Hello @Yousef Samy
I am a developer and owner of a buyers agency firm in Tulum (Jungle Realtor), I own and manage multiple properties, and my properties are generating solid returns, double digits. However not all properties are, this past summer´s occupancy lowered because most tourists went to Europe. However, we are seeing an increase in reservations for this winter. There are properties that are money-making machines in Tulum but there are also ones that don't rent that well, I can share my numbers and a couple of tips on what are the properties that rent the most, what size of unit has the most demand, lowest supply, what are the best locations, reputable developers, and things to look out for in your first investment here.
Hello @Dennis Kraft
I hope you are well!
I have seen your posts on BP regarding Tulum for almost a year now and am curious if you pulled the trigger or if you are still analyzing Tulum.
I have been asked this question several times this week and after speaking to property managers, developers, investors, tourists, and realtors in the area, I have found several factors that combined have lowered the occupancy, especially during summer.
1. Europe opened up & people felt safe to take longer flights, post COVID: let us remember that a lot of tourists hadn't been able to take vacations to Europe due to COVID, I had a lot of friends & family that went to Europe for the summer, a lot of people had been postponing trips. Close friends that live in Ibiza shared that they had record sales in their businesses. Mykonos, Ibiza, Saint-Tropez, and other touristic destinations in Europe had a really high occupancy this summer.
2. Exchange rate USD - EUR.
3. Inflation / Recession: The media has bombarded us with news about recession and inflation and a lot of people are scared and/or having financial problems and have put their vacations on hold.
4. Flight price increase to Cancun: We saw flight prices increase during summer.
5. Supply of STR units: We have seen developers in Tulum building cookie-cutter projects with a high density and cheap design/finishes, these units are not renting that well and some owners have switched to long-term rentals, which were very expensive and scarce. There are a lot of properties that are having double-digit ROI numbers but they have unique designs and features that stand out.
6. One large high season - COVID in Riviera Maya / Mexico: Travel restriction to Mexico was almost never shut down so STR occupancy after lockdown had been increasing we hadn't had a low summer season for a while.
7. Latin American Market: Usually Mexicans and Latin Americans come to the Riviera Maya during the summer and we saw the high-end nationals also traveling to Europe this summer.
8. Some Digital nomads/remote workers/children back to school and office.
9. Sargassum: We saw a couple of months that sargassum arrived on the beaches, this changes every year and there is a website that monitors it.
10. Best DJs & parties in Europe during summer.
It was basically the perfect storm that lowered occupancy and in consequence average daily rates. We had an average of 80% occupancy in Tulum that dropped 50% during summer, my properties in Tulum were still getting bookings but our rates did get lowered about a 15% - 20%, for a couple of months. Now occupancy is up to 60% according to Airbnb. We have started to raise the prices for our highest season which is winter, and we have been getting a lot of new reservations.
Winter is coming, and most touristic destinations in Europe close or drop occupancy significantly. I am constantly monitoring the occupancy and it looks like winter break is going to be pretty high all across the Mexican Riviera Maya.
Also, the new Tulum airport and the Mayan train are scheduled to be delivered the next year 2023, which is pretty optimistic I would say probably 2024 so that will also bring a higher demand to the destination. There are a lot of big commercial and infrastructure projects coming to Tulum so I do see a strong long-term market in Tulum and the Riviera Maya in the future.
I look forward to hearing everyone's opinions/facts.
Best!
First Inwould only buy a house, then it would have to be beach front for me.
The only houses in PDC that are beachfront are in Playacar Fase 1, apart from that only beachfront condos, if you go further down south towards Tulum there are some beachfront houses available in Soliman Bay and Tankah bay, which are beautiful.
Hello @Nicholas Copelli
I am curious to know which development you are talking about, I know most developers here well, perhaps I can share some insight on their reputation and past projects.
I also have the paid Airdna for Playa del Carmen if you are interested in knowing if the rental rates are true.
Best,
S
I almost fell off my chair reading this and the article. Like everybody else, I totally understand, appreciate and respect that, as a realtor, you'd help your clientele secure financing if they can get any. I'd do the same if I was in that position. However, do you really think that suggesting that there are many options and that you could finance a property in Mexico for as low as 4.2% is a good idea (knowing that nobody will get that), especially when you get featured as the resident expert in the article? If I hypothetically had to help clients find financing in Mexico, I'd be careful about what I write if I want to help and not risk ruining my credibility. The great thing about forums like these is that we can write what we want but we can't write just about anything, as we'd stand corrected if we do. Even a little nobody like me who' doesn't have a fiduciary duty towards clients pays attention to what he writes.
But let's get to the substance of things and have a healthy debate/conversation, for everyone's benefit.
You have a list of developers offering developer financing. As you mentioned in your article, it's not common and, as you know, it's even less so now than when you wrote your article. While I totally understand that anything starting with 1 name and can get empty at times, is list not giving a wrong impression?
