Select Riviera Maya Blog

Investing in Tulum Real Estate, an overview

  • By Jorge Raya
  • Aug 30 2021
img God of Winds Temple

When we hear about investments, it may seem that it is something exclusive for those with lots of money or ample financial knowledge. However, that is not the case. Anyone can do it since, by definition, an investment is an activity that consists of allocating resources to obtain a profit of any kind. Considering this, be assured that anyone can invest money, time, and effort to meet their particular goals.

"An investment is an activity that consists of allocating resources to obtain a profit of any kind"

img Tankah Tulum

The reasons for investing our money can be very varied, but the most common is to make our assets grow and thereby ensure our future. There are also many types of investment. Some are high risk with high dividends as stocks and bonds. And there are others intended to provide long-term fruits such as real estate while keeping risk at a minimum. The ideal is always to have a diversified investment portfolio in such a way that profits maximize and risk is distributed.

This document intends to serve as a small guide for those who wish to invest in real estate and specifically in the area of Tulum, Quintana Roo.

Why Invest in Tulum Real Estate?

Here are two important reasons. Rest assured that there are at least eight or even ten good reasons other than these. However, in this article, we will address these two:

1.- It is a tangible asset

When you invest in intangible assets, such as stocks or bonds, all you have to show for your investment is a piece of paper. You don't own anything. If the stock market crashes, your position could be worth next to nothing.

If you invest in real estate, you have a tangible asset. Values can rise and fall over the years; there is no guarantee that they will not decline, but tangible assets are worth something. You still have a property to sell, given you need to get out of the investment.

Since it is a tangible asset, it takes a little longer to sell as you have to settle with a buyer and go through the entire legal process. Still, in the end, you'll walk away with your initial investment and hopefully a capital gain if everything goes according to plan.

2.- The value of real estate generally appreciates

If you invest in a home long enough, it is likely to gain worth. While things do happen, like the 2008 housing crisis, they are not common. Most of the time, buildings and land increase in value, therefore your investment will be worth more than what you paid for it.

You can also force appreciation by renovating or upgrading the property. Whether you buy an undervalued property and fix it up to sell or renovate a rental property, you can increase the value of your home faster than natural appreciation occurs, giving you an even greater return on your investment.

img Tankah Tulum

Why Invest in Tulum?

Tulum draws attention due to its beautiful beaches, bohemian lifestyle, gourmet cuisine, famous visitors, lush jungle, magical cenotes, and views of the Caribbean. For this reason, Tulum has become the destination with more than 1.7 million tourists in a town of just 30,000 inhabitants. Development and infrastructure have quickly grown since it became a municipality in 2009.

Today vacation rental is one of the most lucrative activities in Tulum and dominates sister cities such as Playa del Carmen and Cancun. Two of the main factors driving this lucrative vacation rental market are topography and demand.

Topography:

The coastal city offers a finite area of habitable property facing the sea. With the Tulum Ruins at the north end and the Siaan Kaan Biosphere at the south end, both protected by the Mexican government, there is only 13 km of beach left occupied by 70 boutique hotels.

Demand:

These hotels have become internationally fashionable and too expensive for the average tourist, with rates ranging from $ 600 to $ 1,500 per night. On average, hotel occupancy reaches 70-85% annually and 100% in the holiday season. With only 1,000 beachfront hotel rooms available and reservations sometimes 1 or 2 years in advance, this is a simple case of "Supply and Demand" economics. There are NOT enough rooms in the city to meet the demand for more than 1.7 million tourists, and that number grows at a rate of 12% each year.


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2021 Panorama

Although the global real estate market slowed down due to the COVID 19 pandemic, it never stopped as in other industries. On the contrary, it had the strength and vision to reinvent itself and adapt to the reality imposed by the measures of social distancing and remote work that the pandemic imposed on us. As anticipated, this did not affect in any way and has produced significant real estate offer in the Tulum area and its surroundings. More than 200 developments seek to attract investors from all walks of life and with all sorts of budgets. Compelling options include financing plans and exclusive amenities for all tastes and needs.

With the incorporation of space for remote work, networking and, high-speed internet for video conferencing in almost all developments, builders seek to attract that new generation. A workforce that realized it isn't necessary to be in a specific space to work and be productive. They are the working nomads of the 21st century who are as happy to work in San Miguel de Allende or Tulum.

Likewise, we must consider the above regarding the important vacation rental market now consolidated in Tulum due to the lack of an affordable hotel offer for the average tourist and a limited number of rooms. We can also perceive great interest on behalf of financial institutions to place loans for acquiring real estate in the region. With a constant annual occupancy that duels in the 75-80% for Tulum, there is a high possibility of turning a property into a reliable income source.

Yes, investing in Tulum is good business.

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Vacation Rentals in Numbers

Some of the data that gives us an idea of the current panorama of vacation rentals in Tulum can be listed as follows:

• More than 2,800 properties rented.

• Preferably houses for 4-5 people.

• Seasonality plays a key role in the booking of the properties, being the months of January, February and, March the most requested with 56% of the total annual demand.

• Since 2002, the growth of the vacation rental market has been exponential. Initially, it represented 2% of the market and, today it reaches a growth that is close to 15% per year with approximately 4,500 properties available through different platforms such as Expedia, Airbnb or Trivago

• Since 2002, the growth of the vacation rental market has been exponential. Initially, it represented 2% of the market and, today it reaches a growth that is close to 15% per year with approximately 4,500 properties available through different platforms such as Expedia, Airbnb or Trivago

Buy to rent

In real estate investment, understanding the growth, demand, income range and, property value is vital.

Here is a brief table with the average cost of the property and the average daily rental range that such a property can yield.

Description: Average price: Average daily rent:
1 Bedroom $150,000 USD $106.00 USD
2 Bedrooms $260,000 USD $242.00 USD
3 Bedrooms $420,000 USD $435.00 USD

Occupancy

The average occupancy of vacation rental properties is between 50 and 70% per year, depending on the promotional effort to publicize the property to those looking to rent for their next vacation. Therefore, the promoting and marketing role begins to play a crucial role in this great business. The properties with the highest occupancy rate are offered through multiple platforms and generally with the support of a company dedicated to promotion and booking. These companies charge an annual commission or per individual reservation. How the client decides to cover that cost is a decision that has more to do with the offers and special pricing that each company handles.

img Skyview Homes Tulum

Conclusion

The vacation rental market in Tulum is attractive. But to have a property to rent, it is essential to acquire it first. At Select Riviera Maya we care about in-depth market knowledge, enabling us to catch the best deals on the fly.

We are committed to accompanying our clients and friends in the complex process of finding the ideal property to meet their objectives regarding home or business. If you want more information, do not hesitate to contact us! We will gladly assist you.

We'll help you find a piece of paradise in the Riviera Maya, Mexico

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+52 984 116 6828

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Playa del Carmen, MX

Email

info@selectrivieramayarealestate.com
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