all are VERY different in how we buy things, what we do with money we haven't spent, etc.
> 
> ...



Agree 100000000000% that you can't exclude the buy-in cost from the analysis, but was just trying to compare apples to apples given the PPs figures around the MFs and cost/trip.  Must've had a dozen different set of assumptions in my spreadsheet when I was trying to do my calcs a few months back and I always factored in the TVM on both the buy-in and the MFs.

I think every other year is about the lowest frequency that *could* make sense to own, every 3 years buying 1/3 of the points you need is really pushing it as it forces you to go a given year (given banking/borrowing rules).

And another thing I agree with you on   is that DVC (or other TS I would assume) is not a "here is the final answer that applies to everyone" type of thing.  What works for me may or may not work for you.  I value being able to book my own reservation without going thru anyone else, but I struggle to put a $$ figure on that, others may not care about going thru the rental process.  We plan on going 2 out of every 3 springs/summers and staying for a full week, but DVC may not be that great a deal for someone that even goes 2-3 times a year but only does long weekends due to the higher weekend point requirements as at times you can book a weekend night cheaper direct thru CRO than via using points (depending on the current deals being offered)

For me it works, I realize that I could save a boat-load of money staying offsite or buying another TS and trying to exchange in to DVC, but I wanted the certainty of knowing I had a DVC room whenever I want it.  I have no idea how long I'll own it.  Our two kids are 5 and 7 months, and I can easily see frequent opporunities to fatten the Mouse's pocket for the next 10-15 years.  Will we keep it when the kids are grown up and just go ourselves (sans kids), maybe/maybe not.  Just another non-modellable variable to throw into the mix.

Chris


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## GadgetRick (Jun 19, 2009)

I totally understand owning DVC as I used to own.  Had to sell for financial reasons, not because we wanted to. We have every intention of buying back in eventually.

We went about twice a year so we used the heck out of it. I rarely had points left to bank.


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## littlestar (Jun 20, 2009)

I really like owning DVC points along with my Marriott. Case in point - we wanted to do a 10 day trip to Orlando next March. Today I was able to trade my Marriott 1 bedroom for a 3 bedroom Grande Vista unit. 

Since we wanted a few days onsite at Disney, I picked up the other three days I needed in a Saratoga 3 bedroom treehouse villa (love it that I can book a treehouse for the same amount of points as a 2 bedroom).


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