Investing in Tulum, Mexico
Contractor · Edgewater, Md. · Member since 2018 · 28 posts · 15 votes
This would clearly be a very risky move, but has anyone considered buying a vacation rental in a vacation based rental market such a Tulum, Mexico?
Unlike certain sub markets in the US that are very hot right now due to low inventory and high demand, I feel somewhere like Tulum may offer deals that cannot easily be found here in the states (or at least where I am in Annapolis, MD).
I’ve done some quick research and there are most definitely discounts to be found... the question is, when will tourism return to normal? Could be months, could be years...
Full Disclosure - I love Tulum and would love an excuse to own a condo there to visit.
Might be less risky to buy in a hot U.S. market and use proceeds to visit Tulum and rent a place there.
You're very welcome. Of course, it's easier for you as a Mexican citizen but kudos to you to take advantage of the investment opportunities offered by your beautiful country of origin. Not everybody does.
Foreigners aren't allowed to own property in their own name in the Forbidden Zone, meaning within 62 miles of the international borders and 31 miles from the coasts. Yet, they can enjoy all the rights and responsibilities of a property owners by setting up a bank trust (fideicomiso) or through a Mexican corporation. Because of the administration involved, the corporation is only worth it if you at least own two properties.
The cost of setting up a fideicomiso is included in the closing costs, which represent around 5% of the price of the property. The annual maintenance fee is between $500 and $600. The fideicomiso is valid for 50 years and renewable.
Why many people misunderstand and therefore have issues with the fideicomiso, it's actually a plus, as it provides "free" asset protection because it's the name of the bank that's on the title.
It's noteworthy that, if ever the bank you chose to do the fideicomiso was was filing for bankruptcy, your property will fall out of the bankruptcy and you're therefore protected against that risk.
You're very welcome. Of course, it's easier for you as a Mexican citizen but kudos to you to take advantage of the investment opportunities offered by your beautiful country of origin. Not everybody does.
Foreigners aren't allowed to own property in their own name in the Forbidden Zone, meaning within 62 miles of the international borders and 31 miles from the coasts. Yet, they can enjoy all the rights and responsibilities of a property owners by setting up a bank trust (fideicomiso) or through a Mexican corporation. Because of the administration involved, the corporation is only worth it if you at least own two properties.
The cost of setting up a fideicomiso is included in the closing costs, which represent around 5% of the price of the property. The annual maintenance fee is between $500 and $600. The fideicomiso is valid for 50 years and renewable.
Why many people misunderstand and therefore have issues with the fideicomiso, it's actually a plus, as it provides "free" asset protection because it's the name of the bank that's on the title.
It's noteworthy that, if ever the bank you chose to do the fideicomiso was was filing for bankruptcy, your property will fall out of the bankruptcy and you're therefore protected against that risk.
I will let my friend (who purchased as a US citizen) know about this.
@Simon Duong I've been doing STR in Tulum since end of 2019, we were busy. Then, COVID hit. The property was empty from mid March to mid June. We've been doing fine since, not too many cancellations or empty calendar either. So far, we are riding the wave ok, crossing fingers!. Never done Airbnb before, so doing it for the first time, long distance, and in another country; it has its challenges. But, that's just like everywhere, and with everything done for the first time. Didn't have much life since doing Airbnb. Now, It looks like we have a handle of it. We also have our own staff, so that adds complexity. But, we wanted to do it ourselves to understand what it takes. Maybe one day will hand it over to a management company, will see. Some of our guests, that are in real estate, end up checking out places/lots while on their vacation. People love Tulum, just like we did and decided to invest, so we can also enjoy. We are looking at another place, we'll see. I guess since we did it once, it may be easier the second time around. Hoping so!
I just did an analysis of Playa del Carmen vs. Tulum with interesting data. (I will share all the information sources at the end of the reply). I really think this comparison will help investors.
I’m interested in sharing facts and letting investors reach their own conclusions, so I did a side-by-side number comparison:
Foundation and Population:
Playa del Carmen was founded in 1993.
Tulum was founded in 2008.
That's a 15-year difference.
I've heard several investors and realtors say that buying in Tulum now is like buying in PDC was 10-15 years ago --I'm curious to hear what you guys think.
