Tulum - Looking to invest in an apartment - Any do's and don'ts?

[Aura State]

Hi everyone,

Very new to investing, but interested in buying an apartment that could generate money through airbnb, in Tulum. Do not have all the money, just a down payment, but could get the rest through a loan or get the financing direct from the developer. I'm thinking of a one bedroom for now. I'm an American permanent resident, soon to be a citizen, so would have to pay taxes here.

Given my situation, any tips on how to get this started (successfully) rather than google for answers? Is it now a good time to invest, are the prices any cheaper given COVID?

I will be in Tulum the whole December (and probably January) month so would like to see some options and talk/connect with the right people.

Thanks so much, really appreciate your help!

Aura

[Mike Lambert]

Regarding the financing, it's almost impossible to get a mortgage from a bank outside of Mexico. You could get a mortgage from a Mexican bank, although it's not easy to qualify. The LTV will be 50% max and think double digit interest rate.

Developer financing is rarely available, although there’s quite a bit of “fake” developer financing. What I mean by that is that, instead of having to pay 100% of the price for a pre-construction condo at the signing of the contract, you pay a certain percentage at signing and the rest during construction and/or at delivery. A real developer financing would be a financing post-construction, whereby you can use the cash flow from the property to repay the loan. That is very rare but this is a way I bought with investors thanks to my personal connections with developers.

Seller financing by individuals also exists but is rare. At the request of an interested party, I agreed to put some of my properties for sale in the Riviera Maya with real seller financing. I request 50% down payment and an interest rate higher than the US mortgage rate. The buyer wants to do that because it’s potentially a killer deal for him as he should get very strong cash flows covering all its costs. And he could be only get better conditions from a desperate seller.

Can you get deals because of Covid? Yes and no. On the one hand, there are very few motivated sellers to push the market down, as very few of them have a mortgage to service. Also, the Riviera Maya is one of the few places that has remained open to tourists and there has been a va lot of activity from Americans wanting to have a place there to go in case of another lockdown. On the other hand, the profit margin of the developers has increased as a result of the cash of the peso against the dollar and some are happy to share part of that benefit with their buyers to simulate sales.

Don’t forget that Covid should be temporary. Tourists are gonna come back and real estate is a long term investment.

I just came back from looking at property in Playa del Carmen and Tulum. I see more and more “cheap” condos who are sold fully furnished and with rental management? What’s the catch? They’re super small and the building has very limited amenities. Therefore, you have only one by pool of potential buyers, investors. And, when it comes to rent, it’s hard to compete with Morgan sexe condos in building that have more amenities. I wouldn’t but any of those.

Feel free to reach out if it can help you further and I’m happy to refer you to my buyer agent.