Investing in Tulum?

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Investing in Tulum?

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

@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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Tak Ogihara
New to Real Estate · PDX to Mexico · Member since 2021 · 38 posts · 22 votes
4y
Please tell us the cross border finance companies. I’ve only heard of one. And I wrote to them but never got a response! They were called Cash in Mexico
0 Reply
Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
Sure thing @Tak Ogihara Cash in Mexico is one of them, I have a couple more. Let me send you the contacts on a DM.
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Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Brad Fitzpatrick

@Sebastian Papworth

@Tak Ogihara

Here's an addendum/correction on Sebastian Papworth's post on financing above

1. Developer financing.

This has never been common and it's even less common today because the state of the market. Beware of what I call fake developer financing. True developer financing starts after your unit is delivered. Anything else is fake.

2. Mexican banks

It can be bureaucratically excruciating at times but creditworthy people from certain countries can in theory get a mortgage from a Mexican bank. I used to finance Mexican banks as an international banker so feel free to send me a DM if you'd like to know which ones to use and which ones to avoid if you want to avoid this route. Interest rates are much higher than in the US though.

3. Financing in the US or Canada

Many realtors in Mexico are suggesting that buyers can finance their Mexican property in the US or Canada. They should stop doing that as it's unethical if not plain dishonest. To be clear, no bank outside of Mexico will give you a loan on a mortgage on a property in Mexico. If you take a HELOC, you are tapping into the equity if your home and you can use the money for whatever you want, including going on holiday if you want. So it's exactly the same as if you were paying cash, because the equity in your home is basically cash.

If you have equity in a property in the US or Canada and you're never going to use it for any other purpose than buying a property in Mexico, by all means take advantage of the HELOC's low interest rate and use if to buy your holiday home. If you're an investor though (like most people here), if you use your HELOC to buy a property in Mexico, you won't be able to use it to buy another property in the US or Canada. As any astute investor knows, the only way to use leverage on a property is to take a mortgage on that specific property to tap into the equity of the property that you buy. Taking a mortgage on another property is exactly the same as paying cash for that matter.

4. Financing with your 401K/RRSP using a self-directed IRA in USD.

Again, unlike what some local realtors mention, using your retirement account, whether in the US is no real financing either. Anyone can figure that out easily. You're basically using your own money. It's like the banks selling loans against cash collateral. You're basically borrowing your own money. No OPM or leverage involved here.

5. Cross-border finance companies.

They advertise 2-3% interest rates when, in reality, when you understand the structure of the loan, the real interest rate is more like 10-20%. I don't know how many people use those but you'd have to be smart and good in mathematics and take the time to figure this out and I'd suspect many people don't realize it. There's no secret in finance. The cost of funds for these companies is much higher than that of the Mexican banks so there's no way they can charge less for their mortgages than Mexican banks.

Cash in Mexico is actually different. All they actually do is give you a personal loan in the US, like any US bank would. It's akin to a HELOC but it's a personal loan. You could use the money for whatever you want. Again, from an investor's point of view, it's like paying cash for all intents and purposes.

To conclude, you could get financing in Mexico but it's going to be more expensive than in the US and the LTV will be much lower as well. As I mentioned in my previous post in this thread, this can work fi you buy the right deal but it most likely won't work if you buy the average deal in the market. If you're in the US or Canada and you'll have equity in properties there that you won't need for any other purpose, by all means you can take advantage of the low interest rates there to take a HELOC and pay cash for a property in Mexico with it.
And, above all, whether it comes to financing or any other stage of the purchase process, make sure you don't get taken advantage of. When anybody promotes anything to you or refers you to anybody, make sure that they disclose any financial interest they might have when promoting or referring. While you might think that there's nothing wrong about getting paid for a referral as long as it's good (I've never done it myself), the problem lies elsewhere: you have to understand that their opinion or advice could be biased or first and foremost in their own self-interest, especially if they're not disclosing their financial interest.
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Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
@Mike Lambert

I agree it's not that common, that's why I mentioned 90% of buyers are cash buyers. However there are currently 9 projects offering direct developer financing in Tulum, some are pre-construction and some are immediate delivery.

One example is a project in Aldea Zama in which you can do a 30% downpayment (some start at 20% down) and the remaining balance financed directly with the developer for a 10-year term. (if you pay a higher downpayment the interest rate goes down, the lowest interest rate being 5.99%, which is decent for Mexico considering banks usually lend at 7.99% and up, crazy I know!). If you pay on time on the first day of every month all the monthly payments go to principal and you don't pay any interests until June 2023. You get physical delivery of your unit so you can start getting rental income cash flow and there is no prepayment penalty.

