All Forum Posts by: Sebastian Papworth

I'm unsure if @Mike Lambert is referring to me. If that is the case, I would like to clarify that it was never my intention to personally attack anyone. My aim was simply to share factual information. I have been a devoted follower of this blog for over 5 years, and I distinctly remember a post from Mike four years ago in which he stated: "I have been investing for a few years in the Riviera Maya and was recently presented with a private condo deal in Tulum. I turned it down as I believe it is now too late to invest in Tulum."

However, it is important to acknowledge that the past 4 years have seen Tulum experience its highest income-generating period in history.  As I mentioned in a previous post, predicting the future accurately is a challenge that none of us can accomplish. Tulum is currently undergoing significant changes and developments. While the days of charging $800 USD per night for a palapa in the Jungle may be behind us, it does not mean that there are no longer attractive opportunities in the market. Once the ongoing projects are completed, accessibility to Tulum will improve, especially with the new Tulum airport. Contrary to what you mentioned, the new airport is actually much closer to Tulum compared to Cancun airport. It is only a 20-minute drive by car and will be even more convenient once the Mayan Train is operational, offering high-speed transportation with additional amenities. The train will significantly reduce travel time by over an hour.

It is worth noting that several schools, such as The Green School and the German International School of the Riviera Maya, along with shopping malls, are being constructed in Tulum. This transformation is attracting more families and contributing to the city's growth, leading to a shift in demographics. Consequently, there is an expected increase in demand for long-term properties, transitioning away from short-term accommodations. While there may be an oversupply of studios and cookie-cutter units, it is crucial for investors to focus on properties with unique designs that stand out from the competition and have a long-term vision of Tulum. Exploring the top listings on Airdna can provide insights into how properties that offer something distinctive achieve successful outcomes. Maintaining high occupancy rates requires standing out from the crowd. Although nightly rates have decreased due to the significant inventory delivered this year, among other factors, it is important to consider the rising monthly booking demand, which can be observed on Airdna under Occupancy - Booking demand. I can also share my listings to provide examples of my occupancies and nightly rates. Out of curiosity, do you have any investments in Tulum Mike, if so how are they performing? 

I would recommend engaging in conversations with locals and individuals who speak Spanish, possess firsthand experience living in Tulum, and are part of the community. The Tulum market undergoes rapid shifts due to the extensive projects being constructed. As with any market, there are risks and rewards that need to be carefully considered.

In the words of Wayne Gretzky, "I skate to where the puck is going to be." If you are interested in investing in a market with explosive potential similar to what Tulum has experienced, I would be delighted to share insights on where prominent players are currently investing in Mexico. However, the decision ultimately depends on your risk tolerance and specific needs and preferences.

@Daniel Alvarez Dismissing the entire Tulum real estate market based on an oversupply issue in one specific sector is an oversimplification that fails to acknowledge the nuanced nature of the industry. Just as encountering a faulty vehicle does not render all cars unreliable, the saturation of the 500 ft2 studio and 1-bedroom market in Tulum does not diminish the investment potential of other segments within the region. 3 bedroom + properties are still yielding solid returns (double digits). I own a 3-bedroom penthouse and a 4-bedroom townhouse and I can share my numbers so you can see how much properties are making, I can also share the paid Airdna version of the Tulum market in case you haven’t purchased it so you can make your own research.

It is essential to consider the current infrastructure projects in Tulum. One such project is the construction of a $13 billion train network, which is one of the largest infrastructure undertakings globally. Notably, Tulum will have two train stations, surpassing even Cancun. The federal government is also building an international airport projected to receive 5.5 million tourists annually. Tulum's strategic location between two national parks further enhances its appeal and limits its potential for growth. The city is situated between a UNESCO World Heritage site and the newly established Jaguar Park, which is three times larger than New York City's Central Park.

Why do you think the federal government is massively investing in Tulum the answer lies in the city's projected growth.

I understand that investing in Tulum has become more challenging, but I still believe there are opportunities to make a profitable investment. It just requires looking at real estate opportunities from a different perspective. For long-term sustainable wealth, rather than short-term gains, there are still viable options available, especially for those who can envision what Tulum will become in the next 3-8 years.

