In Tulum Mexico, Nocturna is a custom-designed 3bed/3bath, 2-story penthouse with stunning views of the Mayan Ruins & Tulum National Park. I designed and oversaw the interior architecture, floor plan, and all finishes and interior design.

What made you interested in investing in this type of deal?

After living for several years in the Riviera Maya, I saw the crazy real estate boom happening in Tulum and decided I wanted a piece of the action. Property prices were really attractive! Tulum also has a really unique vibe and some stunning design and architectural innovation. It attracts a lot of celebrities and influencers, having joined the circuit of jet-setter-destinations including Ibiza, Mykonos, and Bali.

How did you find this deal and how did you negotiate it?

I worked with a realtor to find some preconstruction condos in my price range. The one I bought had the best $/sqft, but for some reason only a few units had sold after 6 months on market. My estimates were projecting really solid returns; I just didn't understand why no one was buying up these units! My realtor suggested it might be because of the low-quality renders. So I looked at my spreadsheet one last time and made an offer. 2 weeks later, new renders were released & the project sold out.

How did you finance this deal?

Mexico is a cash market as interest rates there are so high (+12%). So I got a private money loan for the initial 80% down payment to the developer, which got me an 8% discount off the purchase price. Then during construction, I worked on getting a HELOC on my primary residence. When that closed, I used the HELOC to pay off the private money lender.

How did you add value to the deal?

I negotiated a complete redesign of the unit. This was 1 of 4 penthouses in the building, so I wanted mine to stand out. First, I wanted to add a 3rd bathroom. The developer said they had already tried a variety of floor plans but couldn't figure out how to do it. So I got w/ my architect friend and he found a solution, which I presented to the builder. They were impressed and said they'd make it happen. Then they sold our design to half the other units :) I also added a 3rd bdrm on the roof.

What was the outcome?

As a vacation rental, we have succeeded in bringing in an average 28%/year rental yield, with incredibly high occupancy rates. I attribute this largely to our interior design, which we spent a lot of time and money on. When Airbnb Plus launched in Tulum, our listing was invited to join the program. Today, 4.5 years later, the property has gained $150k in equity, which represents a 60% return from value-add and market appreciation, not including the rental yields.

Lessons learned? Challenges?

Creating the 3rd bedroom on the roof as a "lock off" with a separate entrance & kitchen was a saving grace because of the flexibility it gave us. We created 3 separate listings on Airbnb--one for the full penthouse, one for just the downstairs, and one for the rooftop suite. When COVID hit, there was zero demand for the 3 bedroom, but lots of individuals and couples were still traveling. By renting the upstairs and downstairs separately, we were able to maintain over 90% occupancy.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Would definitely recommend working with Sebastian Papworth at Jungle Realtor.