By Miguel Fernandez
A great option for investing in Puerto Vallarta real estate is by purchasing a vacation rental property. Here are some reasons:
• Tourism to Puerto Vallarta is growing exponentially
• The cost of living is low, especially compared to the U.S., Canada and Europe
• Rentals are hot! During the high season last year it was difficult to find an available vacation rental
• You can easily spend part of the year enjoying your property, while renting it out the rest of the year.
Here are a couple of things that you want to think about when shopping for your Puerto Vallarta property.
Location, Location, Location
Do some research. Spend time in different areas of town. Certainly beachfront is always an excellent choice for you and for rental income, but other areas in town offer different amenities. The Old Town area has terrific restaurants, and a great nightlife, with no car required. Whereas, the Marina is the perfect spot if you have a boat or want to take advantage of the sailing lifestyle.
Renting Your Property
Study the current rental market –Are there a lot of vacant rentals? Are properties only booked for certain seasons? Are other people in your building renting their units successfully? A real estate broker will be able to help you define your needs and give you information on popular and rentable locations.
Your Potential Revenue
Do some research regarding:
• Nightly fees of comparable rentals
• Average occupancy
Estimating Occupancy Rate
A great resource is Mexico’s Department of Tourism at: http://www.concanaco.com.mx/documentos/Estadistica_09.pdf — Page 9 shows hotel occupancy rates for various regions throughout the country, through 2012.
Running a condo is moderately inexpensive in Puerto Vallarta. HOA fees tend to be around $2-$4 USD per square meter; a 200 m2 (or 2160 sq. ft.) condo, for example, should have fees between $100 and $500 USD a month, depending on location and amenities. Some buildings include the gas and water and have onsite security.
Bills also tend to be lower than what buyers typically expect. Gas and water bills are fairly minimal expenses, and internet and phone packages can be found relatively cheaply. The most expensive monthly utility is typically electricity. Rates in Mexico tend to be considerably higher than in many parts of the U.S. and Canada. In beachfront areas, air conditioning, which usually consumes high amounts of electricity during the Summer months, can drop substantially during the busy Winter months. So, you will come out about even in the end.
Also, many condos offer onsite administration, which can be very helpful to the owner when renting the unit. The onsite administrator will often handle maintenance, and generally look after your property. And, for an extra fee, they will also help you find renters and handle all of the details for you.
How Will You Manage
Something to consider seriously, as you will be an absentee owner, and will want someone reliable watching out for your investment. We’ll look at a whole host of options in Part 2 of this article.
Personal Use of a Vacation Rental Investment
As mentioned before, one of the most attractive perks to vacation property investment is that the owner can enjoy not only the income from their investment, but also the property itself! Be sure that you are choosing a spot that will work for your needs as well. Who knows, you may be living in your property full-time one day.
Next week, in Part 2, find out how to effectively market and rent your vacation property.