No longer just of interest to fishermen and sun-seeking retirees, Los Cabos real estate has become increasingly attractive to investors seeking an alternative to the volatility of today’s stock markets. Over the past 15 years, owners of property in Los Cabos have seen a healthy appreciation on their real estate investments, and many have also earned steady returns generated by renting or leasing their properties.
This historical cash flow and appreciation, coupled with today’s surprisingly affordable purchase prices have many people asking “How can I get in on the action?”.
Most buyers looking for a rental investment in Cabo think only of nightly/weekly rentals, often overlooking the option of long term property rental. While the vacation rental market commands much higher nightly rates, owners must also face higher marketing, management and maintenance expenses, seasonal tourist flow, and increased wear and tear on their rental units. Most vacation rental properties will also cost much more to purchase, as tourists tend to favor rentals with resort style amenities that are either on the beach, or very close to it.
Opting to invest in a long term rental property can offer many advantages over the short term route. Because prospective long term tenants typically live here year- round, owners have less reliance on the Los Cabos “high season”. Ongoing expenses are significantly lower and easier to forecast, as tenants are usually responsible for paying all utility bills during the course of their lease. In addition, long term rental properties incur less marketing, management and maintenance expenses overall, making it easier to see why this is becoming such an attractive investment option! Below are a few tips to consider when looking for your first Cabo rental property:
1. Do Your Homework - The more research you do, the less risk you’ll face. Ask which developments are popular with long term tenants and get an overview of the pros/cons each has to offer. Key points to consider include:
o Average rental rates vs. monthly HOA dues (and the amenities/services these fees included)
o HOA rules (specifically related to rentals)
o Health of the HOA, condition of common areas, possibility of any major assessments in the near future
o Water, security, or construction issues
2. Be Conservative - Overestimate any necessary renovation/maintenance costs (as well as expenses related to furnishing & equipping the property for rental if applicable), and underestimate rental income. Remember that you’ll need to set aside a portion of your rental income for repairs and maintenance.
3. Choose Wisely - Buy a property that has been well cared for. If buying new, select one built by a reputable builder with a solid reputation. A rental-ready property in a well maintained community will not only save you frustration & hassle, but will also greatly improve your odds of success.
4. Don’t Forget the Taxman - There are many factors that will affect your taxes payable on rental income. Find a certified Mexican accountant who stays up-to- date with the constantly changing Mexican tax laws, and check with your accountant back home as well so you are covered on both sides of the border.
5. Find & Vet Your Team - Assuming you are not yet “living the dream” as a Los Cabos local, you are going to need some help with your new property after returning home. The property management & rental services market in Cabo now offers property owners everything from basic assistance with utility payments, to full service “worry free” property & tenant care. Just remember that deciding on who to trust with your new investment is JUST AS IMPORTANT as deciding on which property to purchase! Don’t shy away from requesting (and actually checking) the references of any potential property manager or rental agent. Ask about past experience with marketing and managing rental properties and request specifics on what services will be included and how your property will be marketed.
The recent surge of investment and development in Los Cabos is building momentum, and continues to attract a growing number of professionals to our local community. This influx has caused demand for long term rental properties to soar over the past 12 months, and there are no signs of it slowing in the near future. While few can justify the dream of owning in paradise simply for leisure’s sake, more people are realizing that Cabo’s fast growing rental market can help combine practical investment goals with lofty retirement dreams.
By Monica Lujan- Suen is a property rental expert and property manager with 10 years of experiences in the Los Cabos rental market. Contact Monica at 624-129-9589 or write her at firstname.lastname@example.org.