Investing in Tulum Mexico
CA · Member since 2018 · 124 posts · 33 votes
Im considering investing i na new construction condo in Tulum or other outlying areas or possibly a home.. Does anyone have any experience with Tulum? I wanted to buy as a second home and use it as a vacation and on the months Im not there use it a an AirBnB. Not sure what the condos rules are regarding that? Being that its in mexico, it seems that everything is laxed compared to US. Any advice, suggestions, referrals to agents or lenders would be appreciated.
@Mike Lambert Did you end up investing in Tulum? I'm considering myself and would love to hear any experiences/knowledge you'd be willing to share.
I have also been looking in a few cities in Mexico. Tulum being one of them. I was planning on traveling this spring to try and make some in-person connections but did manage to get in contact with a few lenders. @Matthew Swearingen
There are no rules either at the condo or any of the government levels preventing you from doing short-term rentals and it's very unlikely there'll be any anytime soon.
I already responded regarding agents and lenders in the other post you published today.
I invested in a presale, Matthew. another bp member here referred his brothers girlfriend and i spoke to her but it was only to have a contact once I visit there more semi permanently. Her name is Mayra Lopez and she's part or Zepto Realty https://zeptorealty.com. My agent is actually Cinthia Hernandez from Coldwell Banker (dm me for her info). I'm also a mexican citizen so my process is different. My friend also invested at the same time as I did as a US citizen. @Matthew Swearingen
@Mike Lambert Did you end up investing in Tulum? I'm considering myself and would love to hear any experiences/knowledge you'd be willing to share.
I've been investing in the area for many years now but you're probably alluding to the development project I've been working on there. After my most recent trip there, I wrote to my interested buyers that should they want to buy in Tulum for lifestyle, I'll be happy to give them the best deal they could find in town. Should they want to buy for investment purposes, I mentioned that, if was me, I'd want to see the rental statistics of the current high season before buying anything in Tulum. Given that they're mostly investors, the decision was made to wait for these statistics before making a final decision to go ahead with the project either in Tulum or in a better location.
If you're looking to buy for investment purposes, you might want to:
1. Make your own estimates of the future income.
2. Avoid extrapolating past figures into the future, as the market is changing, which gets you back to point 1.
3. Avoid overpaying.
Hope this helps. Otherwise, feel free to send me a DM.
@Mike Lambert Super helpful! I'm coming from a place of investing primarily for investment purposes so I appreciate the thoughts.
Hello, thank you for all the info @Mike Lambert I am considering a studio or 1 bedroom in Tulum. Like many I am nervous about getting scammed and making sure the developer is legitimate. I am talking to a couple realtors who have presented some good options in my budget. Did I see in one of your posts you mention Solemn is having major issues? The name of the developer I am talking with today is Smart Investment Opportunities. Solemn appear in the name of their projects i.e. Solemn peaceful, Solem Lagoon, and XKAA is also one of theirs. Not sure if this is the problematic properties you may have referenced?
I'm not sure which post you're referring to and how old it is. Because of the years I've been active in the area and the connections I have on the ground, I regularly hear about issues related to developers. On the one hand, if somebody asks about a developer I know something about and don't say anything and they end up losing money, I'd feel bad about it. On the other hand, I don't like writing negative things about people or companies in a public forum, especially if they're not here to defend themselves. Therefore, I'm not commenting on developers in the forum anymore and I'll only reply to those kind of queries by DM.
As a general comment, there is a difference between scamming and being legitimate on the one hand and having issues on the other hand. I've heard that many developers are having issues because the era of building and selling anything in Tulum is over. Those are victim of the market changes. They're not illegitimate or scammers.
I can appreciate that. It was an older post. I will head your words and ask in private if about a specific developer as to not put you in a position to potentially bad talk someone. On another note, I take it that is hearsay about the ear of building in selling in Tulum being over not your personal belief?
I don't know if that would qualify as hearsay since I've heard it from multiple people who should be in the know of those things. Also, this is typically the kind of issues that would arise if there's a large increase in supply without a corresponding increase in demand. While that would corroborate my own observations on the ground and what I've been hearing, I haven't seen any statistical evidence.
I don't know if that would qualify as hearsay since I've heard it from multiple people who should be in the know of those things. Also, this is typically the kind of issues that would arise if there's a large increase in supply without a corresponding increase in demand. While that would corroborate my own observations on the ground and what I've been hearing, I haven't seen any statistical evidence.
I don't know if that would qualify as hearsay since I've heard it from multiple people who should be in the know of those things. Also, this is typically the kind of issues that would arise if there's a large increase in supply without a corresponding increase in demand. While that would corroborate my own observations on the ground and what I've been hearing, I haven't seen any statistical evidence.
I don't know anything about your situation or your objectives so I'm not sure I'm well placed to give you any advice whether to buy in Tulum or elsewhere in the Riviera Maya. In this respect, bear in mind that what I do is partly influenced by my own situation and objectives, which might be different than yours.
I was working on a development in Tulum but decided to put it on hold until the end of the high season so that I can first see the season's rental statistics because I want to be as sure as possible I can give my buyers the best possible deal. If the stats aren't good, I'll move the project elsewhere. So, accordingly, I wouldn't invest there today in the absence of those data.
