Beachfront condos in Mexico?

Question

Any investors who invest in condos in Mexico? If so how has it worked out for you? How does financing work there? Cancun, los Cabos, playa de Carmen, talum, puerto Vallarta? Is it worth it?

Mike Lambert · Answer

I assume you're talking about investing in condos in beach cities but not necessarily in beachfront properties, who aren't the most profitable investments, given the high price tag that you can't fully pass through through a higher rental income.

All these places could give you high returns but I'd avoid Cancun as people go there for the all-inclusive hotels and resorts and so a short-term rental makes less sense there.

Most people pay cash since that's the easiest solution and it's often not necessary to use leverage to get a nice return on investment. Many foreigners will take a HELOC at home. When you already own property in Mexico, you can use it to get the residency and then you'll get access to the mortgage market. However, the interest rate is prohibitively high for most people.

You can buy cheaper if you buy pre-construction but it's risky if you don't know and trust the developer. They will some times offer developer financing but it's rarely offered to retail buyers and sometimes the developer will offer it because their project isn't good and doesn't sell and it's a desperate attempt to generate sales. The investors who buy with me and I get developer financing from some of the best developers but that's because of my close relationship with them; they won't offer it otherwise. Beware of the many developers who advertise "fake" developer financing, meaning they allow you to pay over time but before the delivery of the property. Real developer financing starts at the delivery of the property so that you can use the cash flow from the property to pay for the part of the price that is financed. Then, you could get seller financing on property resales. I've been offering it when it made sense for both parties with flexible terms but I don't think it's that common. Whatever form of financing you'll get, you'll most likely will have to put at least 50% down, although there can be exceptions.

Hope this helps. Feel free to reach out if you have more questions.