All Forum Posts by: Matt Ayoub

Thanks everyone. Yes I greatly value beyond debt free and am more focused on creating a quality of life situation where I can live simply (frugally) but in a beautiful home in a beautiful place like San Diego or Cabo. My current plan is to add one more in thailand and one in Spain and spend 3 months a year in each location while Airbnbing then when I’m not there. As I age and get less mobile I have access to inexpensive nursing / maid care and cheap medical in at least two of those countries and I can always sell a trophy asset if i need the cash.

Never heard of them. I think it’s a wise strategy to try to establish your listing on Airbnb, Verbo / HomeAway, and maybe even TripAdvisor (which seems to have totally stumbled In their integration for flipkey and booking.com which is clunky but a potential future giant in the space). My experience has been massive swings in share between Airbnb and Verbo / HomeAway  year to year and I definitely believe I have more total bookings as a result of having both. A bad review, cancelled booking, or something else can certainly impact your search placement results... so it’s best not to have all your eggs in one basket. I do see Airbnb as a slicker product and strengthening their position in my market which was not their traditional space (higher end rental in mexico).

I have two rental property investments. 1 SFH in San Diego purchased in 2010 for 900k, currently valued at 1.4m, generating $5,500 in rent a month. 1 SFH (+ guest house) STR / Airbnb in Cabo Mexico purchased in 2016 for 800k, fully furnished / renovated for 150k, and now generating about $10k per month in revenue and valued at 1.4m+.

Having a high paying corporate job and choosing to live very frugally I made the decision to pay off the 4.75% fixed rate loan on the San Diego property and used a large portion of my savings to pay cash for the Mexico property. Does that make me a bad investor? Why would I do that?

Well I don’t assume I will have a high paying job forever and I have 3 kids. For me the worst case scenario is now a guaranteed roof over our heads with no major bills (granted Cali property taxes at 1% are not insignificant). I own outright two very nice properties and can choose to live in one and rent out the other and hopefully provide my family with a decent life in a beautiful place almost no matter what. I can further choose to supplement my income as a Starbucks barista or similar and exit the corporate rat race fully.

Anyway curious about your thoughts? Smart or foolish? Any strategies to consider unlocking value or diversifying further? How to mitigate future risk?

PS I currently work, live and rent overseas.

@Michael Baum what’s interesting is that the homes in the prestigious Palmilla, just one hillside over, with far higher HOAS but essentially the same location and views, and arguably not quite as good beaches below, sell for 5-10m. 

@Michael Baum thanks. I honestly don’t rent it for less than about $500 / night. What I’ve noticed is Airbnb sends extremely low price tips for nights that are already booked which I have accepted as it doesn’t impact me. I don’t really understand why they do that (or if there is any marketing benefit to accepting those tips) but that is what you are seeing. If you try to make a booking the price range is about 500-1000 / night depending on seasonality.

Thanks @Jim Chuong ! I was initially looking in Huatulco, which is beautiful, but a 7-10 hour flight through Mexico City. I liked the geographic isolation of los  Cabos, the rugged Pacific coast and the marine life in the sea of Cortez. It’s a great golfing and fishing destination, with easy proximity to Cali, very low population density / pollution, and massive growth in resorts and tourist volumes past few years. The plan was always to Airbnb what could be a longer term retirement home, so I went down for a long weekend and identified 3-4 viable properties. While a renovation, this one came with a priceless forever view, a great lot with guest house, and lower HOAs, rising to the top. It was totally battered by hurricane odile, so I sent an extreme low ball offer which was rejected. Tried again a little higher - rejected. Third try they agreed to sell. I then toured the property with 4 contractors (taking scrupulous notes on what they thought needed to be done). Great concrete bones, brick ceilings, and tile but a lot of work to be done otherwise. I asked teach for a turnkey bid and compared materials and pricing. Lowest to highest bid was a 4x differential and I went with the lowest. Renovation took about 6 months (lots of lessons learned but we made it happen). In parallel I furnished it head to toe through amazon, Costco, and a few other online stores, shipping down to cabo through a freight forwarder in San Diego. Then hired a great photographer, struck the PM deal with my realtor and off we went. If you search Airbnb for a 4 bed with 10 guests, in Rancho Cerro Colorado, and look for the stunning sunrise over pool profile pic, you will find our listing. We feel very positive about our traction renting it and feel grateful to own such a beautiful property ... clearly a home like this would be totally out of our range in the more developed world.