On my first investment, I got a mortgage with a Mexican bank, and with the rental income, I finished paying the property at year 4 (no prepayment penalty).

Several pros of financing your property in Mexico in MXN:
- 1. Full legal certainty from the bank that you are getting the mortgage with.
- 2. Securing a loan in Mexico will not impact your credit score back home.
- 3. The exchange rate will most likely be in your favor and you can derive income in USD dollars from buying a property that rental clients rent in USD, whereas your mortgage is in Mexican pesos.
- 4. Having access to extra cash that you didn’t know was available to you.
- 5. You can deduct taxes on the interest that you have paid on your mortgage in Mexico.
Cons:
1. Higher interest rates.

Here is a good article about investing in Mexico with your 401K: https://mexlaw.com/investing-m...
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Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Sebastian Papworth

A few things here.

1. A friend's advice. You're a realtor in the Riviera Maya and you're not supposed to promote any project on here. It's against the BiggerPockets rules and for good reasons, as you have a potential conflict of interest and a credibility issue. I see that you're relatively new here. They're serious with this kind of things and patrolling the forums and they might ban you from the site if you don't respect those rules so I'd thread carefully if I was in your position.

2. Financing doesn't make a project good and nobody should buy in a project just because of the financing. If the project is overpriced or not good for any other reason, financing won't make it a good project, especially not at that rate.

3. As an ex-banker, I completely disagree that having a loan in MXN is a good idea as it makes you speculate on the exchange rate. By the way, out of your 5 arguments, only the third one relates to the fact that the loan would be in MXN. You are implicitly suggesting that the MXN will depreciate against the USD, which you have no idea about, not more than me or anybody else. If your home currency is the USD and your revenue is in USD, it makes absolutely no financial sense to lend in USD.

4. If anybody bought in Tulum 4 years ago or more like you did, they're sitting pretty today. However, as you know, anybody who buys today will generally not be able to do what you did as the market conditions, prices and supply/demand situation have completely changed. Taking a mortgage in MXN today and paying it off in 4 years through your rental income is extremely unlikely, if not downright impossible. It'd take much much longer.

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Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
1. @Mike Lambert
2. That is correct; I am an investor in the Riviera Maya, a licensed realtor (license number in profile), and a partner in a brokerage specializing in representing buyers. I don't represent any seller so I can offer an honest and unbiased opinion: my goal is to provide as much information as possible to anyone interested in investing in this area of Mexico.
3. I never promoted any specific project in my replies and rest assured I never will, I shared a financing example in the current Tulum market. I have been following all discussions of real estate in Mexico in BiggerPockets for the last two years and have read most posts and replies, I just recently decided to start participating due to investors asking about specific developers whom I have invested with, or represented buyers. Talking about a potential conflict of interest and credibility issues, I actually saw a post you made 6 months ago (https://www.biggerpockets.com/...) where you wrote:
"I know that there are many more people I've helped who haven't pulled the trigger even though they wanted to. By wondering if there was any other way I could help these people, I decided to do my own development project in Tulum that would address these three issues of risk, price and financing, in order to meet the needs of the savvy buyers and investors."

Let’s lead by example.
I think we both have the same aim in this forum, which is to share our experience and information and help people buy real estate with the lowest risk possible, provide factual information and help define options. I have taken part in over 300 real-estate transactions in the Riviera Maya over the past 7 years, and I know which developers are doing a great job contributing to this area and which have had problems with developments in the past. I will continue to share information that I hope is useful to investors in this forum.

2. My team and I have put together an internal MLS system updated daily (which the current market doesn't have) with an updated inventory and information on hundreds of projects that have been developed or are in the process of development in the Riviera Maya, so we have a clear investing analysis.

3. It's important for investors to know that most Mexican banks will extend you a loan in Mexican pesos, not USD. I don't like speculating; investors can carry out their own analysis by following the historical data of the Bank of Mexico’s official Foreign-Exchange Commission. https://www.banxico.org.mx/tip...

