Airbnb investment property in Los Cabos Mexico

Is Cabo a good market to own an investment property for Airbnb rental income? The answer, in my opinion, is a resounding yes! With real estate values sky high back in the United States, rental properties here in Cabo can make much more sense from a value perspective. The return on investment is often higher here in Los Cabos as well. Even in the midst of the coronavirus pandemic, Los Cabos was able to maintain an average daily rate (ADR) of almost $350/night according to the Los Cabos Hotel Association. That is by far the most expensive hotel room in the country and double the daily rate of hotels in the Riviera Maya. But why is this so important? Because at the end of the day, your Airbnb listing is competing with the hotels. This means that having an affordable Airbnb listing in the range of $125-$250/night fills a much needed void for the budget-conscious traveler.

Another interesting dynamic at play is the change in Airbnb trends. With relaxed work environments and the rise of remote work, people are renting Airbnbs for much longer than in the past. Many people are booking these properties for a month at a time or even longer. In places like Manhattan, you are seeing many smaller companies rent an Airbnb apartment as a flex work space instead of tying themselves down to a long term office commitment. I think many of these trends are here to stay, and Cabo makes a lot of sense given its proximity to many major US markets. The pandemic seems to have accelerated interest in owning property in Los Cabos as a second home or investment.

This poses another question: What is better, renting out your property short term on a platform like Airbnb or renting it out long term? Long-term rentals here in Cabo do very well because most people buying rental properties do go the short-term rental route. Choosing to go the short-term rental route will generally net you more rental income at the end of the day. However, it also increases the wear and tear on the property. One of the main reasons many owners choose the short-term rental option is because they can come down and use the property themselves. If you are renting the property out on a long-term basis, you can take advantage of the fact that the condo or house is always occupied per the lease agreement. If you need help drafting a long-term lease agreement, I can help with that as well.

Airbnb has also made it very easy to pay your taxes to the Mexican IRS, also known as La Hacienda. The Mexican government recently approached Airbnb and made them withhold taxes if they wanted to continue to operate in Mexico. This was because so many people were not compliant nor were they paying their fair share of taxes. About two years ago, they made it very simple. The Mexican government will get their portion of taxes on your rental income before you, as the property owner, are paid. This was a brilliant idea because it simplified the process and you have no fear of not being compliant with taxes, as they are automatically deducted with this change.

How much should you be charged by your property manager for Airbnbs in Cabo? Property management fees shouldn’t be more than 20% or 25%. I see many places trying to charge 35% for short-term renal management! That is highway robbery and is draining your net rental income. If you need help finding a trusted property manager, reach out to me and I can point you in the right direction.

Are you looking to buy an investment property here in Los Cabos? It makes a lot of sense with prices reaching unaffordable levels and returns so low back home in the United States. It kind of defeats the purpose of an investment to overpay for a property, doesn’t it? If you are interested in buying real estate in Los Cabos, reach out to local real estate expert Fletcher Wheaton.