Mexico vacation rental

[Simone Newsome]

Hey BP! I been looking at luxury vacation condos in Mexico. So the hotel handles all bookings, management and cleaning and split profit 70% investor-30% hotel. The Roi is between 10-13% depending on the bedrooms and bookings every year. Just wondering if anyone else tried this out before? Thanks!

[Gord Stevenson]

I have a vacation rental in Mexico. Yes it can work. From an income perspective the key is occupancy. I highly recommend doing due diligence on real historical occupancy for condos of your type (1 bedroom, 2 bedroom, etc) and talk to a few others who already have experience to make sure you get an accurate picture of costs. Do you need to have and maintain a fiedocomiso (spelling? A bank trust, anyway). If so, that could be $500 per year. HOA fees? How are repair bills?

Another interesting wrinkle is potential capital gains tax in Mexico due to currency swings.  I bought a condo when the currency was 13 pesos to the USD.  Recently it peaked at 21 and now it is back to17 or so.  If I had sold at 21:1 for exactly the same number of USDollars that I paid, according to the Mexican tax authority that would be a 21/13 capital gain and I would owe about 30% of that as tax!  Yikes!  Think through what you expect the currency to do, and in what currency the properties are being bought and sold.