4. This has been the best year so far in terms of rental income from the properties I own. I agree that the market will reach a point where the supply and demand balance will shift, and that's why it's important for investors to invest in a project that stands out and has unique features, so they can continue charging high nightly rates and command high occupancy rates. However, with the Mayan Train (https://www.railway-technology...) being built, along with the new Tulum Airport (https://www.travelpulse.com/ne...), the new Formula 1 race track, the Green School, and all the projects planned for Quintana Roo, I see that it will take time for that balance to shift, and strong demand for Tulum will continue. I remember when no one was investing in Tulum and everyone wanted to buy in Playa del Carmen. Now on Airdna, there are 11,105 active rentals listed in Playa, whereas Tulum has only 5,422 active rentals (a little under half), and all the contacts I know who are very involved in politics and the future of this state claim that Tulum will become a bigger city than Playa del Carmen (I honestly have mixed feelings about this). Playa is a more mature market and returns are good, but not as good as Tulum. I am excited to see what the future will bring.
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Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Sebastian Papworth

Out of respect for everyone else here, I have no intention to enter into a personal argument with you. However, since you personally attacked me, I have no choice but setting the record straight to defend myself. I have helped countless people on BiggerPockets to invest internationally and in Mexico by sharing my knowledge and experience over the last several years. While I've spent a considerable amount of my time doing this, I've never promoted anything, made any money or gotten any personal advantage out of it. So, I'll let people judge whether the post I wrote you're referring to is a promotion of anything and I trust they'll figure out it's not.

What are we talking about here? All I pointed to is the fact that you talked positively about a specific project. If you represent buyers for that project and get commissions as a realtor (and on top of it don't disclose it), it's promotion for all intents and purposes and against the rules so I was just warning you against that in a friendly manner (I'm not here to play the police and people can see through direct or hidden promotions it's not my role to judge for others). I purposefully even wrote "A friend's advice" to make my intentions clear. In your reply, not only you attack me but you use that as an opportunity to self-promote yourself and your business!!! Are you kidding me? So, you will excuse me but I don't think you're not in a position to give any ethics lessons to me or anyone else for that matter. Your attacking me and using that as an opportunity to promote yourself tell more about you than it tells about me.

The forums here are about helping each other, not attacking each other. I don't do personal attacks. If you do, please don't target me and let's respect each other, shall we. I don't want to get involved but I will defend myself.

Speaking of helping other members, let's finally get to the substance of things, shall we.

1. The MXN loans are typically what the cross-border finance companies you offer to refer @Tak Ogihara to. Maybe you can confirm this but some of these companies are just brokerages and offer mortgage products from Mexican banks. Typically, the interest rate starts in the 2-4% range but rapidly climbs, whereby you end up paying on average between 10 and 20% of the lifetime of the loan (up to 20 years). To avoid the high interest rates, you'd think you could repay the loan early. Think again. Some of these products can't be repaid earlier and those who can carry a huge penalty so that you'd never want to cancel. In the marketing, the justification for an interest rate of up to 20% is that the peso would depreciate against the USD, whereby you'd actually have to repay less and that would compensate for the sky-high interest rate. If you're good in mathematics, you'll realize that that won't be enough to compensate but let's assume that it does.

The problem is that you have no guarantee that the peso will further depreciate against the USD. It's a toss. And, given that the MXN is already at a historic low against the USD, you could argue that the law of probabilities favor an appreciation of the MXN vs a further depreciation. If the MXN were to appreciate, not only you'll end up paying your 10-20% interest rate but your principle would increase. This is a risk I don't think anybody would be willing to take that risk. Also, the historical data from the Bank of Mexico is about the past, it doesn't predict the future so using it is misleading. As a famous adage on Wall Street says, past performance

Now this comes on top of my previous argumentation against these loans. As a reminder, I was alluding to the fact that an American will buy the property USD. Just because of that, taking an MXN loan would be speculating on a foreign currency, which is risky and unnecessary. Add to this that his currency is the USD and his rental income will be in USD plus what I mention in the previous paragraph and I think taking an MXN loan is plain dangerous, apart from being expensive.

I don't understand why you would suggest to anyone that they could take a MXN loan. Am I missing anything. If I do please educate me. I love a healthy debate and it's useful to readers.

Speaking of debate, you brought the Playa vs Tulum debate, which I'm often asked about. You're telling us that you had the foresight to suggest Tulum over Playa and suggests it was the right advice since there are 5,422 listings on Airdna vs 11,105 for Playa, indicating that Tulum would be a better market as there would be less competition. Such a comparison makes absolutely no sense to me as it only tells half the story as these markets are of very different size.

