When considering an investment strategy in Mexico, planning requires knowledge, analysis, and local connectivity. While many people believe vacation rental investing is the same as real estate investing, there are some key elements that differentiate but are critical to consider. When acquiring a vacation rental property, you must know the market, while also having a firm understanding of the rental industry in the area, projected revenue, comparable ROIs, state and federal rental laws/regulations, tax implications, and much more. It is vital to perform your due diligence in order to ensure you are acquiring the right Cabo vacation rental for your unique strategy.
To secure a successful operation, vacation rental investing requires a lot of work. An investor must understand the industry, the local market, each individual property and all that is associated with them. Ultimately, we advise you have someone who you can trust to guide you through the process and then be available for ongoing operations. On this page, we address all of these issues to help you decide if investing in a Los Cabos vacation rental is right for you.
WHY IS CABO PLATINUM THE BEST CHOICE FOR VACATION RENTAL INVESTING
If there's one thing we know, it's homes in Cabo. We have been in the Cabo vacation rental and real estate industries for more than 10 years. We know the locations, communities, rental numbers, regulations, and more.
When you're dealing with vacation rental investing--especially in an unfamiliar area--you need to the know the players. The people who can get stuff done. And sometimes in Mexico, the people who can pull strings... We have those people.
If you're buying a vacation rental property, there are a lot of factors to consider: HOA, management, and maintenance fees, projected revenue, typical occupancy, taxes, and more. We don't expect you to know these things, which is why we make sure that we do.
Need a knowledgable advisor to help you find the right Cabo investment property? Need an experienced Real Estate professional to help you through the Mexican home buying process? Need a reputable and trusted vacation rental company to manage and market your new investment? We're Cabo Platinum and we'd love to help.
The first thing we need to determine in your investing process is what your budget is. Your budget will determine the options that are available to you. Budget extends beyond just your purchase price as well. It includes how much you are willing to pay per month in maintenance, management, and community-related fees.
Many people come to Cabo expecting to see "Mexican" home prices. In fact, the price of real estate in Los Cabos is comparable to real estate in many parts of the United States. Cabo is widely recognized as one of the most beautiful destinations in the world and the ever-increasing tourism numbers are highly indicative of that statement. More and more Americans and Canadians are deciding they want Cabo to be the place for their second home, vacation home, or vacation rental. Due to this, the housing market continues to increase every year.
One of the most challenging parts of buying a home in Cabo is the amount of down payment needed. There is a limited amount of private and commercial lending available, making cash purchases the most preferred Real Estate transaction. With an owner-financing purchase, it is typical for a seller to require a 50% deposit on a purchase in Cabo. On new developments, developer financing can be offered, however it is not something that we recommend relying on.
Despite relatively high home prices and down payments, there's one thing that we are certain: A Cabo investment is a good investment. From the rental ROI to the ability to escape to your own little Cabo paradise, our homeowners love the perks they receive from owning in Los Cabos.
The second thing that we determine in your investment process is the location. While some aspects about Cabo investment properties are very different from traditional real estate investing, there is one that's exactly the same; location, location, location. It is the most common element you will hear Real Estate professionals, advisors, and investors tell you. If you want a property that will increase in value and give you a substantial ROI, location is a factor that you must take into consideration. Being in the rentals and real estate industry in Los Cabos for 10+ years, we can tell you that location is extremely important to the success of your vacation rental.
AREAS OF LOS CABOS
Many people aren't aware that Los Cabos consists of three different areas: Cabo San Lucas, San Jose del Cabo, and the East Cape. Cabo San Lucas is the primary town that people think of when they read about, "Cabo." San Lucas has the famous IGY marina, vivacious nightlife scene, bustling beaches, and is where you want to be for Spring Break. San Jose is a quieter, artsy town located 30 minutes Northeast of San Lucas. This is the area where people go more to have a secluded and rejuvenating vacation. But that certainly doesn't mean there isn't rejuvenating happening in San Lucas and partying happening in San Jose. And finally, there is the East Cape. Some call it the wild west while others call it a surfers paradise. And then there are those that call it God's country. The East Cape is located about 30 minutes west of San Jose. It consists of miles and miles of beautiful beaches that are made for surfing. The East Cape is private, tranquil, and has land for sale. The beauty of Los Cabos is there is something for everyone, no matter where you are. Our team of Cabo professionals will find you the best location for your investment property.
