8 STEPS TO FINDING A RENTAL PROPERTY
Mexico is very different from rest of the modern
world – I am not saying that Mexico isn't stylish (if you doubt this
statement, visit Polanco in Mexico City, it might change your
perspective!) but searching for the perfect property in Mexico as a
foreigner is a difficult task.
Several essential steps are necessary
to educate yourself, distinguish between areas and sift through developers,
all of which will eventually enable you to find the perfect rental
property for yourself (which you will most probably use a couple of
times a year).
An MLS (Multi Listing Service) is a site which lists several homes
for sale. In reality, it consists of hundreds of real estate listings
belonging to different agencies throughout the world. In Mexico, most
people use a website called Point2Homes which is an international
listing service based out of Saskatchewan, Canada.
The issue with this listing site is that it is not updated or maintained
thus compromising the authenticity of the published listings. For example,
the properties you are viewing may not have accurate prices posted,
resulting in a “bait and switch.” You will need to trust your realtor and
their ability to do due diligence. There are some local websites like
virginrealtymexico.com where they only publish listings on their site that
have been appropriately vetted, and preliminary due diligence has been
conducted to ensure a safe and secure purchase for their clients.
“If you can't describe what you are doing as a process, you don't know what you're doing.”
2) Google Alerts
Google Alerts are automatic alerts that you can set up for specific keywords.
Google sends you emails when it finds your specific keyword results. If
you are searching for a particular development, you will want to set your alert
with the name of the developmental property so that you receive a notification
when a resale becomes available, there is a price reduction or when they run a
You will want to target keywords such as “Condo for sale Tulum” “Rental property
for sale Playa del Carmen” or specific development names like “Trinity Tulum.”
Setting your Google alerts appropriately will help keep you up to date in real
time with new market trends, up and coming communities, pre-released projects,
and breaking news.
3) Find a Great Agent
Finding a great agent is a crucial step to finding that perfect rental
property. A local agent will have their boots on the ground and be the first
to know about promotions, resales, distressed properties, and new developments.
You will need to find an agent who is responsive and committed. To learn how
to find the perfect agent refer to this (What should you look for in your real
estate agent) blog post.
4) Do Not Hesitate
If you have a great agent and have found the perfect property
that checks all your boxes, do not hesitate to pull the trigger. The
market in Riviera Maya is unforgiving right now. If you are not the
first in the door and fast in taking the property off the market, you
will lose out on a great opportunity. There are thousands of buyers
out there who are looking for the same thing that you are. This is true
for both pre-sales and resale of the property. The market is moving fast,
a property you see for sale today may not be there tomorrow.
5) Get in Early
The earlier you get in on a pre-sale property, the better
deal you will get. Developers are incredibly motivated to sell the first
25% of the development as it helps create sales momentum.
I can tell you that you will be walking into a higher percentage of equity
if you get in earlier. To give you an example; for the first development I
ever launched, I priced the first four units at cost, and throughout the
sales process, we increased the prices 10% after every sale.
Thus, my first four clients were rewarded handsomely. If you do your homework
and choose a developer who has a clean track record, you will minimize the
risk of being stuck in a failed project. The only downside to this strategy
is the timeframe for which you will have to wait for your property to be delivered.
You may need to factor this into your expected returns and may have to wait a
little longer to take possession of your property. However, the juice will be
worth the squeeze. You can potentially rake in 10-15% equity (NET).
6) Analyze Rental History
Whether you are purchasing a pre-sale or resale property,
you will want to analyze the property's rental history. You can do this
by asking the owner of the resale to open their books and show the property's
rental income history.
By analyzing these documents, you will be able to identify the ADR (Average
Daily Rate) of the units and the annual occupancy rate. Keep in mind that many
private rental property owners do not claim their entire revenue from rental
income. However, they should make personal records available.
In the case of purchasing a pre-sale property, you will want to ask the
developer for the rental history of their prior developments. If multiple
developers are syndicating the building to a property management and vacation
rentals agency, then you will want to ask that specific company to provide a
rental history of the neighboring projects they operate.
7) Make Multiple Offers
To find the best deals you may want to make multiple offers.
Ask for your agent’s advice in regards to a reasonable initial offer price.
You want to start low, thus allowing the seller to counter offer. However,
be careful to not insult the seller. Too low an offer may be counterproductive.
You don´t want the seller to think that you are not a serious buyer, resulting
in them declining the offer without a counteroffer.
Note: With each offer, you will need to attach an earnest money deposit,
so be careful of finding yourself in a situation where you have multiple offers
accepted and thus having to forfeit your deposit on some of them. I always suggest
making one offer at a time.
8) Make Clean, Direct and Precise Offers
A clean and direct offer is an offer with limited yet precise terms
and contingencies. A contingency is a future event or circumstance that cannot be
predicted. In layman's terms, it means a legal reason to back out. You want to limit
your contingencies to a certain extent. There is a fine line between limiting risk and
submitting a problematic offer.
For example, imagine a seller receiving two offers at a similar price: One from you with
multiple contingencies, allowing you to back out of the deal at any time without penalty for
almost any reason, and the other offer without any contingencies. The seller is likely to
choose the offer with lesser contingencies even if it is at a lower purchase price solely due
to the security of the deal as opposed to being jerked around by the buyer. Keeping your offers
as clean as possible will increase your chance of acceptance.