I also want to share that there's another location I believe is on the brink of exploding as an emerging market due to the Mayan train. All the top players who made Tulum go viral are now opening their projects there (not Mahahual). If you're looking for an emerging market, this might be the right place to consider. I am happy to share in private.

Hello Aileen,

You're right, closing costs for foreign investors are higher in this area of Quintana Roo Mexico (Playa del Carmen, Tulum, Cancun, Akumal, etc) compared to the US. However, one significant advantage is that property taxes here are among the lowest in the entire continent. As an example, a $200,000 property would typically incur an annual property tax of approximately $200. In Mexico, property tax is calculated at 0.001% of the cadastral value of the property. In comparison, New Jersey's property tax rate is at 2.49%. This means that in the long run, you'll end up paying significantly less in taxes in this region of Mexico than in the US.

When it comes to Capital Gains, I've never seen an investor pay the full 35% rate. There are multiple tax strategies available to lower that amount by more than half. I can provide you with the contact information of my CPA, who has a PhD in Mexican taxes and can assist you further in this matter.

Regarding agent commissions, it seems that RETA's commission is unusually high, charging around 10-12% to the seller. However, the average commission for a listing agent here is 6%, similar to the US. It appears that the owners you encountered may not have received proper advice on this matter.

I hope this clarifies some of the key points for you.

Best regards,

 Sure thing Jerrod, we would be glad to share the best investment opportunities in Playa del Carmen. I sent you a DM. 

Hello @Jonathan E Francois
You are on the right path if you're considering investing in a 4-bedroom villa in Tulum, Mexico, however, it's important to take location into account. While owning a property on the other side of the highway in Retorno San Jose or Riviera Tulum may seem appealing, it's not the best idea. You'll be far from the beach, and with the increase in supply in Tulum, it's all about location now.

Instead, I suggest focusing on being as close to the beach as possible or facing the Tulum National Archeological Park (Jaguar Park). Investing in a lot on the other side of the highway will put you 7 km away from the beach (a 20-minute drive), which may not be worth the investment unless the property is unique and low-cost. Plus, there are already 4 bedroom villas generating income for a lower price point in a way better location. 

Building in Tulum can be a challenge, so you'll need to find a good contractor, I recommend being onsite supervising everything if you want the project to come out in the right delivery times and qualities. (If you go that route we have worked with a couple of good builders and can share the contact info) That said, there are other locations where you can get a 4-bedroom villa for less or a similar price point.

For example, the Tulum National Archeological Park is a project that just got announced (Parque del Jaguar) is a federal park with 1,000 federal protected hectares (2471.05 acres) (just to give you an idea Central Park in NYC is only 843 acres), it will have jogging and bike trails with views to the Caribbean, ancient Mayan ruins, 7 new beach accesses, a pier for boats in front of the lighthouse of the park, plant nurseries, viewpoints, butterfly farms, and cenotes. This is HUGE for Tulum! Here is a video it's in Spanish but you can turn on English subtitles: 

Alternatively, the Veleta or Region 15 or R8 is the trendiest local spot, with cool bars, restaurants, and shops on 7 sur street. Region 8 is the closest area to the beach you can invest in, and it will make a big difference in your investment and your resale/exit strategy if you ever want to sell. So, my suggestion is to keep these locations in mind when considering investing in a 4-bedroom villa in Tulum. 
There are other premium locations but the price point can be slightly higher for a 4BD villa. 

Hope this info helps! 

I sent you a DM with a helpful guide to investing in Mexico, I'm sure it will help! 

Hello @Zach Edelman

You have both options you can buy land and build or you can buy turnkey properties most people buy turnkey. There are still some unique Oportunities available in the market but you have to make sure you are buying at the right price, the right location and with key features that make your property stand out from the competition.

If you want to build this investment might be more active since I would suggest to supervise or have someone you trust in the construction site to make sure everything goes according to the budget, quality and time. 

Sunny regards from Tulum! 