Speaking of lists, you refer to your lists of mortgage brokers. I don't know if you've ever financed a property in the US or Canada but there's no such thing as a mortgage broker in Mexico like we know them in the US and Canada and certainly not for foreigners. It'd make no sense given the lack of attractive offerings and the very limited number of potential clients. Are you talking about the cross-border financing companies mentioned in your article, which there are only two of? More on those further at the end of this reply.
Getting to your article now.
Can you explain how your number 1 financing option is even financing? That's merely a payment plan and that's what I've called fake financing in my replies here, as some unscrupulous developers sell it as financing. That's an especially outrageous thing for them to do given that, in fact, the buyer is financing the developer and not the other way around. If that qualified as financing, it'd mean that every developer would be offering financing.
Nobody can have a loan in Mexico to finance a property at 4.20%! Can you give us the details of that loan and I'll explain why that's not a loan to finance a property in reality. Like since when is a personal loan a loan to finance a property, in Mexico or any other country for that matter? In any case, what would be the point of suggesting you can get a loan to finance a property in Mexico at 4.2% when, in reality, you can't get a loan close to or well into the double digit interest rates, which has always been the case in Mexico. Anyway, everybody understands that you can't get a loan to buy a property in Mexico at a rate (much) lower than that of a mortgage in the US. After all, while the FED funds rate in the US stands now at 2.50%, the equivalent in Mexico stands at 7.75% or more than 5% higher. If you can get me a real loan on a Mexican property at anything close to 4.20%, I become your best client and we buy the whole country together. Seriously! ;-)
I'm not sure what special tool you have to compare the interest rates between Mexican banks as these are all over the internet. However, what's the point anyway? Wouldn't have it been more helpful to your readers to mention that interest rates are well in the double digits before people get false hopes and lose their time investigating that option? After all, do people really care whether they pay 11% with bank A or 12% with bank B? It's likely few people will be interested in these loans when they find out how expensive they are. If you get a great deal, such an interest rate could still work but then, does it even make sense to buy a property in USD that generates income in USD and you borrow in Mexican pesos? You'd be taking a huge foreign exchange risk, especially when the peso is close to historic lows against the dollar. But I guess people who sell these loans figure that you've got to figure that out by yourself. Finally, the general rule is 50% LTV. 70% is rare, especially for foreigners.
Finally, the cross-border finance companies. I'm surprised you'd send clients to those, unless they have no other option and absolutely need the money. Can you explain what great results have you been able to get? These are the companies (I mentioned in my reply above) who advertise very low interest rates but, get this, your principal increases over time! So if you convert the cash-flows into a normal-style mortgage, you find out that the real interest rate is between 10 and 20% rather than the advertised 2.4% and 3.6%. Most of the people who have taken these "innovative" loans are in the early stages of the duration of the loan so they have low monthly payments so they might be happy. But wait for a few years and they're gonna realize the mistake they made as their payments balloon. Then, they might want to get out of the loan but the creators of these loans aren't stupid. The prepayment penalties have been determined in such a way that, whatever you do, you end up paying a double digit interest rate over the original lifetime of the loan.
Just the fact that companies would sell such a complex product under false pretences and not explaining to people how these exotic products really work tells me all that you need to know. As I have repeated over and over again in my replies to posts, Mexico offers great investment opportunities and the country isn't full of crooks like some people suggest. However, let's not be naive either. Yes, you need to work with people who know what they're talking about but you also need people who tell you the things like they are. Unlike with these finance companies who advertise a super low interest rate when, in reality, the real interest rate is super high.
If, outside of developer financing, anybody bumps into some cheap financing in Mexico, feel free to send me a DM. We'll calculate the real cost together and, if it's really low, we'll share with everyone .
Mike, I just read this, honestly, what´s up with all the hate in your response, I understand that people have a need to be right all the time but you don't need to do that by bringing others down just to reaffirm your sense of power and knowledge in a bigger pockets forum. Drop the sarcasm and please stop writing about risking my credibility, especially when you misread the article. We are both trying to help people invest safely in the Riviera Maya. We are both humans and we are not perfect but I do the best I can to share the knowledge I have by being an investor, realtor, and developer in the area for 8 years.
You wrote: "Even a little nobody like me who doesn't have a fiduciary duty towards clients pays attention to what he writes." I encourage you to also pay attention to what you read, I invite you to reread it carefully, so you don't invest the readers and your valuable time writing a response on something that you read incorrectly:
You wrote I suggested that someone could get a loan in Mexico at a 4.2% interest rate, in the article, I mention this rate under Financing Option number 3 on the article is:
"A client recently secured a 4.2% fixed interest rate, which is the lowest interest option we have found at present."