@Mike Lambert It is fair to say I’m in the camp of enjoying owning a beautiful home vs chasing a particular return. For me it’s a potential retirement option as well and is generating way in excess of its cost. I’m also enjoying the process of running a small business.

What's interesting is how rapidly the Cabo corridor has developed and how few oceanfront SFH there are now. I think the capital appreciation will be very good longer term while condos will see excess supply and more volatility.

Would love to learn more about units selling for 200k that yield 60k per year. Riviera Maya is beautiful and those are impressive financials.

I agree that Mexico is not that complicated and language not a major issue. Also some properties, eg in Cabo, sell in dollars not pesos. Taxes aren’t super complicated but you likely have to file in both jurisdictions and US citizens are taxed on worldwide income.

With regard to crime, it is a serious issue. We saw a spike in Cabo when they took out el chapo. This was rapidly addressed, but some areas of Mexico really are quite dangerous and may not improve anytime soon.

No worries at all. Always happy to help and can suggest contacts on the ground if helpful.

@Jennifer Velez @Michael Baum Hi there. Yes i do have a vacation rental in Mexico (San Jose del Cabo). A few comments that might be helpful.

1. Financing is hard to get in mexico although you will find sellers willing to finance 

2. The market (at least mine) is not very fluid so days on market are much higher than a hot market in the USA. Something to be conscious of if you think you may need to exit quickly.

3. If you are a cash buyer, you can score some amazing properties. Our place would be 10-20x more expensive in San Diego. It would be considered a magnificent home + guest house with beautiful beaches below, yet it's valued under $1m. HOAs are about $3,000 per year and include excellent gated security. This is low HOA compared to golfing communities like Palmilla which is just next door.

4. Obviously you need a PM on the ground. We give ours 10 percent of revenue to greet guests and manage the staff, manage turns, bills, taxes, guest concerns, etc. We handle all sales and marketing ourselves on Airbnb and HomeAway and hand over to the PM once the booking is made.

5. You will see some seasonality. We are running at 80 percent plus occupancy Nov to May at more than $500 / night. Lots of snowbirds and Canadians. I recommend somewhere with direct flights from major cities. Los Cabos is less than 2 hours from LAX and has a major international airport.

6. I wouldn’t say we have a lot of party crews, our place sleeps 10 and tend to attract multigenerational families or groups of friends. They are comfortable renting a car and love the private pool and spa, gardens, views, grilling and chilling, etc. I have been raising our weekend rate with a 3 day minimum to at least extract more cash from the long weekenders.

7. Utilities on a larger property can be super high (we installed solar and it’s payback appears to be less than 4 years)

8. Staffing costs are low, pool, gardener, maid, handyman very reasonable. Maid does an amazing job.

9. While our community is STR friendly the government is becoming more active and the expectation is you pay taxes (not the case a few years back)

10. You need to be conscious of potential weather events. We installed aluminum hurricane shutters to protect our investment. In fact we bought our place super cheaply from a divorcing couple who saw major damage from hurricane odile. We managed the turnkey renovation (sweat equity) remotely and it worked out great.

11. I’m not really a financial whiz so hard to say exactly what returns are but we generated 115k in top line revenue last year and with around 50 5 star reviews across both channels are starting to tweak pricing and profitability up.

I would love to post a link to the property but not sure that is allowed.

Matt 

San jose del Cabo (los cabos), Mexico.