Is it still a good idea to invest in Tulum, Mexico?

[Val Berechet]

My wive and I were in Tulum for the second time in about a month's time and love the whole Riviera Maya.
So much so that we are thinking about buying an investment condo in a new development that just blew our mind. The development is the Solemn Ocean Living and we are considering a top floor unit with ocean views (development is 1640 ft from the coast)

We were super excited the past two days about it...then got home and I started researching if its actually a good idea and if its a good investment.

The concern is the rapidly rising crime in the area. Up until about 3 yars ago, it seems Tulum was a quiet coastal town, but its grown immensely in tourist and that has attracted the cartels and hence the crime.
Seems though this is a concern throughout Mexico...so is Mexico just a bad idea altogether for vacationing/investing?

We are also wary of putting so much money as a down payment on a development that isn’t even scheduled to start construction until Dec/Jan. The developer is offering a 20% discount if an 80% down payment is made. 

We love the fact that there is a direct flight to Cancun from Phoenix (then about a 1:30 drive to Tulum) and the jungle setting up against the beach is amazing. The food is outstanding as is the whole vibe of the area. 

I’ve also read Mexico is also currently building a new train system, scheduled to open in 2023 that links Cancun and Tulum (and other cities) as well as the new Tulum International Airport also scheduled to open in 2023 from what Ive read...so tourism to the area is expected to explode even more, which obviously from a rental investment perspective would be great...unless of course people are scared to go there.

Additionally, can anyone provide any input on the developer? They seem to have several projects in the works but I think only one is near completion and the developer (Akela Development Group) is a very new company. 

[Mike Lambert]

@Val Berechet

As pretty much everybody knows, Mexico sadly has an issue with drug/cartel related crime, that has been going on forever. In spite of that, more and more foreigners visit, move to, invest and buy real estate Mexico year after year. Why? Because nothing bas happens to 99.99% of them and they feel safe. So they keep coming back in ever greater numbers.

Many people actually feel safer traveling to Mexico than to the US. In the US, they can be randomly shot at a supermarket, a school or a nightclub. In Mexico, that won't happen; you'll be shot if you get involved in the drug business, which most people won't do. Sometimes (rarely), people will accidentally get shot in the crossfire between gangs like a few days ago in Tulum but that type of incident occur pretty much everywhere but you just don't hear about it. When it happens to tourists in Mexico, the press is having a field that with it. Savvy visitors to Mexico avoid certain areas and taking part in certain activities, like they would actually do anywhere.

When a village becomes a city, crime will inevitably rise and that's the same everywhere around the world. In the Riviera Maya, most of the crimes take place in Cancun, which is where most of the population resides. Yet, the murder rate in Cancun is lower than in New York City or LA. Will you refrain from visiting or investing in NYC or LA because of the high crime rate. No, you'll just avoid some areas, like you would in Mexico.

Clearly, if the violence would get out of control and too many accidents with tourists happen, the growth in tourism could in theory slow down but it is nobody's interest that happens, including the drug cartels. And the Mexican government will do whatever to protect the golden goose, as they have proven time and time again.

The renderings of many projects look great and the projects will end up looking great. The quality of those constructions in Mexico is generally top notch. With this kind of development, you'd have to make sure that you don't overpay if you buy as an investment. Look at the price per square meter/foot, as many developers sell super small until to lower the $ price tag. A too high price will translate in a low ROI. Indeed, unless you're in the luxury segment, renters won't give that much of a dime and in any case won't pay a huge premium because your condo is beautiful. People don't go to Tulum to stay in a condo. They spend their time at the beach, doing excursions or drinking or eating out. Ideally, you'd want to avoid the properties that are overpriced and there are many in my humble opinion.

I would never trust the ROI calculations from the developers, as they are meant to sell their condos. They almost invariably end up being exaggerated when compared to the reality. I would calculate my own figures if I were you. You can absolutely make a 9 -11% ROI and even much more in Tulum, especially if you buy the right property and can get any kind of financing. However, you can't buy any property and expect you'll get that sort of return, far from it. You'll need to buy the right kind of property and also having it properly managed will make a difference.

Pre-construction properties are generally speaking the best deals in Mexico if all goes well but there are risks indeed so it's important to know who you're dealing with. There are ways to almost eliminate these risks but, unfortunately, most developers won't go along with that because it's not in their interest.

Since I'm now working on my own development projects, I don't think it's appropriate for me to comment on developers in a public forum but I will respond in my reply to the DM you sent me.