Buying & Selling Real Estate
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback
Updated over 2 years ago, 06/10/2022
Investing in vacation rentals in Mexico
Yucatan, Mexico sure seems like a little piece of paradise. Places like Tulum and Playa Del Carmen are booming with new developments popping up all over the place.
I am looking at some of the brand new developments over there, and there are many turn key opportunities that guarantee 8%-10% ROI for a fixed term. Seems like not a bad idea to mix an investment opportunity with being able to own a piece of own real estate in a great vacation spot.
Are any of you investing in this type of real estate? What are your thoughts and experiences?
I invest in pre-construction condos on the Riviera Maya because I'm connected to the developers and I can invest at large discounts below the project launch price and I get financing from the developer. I don't invest in these turnkey opportunities though, as I think that an 8% to 10% ROI is a lousy return for Mexico. The developer makes most of the money. I prefer to rent by myself and I intend to make much higher returns than that.
@Mike Lambert - Thanks for your response. There is money to be made in the appreciation of the property, as you say, when you do pre construction to project completion. How do you rent by yourself? Air B&B? Did you build your team of trusted maintenance, cleaning people etc? What are the vacancy rates that you estimate for your analysis? Could you share a typical financing plan through a developer?
You can list the property in as many sites as you want, Airbnb being one of the main ones. There are companies that take care of everything. There are techniques to get high occupancy rates. A friend of mine gets above 90% for all his properties. The thing is, in the Riviera Maya, the hotel occupancy rate is above 80% and above 90% for the luxury hotel so you can do well even if you're a lousy operator. Developer financing isn't very common but basically, on delivery, the developer will give me 5 years to pay the 50% of the price that is still due at an interest rate of 6%. Given the strong expected cash flows, I expect to be cash flow positive and will be able to hold the property free and clear after the 5 years!
@Mike Lambert do you tend to buy in just busy areas such as 5th Ave in Playa Del Carmen, or more remote, gated developments?
Hey guys, I’m a little late to the conversation but I would love some more details on purchasing rentals in the Yucatán, as stated it’s a paradise.
What sort of information are you after and are you talking about the Yucatan peninsula or the state of Yucatan (the Riviera Maya is in the peninsula but in the state of Quintana Roo)?
@Mike Lambert I’m specifically interested in Isla Mujeres. As I’m here now, looking around the island shows a lot of room for growth/investment.
I own several beachfront properties around Los Cabos, Mexico and want to put
cocontainer homes on them to be used for STR, AIRBNB. Looking for money (Starting with $60k for a few units then up to $250k). I would be offering 8%. I have everything ready to go, I just need the cash....if anyone has an interest, please let me know. Thanks! Just a side note, I have been involved owning properties in Mexico for 30+ years....
@Briant Patterson Based on my own investing experience in Mexican real estate, maybe it would be better for you if you offer a higher return to your potential investors. If I was offering 8% to my investors, I doubt they would invest, considering that you can easily have a higher return in the US while taking much less risk.
I imagine that your concept of container homes is new and unproven and that therefore you don't want to promise returns that are too high in case you couldn't deliver them.
Also, don't you think that there are better places in Mexico for the container homes. Cabo visitors are typically well-to-do and go there for the glamour so are they going to want to stay in containerhomes?
Thanks @Mike Lambert. I appreciate the input on rate of return. I will definitely take that good advice under consideration. As in any investment, it all about risk/reward. I have been very actively involved in Los Cabos for 30+ years, was part of the GE Money Mortgages for Americans and Canadians buying homes in the vacation areas of Mexico and have a very good understanding of the perceived risks and how to mitigate them. That is one of the reasons I love investing in Mexico. Investors perceive a higher risk in dealing in Mexico and for that, they demand a higher reward. If done right and with the right people and as we say "Don't check your brain at the border", the risks are majorly mitigated so effectively it sends the reward through the roof. You are right about the Uber luxury in Los Cabos, it is nicknamed "The Billionaires Playground" for a reason but there is a huge contingent of people looking for wide open beaches for surfing, fishing, kayaking, yoga and just being away from from town. The investment in the containers, done in a "chic, Boho look" can give travelers a low cost alternative and be able to stay in an area that is not currently serviced by hotels in the immediate area. I will also we using them as floor models for other landowners in the area to be able to purchase. I have all the builders. engineers, etc to make it happen and create upsell opportunities. Absolute worst case scenario for the investor is that if the Short Term Model does not provide the returns desired and they want out, we can just sell the containers ( or the investor can be bought out) at no loss of investment.
I am happy to discuss this more with serious investors. Thanks again @mikelambert for your input!
Hello! I have some opportunities in the Yucatan Penninsula but am hearing everyone purchases in cash and there is no financing available, especially for foreigners. I find this so hard to believe, but can anyone share their insights?
I'm not sure why you find it hard to believe. This is how banking works. Banks in a given country will only lend on properties in their country because they don't have the infrastructure to foreclose in a foreign country. Also, banks in a given country will generally only lend to residents because non-residents don't have a credit history, don't earn income and/or don't have assets in the country so banks don't have much to fall back on should the borrower decide not to pay.
So, yes, as a result, most foreigners pay cash. They do so because, oftentimes, a property financed with cash in Mexico is as profitable as a property financed with a mortgage in the US or Canada, they have the cash and/or they don't want to pay interest and/or bother with the complexities of getting financing in Mexico.
Yet, there are some sources of financing available for foreigners. Feel free to DM me if you want more details.
I'm earlyish in exploring a few Mexico business plans with a partner. I'd be glad to bounce ideas off one another. Message me any time.