Population (2020 census):
Playa del Carmen: 304,942.
Tulum: 46,721.
Playa has 6.5 times the population of Tulum.
However, it all depends on what your target market is, along with your renter profile: are investors looking to rent long-term to residents? Or are you looking to rent short-term to tourists?
PDC’s growth in the past 10 years:
The 2020 census numbers show a whopping 103% increase over the population numbers of 2010. In the past 6 years alone, Playa Del Carmen’s population has grown just over 63%.
According to the census count, the population of Playa Del Carmen stands at 304,942. This is a 103% increase over the 2010 census numbers for Playa, which amounted to 149,923.
Tulum’s growth over the past 10 years:
In 2020, the population in Tulum reached 46,721 inhabitants. Compared to 2010, its population grew 65.3%.
Key differences:
1. Beach access
2. Beachfront density
3. Infrastructure
4. Tulum is a Magic Village, which means it receives a little more public promotion and investment from the government.
5. Upcoming private and public projects.
Public and private infrastructure projects:
1. Mayan Train: Biggest project of the current federal administration, with an approximated cost of almost US$9.81 billion. It will span approximately 1,500 km (932 miles) and will link the states of Chiapas, Tabasco, Campeche, Yucatán, and Quintana Roo, with a total of 21 stations. Playa and Tulum will each have their own train station. Due to be completed in 2023, construction is already in progress.
2. Tulum Airport: Set to be completed by 2023, it is projected to receive 4 million passengers.
3. Tulum’s bypass to reduce city traffic.
4. Formula 1 race track just 15 minutes away from PDC.
5. Green School in Tulum.
6. Both cities have private projects featuring new shopping malls, cinemas, and supermarkets.
7. Extension of the highway to Bacalar.
AIRBNB, VRBO (AIRDNA) AND HOTEL COMPARISON Note: It’s hard to separate hotel occupancy rates between Tulum and Playa because the state’s Tourism Ministry lists both cities under the same category --Riviera Maya-- and the hotel comparison is made by municipality):
Playa del Carmen has 11,105 active listings.
Tulum has 5,422 active listings.
That is a difference of 5,683 listings, which means Tulum has 48.82% of the listings that PDC has active.
Playa has 285 hotels with 43,771 rooms.
Tulum has 159 hotels with 8,390 rooms.
That is a difference of 126 hotels and 35,381 hotel rooms, so Tulum has 19.6% of the number of rooms that PDC has. I believe this is partly because there are several large all-inclusive chain resorts in Playa featuring properties with 800+ rooms, whereas the hotels in Tulum’s hotel zone are boutique "eco-lodges" with a lower room density.
I wasn't able to get the average daily rate (ADR) for hotels in Tulum vs. hotels in Playa. Personally, I think that the median ADR of hotels is a lot higher in Tulum than in Playa, what do you think?
PDC ADR Airbnb: 81 USD
Tulum ADR Airbnb: 125 USD
That's almost 65% more in Tulum.
Median Airbnb occupancy in PDC: 58%.
Median Airbnb occupancy in Tulum: 67%.
Median Airbnb revenue PDC: $1,695 USD.
Median Airbnb revenue Tulum: $889 USD.
That's $806 USD more median revenue in Tulum. More than half.
DEMAND:
Demand in Playa: Playa Del Carmen receives some 1 million tourists a year. That amounts to about 2,740 people arriving each day.
Demand in Tulum: Tulum has become one of the main destinations on the Riviera Maya, receiving almost two million tourists a year (Kayak). That amounts to roughly 5,479 people arriving every day, meaning the approximate tourism demand is double for Tulum than for PDC, with a lower supply of rooms and Airbnb.
Upcoming Real-Estate Projects:
Without an MLS it's very hard to get this number right; we have an approximate figure, so if you'd like more info send me a DM and we can share it with you. According to our internal MLS, Tulum has close to double the presale projects that Playa currently has, and a significant number of units coming to the market in the next few years.
Suggestion: Buy something unique (do not overpay for a commodity, but pay a slight premium to get something special that will make you stand out from all the others once supply starts getting closer to demand.