I don't know anything about your situation or your objectives so I'm not sure I'm well placed to give you any advice whether to buy in Tulum or elsewhere in the Riviera Maya. In this respect, bear in mind that what I do is partly influenced by my own situation and objectives, which might be different than yours.
I was working on a development in Tulum but decided to put it on hold until the end of the high season so that I can first see the season's rental statistics because I want to be as sure as possible I can give my buyers the best possible deal. If the stats aren't good, I'll move the project elsewhere. So, accordingly, I wouldn't invest there today in the absence of those data.
@Mike Lambert
You just wrote: "The era of building and selling anything in Tulum is over" This is tottaly false, not sure who shared this with or how you came up with this conclusion but its not true. This is a public forum and we need to be cautious of what we share. I have been following BP for over 5 years now and I remember 4 years ago you posted something similar, you wrote: "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." You posted several similar comments.
The past 4 years were the highest income-generating years in the history of all of Tulum, I feel sorry if someone actually read your post and didn't pull the trigger 4 years ago. I honestly hope no one followed your advice. Specially 2021, I made more than 120K that year on STR, I recovered my total investment in less than 4 years. I can share all my numbers to whomever is interested. I invested in a second property two years ago and making double digit ROI.
I agree there is more competition now, not all properties are making money, I wouldnt suggest buying a small cookie cutter in a location far from the beach.
However there are so many reasons why Tulum will keep growing, maybe not at the surreal pace it grew the past years, however it will continue to grow.
There is staggering Federal and private development in the region, the government has made it a key national priority to develop the yucatan peninsula. Quintana Roo has the 4th largest airport in Latin America by volumne of passengers (15M), and now a second airport in Tulum is being built with the capacity to serve 4 million pasaangers.
The most ambitious project of the current government is the Mayan Train, a railway system connecting the largest tourist attractions of the southeast of Mexico, almost 1,000 miles of lenght with 20 stations, with a projected cost of 20 Billion USD. This will open the door to other really interesting developing areas. Both scheduled to be completed by 2024.
Nobody can predict the numbers going forward, I know the Tulum market extremely well because I have skin in the game and I am constantly running market studies to see where the market might be shifting, I am happy to share them with the BP community. I am currently looking at a couple of really interesting projects that I expect will perform really well, its all about having something unique that stands out.
@Edgar DeLeon
There are some growing pains and risks like any investment of course, however, I see Tulum real estate as a secure diversification investment option with reasonable cashflow and an incredible lifestyle, amazing architecture, wellness retreats, parties and nightlife, amazing beaches & cenotes. I am sure you can get a really nice property that can offer 8% ROI, and you can use it a couple of times a year.
Noone talks about the cost to sell.
Have an exit plan, because it's way more expensive than you think.
Hello @Maksu Ize
The costs associated with selling your property in Mexico are the following:
1. Capital gains - 30% of profit (if you need help I have a very knowledgeable CPA with a Ph.D. in Mexican taxes that can help you make deductions for capital improvements, or do a one-time tax allowance exception you can do this every 3 years but you have to be a Mexican Resident)
2. If you decide to pay a realtor to sell and promote your property. The average commission is 6%.
3. Public Notary Costs (I can also share the Notary I work with he is very experienced as well)
4. If you purchased through a Trust (fideicomiso) you will need to pay a trust cancelation fee which is around $1,000 USD.
So as a capital gains example: if you purchased a property for $500K USD and you sold it for $800K USD you have a profit of $300K USD your capital gains could be 30% of the 300K USD so $90K USD, however, you can exempt this once every 3 years as a resident or submit official receipts of improvements you made to the property and you can deduct them, and lower that amount significantly.
I have seen some investors do a transfer of rights of the promissory agreement and not have to pay the closing costs of the property, however, I have only seen this happen in a presale and it has to be approved by the developer.
If you need help selling your property let me know I know several realtors that do resales in the area.
It's not very different than the US...
This isn't the first time you personally attack me on here because you don't like what I write. You don't attack others like that in a public forum. This isn't a place for that. Doing that says more about you than it says about me. This is the last time I kindly ask you to stop doing this before I register a complaint.
Besides that, I'm not sure I need to receive a lesson in prudence from you. Sellers of financial products by law have to write the following disclaimer: "Past performance isn't a guarantee of future performance". Is it normal to extrapolate Tulum's recent past of abnormally high demand from the pandemic to the future in which there is a huge increase in supply coming and demand gets back to a more normal level, as you suggested yourself. I notice that there's no mention whatsoever of that huge increase in supply in your analysis/reply. As a realtor, don't you think that's important and significant?
Ironically, while we can understand you're not happy if somebody isn't necessarily positive about Tulum, you totally misunderstood what I wrote. All I wrote was that any developer that builds properties cannot assume they're automatically going to sell them. This would be the case in any (healthy) market so I wasn't giving any opinion about the market there and I wasn't even being negative.
