All Forum Posts by: Mike Lambert

Hi Maura, sadly you can pretty much forget DSCR loans outside of the US and loans for land or construction internationally, with very rare exceptions. It's good that you have the HELOC option though.

@Nikki Stoddart

You first have to pay taxes in Mexico. Assuming you buy in the forbidden/registered zone:

1. If you buy through a fideicomiso, gross rental income from the leasing of real estate, property and time-sharing services by a nonresident individual is subject to a 25% withholding tax. No deductions are allowed.

2. If you buy through a Mexican corporation, you'll pay the 30% income tax after deductions of expenses.

Bear in mind that the expenses in Mexico are much lower than in the US.

If you use a Mexican corporation, there are costs associated with it and you'll have to lodge a tax return in Mexico. Therefore, the general advice is to go for the fideicomiso if you buy one property and the corporation if you buy multiple properties. Bear in mind that there has been talk of a fiscal reform whereby the deductibility of expenses within a corporation would only be allowed if the corporation has a real business and merely renting properties wouldn't qualify as a business.

The, you'd be taxed at the US level but you should be able to deduct your taxes paid in Mexico by virtue of the treaty for the avoidance of double taxation between the two countries.

For many Americans who buy in Mexico, this means that they'll end up paying the same amount of income taxes as if the property was in the US.

I'm not a tax advisor so don't take my word for this and consult with tax specialists as needed.

Hope this helps!

@Pantelis Papamanolis

I had an afterthought about my previous reply to you. When deciding where you want to invest and in what kind of properties, you might want to think where you have or can create an edge. For example, our market occupancy rate is supposed to be around 50 - 55%, which is given that it's a seasonal market. We should be rented the whole summer and have some occupancy in the shoulder seasons but occupancy in the winter, although higher than before the pandemic, remains low and most properties are sitting empty. Because we have a "secret sauce", my investors and I enjoy a 90% occupancy this low season - winter (which by the way is why I mentioned before that our net returns would be highly misleading for you because they're so much higher than what others are getting).

I understand you're new to the game but you can still create your own secret sauce. You're Greek, you might speak Greek and have family and connections in Greece, know the culture. While not as good as Spain or Portugal, Greece shares some similar characteristics like the low property prices and big tourism industry so it could still be a good market for short-term rentals. Then you live in Switzerland, which has lots of wealthy people and expensive properties. Do you see where I'm going?

@Basit Siddiqi

All that you mentioned is spot on and, yes, "poor" is a relative term and is in the eye of the beholder. I'm originally from the European Union, where unemployment is structurally significantly higher than in the US. So from my perspective, 11% isn't actually all that high. Also, it's important to understand that, due to the European welfare systems, unemployed Europeans have more buying power than their American counterparts.

This being said, Spain is clearly not the wealthiest country in Europe, especially compared to Northern European countries. But they (proportionately) got significantly better since the Global Financial Crisis, when their unemployment rate was above 20% and their young employment rate was way higher.

$60 to $120 for a room isn't bad. You need to consider the price of the property and the holding costs though. Not having looked at the figures, I'd bet it's much more profitable than in New York given the property prices there, notwithstanding the legal issues.

Getting back to what I'm doing, the unemployment rate in Spain has absolutely nothing to do with our profitability, which is dependent on visitors from wealthier countries continuing to spend their holidays in the Costa del Sol and the constraints to further development (and competition). And like there's only one Florida and California in the US, there's only one Costa del Sol in Europe. But there are plenty of areas I wouldn't touch in Spain as there are many areas you wouldn't touch in the US.

@Pantelis Papamanolis

To answer your questions:

1. When it comes to the US, I'll let American members answer that question as they know better since I'm Canadian. I know that it's all over the place and it depends on what you call a good area so I'm not sure it'd be that easy for them to answer.

2. When it comes to Europe, I'm focusing on the Iberian peninsula (that's Spain and Portugal) for short-term rentals. I don't mind sharing my figures if you really want to see them but it would be counter-productive as they're not reflective of the market. This is because I'm buying with investors and I bring value to them by ensuring that, if they invest with me, they make more money than if they were investing by themselves while having little to do and little worries. That's a tall order and that forces me to find off-market deals that are significantly better than what you can find on the market. Therefore, if you want to invest in short-term rentals, you should use a tool like Airdna to get accurate estinmates.

Hope this helps!

@Basit Siddiqi

You came to the right conclusions when it comes to LTRs, although there are always exceptions and deals to be made/had.

I don't agree with your assessment of the economy being poor though. In fact, the Spanish economy has been doing quite well in a European Union context over the last few years. I'm not sure where you spent time in the country but there are wealthier and less wealthy areas and there are areas of Spain that have a much better economy than most of the US. Of course, if you compare with your home city of New York, it's another story but that doesn't seem to be fair.

If you look at the GDP per capita, it's indeed significantly lower than in the US but that's reflected in the property prices. And that's why we buy property at Spanish prices and rent them to wealthier Northern Europeans and Northern Americans. That's how you get the best of both worlds.

 A few of us have replied to your question in this thread.

@Alex F. you're generally spot on with your comments. Bear in mind that many people don't want to self manage. Time and lack of stress are more precious commodities than money after all.

Also, the train has been  totally overhyped by the real estate promoters. I don't see why it'd bring significantly more tourism to the Riviera Maya and it's not its purpose, which rather to help develop the inside of the Yucatan peninsula (mind you it won't hurt either). The first section that was opened shows that by the way. If it was about developing the Riviera Maya, they had much better spent the money on the road network, which leaves to be desired in my humble opinion.

Hi Emily,

It's all a question of definition but the high season typically ends in April, not May although Covid distorted things a bit over the last few years. Peak season is typically Summer, not March April but there's typically high occupancy during the Easter Holidays.

Hope this helps!

@Emily Anderson

You are correct with the way the taxation works but it makes no difference to most foreign buyers when it comes to cash flow. This is because they're generally in high tax brackets and high tax countries.

Foreigners (Americans and Canadians included) will be taxed in their home country according to their home county's tax rules and their marginal tax rates would generally be higher compared to what Spain will charge, even considering the 24% withholding tax. They generally will be able to deduct the amount of taxes paid in Spain against their domestic taxes. So, even if they were allowed to take tax deductions in Spain, they'd have to pay the amount of the deductions as extra taxes in their home country so it makes no difference to them whatsoever.

Youtube videos can be great but oftentimes they don't give you the whole/real picture.

@Rick Albert

Clearly, Spain isn't the best country for your typical LTR but it's a great place for STRs. It's the second most visited country in the world, ahead of the US, even though it's smaller than Texas!