Mexico vacation rental
I have a vacation rental in Mexico. Yes it can work. From an income perspective the key is occupancy. I highly recommend doing due diligence on real historical occupancy for condos of your type (1 bedroom, 2 bedroom, etc) and talk to a few others who already have experience to make sure you get an accurate picture of costs. Do you need to have and maintain a fiedocomiso (spelling? A bank trust, anyway). If so, that could be $500 per year. HOA fees? How are repair bills?
Another interesting wrinkle is potential capital gains tax in Mexico due to currency swings. I bought a condo when the currency was 13 pesos to the USD. Recently it peaked at 21 and now it is back to17 or so. If I had sold at 21:1 for exactly the same number of USDollars that I paid, according to the Mexican tax authority that would be a 21/13 capital gain and I would owe about 30% of that as tax! Yikes! Think through what you expect the currency to do, and in what currency the properties are being bought and sold.
@Gord Stevenson The term you are looking for is "Fideicomiso." @Simone Newsome Do you have a place in Mexico in mind?
@Account Closed I been looking in Tulum and playa de carmen
@Gord Stevenson thanks for your informative reply! Those are great question I need to talk with the hotel about. The hoa fee is 1% of the purchase price
@Account Closed 1% HOA sounds high. These are approximate numbers from memory for a 2bdr/2bath condo in Puerto Penasco: My HOA fee is $358/mo and includes water. Plus I have to pay the HOA $10/night for nights that are rented. I pay electric ($80-100/mo) separately. Property tax is very low ($100/yr or so). State rental tax is 2% of revenue. IVA (income tax) is something like 30% of profit...but only full "factura" expenses can be deducted. When you sign up to pay income (IVA) tax, the tax is phased in over 10 years, so you only pay 10% of it the first year, 20% of it the second years, etc until you pay 100% of the 30% or so in the 10th year. Most people would need a Mexican accountant to help with filing state rental and federal income taxes...I pay $58/month for that...although maybe your HOA fee covers that? I view it as a bit of a retainer as well as she is local, speaks Spanish, and knows "everybody" and can straighten out small issues when they pop up, and can pay the local electric bill etc. If you are renting in Mexico I believe you need a Tax ID number, and to get that you need a Temporary Residency card. That costs a few hundred dollars to set up and maintain.
1 Bed with a value of $195,800
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
Average Rate
(USD) $250 $175 $175 $175 $150 $150 $200 $200 $150 $150 $200 $250
Average Nights 26 20 20 15 15 15 20 20 15 15 15 26
Booked
Earnings $6,500 $3,500 $3,500 $2,625 $2,250 $2,250 $4,000 $4,000 $2,250 $2,250 $3,000 $6,500
(USD)
TOTAL $42,625
Property Management Fee (25% of rental income) $10,656.25
Electric $1,958.00
Cable/Wifi $1,000.00
Property Taxes (Estimated) $391.60
HOA fee (Cuota de mantenimiento) 1% value of purchase ann$u1a,9l)58.00 TOTAL ANNUAL EARNING TO THE OWNER
$26,661.15
(ROI) Return on Investment Annual
TOTAL $15,963.85
@Gord Stevenson this all the info I have so far
So $163 a month for HOA fee
Estimate income $42,625
Estimate fees $15,963.85
TOTAL ANNUAL EARNING TO THE OWNER
$26,661.15 after fees
(ROI) Return on Investment Annual 13.62%
Ok, 1% annual (not monthly) but excluding electric and cable/wifi/phone. That makes sense. My HOA includes those items, so it sounds like the same ballpark.
So, the key items then would be believing the rental night numbers...and then allowance for state rental taxes (if they exist in your area, and if not being accounted for in the above numbers...I pay 2%). And IVA (income tax) assuming you are going to be compliant with tax laws. I know some don't file IVA but it is the law, and not doing so may come back to bite.
Good luck! I hope it works out well for you. We do like our condo and I am happy we did it.
@Simone Newsome sorry I forgot to add the mention in the post above so you would get notified.
@Simone Newsome Do not expect to make as much as has been made in the past in that area. The security situation has gotten worse. Less people are booking that area.
http://www.nbcsandiego.com/news/local/US-State-Dep...
I like Western Mexico right now or places like San Miguel de Allende which is also a lovely place to visit if you can afford that market.
@Account Closed thanks
@Simone Newsome hello, have you purchased the vacation all condo in Tulum/PDC? How is it going?
I am active in the Tulum/ PDC market in Mexico if somebody needs any connections or advice
@Simone Newsome how did this play out?
@Eli Koren I am interested in Tulum. Have seen a few condo/hotels under development and they seem very attractive. Also maybe Bacalar. How do you see occupancy picking up post-COVID? Do you think the Tren Maya will have a big impact in vacation rentals?