The client I am mentioning in the article refinanced in the US and got this rate a couple of years back, I never wrote about a buyer getting this rate in Mexico.
We do have a list of developers that offer in-house financing, this list has currently 10 projects, and they all have different financing options. If anyone wants to know what is being offered I am happy to share it on a DM because it changes frecuently. We also have a list of 5 mortgage brokers who have access to all the Mexican bank products available for foreigners.
It's my responsibility to share all the options with investors and then let me judge what is the best option for them. As far as cross-border finance companies in Mexico there are way more than two of them, we don't use them frequently but we have closed a couple of transactions with one of them.
I mention in the article multiple times that interest rates in Mexico are higher than in the US and Canada, I also mention that 90% of foreign buyers are CASH buyers. The real estate market in Mexico is a cash market, which is definitely a big plus since it gives stability and lowers the risk of home loans defaulting.
I wrote this article back in 2019 (Most of the article is up to date however I am going to update it, there are a couple of figures that have changed, especially after the Fed raised interest rates in the US.)
I will also record a video about this topic with a couple of mortgage brokers we have worked with especially with interests rising in the US, these options in Mexico might become more attractive to investors. I will send the link once ready.
I bought my first STR property in Tulum through a Mexican mortgage and prepaid it in full four years later without any penalty, even though the interest rate was 8% fixed I didn't have any other option, and I am happy I made this investment.
Happy and safe investing!
Hello @Erica Lopez
I wrote an article about this a couple of years ago:
https://everythingplayadelcarm...
I hope this helps, I have a list of projects that currently offer developer financing in the Riviera Maya and I also have the contacts of all the local mortgage brokers that have helped us get financing for foreigners, with interest rates rising in the US, financing in Mexico has started to be a good option for foreigners, especially because most types of these loans don't impact your credit score in the US.
I am happy to share the contacts of the mortgage brokers and a list of properties with in-house developer financing in a private message!
Hello @Amy Knoles
I can't speak about CABO but I can speak for Tulum, I know the market like the palm of my hand. I know most developers personally, their track record, and their reputation. I have lived here for over 8 years, it's a small town.
If you share the name of the project I can give you more info.
I know Gerardo and Michael the owners of Mexlaw they have been here for a long time and we have worked with them multiple times.
I think I haven't seen that floorplan you are talking about, not sure how you can fit 6 people in 500 ft2, do you mean 4 people?
I like sunken living rooms they look very cool!
Watch out for any water filtrations from the upstairs pool I have seen that happen in a couple of projects, make sure it's a good builder.
I like boutique projects with fewer neighbors, more exclusive, less resale competition, and less rental & rate competition as well. Just watch out for HOA fees because they can be higher in boutique projects if they have a lot of amenities, not having an elevator will help here, and if one owner stops paying it can mean a lot to the other owners.
I have to tell you that the price per square foot is a bit higher than the average and there are better locations in Tulum. La Veleta is not one of the nicest neighborhoods, I do like Holistika because you have a strong market that loves holistic activities that can rent your property.
I can help you review what are the average nightly rates in that location in comparable properties so you can have real numbers of your neighbors, not sure if you are familiar with AIRDNA, I have the paid version for Tulum, and I would be happy to share the info with you so you can make the best choice.
I just went to the beach today and there is no sargassum, the beaches are beautiful now, it is seasonal.
The international Tulum airport and Mayan train are still on track and planned to be ready in late 2023, this are the biggest projects of the current administration.
Regarding the elevator, you will not be able to rent to multiple people who can't walk up that many stairs and you might get negative reviews about people having to carry their luggage. Most of the tourists in Tulum are millennials & generation X, not as many baby boomers, I own property without an elevator in Tulum so I know... Your resale value might be lower because of this as well.
The aesthetics are definitely a plus there are a couple of developers that have built incredibly beautiful properties in Tulum and are killing it with super high rates and high occupancy in locations that are not the best but they are rare. If you combine both aesthetics and a top location you will have a little money-making machine!
As far as appreciation goes remember that in real estate you make your money when you buy not when you sell, as Warren Buffet once said: “Only when the tide goes out do you discover who’s been swimming naked.” So it's important to buy "right".
I am open to a phone call if you want to talk more about this.
Good luck Amy!!!
Hola Omar,
Yo soy mexicano y tengo inversiones en Tulum. También soy dueño de una inmobiliaria en la Riviera maya, representamos a compradores, cualquier pregunta que tengas con mucho gusto te puedo compartir mi experiencia, contactos y conocimientos.
Great knowledge! I didn't know how it worked in Australia, thank you for sharing. I totally agree with everything you said, I would only add that there are 3 associations that regulate the market and offer training for real estate agents: AMPI (Asociación Mexicana de Profesionistas Inmobiliarios) this is the only one that adds you as a member of the NAR GLOBAL TEAM, AMII (Asociación Mexicana de la Industria Inmobiliaria) and CANACO (La Cámara de Comercio, Servicios y Turismo) It's important to note that NOT all active brokers in Quintana Roo have a license so if anyone is investing make sure your agent has one, and its a member in one of this associations.