KNOW THE COMMUNITY
There are 8 major communities in Los Cabos where a majority of villa rentals occur. Each of these communities have different rules, regulations, amenities, HOA fees, and more. Knowing the ins-and-outs of these communities is essential to the success of your vacation rental investment. Between real estate and villa rentals, our team is in one or more of these communities each and every day. Each community in Los Cabos operates a little bit differently. Some of them have specific rules regarding your rental property, such as in-house marketing, additional rental fees, quiet hours and security clearance.
Additionally, you must know the costs associated with ownership in each community. Different communities have different HOA prices that help pay for maintenance, landscaping, security, and community amenities.
Community amenities are oftentimes one of the most important factors for our client's who are buying real estate in Cabo. Whether buying a home or property for personal use, investment purposes, or a mix of both, amenities can play a large role in determining the level of enjoyment and ROI that comes from a property. If you're going to be using your home for personal use, it is important to have the amenities you want. For example, if you're a golf enthusiast, we want to look for a home in Puerto Los Cabos, Quivira, Cabo del Sol, or Diamante as those are the communities with exceptional courses located within the community.
Some of the most common amenities that our clients ask for are gym, spa, on-site restaurants, and golf. Whether you're one of those people who doesn't like to miss a day of their workouts or someone who is trying to get back in the swing of things, having a gym at your property makes your life easier. The best gyms in Los Cabos are at resort communities, such as Hacienda Beach Club and Diamante. And after a hard workout, what better way to recover than releasing toxins in a sauna, grabbing a green juice and massage, and/or soaking in a hot tub. We make sure that our golfers get themselves in an ideal location that allows them to take a golf cart straight from their garage to the course. Amenities are a very important part of your home and we want to make sure that you have all of the ones that are important to you.
PROJECTED INCOME & EXPENSES
Rental income will depend on the type and size of residence, location, amenities, and a few other factors. It is important to ensure that your new investment home will earn substantial ROI. As the goal of an investment is to increase wealth, you must know that your income will not only exceed your monthly expenses, but exceed them enough to provide you with an adequate monthly profit.
Trying to estimate your monthly or yearly rental income takes someone who knows the Cabo rental market. They have to know the nightly rates for all different types of properties, high and low seasons (and subsequent price change), and projected occupancy rate. One of the perks of buying a vacation rental in Cabo is that the chance that your new home you are looking at has already been on the rental market and can provide you with exact statistics. The thing to consider about past rental income is that it will differ heavily based on which companies were marketing it. Did they have proficient marketing? Were they connected to all of the pertinent OTA's in Cabo? Do they work with travel agents? If you don't have the right marketing partner who can position your vacation rental properly, it will appear to be a weaker investment than it truly is. At Cabo Platinum, we have the tools and foundation to ensure your investment is positioned correctly in the marketplace and has as many eyes on it as possible. The rental market in Cabo is so diverse that a projected ROI will differ, but as a general rule of thumb, we like to aim for a 10% annual ROI.
Your average monthly expenses are a crucial part to any vacation rental. Obviously purchase price plays a factor in your home buying decision process. But one mistake that investors make is forgetting to factor in the monthly costs. Those costs include HOA fees, maintenance fees, utility bills (oftentimes significantly higher when occupied by renters), and property management fees.
Having the best property management company to take care of your vacation rental is critical to your success, happiness, and overall enjoyment of your new home. Be sure to review each company and make sure they have the options that will ensure long term success. Discuss your requirements and ask for testimonials. See if they have good reviews on rentals websites and return guests. All of these factors will determine your long-term Cabo investment strategy.
HOW TO MAXIMIZE YOUR INVESTMENT
Our team of rentals and Real Estate professionals have created a large pool of satisfied investors. Sit with them, talk about your goals and see if the Cabo Platinum team is the solution you are looking for. Our entire team would love the opportunity to earn your business.