Playa has a population of 304,942 at last count. Tulum only has 46,721. So, Playa is 6.5 times the size of Tulum. If you calculate, Playa has 1 listing for 27 inhabitants whereby Tulum has 1 listing for 9 inhabitants so Tulum proportionately has 3 times more listings than Playa. And, to top it off, as you know, there are more units in construction in Tulum than there's in Playa, even though Playa is 6.5 times the size of Tulum.

Then, land is much more expensive in Playa than it is in Tulum and the construction costs are pretty much the same and Playa is also a more established destination. Given all this, you'd expect that prices in Playa would be higher but, incredibly so, they're lower.

This by the way is why, whenever I've been asked about or given the opportunity, I've been warning people about overpaying for a property in Tulum.
1 Reply
Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
@Mike Lambert
Neither do I, I don't think anyone is interested in this personal argument so I will try to keep it short.
Who threw the first stone? You wrote:
"A friend's advice. You're a realtor in the Riviera Maya and you're not supposed to promote any project on here. It's against the BiggerPockets rules and for good reasons, as you have a potential conflict of interest and a credibility issue. I see that you're relatively new here. They're serious with this kind of things and patrolling the forums and they might ban you from the site if you don't respect those rules so I'd thread carefully if I was in your position."
I read this comment and frankly, it sounded more like a personal attack than a friendly comment, you could have sent me a DM for that matter. If you weren't attacking and you were really offering friendly advice, then I offer an apology. Only you will know the real intent behind it.
I never promoted a project or spoke positively or negatively I only offered an example I never gave a positive or negative opinion about it just shared facts. I'm not promoting myself I am just sharing facts. I have already written what my goal in this forum is, if you go to my profile I disclose all the information about myself, not hiding anything.
My values have always been creating win-win transactions and always focusing on creating long-term relationships. Like I mentioned I have been living here for 7 years now, I meet so many previous clients (now friends) on the street, in supermarkets, etc, even my child was born here. We have a saying in Mexico that goes: "Pueblo chico infierno grande" (small town big inferno) we all know each other in the real estate industry so I take my reputation very seriously.
Correct realtors make commissions, as well as developers make a profit from the sale of the properties.
I am all up for respecting, helping each other, and providing valuable information to readers, today is my wedding anniversary and my wife is going to kill me if I spend another hour writing in this forum lol.
I am always eager to start a healthy debate based on facts and the Playa vs Tulum is one of my favorites, so I will take my wife out and I'll reply with more hard data during the weekend.
0 Reply
Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Sebastian Papworth

I don't attack anyone and I have no personal interest in attacking you so why would I? True, I could have sent you a DM, which I didn't do since I wanted to comment on your post as well so I did both at the same time. To be extra cautious and make sure you took what I wrote as a friendly advice, I wrote "A friend's advice" so as not to leave any doubt or so I thought.

Now I believe it's not my job to do the police on BiggerPockets and everybody can write what they want. Because I thought you were promoting and might not know the rules since you were new, I assume that the th"BP police" might think so as well so my only purpose was to let you know that you could potentially you into trouble.

Why could BP think that you were promoting? You gave details about a specific project in a positive way. Let's assume that that made me interested in the project. I'd contact you to get the details and then, you could get a commission from the developer by referring me or you could become my agent and get paid that way. If that would happen, that would be against the BP rules because you would talk about a project without disclosing that you'd get paid by a third party if I were to buy as a result of your intervention. This is where the conflict of interest and credibility issues I mentioned would arise.

Around two days ago, after reading one of your posts earlier in this thread, I thought you must be an agent. I checked your profile and it wasn't indicate but you have mentioned it in the meantime and added your license number. Mind you, since that disclosure in the thread, anybody who just reads the thread without checking your profile might not be aware that you might get paid realtor commissions, which again could be a bit delicate (your might argue that it's their problem though).

So, now, you can understand why I wrote why I wrote and that, most importantly, I was just trying to help.

As to Playa vs Tulum, even though I started my comments with "speaking of debate...", I wasn't actually debating. All I did was adding some missing facts but then I didn't express any opinion or drew any definitive conclusion. That's what I always strive to do: sharing knowledge, facts and ideas and then let people draw their own conclusions. Hopefully, readers appreciate that in my posts. So, in this specific case, while I was challenging the fact that Tulum would be a better / less competitive market solely based on the number of short-term rental listings, I stopped short of concluding/writing that Playa is better.

On this note, I wish you a happy anniversary!

