Well, it’s been a wild ride over the last year or so. Back in 2022 (on Cinco de Mayo, no less!), I made a non-refundable deposit on my next vacation rental dream—this time in gorgeous Sayulita, Mexico. I closed on July 25th, 2022. On one hand, it was a spontaneous decision, but on the other hand… if you know me, you know I did my due diligence first.
In this post, I wanted to share with all my industry friends the lessons I’ve learned so far, in the early phase of this adventure. Hopefully this will be particularly helpful to those of you who have considered purchasing a property in Mexico.
Here are my takeaways from the planning stage of this investment:
My Spanish is spotty at best
I’m going to need to work on that. 😂 But I did manage to learn a few key words and phrases, like: No hay necesidad de impresionarme con tus habilidades de conducción. Por favor, no pase a otros vehículos para ir más rápido. [No need to impress me with your driving skills. Please do not pass other vehicles to go faster!]
Support is essential
Despite my decades in real estate and over a decade in vacation rentals, I was filled with doubt about this purchase. After all, I was buying in a new country, with many unknowns and political risks involved… and you simply don’t know what you don’t know. But then a dear friend reminded me to believe in myself, and trust that my years of knowledge and skills prepared me for this moment. After that reminder, things started to flow like agua.
And so is the right real estate agent
Like most markets in the world, the Sayulita real estate market was con fuego in 2022. The few properties that did come available quickly went under contract. But thanks to the incredible agents that assisted me, Abigail Fernandez and Gabriel Jones, I was able to scoop up my little gem before it even hit the market. Don’t settle for just any agent, because they can truly make all the difference!
The key to life is to be unflappable (And hire your own experts)
This deal was not without its thorns, of course. Let’s just say the property had not been well-maintained over the years. Plus, the seller did not want to provide any disclosures. But where else can you get an ocean views like this?! When I worked in commercial real estate, we never got disclosures, anyway, so I was a little more comfortable going without them. I was also comfortable with walking away if I needed to. In fact, I did walk away from this deal at one point. But it came back!
Another reason I was comfortable moving forward without disclosures? I hired my own experts. A lot of them. Home inspector, Structural Engineer, and Electrical Engineer, to start.
My agent also hired contractors to inspect all of the mechanical systems separately (HVAC, Electrical, Solar, etc.). And I had her collect bids for work and deferred maintenance, including removing the hot tub (water does NOT belong on a roof…fight me!), as well as roofing, painting, and flooring bids.
Through that process, I learned that I will need to replace the palapa roof…a $15K expenditure that may have been a big surprise during the rainy season! But thanks to due diligence, I was able to budget for this up front when running my numbers.
So, in other words, do what you can to assess the pitfalls… then take the leap!
Run the numbers!
My favorite part 😊. Here’s the down and dirty math on my initial deal…
Location: Sayulita, Nayarita, Mexico
Details: 4 Bedroom/4 Bathroom Condo
Purchase Price: $795,000 USD
Rental Rates: Worst case, $400/night. Base case, $500/night. Best case, $600/night
Occupancy: Worst case, 50%. Base case, 60%. Best case, 70%
Cash on Cash Return: Worst case, 5%. Base case, 7%. Best case, 10%
UPDATE: I was pretty conservative with my initial numbers, which were based on the property’s condition to start. Here’s where I think they’ll end up post-rehab:
$695/night and 80% occupancy during peak season
$495/per night and 50% occupancy non-peak
P.S. If you’re looking to run your own numbers and need a little help, check out the TDG Blueprint for Beginning Rentalists, which covers—in detail—the buying process, along with handy charts for due diligence that covers all your bases!
Consider your exit strategy upon acquisition
I was lucky to purchase two investment properties during a market low, but that’s not the case this time. I’m confident I’m purchasing this property at the peak—and I am totally okay with that. Why? First, I plan to hold this property between 7-10 years (thank goodness for patient money!). Second, other 4 bedroom/4 bathroom condos in the area that are maintained and well-furnished are currently selling for $1.1M.
With the TLC I put into the property over the past few months, I could flip it. Worst case, I sell at a loss, but let’s be real….it can’t be worse than most of the losses we are currently experiencing in the capital markets.
Again, buying a property in Mexico is a leap of faith, not without risk, and not for everyone! But where in the world are you able to get an ocean view like that and a 10% to 16% return (because I do plan on hitting my best numbers)?!
What’s next? First, hire staff (my home will be fully staffed with housekeeping from 8 am to 4 pm daily—yep, that’s right!) and get the property listed for guests to find.
I can’t wait to keep sharing my journey with you. My next post will include before and after photos, so stay tuned!!
If you are considering purchasing a vacation rental south of the border, please feel free to reach out to me. It has been a journey, and I am so grateful for everyone that reached out to help me along the way. So it is my turn to pay it forward!