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
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.
thanks for asking this questions here. The only point you have to ask your self:
-what you are looking forward from your investment.
- it is rental only, or both vacation and rental?
- what the % of cash flow or ROI you desire?
- have you check the builder history?
- Florida has immigration issue right now with construction.......
If you know already why to invest in Tulum specifically than you did your homework correct. You are ready for the investment in that specific area, knowing all the billion dollar investment it will growth exponential and take care your investment.
Price are currently going up moderate which is good. Beside what you buy, the rental will look at service, quality, transportation to the beach, make themselves confortable to work from there as well. Of course the management will implement all and you have less work to do if you go with that root.
Those are base point to check if you do the right things. Always go with a reputable advisor or license agent to support your due diligence.
Real Estate Agent · Tulum Mexico · Member since 2021 · 65 posts · 62 votes
3y
I'm unsure if @Mike Lambert is referring to me. If that is the case, I would like to clarify that it was never my intention to personally attack anyone. My aim was simply to share factual information. I have been a devoted follower of this blog for over 5 years, and I distinctly remember a post from Mike four years ago in which he stated: "I have been investing for a few years in the Riviera Maya and was recently presented with a private condo deal in Tulum. I turned it down as I believe it is now too late to invest in Tulum."
However, it is important to acknowledge that the past 4 years have seen Tulum experience its highest income-generating period in history. As I mentioned in a previous post, predicting the future accurately is a challenge that none of us can accomplish. Tulum is currently undergoing significant changes and developments. While the days of charging $800 USD per night for a palapa in the Jungle may be behind us, it does not mean that there are no longer attractive opportunities in the market. Once the ongoing projects are completed, accessibility to Tulum will improve, especially with the new Tulum airport. Contrary to what you mentioned, the new airport is actually much closer to Tulum compared to Cancun airport. It is only a 20-minute drive by car and will be even more convenient once the Mayan Train is operational, offering high-speed transportation with additional amenities. The train will significantly reduce travel time by over an hour.
It is worth noting that several schools, such as The Green School and the German International School of the Riviera Maya, along with shopping malls, are being constructed in Tulum. This transformation is attracting more families and contributing to the city's growth, leading to a shift in demographics. Consequently, there is an expected increase in demand for long-term properties, transitioning away from short-term accommodations. While there may be an oversupply of studios and cookie-cutter units, it is crucial for investors to focus on properties with unique designs that stand out from the competition and have a long-term vision of Tulum. Exploring the top listings on Airdna can provide insights into how properties that offer something distinctive achieve successful outcomes. Maintaining high occupancy rates requires standing out from the crowd. Although nightly rates have decreased due to the significant inventory delivered this year, among other factors, it is important to consider the rising monthly booking demand, which can be observed on Airdna under Occupancy - Booking demand. I can also share my listings to provide examples of my occupancies and nightly rates. Out of curiosity, do you have any investments in Tulum Mike, if so how are they performing?
I would recommend engaging in conversations with locals and individuals who speak Spanish, possess firsthand experience living in Tulum, and are part of the community. The Tulum market undergoes rapid shifts due to the extensive projects being constructed. As with any market, there are risks and rewards that need to be carefully considered.
In the words of Wayne Gretzky, "I skate to where the puck is going to be." If you are interested in investing in a market with explosive potential similar to what Tulum has experienced, I would be delighted to share insights on where prominent players are currently investing in Mexico. However, the decision ultimately depends on your risk tolerance and specific needs and preferences.
To answer your questions, no, I wasn't referring to you specifically and, as one might expect given my latest comments on the matter, I'm happy I sold out of the area (both personal- and project-wise) since I became uncomfortable with the risks.
I may add that it's perfectly normal and healthy for us and others to have different opinions and that makes up for a good and interesting debate within a forum like this. Also, as a local realtor, I would expect you to be at least somewhat positive about the area. Even the other realtor I mentioned earlier, who was negative from an investment point of view, was positive from a lifestyle point of view. Speaking of which, I oftentimes get private messages asking me about Tulum and my first reaction, whatever the precise content of the message, is to ask whether it's mainly for investment or lifestyle.
Ultimately, only the future will tell which view is the most accurate. For that reason, as you might have noticed, the best thing I can do is encourage people to ask themselves questions, the very same questions I asked myself before drawing my own conclusions. In the meantime, people can make their own opinion, based on their own information and what people like us share if it makes sense to them.
Investor · Trenton, NJ · Member since 2015 · 50 posts · 9 votes
2y
Does anyone have experience with banks or lenders in Mexico taking mortgage for investment property in Tulum? I'm looking for info on how much downpayment to make and LTC info.TIA
LTV min 50%. Minimum amount will be high with some lenders because you can't get title insurance in Tulum and that whole area. Also, some banks don't want to lend in areas where there is evident overbuilding and that is probably the worst offender whatever the LTV. They generally hate risk (although that's what they're supposedly being paid for). So, most buyers in Tulum pay cash. Good luck!
Investor · The Americas and Europe · Member since 2016 · 1k+ posts · 1k+ votes
2y
You're welcome @Vidyadhar R.. To best answer you and to make sure I don't mislead you, let me give you some context before replying to your specific question.
I've never applied for a mortgage in Mexico. I've never needed to, as I've invested with investors and also we've benefited from seller financing. I therefore haven't dealt with the lenders' department that deal with personal mortgages and so there's nobody I can recommend you personally.
I get my information on the topic through my relationships with the commercial lending departments of the banks (I used to lend to them when I was a banker). As I now invest into developments, I regularly talk to these bankers to make sure that our condo buyers will be able get a mortgage if needed and to make sure that their risk when buying will be as low as possible. The idea is that if a conservative bank will grant a mortgage, it's a seal of approval for the project. If it's too risky for them, I don't want to have a situation in which the buyers', investors' and my money are at (too much) risk.
I was recently taking to them about a market in another part of Mexico that's performing very well but has a pocket of overbuilding in a specific area. Therefore, I wasn't that surprised when a bank told me that they won't lend there. To be clear, I haven't asked them about Tulum, simply because I've moved on from investing in that area. However, what's happening in Tulum is the same as what's happening in that area where the bank won't lend but on a much grander scale. Therefore, I suspect that lenders might have even more of an issue lending in Tulum as well, aside from the title insurance issue. That's what logic says to me but that might not be the case. Indeed, logic doesn't always dictate behavior, especially when there's an opportunity for the banks to make a lot of money. We've seen that movie before in the US, haven't we?
Generally speaking, it's not that easy for everyone to qualify for a mortgage in Mexico and, given the potential additional constraints related to Tulum, your best bet is to check with all the banks. It's not like in the US, there is just a handful of them.