@Mike Lambert
I am almost always in agreement with what you post here, and I am aware of all the time you invest in sharing your knowledge with investors. However in this case I don't share the same opinion due to personal experience let me share why:
1. Most buyer agencies have access to the entire market there are some exceptions (unlisted properties, pocket listings) but it's very rare that we are not able to represent buyers in any listing they share with us. And if the developer or listing agent won't allow us to represent the buyer (99% of the deals the commission is paid by the seller) we will still share our contacts and make sure they are safe, if the deal is really good we will tell them, if they are happy and got a good deal most likely we will get referral business from them and have more investors sharing their positive experience while investing in Mexico, it's always important to keep a long term vision. I'm curious to know why you think we don't have access to all the market?
2. We have to understand that there are different types of agents and agencies here (not going to name all):
a) Buyers Agencies (Represent buyers and have access to approximately 99% of inventory)
b) Master Brokers or Developer`s In-house sales team (They have exclusive projects and represent the seller's interests, in most cases, they can only sell their inventory, so like Steve mentioned its human nature they will do everything they can to sell you their property)
c) Dual Agencies (It's not illegal here like in some states in the US, might be a conflict of interests)
If an investor follows your do-it-yourself suggestion of going directly with the listing agent, he will take a long time and will have to talk to a lot of people who will automatically register their name, email, and phone number in their databases. If he then likes one of these properties and wants a buyers agent to represent their interests, we as buyers agents probably won't be able to help him because developers and master brokers will claim they received the investor first and they already have him registered in their database, it's very weird however some won't respect the buyer's decision even though we have a buyers representation agreement! This is when problems arise and a lot of investors don't know this.
3. In Quintana Roo most agents have access to the same inventory, most listings are not exclusives you should be able to buy any project with the agent you want and trust, we will probably all send the buyer the same options based on their needs/wants. If you already contacted an agent it's most likely that he has registered you on the developers/master broker databases so if you decide to work with someone else they most likely are notified, you will only have a lot of agents looking for the same properties for you, we like to respect the time and effort of all representatives, so if you initially didn't pick a buyers agent to help you out in the first place, I would recommend working with the first broker that sent you that property (if he is licensed and you trust him). When we have the first call with a buyer we always ask if he is working with another agent and if he is we ask for a representation agreement if not it's just a waste of time for most parties involved and it can end up being a conflict.
4. How much time does the buyer have to be able to scout for properties, does the buyer want this to be an active investment or a passive investment? If an investor likes the do-it-yourself approach you mention I would suggest getting a buyers agent first to send you comparable properties and if you find something you like on Point2homes or other websites take a screenshot and send it to your buyer's agent to get his point of view and to add it to the showings if its a good option.
I know your intention is always good however sending investors directly to listing agents is sending them to the unknown. They don't know what type of agent they will get, and unfortunately due to the registration process I mentioned, If they contacted the master broker or the developer directly at first they might have problems trying to add a buyer's representative to watch out for their interests.
I hope that sharing how the inside process of dual agencies, master brokers, and developers work helps investors get a licensed trustworthy buyers agent at the beginning of their scouting process.
Safe investing!
Hello @Kay So
Sure thing ill share the contacts for the property managers in a DM.
Mar y Miel`s first phase was on the market for some time so maybe they had to offer strong incentives to buyers, when did your friend buy? I'm thinking your friend bought at presale maybe at family & friends price list and got a large discount. I am reviewing our internal MLS and the lowest price I see on the first phase was actually in MXN so maybe it has to do with an exchange rate, converting the MXN price to USD in our current exchange rate the starting price for phase one was around 320K USD for a 2BD 2.5 Baths. I am trying to remember when they launched the first phase I'm pretty sure it was 2019 3 years back, congratulations to your friend she got a really good deal! According to our STR market studies villas, houses, and townhouses rent really well, I personally like the architect and the design of the Mar y Miel villas, I don't think paying double is the best way to go right now, we can help you sending you comparable properties so you can decide which is the best way to go and what options you currently have.
To answer your last question: Yes it's normal for developers to raise the prices we call it controlled appreciation (if you invest in the initial stage of the project you will get the highest discount, the risk is also higher during this stage) and also there is a market appreciation over time if your friend bought when they initially launched back in 2019 and now the prices have doubled that means around a 30% yearly appreciation which can happen in Tulum.
It's not normal for developers to give a 50% discount it's actually a huge red flag. Usually, discounts are lower than 10%, If I see something higher than that the prices might be inflated or there is something going on.
Hope this helps!