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Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
@Mike Lambert
Happy 2022!! Sorry for the delay we have been overwhelmed with work.
It has taken me longer than I thought to do my analysis of Playa del Carmen vs. Tulum. I am not an expert in statistical analysis, so if I’m wrong anywhere please correct me (Not sure if I can add all the links of the sources of data to this post, ill try. I hope I don't get in trouble). I really think this comparison will help investors. Both are really attractive markets and they offer different characteristics; I know a lot of people that prefer PDC to Tulum and vice-versa, so it’s a case of different strokes for different folks.

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. 

As you stated Mike, Playa indeed 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: Invest in 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.
https://www.lonelyplanet.com/articles/tulum-mexico-digital-nomads

https://everythingplayadelcarmen.com/population-of-playa-del-carmen/

https://www.airdna.co/

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://www.eleconomista.com.mx/estados/Quintana-Roo-registra-la-mayor-tasa-anual-de-crecimiento-poblacional-de-todo-el-pais-Censo-2020-20210127-0108.html

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/

https://www.greenschool.org/

http://www.datatur.sectur.gob.mx/SitePages/Visitantes%20por%20Nacionalidad.aspx

https://www.reportur.com/mexico/2021/07/17/futuro-aeropuerto-tulum-podra-recibir-4-millones-pasajeros/

https://www.elfinanciero.com.mx/empresas/2021/09/21/tren-maya-sale-re-caro-se-dispara-47-su-costo-y-suma-5-meses-de-retraso/#:~:text=Actualmente%20su%20costo%20es%20de,de%20pesos%20con%20IVA%20incluido

https://en.wikipedia.org/wiki/Municipalities_of_Quintana_Roo

https://www.travelandleisure.com/trip-ideas/i-moved-to-tulum-during-the-pandemic
7 Reply
Tak Ogihara
New to Real Estate · PDX to Mexico · Member since 2021 · 38 posts · 22 votes
4y
@Sebastian Papworth Wow. Thank you for all that data and information. I really appreciate hard data to form my own “gut instinct”, as ironic as that may sound, I really like to process all the data points (hard data and facts like your list, similar news article and posts, and multiple trips to the area meeting people both locals and visitors to hear their input and insight).
After all that, I just wait for something to “come to me”. It sounds divine but I trust that one unit/project will become the obvious choice for me after looking at 15-20 developments in Tulum and Playa.
in any case, thanks again for the research.

