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Property investment in Mexico

Land, Apartments, or Houses? What is the best investment in Mexico? And is it wise to invest in Mexico at the moment? And what to consider when you plan on investing in property in Mexico. 

Investment goals, the standard of living, and risk profile: are the elements to take into account when you are deciding to use your money for purchasing a property.

For example:

  • you can acquire a lot, and build a house, rent it out to someone else so they can start building, or divide it into multiple lots to sell with profit (if that is allowed)
  • you can invest in an apartment, or apartments, like timeshares or holiday lets, and rent them out through a real estate agent for short or long-term rent. This way you do not need to be present for renters and maintenance of the building.
  • or you can buy a house, or houses and decide to live permanently or part-time in Mexico. Or rent those out for long or short term.

The biggest question is: What is the best type of investment for you and for the location you want to invest? In some areas, it is wiser to invest in apartments, in other more rural areas you have more opportunity to buy large pieces of land to build houses, and in the cities, you are more likely to buy apartments or houses. And there is of course the market, the values, and the availability. It all comes down to a combination of factors involved.

Is Buying Land A Good Investment?

Investing in a real estate property is not only acquiring a house or an apartment for sale. You can find excellent opportunities also investing in land.

There are different types of land to buy:  investment lots and residential lots. And your real estate agent can tell you all about it since most of these types of lands are being sold in tourist areas and city suburbs. You have to be aware of the given destination to the land before you buy and if it is a clean title or Ejidal property that involves a lot more work to buy and register. You also have to be aware of any Federal and local laws about building quantity for the type of lot you buy. Your notary should be able to cover all that for you. For example, an investment lot will not have any facilities and maybe the law requires you to build within a certain amount of time or have facilities like water installed or the property boundaries fenced.

Location of your property equals value

Of course, not all investments in real estate are equal. Their location is crucial and future growth plans are essential. Tourist areas offer great potential but prices are high, for example in Tulum and Playa del Carmen land can sell for as much as 90US$ per m2 compared to 35 US$ in 2018 for the same investment lots. Abd prices are still rising.

Imagine if you had bought land in this area only 10 years ago, either an investment lot or a safer residential lot; with the current real estate demand, your investment’s return would be several times higher than what you paid years before.

For the years to come you have to make wise choices about location and demand. Unless of course you just want to live a happy Mexican life and not worry about property value because it is your retirement home or your forever home without any investment interest.

The housing market is on fire in some areas of Mexico

Since prices are over the top in areas like Puerto Vallarta, Riviera Maya, certain pueblos Magico, and even in Merida, people are looking elsewhere to realize their dreams. Oaxaca, Campeche, and Lake Chapala area (Mexico’s largest lake) are upcoming areas. And prices there are already on the rise.

Although not many apartment buildings are built there, many people invest in communities and living groups for like-minded people in sustainable ways of living.

Earth houses, eco-friendly and self-containing residences are hip and many are being built on shared lots of land away from the city yet with the cities within reach.

But even in remote areas like the lands between Cabo San Lucas and south of Ensenada, more or less in the middle of nowhere land is being sold and houses are being built. Despite missing out on proper infrastructure and facilities,  and while enduring summer water shortage

Investing in property is all about profitability

Houses generally provide greater long-term appreciation compared to apartments, because land tends to raise in value and apartment blocks don’t since the landowner is not the same owner of the apartment.

Although houses tend to generate higher capital gains, their profitability is generally lower as compared with apartments. For apartments that are easy to rent out, you can build a lot of apartments within the same facilities, and therefore building costs are relatively lower than for a house.

An apartment acquired in Mexico in a tourist area could be the best solution for your return on investment. With this type of property, you could get higher income from rentals due to the different types of tenants:

  • Due to its average size, an apartment is a type of property for people looking for a small and comfortable place to live and work, especially if they are digital nomads. The demand from this kind of tenant is currently very high.
  • Apartments are the perfect solution for vacationers because usually they are located either in the city where the hustle and bustle take place or close to the beach, and to the best tourist attractions.
  • When you buy a house, usually you are the sole owner of an entire building: therefore, maintenance and repair costs are higher compared to an apartment, where these expenses are shared by the entire real estate complex. Higher operative expenses will go to reduce your property’s financial profitability.

When should you buy a house over an apartment? 

  • Houses are generally used by the family and later passes from the hands of the parents to the children.
  • If you are the sole owner of the house, since you control 100% of the property, you can continue making strategic improvements to increase its value. For example, making renovations without requiring the permission of other residents as it is in an apartment complex.
  • Pet-owning tenants can choose to rent a house because it can be more suited to their specific needs.
  • by building a house on your own land you get to decide how close you are to the neighbors, you can buy a large piece of land and build in the middle to create privacy.
  • If you have no intention of gaining more money from the house for you are living in it as a forever home,  a house might suit you better because you can build it according to your own standards and layout.

A few more things to keep in mind when you want to invest in Mexican real estate

  • If you are starting your real estate investment portfolio, you may feel more comfortable acquiring a lot than a house. The lots represent a low-risk investment, and their value can have more growth potential.
  • Buying land is not for those who require a steady money flow, if you are looking for a recurrent passive income, you have to consider buying a house or an apartment.
  • Houses can offer you greater appreciation, but a low return on the initial investment.
  • apartments can provide you with better returns compared to houses, especially if you decide on vacation rentals. This makes it excellent if you require a constant flow of income for example to pay for your own stay in Mexico.
  • If you are inexperienced in real estate transactions it might be wise to get in touch with a real estate agent. In Mexico, real estate agents are not always legalized, in some states anyone can sell real estate. Make sure you deal with an established agent and learn from them. By studying the market and the process you might be able to do the investment yourself, and only rely on a notary to register the deed of sale.
  • Make sure you know what property you are buying and that you are allowed to do with it as you please. For example, not all Ejidal property is meant to be used for housing.
  • And keep in mind: If it sounds too good to be true, it probably is!