New Member-Nashville-Seeking Advice On Tulum Property Purchase

[Kimberly Miller]

Hey everyone! My name is Kim and I'm new to Bigger Pockets. I am a Canadian currently living in Dubai, but will be moving to Nashville TN in July-so would love to connect with others in the area once I'm settled! I plan on making a purchase in either Nashville or the Smokey Mountains areas within the next 12 or so months.

I wanted to ask for some advice re. a property purchase I made in 2023. I am an entrepreneur, and began to make some pretty solid money in 2022. I knew I wanted to get into real estate investing, but to be completely honest, I was 25 years old at the time and did NOT do my homework. At the time, I really enjoyed vacationing in Tulum-and the markets were booming there. Property prices in Canada were extremely high-the 2bdrm condo I was renting in Toronto at the time was valued at almost 2M, to give some perspective-so I thought purchasing a small condo in Tulum would be a smarter and safer investment since tourism was booming and the prices were so much more reasonable. I also had enough capital to pay cash for it-and at the time not having a loan seemed ideal, however now I realize the opportunity cost of using all that cash was massive.

Anyways, after visiting a few units, I decided to pull the trigger on a turn-key 1 bedroom condo in La Veleta (Tulum) @ 169000USD which was delivered in Jan/24. It honestly is a lovely little unit, but the area is not as developed as I was expecting it to be by now, and the "boom", to put it bluntly, has faded. There is an overwhelming supply of units, especially studios and 1 bedrooms. Because of the ongoing construction in the area and the lack of paving on the road the condo sits on, it was a very difficult sell on airbnb/guests were not happy with all of the noise and difficult drive in. This sort of forced my hand to focus on long term tenants. I had someone in for about 8 months, but they left early April, and at the same time my property manager told me he was no longer able to work with me, presumably because he's focusing on larger (more profitable) villas.

I did immediately get online and do my best to find new property managers/mgmt companies, but I found that almost everyone whose website/references/resume I was impressed by was not taking on 1 bedroom units. This left me with the mediocre options to choose from, I guess you could say. I really will also mention that its been challenging to find people with no contacts in Tulum. The real estate agent I bought the property through actually stole a deposit of 8000usd from me that I was never able to get back-so at this point with him out of the picture and the previous PM unwilling to help, I felt very stuck.

I did manage to find a PM after a few phone calls, but again, it felt like I was choosing the best of the "left overs". So far, I am not very impressed with her. It has been 2 months now and we have not been able to get someone in the unit. I have constantly been following up with her, seeing if we need to drop prices etc, and she has assured me she's doing everything she can on her end, however I'm blindly trusting her at this point, and I really do think there must be better quality managers out there.

So, I guess this brings me to where I'm at now-here are a couple thoughts/questions I have that I would love some insight on:

1) do I get out now and just cut the losses on the acquisition costs/taxes/deed creation? I know this TYPICALLY is not suggested, but I'm genuinely worried about the future of tourism in Tulum, and I'm not sure if I can see things getting back to "pandemic boom levels". Now that I am taking the time to property educate myself on everything that is real estate, is losing lets say 30,000usd on the transactions, but getting 140,000usd back in my bank account, worthwhile because of the fact that I can invest this money elsewhere in the US, and utilize loans to make my money go further? I guess this is assuming I can even manage to sell it at its current valuation, which to be honest I'm not sure of.

2) if anyone has any sort of contacts in Tulum for PM or marketing, I would really appreciate an introduction.

3) if anyone has a unit of their own in Tulum, is this normal for it to be sitting empty for 2 months?

I really appreciate any help or advice that can be offered. As I'm sure a lot of you can relate to, this is a difficult world to navigate being young and having no guidance, and in my situation no contacts where my property is. I've definitely learned from my mistakes through this whole process, and am spending a lot of time educating myself right now. I'm looking forward to a (hopefully) much more successful and less stressful second purchase.

[Mike Lambert]

@Kimberly Miller welcome to BiggerPockets!

Sorry to read about your story, which I'm familiar with in that I've been warning people on here against the risks of investing in Tulum over the last two years for the exact reasons you mentioned. So, sadly, you're the proof in the pudding and you're not alone!

I'm not sure what kind of replies you're going to get if any because, aside from the fact that most people on here don't know the Tulum market, if I give you my advice, I'll feel good and will be rewarded with your gratefulness if I'm right but, if get it wrong, you might be angry about me and possibly complain, I might feel guilty and my reputation could take a hit, especially on a public forum. For all these reasons, many people won't tell you what to do even if they have a clear idea about it. Moreover, in my specific case, people (including some who follow me on here) pay me for coaching so it'd be unfair for me to give me free advice. Also, any advice is subjective so I rather give you the objective facts that will lead you to the right conclusion. And, isn't it more powerful if you come to the right conclusion/decision by yourself.

In this case, I think there are three questions that you can ask yourself, the answers to which can tell you what to do without a hint of a doubt:

1. If property managers could make even decent money by renting 1-BR units, don't you think they would do it? Based on what you mentioned yourself, what are the odds that you'd find a property manager to rent your unit, let alone a good one, and that you'd get satisfactory results?

2. Everything has a price. Given the market conditions (you describe), it's extremely unlikely you could sell the condo above its value, presumably $140k. If you sell at that price, you'll likely have to pay a 6% commission so you'll end up netting $131.6k. Let's assume that you hadn't bought the property and that you could buy it today. Knowing all that you know today, how much maximum would you pay for it? If the price you come up with is less than $131.6k, shouldn't you be selling?

3. Let's assume that the price you just came up with was higher than $131.6k. Should you then keep the property? Aside from the property management issue you'd have to solve if you decide to do so, you'd need to answer this last question IMHO. Let's assume that you concluded that you'd be ok to buy the condo for $150k today, you might want to ask yourself whether there is a better way to invest these $150k. If the answer is yes, shouldn't you, again, be selling?

I trust that, after asking yourself these questions, what you should do will be obvious to you.

Hope this helps and good luck!