Yucatan, Mexico sure seems like a little piece of paradise. Places like Tulum and Playa Del Carmen are booming with new developments popping up all over the place.
I am looking at some of the brand new developments over there, and there are many turn key opportunities that guarantee 8%-10% ROI for a fixed term. Seems like not a bad idea to mix an investment opportunity with being able to own a piece of own real estate in a great vacation spot.
Are any of you investing in this type of real estate? What are your thoughts and experiences?
I invest in pre-construction condos on the Riviera Maya because I'm connected to the developers and I can invest at large discounts below the project launch price and I get financing from the developer. I don't invest in these turnkey opportunities though, as I think that an 8% to 10% ROI is a lousy return for Mexico. The developer makes most of the money. I prefer to rent by myself and I intend to make much higher returns than that.
@Mike Lambert - Thanks for your response. There is money to be made in the appreciation of the property, as you say, when you do pre construction to project completion. How do you rent by yourself? Air B&B? Did you build your team of trusted maintenance, cleaning people etc? What are the vacancy rates that you estimate for your analysis? Could you share a typical financing plan through a developer?
You can list the property in as many sites as you want, Airbnb being one of the main ones. There are companies that take care of everything. There are techniques to get high occupancy rates. A friend of mine gets above 90% for all his properties. The thing is, in the Riviera Maya, the hotel occupancy rate is above 80% and above 90% for the luxury hotel so you can do well even if you're a lousy operator. Developer financing isn't very common but basically, on delivery, the developer will give me 5 years to pay the 50% of the price that is still due at an interest rate of 6%. Given the strong expected cash flows, I expect to be cash flow positive and will be able to hold the property free and clear after the 5 years!
@Mike Lambert do you tend to buy in just busy areas such as 5th Ave in Playa Del Carmen, or more remote, gated developments?
@Jakub Bednarz Close to the 5th.
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