1 Reply
Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Sebastian Papworth
Thank you and Happy New Year to you too!
Interesting conversation. Let me add my two cents, although I'm not necessarily a big fan of this type of comparison, actually for the exact reasons you mentioned: people have different tastes and opinions and both could work from a lifestyle and/or investment point of you so I wouldn't pin them against one another (and I'm not suggesting that's what you're doing).
Foreigners who buy there do it for lifestyle, investment or a combination of the two. As long as there is a significant lifestyle part to it, whatever is best for them will depend mainly on their personal tastes. In this respect, I have my personal preference but I don't think anything is interested in that here. I would have no problem sharing my preference if only I had one but I don't. It really depends what property we're talking about and what the purpose is.
After I read your post, I asked myself the following question: "If I new nothing about the area, which one would I think is the best after reading your post if I had to base my decision on what you read". The reply that I got what that it's slightly tilted towards Tulum. Yet, that didn't change my opinion that it's a tie for from an investment point of view. Why is that? As you suggested, there can be an issue with information and so I'll add some deeper analysis that I don't see mentioned very often and limit myself to two points as the purpose is just to illustrate my point.
Firstly, much more than in Tulum and due to Playa's much bigger size and expansion, the market in Playa is much more diversified. If money was no object, pretty much anybody who stays in Playa would want to be downtown and walking distance from the beach and the 5th Avenue. The only exception would be the Playacar fanatics but, as much as I like Playacar, it's like being in another city in my opinion. The ADR in that downtown area is way above the $81 dollars you mentioned and the $125 you mentioned for Tulum. That $81 figure includes a huge number of properties in much less desirable locations. So, if you happen to own property in that downtown area, you're lucky. And that's not only because you own property in the most desirable area. That area in Playa is fully built out, which limits your competition. Of course, developers could buy a row of houses, demolish them to make place for a development. The problem is that land costs are horrendously high. Then, you have to pay for the price of the properties you're going to demolish on top and add the demolition costs. So, to make it profitable for developers, the condos have to come with a higher price tag, which would bring up the overall real estate prices in the area. So, as an existing owner, you might not mind that additional construction.
Secondly, contrast that with Tulum, where there's no 5th Avenue and you can't buy walking distance from the beach like you can in Playa. Tulum is different anyway andit's mostly about the jungle. But it means you compete with pretty much all the area between town and beach.
That statistic of 2 million visitors in Tulum has been misinterpreted and misused so many times!. The real statistic is that 2 million have visited the Tulum archeological ruins during some year before the pandemic. People are wrongly implying that 2 million people are staying in Tulum over a year. If you look at Tulum's recent past and current infrastructure, it doesn't have the capacity to host all these people. Clearly, most of the visitors to the ruins are staying in Cancun, Playa and the all-inclusive resorts between Cancun and Tulum and just go to Tulum for the day.
Let's look at the figures though. The conclusion that the demand is double in Tulum compared to Playa while Tulum has only half the supply makes no sense based on the very figures you quoted. On the one hand you mentioned that Tulum had an Airbnb occupancy rate of 65% and that Playa's was 58%. So for the sake of simplicity, let's assume that they're identical, given the small difference. On the other hand, as you rightfully mentioned, Playa is 6.5 times bigger and 2 times more active listings. Adding to this that Playa has morte hotel rooms too (as you'd expect), it's mathematically impossible and makes absolutely no sense that that twice as many people (2 million) would stay in Tulum than in Playa (1 million)! And anybody who visits both areas can see that there are many more visitors in Playa, which you'd expect because of the respective size of the cities and the more established nature of the Playa market. The confusion/difference could come from the fact that, as I alluded to above, a city receiving a tourist doesn't mean that the tourist is staying in that city.
While the points that I added to the conversation sound more favorable to Playa but they I'm not suggesting that Playa is better than Tulum for investment purposes. Again, I personally think it's a tie, depending on what the objectives are. The way to look at this post/reply is this. The facts and figures you mentioned tilted the balance slightly towards Tulum according to my interpretation. So all I did was just bringing the balance towards the middle.
Like most people, I hated statistics when I was in college although I somewhat thought they might be useful one day and decide to become good at them. Nowadays, I'm glad I did. :-)
1 Reply
Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
@Mike Lambert
Thank you for sharing your personal opinion and interpretation of this analysis.
People compare PDC & Tulum all the time and they ask us our opinion almost on a daily basis. I base my answer on their needs/wants and expectations. As an investor in both cities, I see different pros and cons. I try to stick to data to stay as objective as possible and help investors reach their own conclusions.
Here is the source for the two million tourists: https://www.kayak.com.mx/Tulum...
"Tulum has become one of the main destinations in the Riviera Maya, a place that receives almost two million tourists each year despite the fact that its population barely reaches 20,000 inhabitants."
If indeed this article is talking about the visitors of the ruins, how many tourists do you know to stay in Tulum on average a year?
Do you really think ADRs for beachfront hotels are similar in Tulum to PDC?
How many years behind do you calculate Tulum is compared to PDC?
I have seen people in bigger pockets forums talk about the supply of properties in Tulum surpassing the demand, based on the numbers I have seen returns are very solid post-pandemic, I have made multiple projections and analyses based on our internal MLS and I am curious to hear what you think.
It's important to note that in Tulum you are able to buy clear titled properties within walking distance to the beach, not everyone knows about them and there is a very short supply, but they do exist.
Something that I like about PDC is that it's a more mature market and its geographic location makes beach access very simple, I like the walkability of the city, and since it's in the middle of two golf courses so downtown growth is limited.
