Pre-sale opportunities in Tulum, Mexico

[Carey Gatto]

Hi, I wondered if any members here are looking for an off-shore investment property? I just bought a condo in Tulum, Mexico. The developer offers financing packages. The ROI is 10-15% from rental income and annual appreciation averages around 8%. Prices start around $200k. It's a great opportunity to break into the short-term, vacation rental market which is booming right now due to remote working and AirBnB. If you want some more info, please put your email in the comments or send me a PM. Thanks!

[Mike Lambert]

@Carey Gatto

This kind of ROI claims are have been used in the past by unscrupulous developers and promoters alike to sell to unsuspecting foreign buyers. A couple years back, there used to be huge billboards everywhere advertising such ROI claims. Some developers went as far as guaranteeing such an ROI, only to not honor their guarantee when push came to shove. These claims then disappeared as anybody who knows the market there knows they were bogus and it turned out buyers unsurprisingly didn't make the promised ROIs. Therefore, I'm surprised to read that they're being used again after having been debunked. Given that the market is hot with a lot of money in the hands of eager new buyers, I guess some developers figured they could use that tactic again. The reality is that nobody can properly estimate how much rental income will be made in a few years and it also depends on the operator anyway. And, if you overpay for your property or own the wrong one, you won't make that kind of return for sure.

No legit developer today will make any ROI and/or capital appreciation promise as they know that they can't. When it comes to capital appreciation, anybody who's familiar with the Tulum market knows that this kind of estimates are baseless, especially since there's no MLS so there are no available figures to determine what the past (let alone the future) appreciation has been. We can go with our best guess about how much it's been in the past but it doesn't give any guarantee about the future, especially in a market like Tulum.

As to the financing, it could be great for you if it is legit but beware there are a lot of fake financing schemes. There have been financing packages from developers in the past and I've been a beneficiary of so they used to exist (although they were always the exception rather than the rule). However, they seem to have all but disappeared because the market has become so hot that the developers, generally speaking, have no need or interest whatsoever to offer financing to sell their properties. In such a market, beware that some developers might offer financing because their project wasn't good and therefore didn't sold and that's the only way they found to sell. That can be very risky because they generally can only offer financing for a certain number of buyers only. They start selling with the financing and start construction with the money they got from these buyers. Once they remove the financing, if they can't sell more condos, the project likely will go bust in the middle of construction and the early buyers will lose their money.

Now, all these comments might be more useful to others since you have already bought. And I don't know if you're still at the stage in which you can get out even if you wanted to. If I was 100% in, I'd just do my best to make sure that I'm not throwing good money after bad and then I'd hope for the best. If, like I do, you have trustworthy contacts on the ground, I'd make sure they keep an eye on what's going on (you don't necessarily have to that if you know the developer is legit). And, then if you get the property, while you can't really control capital appreciation, you can take steps to maximize your ROI.

I've been investing in the area for years now and have helped many people buy there so I'm more than happy to help you if I can. If you give me the name of the developer, I could try to find out if they're legit through my well-connected network on the ground. And, when the time comes and you have a condo there, feel free to connect if you want to talk about ways to get the best ROI out of your property. While you can't count on out of thin air ROI promises from developers, you can do your best to maximize your own ROI, independently of what others or the market do.