Buying real estate abroad - suggestions please

[Bamboo67]

Aloha Mustachians,

I'm in a bit of a decision-making pickle here and could really use some advice from anyone with experience in investing in Mexico, particularly Tulum.

A bit about me - I'm in my mid-30s and shifted to a programming career a few years back. It was a game changer for me, financially speaking. I managed to climb out of debt and have saved up a decent amount of money since. Now, I'm thinking about diving into real estate investment, but US prices are just... yeah, out of my league.

So, here's the deal: I visited Tulum during my holidays in 2022 (and I'm back here again now!) and, to put it simply, fell in love with the place. I've been mulling over the idea of investing in a rental property there. But, and here's the crux, I'm a bit worried about the rental market dynamics.

I came across this article https://rivieramayacozy.com/average-rental-revenue-tulum/ and it got me thinking. The growing saturation of rental properties in Tulum - is it going to cause rental prices to plummet? I'm seeing hints of that already since it clearly shows the despite growing occupancy the revenue is decreasing and it's making me second-guess this investment idea.

I'm really hoping to connect with folks who've got some experience with the market. Any insights, warnings, tips, or just your two cents would be immensely appreciated. Is it still a wise investment? Are there any unforeseen pitfalls I should be aware of?

Also, is it a sane idea to get your first property abroad instead of your home country?

[uniwelder]

My wife is Mexican and her brother in law owns a small hotel in Tulum.  We don't understand his various investments, nor do we want to recreate them.  He's very in tune with what's happening politically and is native to Quintana Roo, so he invested early and I assume he'll sell at some point to a clueless foreigner.  Don't be that guy.  At some point, Tulum is no longer going to be the hippest place and tourism will shift somewhere else.

Besides vacationing, there is nothing going on in Tulum.  It's in the middle of nowhere, with no infrastructure around it.  My wife lived in Merida for 5 years doing her graduate studies.  It's a city of 1 million people with a rich history and the about the lowest crime rate in Mexico.  Prices have gone up considerably since Covid, but it's still not too ridiculous.  Its economy has a lot of expat and tourism money feeding it, but it's not entirely dependent, like Cancun or Tulum are. 

[Bamboo67]

My wife is Mexican and her brother in law owns a small hotel in Tulum.  We don't understand his various investments, nor do we want to recreate them.  He's very in tune with what's happening politically and is native to Quintana Roo, so he invested early and I assume he'll sell at some point to a clueless foreigner.  Don't be that guy.  At some point, Tulum is no longer going to be the hippest place and tourism will shift somewhere else.

Besides vacationing, there is nothing going on in Tulum.  It's in the middle of nowhere, with no infrastructure around it.  My wife lived in Merida for 5 years doing her graduate studies.  It's a city of 1 million people with a rich history and the about the lowest crime rate in Mexico.  Prices have gone up considerably since Covid, but it's still not too ridiculous.  Its economy has a lot of expat and tourism money feeding it, but it's not entirely dependent, like Cancun or Tulum are.

Thanks for your input, highly appreciate it.

[BrianT]

From my own personal experience, as well as hearing from my friends, it comes down to management whether it's overseas or in your own backyard. If you can't do it yourself, you need someone on the ground that you can trust. Just like how you invest in the S&P 500, you are expecting the management to run those companies well so that there is a solid return for investors. Your rental property is no different...except that you're much closer to the action.

[uniwelder]

Something else to mention are environmental concerns--- hurricanes, sea level rise, corrosion.  Older hotels in Cancun are falling apart because rebar in the concrete rusts relatively quickly due to the saltwater, so figure on a lifespan of perhaps 40 years for a multistory building.  Climate change is also very real and the entire area is extremely flat and very close to sea level.  My wife has never experienced a hurricane is Merida, but when there were warnings, all her friends from the city were telling her to prepare for at least a week without food or fresh water.  In Tulum, being as remote as it is, must take longer to recover from storms.  Here's an article you might want to read through-- https://www.theguardian.com/environment/2022/mar/14/mexico-cancun-beaches-tourism-sea-levels-climate-crisis-quintana-roo

[uniwelder]

Here's another discussion about vacation properties in Tulum worth reading---- https://forum.mrmoneymustache.com/real-estate-and-landlording/buying-investment-property-in-mexico/msg2990832/#msg2990832