I do see Tulum growing consistently, something important: services and infrastructure need to grow along with private development, parks, and green areas have to be assigned. Also, affordable housing is needed for people that work in Tulum because more and more people will move to Tulum to build the airport, train, and other projects. I have seen the urban development plan of the "new Tulum" and there are definitely big plans for the city and municipality.
1 Reply
Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
@Tak Ogihara
Sure thing, I hope this helps you in your decision process. I work in a very similar way to what you just shared so I hear what you say. I would say there is no perfect investment however it definitely has to make sense and feel right. I wish you the best of luck on your investment and hope you find the property that meets your needs/wants at the best possible price! Anything I can help feel free to ask.
0 Reply
Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Sebastian Papworth
I know! People love to compare!
To answer your questions:
Yes, that statistic comes from the ruins. I think it's being used because it's a nice statistic and, as far as I know, there's nothing else available. How many of these people stay in Tulum? I have no idea. However, let's make a back of the envelope calculation based on the figures you supplied. I'm going to be conservative in my calculations. What this means here is that, because I believe the real number is much lower, I'm going to err more on the side of overestimating.
For short-term rentals, 65% occupancy would give 34 weeks of occupation per year. Generally speaking, people will stay at least a week. Knowing that there are people staying for more than a month, I'm probably conservative by assuming that the average renter will stay for two weeks. We know that the main inventory is made up of 1- and 2-bedroom condos and Tulum has a lot of studios too. To be conservative and simplify the calculation, I will assume that we have only 1- and 2-bedroom properties in a 50 - 50 proportion. Since some properties will have a sofa bed in the living room, I'll assume that a 1-bedroom hosts 3 people on average and a 2-bedroom hosts 5. We therefore have an overall average of 4 people per stay.
For hotels, I'll use 80% occupancy, which comes down to 42 weeks per year, and 3 people per room instead of 2 to take children into account. So, I'm being conservative again by ignoring the people traveling solo.
4 people * 17 stays per year (34 / 2) * 5,422 short-term rental listings = 368,696 visitors staying in short-term rentals
2 people * 21 stays per year (42 / 2) * 8,390 hotel rooms = 352,380 visitors staying in hotels
So, I get a total of 721,076, which is probably an overestimation given my conservative estimates. In any case, you can see that there is no way we can get anything close to 2 million. In any case, even if the figure is less than my 721,076, it's going to be pretty good for a city of 46,000 so there's no need for Kayak or some developers to inflate the figure to 2 million.
I wasn't taking about ADRs of hotels. I was comparing ADRs of short-term rentals close to the beach in downtown Playa vs Tulum as a whole. This isn't a like-for-like comparison but my point was to illustrate that the ADR in Playa can be very different depending on the location within the city.
Tulum is behind Playa it started to develop later, like Playa is behind Cancun. However, Playa (thankfully) should never become another Cancun and Tulum should never become another Playa because of the building restrictions and the objectives of FONATUR so I don't think it makes sense to look at Playa to imagine what the future of Tulum will be.
Yes, there have been talks about an upcoming oversupply of properties in Tulum. This is my typical reply when people bring that to me:
1. I don't have a crystal bowl (and nobody else does for that matter).
2. If you buy for lifestyle, all you'd need to do would be to cover your costs.
3. If you buy as an investment, any investment carries some risks with it. You have absolutely no control over it so all you can do is put yourself in the best situation should it happen. How do you do that? You buy value properties, meaning properties that have the best possible ROI as opposed to the fancy and expensive ones. This way, you'll be in a better position to face the price competition that would occur.
4. If you're an investor and that's an issue for you, you can invest somewhere else in beautiful Mexico.
Yes, I keep repeating to people that it's not a good idea to buy ejido properties in Tulum (or anywhere else in Mexico for that matter), as these properties don't have a clean title. Mind you, I have friends from Canada who bought ejido land overlooking the beach in Zipolite in the province of Oaxaca and they're gonna build a house on their lot (they're already spending their winters there). There is no land with clear title there, they got the land for cheap and they're going to build a house cheaply (they have turned hippie but not hippie-chic ;-)). They're aware they could end up being expropriated but they can live with it. Its could make sense in that situation but it doesn't in Tulum!
1 Reply
Deisy P.
Rental Property Investor · South Padre Island, TX · Member since 2018 · 160 posts · 157 votes
4y
If anyone already has a property in Tulum: I purchased with iiK Tulum back in 2020 (presale). It's almost completed BUT when I went to check the progress back in January, i noticed that one of the pools on the rooftop did not have the blue tile as advertised and honestly, i don't think they'll add it to any of them. I asked my realtor to make sure and let the developer know that I want that blue tile in my plunge pool moving forward. The contract said, the finishes include it. What can I do about the pools outside of my unit though? Any suggestions? I haven't fully paid it. I pay it in full at estimated time of closing in August.
0 Reply
Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Deisy P.
Why are you concerned about the other plunge pools? Are you concerned about the aesthetics.
In any case, I had a look at the website and it says nothing about the developer. This is a red flag. As I often write, it's important to buy from the right developer when you buy pre-construction to avoid that kind of situation.
Mind you, in your case, it sounds that at least you're gonna get your condo soon and that it won't be all that different than what you ordered.
0 Reply
Deisy P.
Rental Property Investor · South Padre Island, TX · Member since 2018 · 160 posts · 157 votes
4y
@Mike Lambert Not the other plunge pools. The rooftop pools. The developer is Riseub.mx and yes I know what you mean about researching the developer. It could have been a very expensive rookie mistake. My realtor showed me another construction they did in Playa and so I went with it.
0 Reply
Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Deisy P.
I haven't heard about the situation thus far but you can always contact a lawyer if the developer doesn't fulfil its legal obligations. As a buyer of a unit, you also own your share of the rooftop pools.
0 Reply
Deisy P.
Rental Property Investor · South Padre Island, TX · Member since 2018 · 160 posts · 157 votes
4y
@Mike Lambert Yes, I have one, from the start. We're working on that now. Thanks, Mike.