FLIGHT INFORMATION: “During the period from January to August 2021, Cancun Airport received 3.8 million foreign visitors. This was almost 4 times more than Los Cabos airport in Baja California Sur (BCS), which registered 1.07 million, and almost 3 times more than Mexico City International Airport, which received 1.4 million". "In absolute terms, Quintana Roo receives 46.5% of all foreign visitors to Mexico, making it the country’s number one generator of tourism revenue".
Cancun airport had its second-busiest day on record on Saturday 18th of December 2021 in terms of the number of incoming and outgoing flights: a total of 648 flights touched down at or departed from Cancun airport, just 11 fewer than the all-time high of 659 flights on March 31, 2018.
Cancun’s record was in 2018, when the airport handled 25.2 million passengers.
As a new article with the top post-pandemic travel trends states: "While Dubai remains at the top of the list, the most notable rises include Miami, from 18th to 5th, and new on the list, Cancun (Mexico) at 2nd with 4% of the air ticket share." Cancun Airport wasn't even on the list and it’s now in second place just after Dubai. The two highest risers, Cancun and Miami, are both major leisure destinations popular with US holidaymakers.
SOCIAL MEDIA:
#Playadelcarmen has 4,300,000 Instagram posts.
#Tulum has 7,600,000 Instagram posts.
The younger crowds are making a lot more noise on Instagram about Tulum than about PDC.
Conclusion: My conclusion is speculative and since I don’t have a crystal ball I wouldn’t venture to post this online, and also I don’t want to help or affect one particular city over the other, since as I mentioned I honestly like both destinations. Each has its pros and cons depending on your specific goals, but if anyone is interested in knowing my point of view and what I think might happen in the medium and long term I’m happy to share it in private.
P.S:I am not an expert in statistical analysis, I hope this helps here are the sources of information:
https://www.lonelyplanet.com/articles/tulum-mexico-digital-nomads
https://everythingplayadelcarmen.com/population-of-playa-del-carmen/
https://www.lajornadamaya.mx/quintana-roo/177934/tulum-encabeza-preferencias-en-zonas-arqueologicas
https://realestatemarket.com.mx/mercado-inmobiliario/32231-vision-general-de-tulum
http://sedetursys.qroo.gob.mx/ocupacion/ocupacion2018.php
https://ftnnews.com/tours/42946-forwardkeys-top-travel-trends-of-2021
https://www.estadisticas.inah.gob.mx/
http://sedetursys.qroo.gob.mx/ocupacion/
https://londondailypost.com/top-travel-destinations-to-visit-in-2020/
http://sedeturqroo.gob.mx/ARCHIVOS/COMO_VAMOS_ENERO_NOVIEMBRE_2019.pdf
http://sedeturqroo.gob.mx/ARCHIVOS/Como-Vamos-202001-05.pdf
https://qroo.gob.mx/sedetur/como-vamos
https://mexiconewsdaily.com/news/cancun-airport-record-flight-numbers/
https://www.forbes.com.mx/brand-voice/ad-turismo-wellness-un-viaje-al-interior/
https://www.forbes.com.mx/ad-green-school-futuro-educacion-sustentable-zama-desarrollos/
http://www.datatur.sectur.gob.mx/SitePages/Visitantes%20por%20Nacionalidad.aspx
https://en.wikipedia.org/wiki/Municipalities_of_Quintana_Roo
https://www.travelandleisure.com/trip-ideas/i-moved-to-tulum-during-the-pandemic
I looked into buying in Mexico. The biggest disadvantage that you will face there is the near complete lack of financing options. You will probably have to make the purchase in one lump sum cash payment. If you do manage to finance it, it will be at a high interest rate with 50% down, and a 5 year term. All of that combined usually means a leveraged buy in the US will give you a better ROI/ROE.
I just did an analysis of Playa del Carmen vs. Tulum with interesting data. (I will share all the information sources at the end of the reply). I really think this comparison will help investors.
I’m interested in sharing facts and letting investors reach their own conclusions, so I did a side-by-side number comparison:
Foundation and Population:
Playa del Carmen was founded in 1993.
Tulum was founded in 2008.
That's a 15-year difference.
I've heard several investors and realtors say that buying in Tulum now is like buying in PDC was 10-15 years ago --I'm curious to hear what you guys think.