@Edgar DeLeon asked for my personal advice and what I would do. As you can read, I adopted a balanced approach by suggesting I wasn't necessarily in a position to give him any advice and I answered about what I'd be doing and what I'm doing. While I wouldn't necessarily volunteer that kind of information, I didn't want to be evasive and I wanted to help.. As far as I know, free speech is still in the constitution or did you change that?
Now, let's try to make this exchange useful to the readers by talking about the substance of things, shall we? Maybe have a healthy debate in which we're respectful of each other's opinions? What I answered to Edgar is that I wouldn't buy anything today because I'd first want to see the Airdna statistics for this year's high season. Now, I wouldn't have written this a couple years ago during the Covid bubble. Why did I write this and, most importantly, why do I want to see these statistics first? I was there in December and the town, including the hotel zone was pretty much empty, or at least compared to what it usually is. A friend of mine who own 20 condos there told me they were all empty, which had never happened before. I then checked on Airbnb and they were plenty of properties like luxury 2-bedrooms renting for $75 a night! Is that what you call a booming market?
Tulum's population as of the last census (2020) was 46,721. According to Point2Homes, there are 18,336 properties in Tulum. If you go to realtor.com, you'll find out that the whole of Los Angeles county has 19,419 properties for sale for a population of 9,861,224!!! If the number of visitors in Tulum is decelerating significantly, who's going to buy and rent all these properties? It doesn't take a Phd to see that there is a problem somewhere. When the numbers of visitors was still growing and exploded during the pandemic, it could have justified the construction boom but, if that number start toi decelerate, we have a problem on our hands. And yes, like famed economist John Maynard Keynes once said, when the facts change, I change my mind. So, it is unreasonable to want to see the Airdna statistics before forming an informed opinion? I don't think so.
Is the train or the airport going to solve the issue? Let's again use our common sense here. Let's start with the train. I've been traveling there for years and met countless people. I've never met anybody who was complaining about the time it takes to go from the airport to Tulum and nobody told me they would come or come more often if they can win 30 mins of commuting by taking the train. As to the airport, the last thing I read about it was that the project was suspended. Has there been any change to that. Anyway, the airport was meant to be a small airport and most visitors would still arrive through Cancun. Moreover, the site is in Felipe Carillo Puerto, 45 minutes away so it's not going to change that much either.
While I don't like to give advice here, if I had to, my best one would be to tell people to not necessarily listen to me or to you but use their common sense and do their own analysis. Go on Airdna and check the statistics. Go on Airbnb and see what you can get for what price when you rent. Then, try to figure out if you can get an ROI of 8% now and in the future and draw your conclusions.
In the hypothetical case that the high season statistics are not satisfactory for your analysis, what other locations would you eventually consider? In other words, what do you mean by "elsewhere"?
What did I mean by elsewhere? If you don't mind, I'll remain vague on this one because I haven't made the final decision. Also, this is a public forum so I'll let my buyers know first. Yet, I could have written "elsewhere in Mexico". I believe there's never been a better moment to invest in Mexico but you can't just buy anywhere. I want to avoid areas that have (serious) issues.
The main issue, as everywhere else, is the supply and demand imbalance because oversupply is what can kill a short-term rental investment for good. It's ok to have a building boom when demand precedes, not the other way around (build and they'll come). In relation to that, I like low supply and high demand, geographical constraints, difficulty to obtain a construction permit.
Also, in my humble opinion, one of the biggest mistakes make people when investing in many types of assets is that they look in the rearview mirror. They buy what worked and they expect it's going to continue indefinitely. I look at what's going to work, not what has worked. At some points, the music stops and you don't want to be the one left holding the bag. Some ships have sailed and you might have missed the boat. If that happens, look for the next one.
@Michelle Reshel I own several properties in Tulum and also manage a portfolio of vacation rentals there (my properties included). There are some great opportunities in Tulum. Also some risks. It's important to think carefully about (1) the type of property, (2) the developer, and (3) location. There's a lot of supply on the market so one really needs to stand out on Airbnb to be successful. A lot of competition. And certain properties work better than others. Hope this helps and happy to answer any specific questions you have!
Hey @Edgar DeLeon - Just be aware that there is a lot of competition in Tulum for vacation rentals, and 1-bedrooms make up most of that (42% of the market currently, according to Airdna). Personally, I would go for a larger property (4+ bedrooms). If that's not in the cards/budget, then I would only do a studio if it offers a significant discount from a 1-bedroom. Your 1 bedroom will mostly be rented by individuals and couples, but it at least gives you the flexibility to put a sofa bed in the living room and sleep up to 4 people.
Regarding choosing a developer, I really recommend visiting one of their previous developments in person so you can see finish quality. Ideally a property that is a couple years old.
Hope that helps! Happy to answer any other questions you have being an owner in Tulum but also managing vacation rentals there.
@Michelle Reshel I own several properties in Tulum and also manage a portfolio of vacation rentals there (my properties included). There are some great opportunities in Tulum. Also some risks. It's important to think carefully about (1) the type of property, (2) the developer, and (3) location. There's a lot of supply on the market so one really needs to stand out on Airbnb to be successful. A lot of competition. And certain properties work better than others. Hope this helps and happy to answer any specific questions you have!
Great feedback and information thank you very much!