Total newbie - Vacation rental in Mexico. Thoughts?

[Trent Warner]

BLUF: Mother-in-law has spent many years vacationing in Mexico regularly, wants to buy a beach front condo in Puerto Penasco as a VRBO. Wants to know if wife and I would like to "go in" on it with her.

Hello all! Thank you so much for he opportunities you all provide with this huge collaboration of expertise, and in particular thank you to Brandon Turner for the awesome books that gave me the avenue to this!

I am determined to have a cautious, well-calculated approach to my rental investing. However, a somewhat hot opportunity sprang up recently, and I'm wondering if it's something I should go for. My mother-in-law has been in property management for ages, and has spent the past few years vacationing in Mexico pretty regularly. She now is pretty sure about wanting to buy a beach front condo there, probably in Rocky Point, and rent it out as a VRBO. She has come to my wife and I directly to see if we'd be interested in going in on it with her. 

Does this seem like an opportunity I shouldn't pass up? Or would i be rushing my own rental ambitions and generating too much risk with too little understanding?

[Mike Lambert]

Hi @Trent Warner

I don't know much about your situation and that of your mother in law so I'm going to talk facts and figures rather than advice. When I'm the one getting the advice, I'm trying to make sure that people know who give the advice know what they're talking about.

@Nathan Gesner has a point about doing business with family but that's your decision. There are pros and cons. Some people do it and others don't.

As to the substance of things, is your mother-in-law going to present you with a specific opportunity with facts and figures or is she asking you for a blank cheque?

If you want to make yourself an opinion on how profitable that beachfront condo could be, you "just" need to find about prices, rental and occupancy rates and costs and you'll find out whether that qualifies as a profitable investment or not.

I've been investing in Mexico for years and replied to hundreds of posts on the topic. I often repeat that people who invest in Mexico should make sure they know what you're doing. Yet, I disagree with the advice that @Andrea Lane got. If you buy property in Mexico, you need to get yourself a good lawyer. A good lawyer will tell/teach you what you need to know about the local real estate laws. As to the zoning laws, you need to know about them if you're going to build (which I assume isn't your mother-in-law idea). Otherwise, your lawyer will have to make sure that the zoning of the property is in accordance with the local rules. But knowing which property to buy in which location and paying the right price for it could make a big difference in your investment returns.

Buying property in Mexico, especially vacation rentals partially used as second homes is way more mainstream and easy than many people think. Many people ignore that private American (and Canadian) citizens own a colossal amount of real estate in Mexico as a group. I have met countless fellow owners and I still have to bump into an owner who regrets his/her decision.

Finally, many buyers in Puerto Penasco are from Arizona for obvious reasons. I don't know if your family is from there but the closest alternative for a beachfront condo for them would be California / San Diego. You might want to compare the price of a like-for-like beachfront condo in both places. Chances are that the price of the condo in Puerto Penasco will be less than your downpayment for a similar condo in California. When comparing costs, you might find out that the total cost of ownership in Puerto Penasco including taxes is lower than just the property taxes in California.

I hope this helps but, ultimately, you might want to get the facts and figures and make your own decision.