Analyzing Properties in Mexico

[Marina OLeary]

For those of you investing in short term rentals in Mexico, what tools are you using for analyzing potential properties?

[Mike Lambert]

@Marina OLeary

@Aaron B.

There is no site specifically for Mexico but AirDNA works there and has data indeed. I don't use them though because they're totally unreliable. This is because, unlike in the US, there are several markets in function of the quality of the property and the rental rates vary widely. You could easily make twice as much money than your neighbor while Airdna thinks the properties are similar. So, a 1 BR isn't the same as another 1 BR if you see what I mean. In the same area of the same city, you can make a killing if you own the right property or you can make little money if you own the wrong one.

So, instead of using AirDNA, I reverse engineer. I decide what minimal rate of return I want. I know the price of the property and I can precisely estimate the expenses. That gives me the revenue I need to make to get my return. Then, I calculate the nightly rate I'd need to charge if I had 100% occupancy. Invariably, that rate has been so low that I know that, should I charge that rate, I'd get 100% occupancy indeed. So, I know that I can get my minimum return and potentially much more given that I can rent at a higher rate. Hope that makes sense. Of course, my knowledge of the market helps here but, irrespective of that, the daily rates I've been getting have been so low that they were a no brainer anyway.

@Victor Castro

Your dad is right and it's because Mexico is mostly a cash market, whereby the property values aren't dependent on the level of interest rates as they are in the US. I'd say it's a good thing and that's why I invest in Mexico and not in the US. Indeed, you'll get much more cash flow in Mexico so capital appreciation is less important. However, while you might get less capital appreciation in Mexico than in California or New York City, you'll typically get more capital appreciation in Mexico's best markets than in the Mid West. Also, property prices can't go to the sky because of affordability so the capital appreciation potential of the most expensive US markets might have been reached for some time, especially in our new world of high interest rates.