Tulum- Investing in a Condo Hotel

[Kevin Stewart]

I've been reading the forum thread(s) on Tulum, but they date back a few years, so I wanted to get some current insight into the market as we are considering investing in a Condo/Hotel project there. 

The property woud be managed by a third party hotel management company, and offer many ammenities like mini-market, restaurant, coffee shop, gym, wellness center. Guests will have to 24 hour room service and access to Tulum beach clubs. 

Returns are projected to be between 11-16% *conservatively*. Management takes a 20% operations fee. Owners get use of their unit for 50 days a year, and can put it back into the rental "pool" if they don't want to use it. You have the option of using your 50 days at another one of their hotel properties worldwide. Lastly, returns are pooled and paid out based on the performance of the entire hotel, not based on individual units. 

We have not invested in this type of asset class before, but my initial feeling is that it feels a bit like a time-share. I like that it is professionally managed, and we do not need to worry about whether our individual unit is rented, however I do have concerns about resale with this business model. 

Any insights into this type of asset class (specifically in Mexico), as well as investing in Tulum is greatly appreciated. Thank you!

[Sebastian Papworth]

Hello Kevin,

I am a developer, investor, and realtor in the Riviera Maya, I have been buying and selling properties down here for more than 10 years, and I have some of experience in Condo-Hotels.
In my experience, I haven't seen a Condo hotel that can get double-digit returns in Tulum yet, those numbers don't look very conservative to me.

I would have several questions for the developers:

1. 1. Will they have one rental pool for all types of units or one pool for each, since there is a larger supply of studios and 1 Beds in the area, if you invest on a larger unit you should have a higher return.
2. 2. Make sure they send you their hotel operation agreement signed by the developer and the operator with the rules and regulations before you sign the promissory agreement and wire the initial payment. (IMPORTANT, dont sign without this, I have seen situations when they change the rules of the game after you already purchased)
3. 3. Is the hotel operation mandatory? If so for how long? What if they dont achieve the returns they are projecting?
4. 4. Who will take care of the ware and tare of your condo?
5. 5. Do they pay HOA, utilities, etc?
6. 6. What happens if an owner wants to leave the hotel operation and manage it themselves to lower down rates and get higher occupancy?
7. 7. Do you have parking & storage space in your deed and title or is it part of the common areas?
8. 8. Have them add the Beachclub agreements as annexes to your purchase agreement and rental agreement
9. 9. Is it a presale or immediate delivery?
   

Resale is more difficult because you will need to find a buyer who is open to restricted usage of their property.

I know most developers and projects in Town if you want to tell me the name of the project in a direct message I would be more than happy to give you my honest opinion of the project and the reputation of the developer. 

Hope this helps!!