Buying land, building a villa, and renting it in Tulum

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A friend-of-a-friend recently purchased land in La Veleta, Tulum and built a 6-bedroom villa with a pool for under $200k. She now rents out the entire place for approximately $500/ night (slightly higher during holidays and the high season). The property is approximately 600 sq meters and 3 miles from the ocean in a gentrifying neighborhood. A car is needed to get to the beach. 

Although she hasn't formally marketed her place, it's booked out 50%-75% of the time through Airbnb.

I'm interested in doing the same, and would appreciate advice on land acquisition and the building process.

Thank you in advance,

Christina

[Mike Lambert]

Christina, this is an awesome idea. I started investing in the Riviera Maya last year because I get access to first class properties well below market value at private pre-launches through my personal relationships with developers. Also, the economy and the real estate market are on a tear. The province of Quintana Roo is growing as fast as China. Playa del Carmen was the fastest growing city in 2014 and Tulum got the title in 2016. Tulum wasn't a city even 8 years ago!

I started investing in Playa del Carmen in what is probably going to be the best condo building in town, right where the downtown core is moving towards and in front of what will be the town's biggest shopping mall (the city has just issued the permit and very few people in town knew about it). I got in the private pre-launch at well below market value. Then I got the opportunity to purchase 2-bedroom penthouses in Tulum close to the beach My pre-launch was $ 220,000. When the project launched something like 3 months later and the price was $ 369,000, giving a 68% paper profit before the construction had even started!

Such deals should deliver huge profits but having your house built is even more profitable. Indeed, you rent and sell in USD but all your (very low) costs are in MXN (mexican pesos). I'm looking ay doing the same, but possibly closer to the beach. As you might now, financing is prohibitively expensive in Mexico but, with the figures that you mention and which are realistic, you could get very big returns and your money back quickly even if you pay cash! This being said, I have access to a cheaper source of financing through my contacts, which would work out given the huge cash flows. This way, you could borrow up to 75% of the value of the house and turbocharge your investment returns. The only issue is that they want to lend minimum $ 2 million for a given project. So that would take the construction of several villas and I've been thinking of putting a group together for that purpose.

I know some developers there but I'm wondering why you just don't ask your friend to ask his/her friend to refer her builder to you. If you do that we could compare notes and see what the best options are. If you buy in Mexico, you have to be very careful who you're dealing with. Even more so if you build.

Hope this helps

Mike