Did they suffer loss of principal during down cycles (or even up cycles for that matter). 

Many people are suffering from losses.

They are suffering from their own stupidity, being "over-leveraged", and the investor from greed/fear inducing a good old fashioned Bank RUN on them, which they don't of course have the funds to pay out without bankrupting themselves.

From talking to locals, there's a couple of issues than need to be addressed, some are the non-ecological practices that some of those developers have, unfortunately, our government profits from this investors and allows them to destroy manglers (which are the natural water purifying system of that area) dismantling hectares of mangroves and degraded the habitat of resident and migratory species burying animals alive.There's proof of fecal material floating beneath the city of Tulum, only 20% of the water is sent to the water treatment plant, there's no infrastructure for the exponential growth.The landfills in the middle of the jungle that is leaking hazardous pollutants into the freshwater system and that something that developers won't tell you.I love my country and it would be a disaster for everybody if this place ends up like some other great beaches around the world, that are completely ruined by greedy investors not following the rules.There's no urban or comprehensive master plan, and one of the risks is that Tulum will be like Playa del Carmen is today, overgrown and with environmental devastation.I will advise doing a lot of research before getting something in Tulum, different country, different rules, and practices.

Regardless of paper returns, as you noted, these are the homes located in areas that suffer first and the most in an economic downturn or other times of distress. 

If you want 100% of your investments in public equity, that is fine and you will reap those rewards or suffer those losses.  

It just obviously won't be market specific.On a personal rezoning I did for a house hack new-construction triplex, I was asked numerous questions about how many bushes and trees I was going to plant.

I'm not sure if it was just that we planted the seed but the timing wasn't right at first?

Keep any plants or tree/branches away from the house even the roof.

;-) Your comments are refreshing for me, as a fund manager, to remind me that we can't let subscriber communications suffer in the midst of a major economic disruption.