Investing in Tulum?

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Investing in Tulum?

Arwin Nassiri
Member since 2020 · 28 posts · 21 votes

Hi all, newbie here with a few questions regarding investing in STRs in Tulum. I’ve been evaluating a few different recommended markets for STRs (Florida panhandle, Smoky Mountains etc) and I’ve found that from a numbers perspective, Tulum has the most potential for returns, here’s why:

1. You can buy a pre-sale hotel-condominium with resort like services and property management features for 100-150k. These have potential to easily go for $100+ a night. I don't know much about management fees, but from what I've found is that they rival HOAs in popular STR markets

2. Tulum is growing very quickly and it’s easy to find developers who are building new condo-hotels left and right. I know that supply must meet demand but it seems like the growth in Tulum has a ton of potential to aid in appreciation

3. Real-estate in Tulum has been heavily impacted by Covid thus slashing prices.

I’d love for someone to point out what I’m missing in my current analysis and let me know what the risks are

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Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
5y

@Nick C.

You bring some interesting points.

The sargassum has been an issue for a while now but it's mostly seasonal and so its impact hasn't been what I initially feared, as you can read from this very recent article: https://www.riviera-maya-news..... Mind you, if its was to become a more serious problem, it would be a disaster for your state of Florida, which is being hit as well (in particular the Atlantic side).

The potential oversupply issue is a serious problem for Tulum. The path of progress has been moving from Cancun to Tulum through Playa del Carmen. When I decided to invest in the Riviera Maya a few weeks back, Playa del Carmen was pretty much "done" and Tulum was supposed to be the next best thing. Yet, I went first for Playa del Carmen. Part of it was for lifestyle reasons but I thought it was a better investment.

Like in the US and everywhere else for that matter, real estate investment is about location, location, location. And there is no more land available in Playa del Carmen proper. I had the opportunity to invest in the last plot of land available and we'll be almost right by the beach and 5th Avenue. This is absolute prime location. Even, if, for any reason, the overall occupancy rate for short-term in Playa del Carmen would drop (for example as a result of an increased supply), we'll probably still get rented. And new construction occurs further and further from downtown, which is much less short-term rental friendly.

In Tulum, there is no 5th Avenue and there aren't any condos or villas close to the beach. So, unlike Playa del Carmen where it's about being close to the beach and the 5th Avenue, it's about being in the jungle in Tulum. The problem is that there's already a huge amount of condos under construction in Tulum and there's a huge amount of jungle left to be built out. So, yes, there is a potential oversupply problem there. Moreover, what people liked about Tulum was its hippie bohemian chic character that is fast disappearing with the huge developments taking place there. As Tulum becomes more like Playa del Carmen, it will lose its attractiveness to these people. But it will never be as Playa del Carmen because of the building restrictions so it won't be a viable alternative to the Playa del Carmen-style people like me either.

Many people have been discovering Tulum recently but it's nothing new. The best time to invest there was a few years ago. When buying a new property today, I'd definitely be conservative when it comes to rental income projections.

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  • Mike LambertPro Member
    Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Mayra Mangual

    I forgot to add an important point about discounts. There are true and fake discounts. Beware of the fake discounts.

    A true discount is when the developer gives you a discount because you give him more cash earlier. Typically, the higher amount of money you pay and/or the earlier you pay it, the higher the discount. That's a win-win for both parties.

    Let's get to the fake discount now. There is no MLS in Tulum so, if you don't know the right people who are knowledgeable about the market, you cannot possibly know what's the fair market value of what you buy although, of course, you can always comparison shop. Let's say a developer sells condos that have a fair market value of 90 k. They could price them at 120 k and then supposedly give you a discount of 25% or 30 k, which would bring the price down to 90 k. That's a win-lose situation.

    The developer you mentioned give generous discounts yes but are they real or are they fake? As far as I'm concerned, I don't really care because I won't advance any money to a company who doesn't always respect their legal obligations towards clients.

    1Reply
  • Mayra Mangual
    Member since 2021 · 15 posts · 2 votes
    5y

    Are you saying the developers I mentioned don’t respect their legal obligations? I thought I did my due diligence on both but if I missed something please share.

    0Reply
  • Mike LambertPro Member
    Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Mayra Mangual

    You now know through our exchange of private message that I wasn't talking about those two developers but I'm mention it here for everyone's benefit.

    0Reply
  • Rami K.
    Investor · Member since 2021 · 5 posts · 3 votes
    5y

    @Mike Lambert given that there's no MLS what's a good way of finding out what's a good deal and what's not? What's a fair $/sqm nowadays for pre-construction sales in Tulum? Appreciate any insight on this.

    @Mayra Mangual which developers do you recommend?