Population (2020 census):
Playa del Carmen: 304,942.
Tulum: 46,721.
Playa has 6.5 times the population of Tulum.
However, it all depends on what your target market is, along with your renter profile: are investors looking to rent long-term to residents? Or are you looking to rent short-term to tourists?
PDC’s growth in the past 10 years:
The 2020 census numbers show a whopping 103% increase over the population numbers of 2010. In the past 6 years alone, Playa Del Carmen’s population has grown just over 63%.
According to the census count, the population of Playa Del Carmen stands at 304,942. This is a 103% increase over the 2010 census numbers for Playa, which amounted to 149,923.
Tulum’s growth over the past 10 years:
In 2020, the population in Tulum reached 46,721 inhabitants. Compared to 2010, its population grew 65.3%.
Key differences:
1. Beach access
2. Beachfront density
3. Infrastructure
4. Tulum is a Magic Village, which means it receives a little more public promotion and investment from the government.
5. Upcoming private and public projects.
Public and private infrastructure projects:
1. Mayan Train: Biggest project of the current federal administration, with an approximated cost of almost US$9.81 billion. It will span approximately 1,500 km (932 miles) and will link the states of Chiapas, Tabasco, Campeche, Yucatán, and Quintana Roo, with a total of 21 stations. Playa and Tulum will each have their own train station. Due to be completed in 2023, construction is already in progress.
2. Tulum Airport: Set to be completed by 2023, it is projected to receive 4 million passengers.
3. Tulum’s bypass to reduce city traffic.
4. Formula 1 race track just 15 minutes away from PDC.
5. Green School in Tulum.
6. Both cities have private projects featuring new shopping malls, cinemas, and supermarkets.
7. Extension of the highway to Bacalar.
AIRBNB, VRBO (AIRDNA) AND HOTEL COMPARISON Note: It’s hard to separate hotel occupancy rates between Tulum and Playa because the state’s Tourism Ministry lists both cities under the same category --Riviera Maya-- and the hotel comparison is made by municipality):
Playa del Carmen has 11,105 active listings.
Tulum has 5,422 active listings.
That is a difference of 5,683 listings, which means Tulum has 48.82% of the listings that PDC has active.
Playa has 285 hotels with 43,771 rooms.
Tulum has 159 hotels with 8,390 rooms.
That is a difference of 126 hotels and 35,381 hotel rooms, so Tulum has 19.6% of the number of rooms that PDC has. I believe this is partly because there are several large all-inclusive chain resorts in Playa featuring properties with 800+ rooms, whereas the hotels in Tulum’s hotel zone are boutique "eco-lodges" with a lower room density.
I wasn't able to get the average daily rate (ADR) for hotels in Tulum vs. hotels in Playa. Personally, I think that the median ADR of hotels is a lot higher in Tulum than in Playa, what do you think?
PDC ADR Airbnb: 81 USD
Tulum ADR Airbnb: 125 USD
That's almost 65% more in Tulum.
Median Airbnb occupancy in PDC: 58%.
Median Airbnb occupancy in Tulum: 67%.
Median Airbnb revenue PDC: $1,695 USD.
Median Airbnb revenue Tulum: $889 USD.
That's $806 USD more median revenue in Tulum. More than half.
DEMAND:
Demand in Playa: Playa Del Carmen receives some 1 million tourists a year. That amounts to about 2,740 people arriving each day.
Demand in Tulum: Tulum has become one of the main destinations on the Riviera Maya, receiving almost two million tourists a year (Kayak). That amounts to roughly 5,479 people arriving every day, meaning the approximate tourism demand is double for Tulum than for PDC, with a lower supply of rooms and Airbnb.
Upcoming Real-Estate Projects:
Without an MLS it's very hard to get this number right; we have an approximate figure, so if you'd like more info send me a DM and we can share it with you. According to our internal MLS, Tulum has close to double the presale projects that Playa currently has, and a significant number of units coming to the market in the next few years.
Suggestion: Buy something unique (do not overpay for a commodity, but pay a slight premium to get something special that will make you stand out from all the others once supply starts getting closer to demand.
