50k property renting for $850 in Mexico? FACT or FICTION?

[Nathan Asher Robson]

Hi guys,

Recently stumbled across a realestate agent from the UK operating out of a popular tourist/expat destination in Mexico.

He’s offered me three properties for around 40-60k USD, in which he basically has guaranteed that one of them will rent “easily” for 850$

My goal is to buy a property in cash this year for around 50k and rent it out for as much cashflow as possible.

And at 850$, that’s a 20% cash on cash return..

Is there anyway to verify it? How can I know if I’m being scammed or if this is a legitimate opportunity?

The property is listed on an MLS.net, by the way..

[Mike Lambert]

Foreigners can own property in the coastal areas provided they do it through a fideicomiso (bank trust) or Mexican corporation.

There is no MLS in Mexico, except in the Puerto Vallarta area and it's not mls.net

There are two markets in Mexico. The properties that have North American standards are traded and rented (oftentimes short term) in USD and that is the market for foreigners and wealthy Mexicans.

Then, you have the property for locals, traded and rented in MXN (pesos). I’d never buy in that market and so I don’t know it; I’m only active in the first one.

This would be a long term rental (or at least by the month) $850 seems huge for that market; it's a lot of money for these folks. The CAP rate, although very high, could in theory be possible. Maybe the vendor is motivated. Or maybe it's a high crime area.

These markets are completely separated. You cannot buy in the second, renovate and rent or sell in the first market. Indeed, you’re never gonna be able to renovate to a standard high enough and, even if you could, if wouldn’t work because the locations are different.

There could be an exception. Adventurous young people staying temporarily or foreign retirees who don’t have the budget for a better property could in theory be renting such a place for that price.

Yet, even if that was the case, how would you manage the property? What would you do if the long term tenants don’t pay?

In any case, I’d never buy such a property sight unseen and without proper due diligence. When I vesting internationally, I t’s important to either know what you’re doing or know somebody who does and who you can trust.

Mexico can be a great place to invest and you can get rental yields even higher than that but you need to buy the right properties in the right place. To me, it means buying nice properties to operate as short-term rentals.