    0Reply
  • Mayra Mangual
    Member since 2021 · 15 posts · 2 votes
    5y

    @Rami K. I really like Mennesses the people I spoke to give me comfort and they have a good reputation in playa del Carmen. Mistiq  builders have been doing developments in different parts in Mexico and everyone in Tulum is raving about them 

    0Reply
  • Mike LambertPro Member
    Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Rami K.

    What's your definition of a good deal? It's different for everyone.

    There's no such thing as a fair $/sqm. You're buying by the square meter but you're renting by the bedroom so your ROI won't come from the square footage, at least not mainly.

    It's on a case by case basis. You can try to compare different projects. I'll eventually have to do it myself to properly price a new development I'm working on. 

    1Reply
  • Rami K.
    Investor · Member since 2021 · 5 posts · 3 votes
    5y

    @Mike Lambert understood, thanks. It gets confusing with the lack of MLS data and information about recent sales, which makes it harder to conduct comparisons, etc. What methods do you recommend?

    1Reply
  • Rami K.
    Investor · Member since 2021 · 5 posts · 3 votes
    5y
    Originally posted by @Mayra Mangual:

    @Arwin Nassiri can you share the name of the development? I met with Giada sales people while I was there and saw some of their projects such as Amira and Katia. I did not know you can get so much discount with Giada.

    @Mike Lambert I just saw this message that you invested couple of month ago una place in PDC. Which development was that? I also looked at one there from Mennesse which has not started construction yet. 

    Hi @Mayra Mangual:
    Did you end up buying with Giada? In which development and what areas do you recommend? What discount were you referring to? Thanks

    0Reply
  • Mike LambertPro Member
    Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Rami K.

    You won't find information about recent sales. I made a new friend here on the rooftop terrace of one of my condo buildings in Playa del Carmen. She proudly told me how little she paid for her condos by buying early until she found out that I paid way less than her. All this to say that you really have idea about what people paid for a property until they tell you.

    What I was suggesting you might want to do is collect and compare the developers' prices on their unsold units. That's for the price aspect of it.

    When you look at the goodness of a deal, you might want to look at the risk aspect too. When you advance money to the developer, does it go into an escrow account so they can only use it for the construction or can they just take your money and flee to South America? Also, how many units are already sold in percentage terms? The more the better as it decreases the risk  that the project will fail due to a lack of funding.

    1Reply
  • Mayra Mangual
    Member since 2021 · 15 posts · 2 votes
    5y

    @Rami K. hi no I did not buy with Giada...I saw some of their developments but did not convince me and the only one that did Amira was out of my price range.  I am looking into Mistiq and Mennesse haven’t decide yet which one but still open to other options.  When you catch the development early in preconstruction prices are very low then as units get sold they go up so something to consider if you going to wait until most units are sold reason why you need to do your research and make sure you working with a reputable developer that has not defaulted on the projects and delivered on time.

    0Reply
  • Miguel Mark S White
    Member since 2021 · 3 posts · 0 votes
    5y

    @Mayra Mangual @Mike Lambert   Thank you both for such great insight and guidance.  Having done my fair of research over the years, It's really great to hear "reality" in conversations concerning buying in the Riviera Maya.  I have been traveling to PDC and Tulum for the last 20 years, and regretfully, only now, beginning to look at purchasing a condo.  Last year, I spent over a month there (Tulum + Bacalar), and I plan on spending at least 2 - months a year going forward.  I have been all over the Yucatan and Tulum keeps calling me back.  Bacalar has the signs of a next Tulum - but it's too far for me.  Have any of you had any experience with Selva Norte Tulum or their subsidiary company, SI Soluciones Inmobiliarias? They're pricing seems very reasonable compared to other developments I am looking at.  Any input would be awesome.  My goal is to spend 2-3 months a year there and rent it out for the remaining 9 - so I am not sure this initial property will be for pure investment purposes. 

    0Reply
  • Denise Ausderau
    Member since 2021 · 9 posts · 1 vote
    5y

    Hello all!,

    Just joined Bigger Pockets today. I just purchased a Studio at MENESSE after spending three days in Playa and Tulum looking at properties. Anyone else out there that purchased there? Unit will be ready at end of March 2022. Is Sam's Club the best place to purchase pots and pans and other Kitchen supplies, as well as Bath towels, Sheets etc.? Also best place near Tulum to buy Artwork and other decorative items? Any input would be greatly appreciated!

    Thank you,

    Denise Ausderau

    1Reply
  • Miguel Mark S White
    Member since 2021 · 3 posts · 0 votes
    5y

    @Denise 

    @Denise Ausderau  congrats!  My recommendation would be to join the Tulum Facebook Group Page.  That is an excellent source for the questions you are asking.  Amazon.mx works well in Tulum as well.  Hope this helps.

    0Reply
  • Denise Ausderau
    Member since 2021 · 9 posts · 1 vote
    5y

    Thank you so much Miguel Mark S  White! I will join that group and absolutely look into Amazon Mexico.

