All Forum Posts by: Mike Lambert

@KC Frank

Sounds like it'll be for a large part a lifestyle purchase, which makes it easier. However, when it comes to cash flow and appreciation, there's something important to understand. In such a vacation market, cash flow and long term value oftentimes go hand in hand. It's not like in the US where you have the cash-flowing low appreciation Mid Western-style and the negative cash flow high appreciation Californian-style market. If there's no cash flow, there's not much long-term property value increase because very few of the kind of properties that you'd buy are primary homes and therefore they don't have that intrinsic value. This is especially true in a resort, in which no home would probably ever be a primary home. So, the long-term value is closely tied to the cash-flow potential.

When it comes to the whole area, that ship has sailed in my opinion. Of course, I don't know what your time horizon is. The long term price trajectory will partly depend on whether the sargassum issue can be contained or whether it gets worse and on how much overbuilding eventually takes place.

If you want to be in a resort, the resort is more important than the location in my opinion. Most people won't care if it takes 10 minutes longer to go to a resort if it is better. I tend to put my mouth where my money is so, if you don't want to be in a resort, I'd go for Playa del Carmen, which is easy access from the airport.

Something important to understand is that your guests (and yourself) typically will have to pay to use the resort facilities. If they want to use the resort more than once or twice during their stay, it's probably gonna be cheaper for them to take the all-inclusive package. In theory, this could work if the resort is for example close to Playa del Carmen, your guests want to use it once or twice and go to town the rest of the town. Problem is I'm not sure how many people would do that since you typically have the resort lovers and the resort haters and people who want to enjoy Playa del Carmen typically want to be downtown and take advantage of the walkability. So, if I was to buy in a resort, I'd want proven cash flow at the very minimum.

@KC Frank

Sounds that this kind of opportunities would work for your lifestyle but make sure you understand how much money you're going to make and what the rules are, as it might be way less than you think and also there are rules attached to your investment that are outside of your control. I've been investing in the area for years and always avoided them like the plague.

Also, if it was me, I'd put my cash in a more profitable investment and stay at an all-inclusive resort "for free" using the profits of that more profitable investment. These resorts are cheap so I rather be the renter than the owner. Moroever, it'd be better from a lifestyle point of view as I can stay in a different one each time and so it would be way more exciting ans less boring.

Hi Lexi,

Houses are mind-blowing cheap in Detroit compared to Miami. Yet, Miami has been by far the better investment. The question is also how much rental income you're going to be able to make. In Punta Cana, you'll have tho contend with the fact that most visitors want to stay in all-inclusive resorts and you can't compete against that while, in Tulum, you might have to contend with overbuilding of epic proportions and the ensuing competition. My advice to you: use Airdna to try to estimate future profitability. You might be in for a surprise.

@Sebastian Papworth the Dominican Republic offer some limited tax incentives but they are specific to some properties and you do have to pay taxes there. I don't know who you talked to but realtors in the Dominican Republic are unlicensed and unregulated so everybody and their mother can become one and they do. There are some good and professional realtors there but take what you're told by them at face value at your own peril. Moreover, even if it was true, foreigners have to pay taxes in their own country anyway so that would be irrelevant.

 @Jarrett Fogelman

Self-promotion is rightfully not allowed on the forum and so I don't want to write anything that potentially could be interpreted as such. I therefore answered your question by direct message.

@Jarrett Fogelman

The answer will depend on the rational behind your unwillingness to but a property just by yourself.

If you just want to spread the risks, you can invest through these crowdfunding platforms. Alternatively, you could buy a property with other people (you know or don't) under a fractional ownership structure or you and fellow investors could set up a partnership, which would buy and hold the property.

If you don't want to get involved, you can be a passive investor and invest in the deals of active investors. For example, I invest internationally and most investors don't have the time, knowledge resources or willingness to do it by themselves and therefore some of them invest in my deals. Plenty of investors do the same thing in the US.

Hi Maura, sadly you can pretty much forget DSCR loans outside of the US and loans for land or construction internationally, with very rare exceptions. It's good that you have the HELOC option though.