0 Reply
Sebastian Papworth
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
4y
Hello @Deisy P.

Congratulations on investing in Tulum, and almost getting your unit!
I am Sebastian Papworth a buyers agent at Jungle Realtor, we haven`t closed any properties on iiK, however, I liked the style of the project since I saw it, I am excited to see it finished, we have closed a couple of units on another project from the same developer CEREN in PDC, I know the person who runs the sales and marketing of both projects we are both colleagues in the Mexican Association of Realtors, I am sure they can help you out.
If it's in the promissory agreement signed by the developer they have to honor it, it's good that you haven't paid off the remaining balance until you reach an agreement.

If you need any extra help send me a DM and we can chat directly.

All the best!
1 Reply
Dennis Kraft
Member since 2021 · 5 posts · 1 vote
4y
Hello together,
what do you think has the Sargassum for a negative impact on investing in Tulum on longterm?
greetings
Dennis
0 Reply
Tak Ogihara
New to Real Estate · PDX to Mexico · Member since 2021 · 38 posts · 22 votes
4y
Quote from @Dennis Kraft:

Hello together,
what do you think has the Sargassum for a negative impact on investing in Tulum on longterm?
greetings
Dennis

Hi Dennis, I'm no expert here but I was just down there a few weeks ago at a beautiful beach-front wedding in the "Hotel Zone" of Tulum. It was absolutely beautiful.
I'm sure there are hard numbers and statistics if you search, but just seeing from the crowds at Cancun Airport, and overcrowded streets of Tulum, the Sargassum hasn't done anything (negative) for tourism. I don't think there is any correlation, but if anything, the numbers in tourism keeps going up and up, even as news of the "seaweed problem" has spread.
I think mainly, Tulum is famous for it's beaches but it's certainly NOT where most of the people tend to spend their days... There is so much to offer in activities and other experiences that the beach actually plays a small part of their itinerary.
The hotels and beach clubs also do a good job of managing and maintaining Instagram-worthy beach for everyone's photo-ops.
Also, while touring properties for sale, I came across a developer who was using bricks/concrete blocks made from collected sargassum. They're only used for privacy walls and decorative pieces, not for structural/building materials but still, nice to see waste being upcycled for different uses.
Hope that helps!
2 Reply
Deisy P.
Rental Property Investor · South Padre Island, TX · Member since 2018 · 160 posts · 157 votes
4y
@Sebastian Papworth Thanks so much for replying to me about this. It would be great to be able to speak to someone that can talk to the developer. I'm sure I would be able to get my condo the way I want and agreed to but i'm concerned about the rest of the swimming pools (rooftop). Sending you a DM. Thanks.
0 Reply
Mike LambertPro Member
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
4y
@Dennis Kraft

Nobody has a crystal bowl and I have been surprised by the limited impact thus far. I can't predict the future better than anybody else. Aside from what @Tak Ogihara mentioned, it's been mostly a seasonal phenomenon that occurs during the low tourist season

If anybody is concerned about it, my advice would be to look at Mexico's Pacific coast. Indeed, the sargassum affects the whole Caribbean, including the US coast from Florida to Texas. Tourists would have to go somewhere. So, if ever it really becomes too bad problem, hordes of visitors from Florida to the Caribbean to South America would most likely relocate to the Pacific coast of Mexico, resulting in a huge boom there. Indeed, California, aside from being overpriced, isn't warm enough in the winter so Mexico's Pacific coast has very little competition.
Mind you, Mexico's Pacific coast doesn't need a sargassum boost to do well. Fonatur, the government body who made the Riviera Maya the tourism juggernaut that it is today is investing massively on the country's Pacific coast. In Mexico, investing along or, even better, ahead of Fonatur has proven to be a surefire way to make lots of money in the past.
1 Reply

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