    0Reply
  • Mayra Mangual
    Member since 2021 · 15 posts · 2 votes
    5y

    @Denise Ausderau congrats I looked at messesse and really liked their development I have not decided yet but now I know if I go with Mennesse I will have a neighbor. 

    0Reply
  • Denise Ausderau
    Member since 2021 · 9 posts · 1 vote
    5y

    Myra, please do let me know. And even if you just buy in Tulum let me know. We can share ideas for decorating and all other things related,

    Denise

    0Reply
  • Mayra Mangual
    Member since 2021 · 15 posts · 2 votes
    5y

    @Denise Ausderau yes I would like that, I don’t know anyone in Tulum yet but my realtor so is nice to have others to share ideas. 

    0Reply
  • Mike LambertPro Member
    Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Miguel Mark S White

    Don't have regrets from buying earlier. You didn't have a crystal bowl then. As successful real estate investors say all the time, the best time to buy is now.

    Bacalar is awesome! I don't believe that it's the next Tulum though. Besides, prices have already increased substantially there.

    As to Selva Norte Tulum, I haven't heard anything about the company behind the development. However, the development is on the wrong side of the highway, hence the lower price. I'm currently working on a development in Tulum and planning to beat them (and everyone else) on price, while being on the right side of the Highway.

    Also, I saw that they'd be offering a guaranteed return. There is no such thing. The developer isn't a bank and the odds that such a guarantee can be honored are doubtful at best. They're a ploy to get massive sales. In many cases the developer (not this one specifically) has been unwilling and/or unable to fulfil their promises when it comes to the guarantee.

    0Reply
  • Miguel Mark S White
    Member since 2021 · 3 posts · 0 votes
    5y

    @Mike Lambert  Thanks, Mike.  You haven't heard the regret... lol...  It was 2000.  Blue Parrot Inn in PDC.  Canadian gentlemen was selling his 1bed 1bath for 30K USD!  Thanks for the feedback.  I always take guarantees with a grain of salt.  -Mark

    0Reply
  • Mayra Mangual
    Member since 2021 · 15 posts · 2 votes
    5y

    @Miguel Mark S White I agree with Mike location is key and being on the other side of the highway (tulum Ave) your returns might be affected. People want to be as close as possible to the beach, a bike ride so staying between the beach and tulum ave is best at least in my opinion.  As you, I wish I would of bought years ago but hey it is still good time to do so and secure some good investments but doing your due diligence is key. 

    0Reply
  • Brianna Gardner
    Member since 2020 · 4 posts · 1 vote
    5y

    Hey Mike! Thanks for all this extremely useful information. Do you know anything  about the company Anah? We looked at their property and it seems like a good deal - $332k for a 2BR penthouse with private pool and ability to lock off, free shuttle to ziggy’s with free beach access too. 

    1Reply
  • Mike LambertPro Member
    Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Brianna Gardner

    You're welcome! The developer has been in trouble with projects in the recent past and I know many people had to wait for years to get their condos delivered. I'd definitely stay away.

    Besides, I'm not sure why you'd qualify a $332k 2BR as a good deal. That's very expensive and, in real estate, you make money when you buy. This is no exception. Of course, if it's a lifestyle buy, it's another story although such a budget would probably get you (much) further.

    0Reply
  • Brianna Gardner
    Member since 2020 · 4 posts · 1 vote
    5y

    @Mike Lambert oh wow, really? How have you heard of this? I need to find more information about them.

    0Reply
  • Mike LambertPro Member
    Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
    5y

    @Brianna Gardner

    I haven't done any research online. You might be able to find something or not if you do. As an insider, I heard it first through the grapevine but I know it is factually correct because they have a development in Playa del Carmen in which construction had been stopped for a very long time and that was for everyone to see. I ignore whether this situation has been resolved but, in any case, this is more than enough of a reason for me to not buy anything from them in pre-construction. If it happened once, it can happen again!

    0Reply
  • Eduardo Calle
    Rental Property Investor · Atlanta, GA · Member since 2018 · 65 posts · 29 votes
    5y

    @Mike Lambert Hello everyone,

    I’m from Atlanta Ga but currently living in Playacar

    Phase 2 in Playa del Carmen i bought a condo here in the last development available call AWA, i highly recommend it, it’s beautiful, safe and has the best amenities in the area.

    But I’m also investing in Tulum in the newest and closest area to the beach call Tulum 101 or area 101.

    This is going to be a huge gated development with other different apartment developments inside all with their own gate as well and nice amenities.

    Right now aldea zama is the hottest area because the proximity to the beach, but not anymore since Area 101 came out. That been said i expect to get better returns from my condo when is completed.

    Park 101 by Los Amigos well known developer in Tulum is the name of the project where I’m buying inside Area 101.

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