Securing Financing in Mexico through Non Traditional Avenues

10 Replies

I have always lurked in the forums and articles of BP, this is my first post.

I invest in single family in Mexico, specifically Cabo San Lucas and run them all as vacation rentals through Airbnb/ VRBO and some longer term vacation rental as well.  Everything that I have bought up until this point has been purchased as a cash deal, or short term seller/developer financing.  Financing through Mexican banks is an option but not an appealing one as rates are in the 9-15% range for a typical mortgage.  Mexico is not the most credit friendly society no matter how good ones credit profile and creative financing of any kind is something that is not readily available as of today. 

I am looking for creative ways to finance future purchases.  Is anyone familiar with American banks, investors that finance foreign transactions?  The one thing that is advantageous moving forward and which may inform your answers is that I have a ton of equity in everything that I own here, because of how I have been forced to purchase.  I know from asking, that using my existing properties as collateral on a loan in the states is unlikely but perhaps somebody knows a creative way to accomplish this.  I am an American citizen with little credit history in the states, I moved to Mexico right out of university and have lived my entire adult life here. Thanks for any input you all have, I am happy to provide more information if needed! 

Hi Alex,

I invest in Mexico but I prefer the Riviera Maya over Los Cabos. We have all the same problem. I use developer financing for half the purchase of pre-construction condos. I don't think you can do anything better, given that no foreign financial institution will take a Mexican property as collateral and anyway anybody who would would charge probably as much as a Mexican bank. The high interest rates in Mexico reflect the higher risk and, whoever is the lender, the risk is the same. Why would a lender lend for the purchase of a Mexican property under 9% when they can give a hard money loan with a much higher interest rate for the financing of a US property, which is much less risky? Now if you find something interesting, feel free to let me know and I'll do the same.

Thanks for the response, last year I took a meeting with an agent from a company called HIR Casa.  They are based out of Mexico City and were offering 5.8% - 7% financing on 7 and 10 year notes. It required 25-50% down and the rate was based on down payment %.  I couldn't find any reliable references and the way the representative presented the deal made me a little hesitant.  I am curious if you have ever heard of this company? They have a website which is vague but perhaps you know someone who has financed through them.  

The next logical step for me is to start a fund, but that is a while off and a few more results away from being a viable reality. At least in my market there is not much in the way of funds or pools and there is very little competition for my specific niche. 

No I've never heard of them. That rate wouldn't be bad for Mexico and could work if you have very high cash flows that would make your cash flow positive. Of course, the question is why they would lend so cheaply for Mexico and it's not a good sign if the website looks dodgy.

The only other option that I have seen on the financing side is through a Mexican investment bank which offer short term personal loans but they are willing to dig in to the terms of a deal and offer a negotiable rate based on the value they see in the deal.  I have money with Actinver and they will offer short term loans but dont have any mortgage products currently.

The problem with this is generally the length of the loan which I have never seen be more than 5 years.  If you come across any other options please let me know, I appreciate the help

Good day Alex,

I have lived many years in Los Cabos. I left in 2014. Things have developped immensely since then. Thousands of hotel rooms have opened since then....

How is the business in vacational ownership going for you lately? I hear there is a lot of competition in the area. Back just a few years ago, AirBnB did not even exist in Los Cabos...

Have you ever thought of investing in rentals for locals? There has been a huge influx of out of state worker coming to Los Cabos for work. This definitely creates a big demand for housing (rentals included)...Something to consider...

The interest rates for a loan you mentioned in your post seem very low. Perhaps even suspiciously low. All I evered heard was 10 to 15% when I was there....

My suggestion would be to find partners. Friends, family and co-workers to start. Wealthy friends of friends later as you build your portfolio...

@Francisco Cimon  

You are right about a lot of those points. The area has grown a lot since I moved here in 2011. As far as vacation rentals I could not be happier. We are at a roughly 30% NOI across all rentals and while you are right there is more competition it is still nothing compared to a big city. The majority of the listings in Cabo are not optimized to garner bookings and people are not fully taking advantage of the platform.

As far as rentals for locals everytime I have considered that route the math just doesn't add up.  You know Cabo well so I will use a specific example, Roca Vista apartments behind squid roe.  When I was renting long term to locals I was getting roughly 8000 pesos a month about $450.  As a vacation rental the same apartment has net $1100-$1800 monthly for the last two years.  The work is marginally more, I self manage so I do my own check ins and check outs but we are talking about maybe 10 hours extra a month total.  

One of the biggest fears I had when converting all my units from long term to vacation was that they would get trashed by vacation renters but especially through Airbnb/VRBO the opposite has been the case.  The renters we get take better care of the place then the long term renters that we had before.  So as of now vacation rental makes a lot more sense.  

Currently through Santander I can get a 20 year note for 11.5% so you are right about that.  Te loan I was talking about above was through an entity that is marketing itself to foreigners that want to buy property in Mexico.  I decided not to use them and am happy that I didnt take the risk.  

Thanks for the input if you ever come back to Cabo and need a place to stay for a few nights let me know!


I am happy to hear that things are working very well for you in Cabo. I love Cabo. Cabo is the number one destination for tourism in Mexico (cancun/riviera maya might bring more people because of the greater amount of hotels but Cabo is a more prestigious destination) . Great golf, great fishing, many flights, new modern airport, great weather and the best group of hotels in the country. 

I work in the hospitality industry so I am very familiar with the AirBnB effect on hotels. Have you had any issues with local/municipal authorities regarding your long term vacation rental business (tax laws, permits, etc.)?

@Alex Scattareggia Hi Alex, My wife and I are currently considering the move down to Cabo ourselves. Looking to get into the short term vacation rental market. When looking at properties there it really seems like only few have taken the extra time to run their property properly on the rental sites... from your experience what areas do you see perform best and what types of properties are you looking for? Cheers, Bryce

@Bryce Penner Hi Bryce, good to hear! Cabo is an interesting market but the under served portion of the short term rental market seems to be affordable and quality. Something in the ballpark of $90-$200 nightly. The luxury rental marketed is saturated with listing s and the majority of the lower nightly rate stuff isn’t great. 

As far as area specific, we have had the most success and highest occupancy rates with something that is walking distance to downtown Cabo/ the marina. The convince seems to appeal to people. For awhile that area also had a lower price point then the rest of Cabo so we were able to find less expensive properties put some money into them and advertise the location as a selling point. The market has improved downtown and sellers are definitely more aware of the value of what they have but it is still lower price/sq ft then the higher end neighborhoods in Los Cabos, (the Corridor, Pedregal, San Jose hotel zone etc.)

Hope that helps!