@Nikki Stoddart

You first have to pay taxes in Mexico. Assuming you buy in the forbidden/registered zone:

1. If you buy through a fideicomiso, gross rental income from the leasing of real estate, property and time-sharing services by a nonresident individual is subject to a 25% withholding tax. No deductions are allowed.

2. If you buy through a Mexican corporation, you'll pay the 30% income tax after deductions of expenses.

Bear in mind that the expenses in Mexico are much lower than in the US.

If you use a Mexican corporation, there are costs associated with it and you'll have to lodge a tax return in Mexico. Therefore, the general advice is to go for the fideicomiso if you buy one property and the corporation if you buy multiple properties. Bear in mind that there has been talk of a fiscal reform whereby the deductibility of expenses within a corporation would only be allowed if the corporation has a real business and merely renting properties wouldn't qualify as a business.

The, you'd be taxed at the US level but you should be able to deduct your taxes paid in Mexico by virtue of the treaty for the avoidance of double taxation between the two countries.

For many Americans who buy in Mexico, this means that they'll end up paying the same amount of income taxes as if the property was in the US.

I'm not a tax advisor so don't take my word for this and consult with tax specialists as needed.

Hope this helps!

@Pantelis Papamanolis

I had an afterthought about my previous reply to you. When deciding where you want to invest and in what kind of properties, you might want to think where you have or can create an edge. For example, our market occupancy rate is supposed to be around 50 - 55%, which is given that it's a seasonal market. We should be rented the whole summer and have some occupancy in the shoulder seasons but occupancy in the winter, although higher than before the pandemic, remains low and most properties are sitting empty. Because we have a "secret sauce", my investors and I enjoy a 90% occupancy this low season - winter (which by the way is why I mentioned before that our net returns would be highly misleading for you because they're so much higher than what others are getting).

I understand you're new to the game but you can still create your own secret sauce. You're Greek, you might speak Greek and have family and connections in Greece, know the culture. While not as good as Spain or Portugal, Greece shares some similar characteristics like the low property prices and big tourism industry so it could still be a good market for short-term rentals. Then you live in Switzerland, which has lots of wealthy people and expensive properties. Do you see where I'm going?

@Basit Siddiqi

All that you mentioned is spot on and, yes, "poor" is a relative term and is in the eye of the beholder. I'm originally from the European Union, where unemployment is structurally significantly higher than in the US. So from my perspective, 11% isn't actually all that high. Also, it's important to understand that, due to the European welfare systems, unemployed Europeans have more buying power than their American counterparts.

This being said, Spain is clearly not the wealthiest country in Europe, especially compared to Northern European countries. But they (proportionately) got significantly better since the Global Financial Crisis, when their unemployment rate was above 20% and their young employment rate was way higher.

$60 to $120 for a room isn't bad. You need to consider the price of the property and the holding costs though. Not having looked at the figures, I'd bet it's much more profitable than in New York given the property prices there, notwithstanding the legal issues.

Getting back to what I'm doing, the unemployment rate in Spain has absolutely nothing to do with our profitability, which is dependent on visitors from wealthier countries continuing to spend their holidays in the Costa del Sol and the constraints to further development (and competition). And like there's only one Florida and California in the US, there's only one Costa del Sol in Europe. But there are plenty of areas I wouldn't touch in Spain as there are many areas you wouldn't touch in the US.

@Pantelis Papamanolis

To answer your questions:

1. When it comes to the US, I'll let American members answer that question as they know better since I'm Canadian. I know that it's all over the place and it depends on what you call a good area so I'm not sure it'd be that easy for them to answer.

2. When it comes to Europe, I'm focusing on the Iberian peninsula (that's Spain and Portugal) for short-term rentals. I don't mind sharing my figures if you really want to see them but it would be counter-productive as they're not reflective of the market. This is because I'm buying with investors and I bring value to them by ensuring that, if they invest with me, they make more money than if they were investing by themselves while having little to do and little worries. That's a tall order and that forces me to find off-market deals that are significantly better than what you can find on the market. Therefore, if you want to invest in short-term rentals, you should use a tool like Airdna to get accurate estinmates.

Hope this helps!