@Mike Lambert

I concur with the widely held notion that a few years ago, the properties in Tulum experienced a surge in their occupancy rates due to low supply, leading to a remarkable increase in average daily rates (ADRs). However, given the current situation, it is essential to engage in extensive research, scouting, and analysis, and invest in prime locations and features that distinguish one's property from others. Platforms like Airdna offer insights into the top-performing properties, which investors can model and improve upon for better performance.

From my perspective, Cancun, Playa del Carmen (PDC), and Tulum share similar risk-reward profiles, with Cancun being the most mature, followed by PDC and then Tulum. Although the three regions have different urban development plans and geographies, some growth trends observed in Cancun have been replicated in PDC. I am willing to engage in detailed private discussions on the future of Tulum and PDC.

To determine the growth potential of the real estate market, I have analyzed the supply and demand for hotel rooms and short-term rentals (STRs) in both cities. Although Tulum need not have as many hotel rooms as PDC, understanding the current demand for Tulum can help identify the sectors with the highest growth potential.

It's worth noting that many STRs are now transitioning to long-term rentals due to an oversupply of rentals and a shift in preference from Airbnb. The construction of the Tulum Green School has resulted in a long waiting list of families wanting to relocate to Tulum, leading to several investors purchasing properties in the locations nearest to the beach or national parks, with delivery dates scheduled for 2024/2025. Villas and houses are also selling and renting exceptionally well.

As you may be aware, the Tulum and PDC markets are dollarized, but many soft and hard costs are in Mexican pesos. The strengthening of the peso, driven in part by nearshoring initiatives such as Musk's Gigafactory, has led to several price reactions in the Quintana Roo real estate market.

@Juan Mora

There have been numerous ambitious projects close to the Coba Ruins that offer off-grid self-sustainable communities with a vast array of amenities. However, only a few have been built and proven successful. Among these projects is the impressive Azulik Uh May museum in Francisco Uh May, which has attracted a lot of interest in land buying in the area. Many people are interested in creating an off-grid home in this secluded jungle location, primarily for disconnection and relaxation purposes.

If you're interested in short-term rentals (STRs), investing in this area may not be the best option. The project seems to be more targeted toward the local community and long-term rentals. In my opinion, there are better locations for STR investments.

I beg to differ with @Mike Lambert, I don't think the "ship has sailed in Tulum". 
The cookie-cutter projects in Tulum have had lower occupancy rates due to various factors. However, I believe that the large infrastructure projects scheduled to be completed next year will adjust occupancies. For instance, the construction of Tulum Airport has begun, with plans to have five million annual passengers, including a station for the Mayan train that will connect the entire Yucatan peninsula. 
If you compare the supply of hotel rooms: Tulum only has around 10,000 hotel rooms while Playa del Carmen (Solidaridad) has approximately 45,000 hotel rooms, which is why big hotel chains are planning on opening in Tulum. 

Tulum has significant plans for the future, and many Mexican politicians and private sector players believe that it will surpass Playa del Carmen.
Overall I believe specific locations in Mexico are great investment opportunities, as the world splits into east and west, bringing production closer to home is becoming a priority for major Western economies. Mexico could play a key role in this story, as evidenced by Elon Musk's announcement that he will open a Gigafactory in Nuevo Leon. Look at the exchange rates between the MXN and the USD. I think big shifts are happening...

Sources: 

https://thecancunsun.com/airli...
https://mexico-now.com/sedena-...@Mike Lambert

Hello @Brian Amacker

Congratulations on your investment at Edena! 
I can share a couple of insurance agents' contacts in the area, so you can get quotes and compare coverages and prices. 

Basically, the agent will send you a form asking you for the value of the property, the contents of the property, electronics and appliances, glass breakage, how many stories the house/condo has, the distance from the ocean, etc. 

The price will vary if you hire coverage for hydrometeorological damages, which I strongly suggest you do even though Edena is on the other side of the highway. 

For example, on one of my properties in Tulum, I pay around $1,500 USD a year so approx. 125 USD a month, curious to know how much on average insurance for a 3 or 4-bedroom property in the US or Canada costs.