FLIGHT INFORMATION: “During the period from January to August 2021, Cancun Airport received 3.8 million foreign visitors. This was almost 4 times more than Los Cabos airport in Baja California Sur (BCS), which registered 1.07 million, and almost 3 times more than Mexico City International Airport, which received 1.4 million". "In absolute terms, Quintana Roo receives 46.5% of all foreign visitors to Mexico, making it the country’s number one generator of tourism revenue".
Cancun airport had its second-busiest day on record on Saturday 18th of December 2021 in terms of the number of incoming and outgoing flights: a total of 648 flights touched down at or departed from Cancun airport, just 11 fewer than the all-time high of 659 flights on March 31, 2018.
Cancun’s record was in 2018, when the airport handled 25.2 million passengers.
As a new article with the top post-pandemic travel trends states: "While Dubai remains at the top of the list, the most notable rises include Miami, from 18th to 5th, and new on the list, Cancun (Mexico) at 2nd with 4% of the air ticket share." Cancun Airport wasn't even on the list and it’s now in second place just after Dubai. The two highest risers, Cancun and Miami, are both major leisure destinations popular with US holidaymakers.
SOCIAL MEDIA:
#Playadelcarmen has 4,300,000 Instagram posts.
#Tulum has 7,600,000 Instagram posts.
The younger crowds are making a lot more noise on Instagram about Tulum than about PDC.
Conclusion: My conclusion is speculative and since I don’t have a crystal ball I wouldn’t venture to post this online, and also I don’t want to help or affect one particular city over the other, since as I mentioned I honestly like both destinations. Each has its pros and cons depending on your specific goals, but if anyone is interested in knowing my point of view and what I think might happen in the medium and long term I’m happy to share it in private.
P.S:I am not an expert in statistical analysis, I hope this helps here are the sources of information:
https://www.lonelyplanet.com/articles/tulum-mexico-digital-nomads
https://everythingplayadelcarmen.com/population-of-playa-del-carmen/
https://www.lajornadamaya.mx/quintana-roo/177934/tulum-encabeza-preferencias-en-zonas-arqueologicas
https://realestatemarket.com.mx/mercado-inmobiliario/32231-vision-general-de-tulum
http://sedetursys.qroo.gob.mx/ocupacion/ocupacion2018.php
https://ftnnews.com/tours/42946-forwardkeys-top-travel-trends-of-2021
https://www.estadisticas.inah.gob.mx/
http://sedetursys.qroo.gob.mx/ocupacion/
https://londondailypost.com/top-travel-destinations-to-visit-in-2020/
http://sedeturqroo.gob.mx/ARCHIVOS/COMO_VAMOS_ENERO_NOVIEMBRE_2019.pdf
http://sedeturqroo.gob.mx/ARCHIVOS/Como-Vamos-202001-05.pdf
https://qroo.gob.mx/sedetur/como-vamos
https://mexiconewsdaily.com/news/cancun-airport-record-flight-numbers/
https://www.forbes.com.mx/brand-voice/ad-turismo-wellness-un-viaje-al-interior/
https://www.forbes.com.mx/ad-green-school-futuro-educacion-sustentable-zama-desarrollos/
http://www.datatur.sectur.gob.mx/SitePages/Visitantes%20por%20Nacionalidad.aspx
https://en.wikipedia.org/wiki/Municipalities_of_Quintana_Roo
https://www.travelandleisure.com/trip-ideas/i-moved-to-tulum-during-the-pandemic
You're the man, @Sebastian Papworth!
This would clearly be a very risky move, but has anyone considered buying a vacation rental in a vacation based rental market such a Tulum, Mexico?
Unlike certain sub markets in the US that are very hot right now due to low inventory and high demand, I feel somewhere like Tulum may offer deals that cannot easily be found here in the states (or at least where I am in Annapolis, MD).
I’ve done some quick research and there are most definitely discounts to be found... the question is, when will tourism return to normal? Could be months, could be years...
Full Disclosure - I love Tulum and would love an excuse to own a condo there to visit.
There are lots of solid investment opportunities in Tulum, @Ricky Cassidy. I own a few properties there and also have a property management company. There are certainly risks, but also high yield potential—as you mention from lower prices in terms of what your money can buy. Think 3-bedroom penthouse with private pool for $300k.
@Ricky Cassidyundefined