The 5 questions that no Real Estate company in the Riviera Maya wants to be asked
Dear Real Estate Investor in the Riviera Maya, Mexico,
My name is Javier Hernández, I’m the founder of Buenbnb, a company that provides digital property management services for rental properties. I been involved in the real estate business from the perspective of digital solutions and hard data and through my experience I have developed a radar to detect bulshit and lord oh lord... The Real Estate industry in Riviera Maya is quite crowded with Tons of BS.
Something I’m sure you have noted by now if you live anywhere along the Riviera Maya is the lack of sophistication by 98% of the Real Estate firms that operate here, who prey over unaware investors with nonsense more appropriate for MLMs than to Real Estate.
There's an old adage in the real estate industry, "It's all about location" and that here in the Riviera Maya, is not really the whole picture and if you take it like that, you will end up losing money, as location alone will not ensure you are making an informed decision. It can be Tulum, Playacar or Puerto Aventuras you are still at risk of losing all your investment if you don’t make your due diligence.
The intention of this post is to help you transition from unaware investor to woke investor by giving you the right questions to ensure you are dealing with proper Real Estate firms who know what they are doing and focus your due diligence in the right path.
The 5 key questions you need make are:
Is the terrain of my property completely private or part of an Ejido?
Is the infrastructure of the property developed with the standards set by the local laws?
Are there new development plans around my property?
How is the criminal activity in the area I plan invest?
How can you ensure X% ROI?
Let’s go on the why and what should you expect from each of them.
1) Is the terrain of my property completely private or part of an Ejido?
An Ejidal is a special division of land, which is own by a group of people, if the land you are on is not sold the Ejidatarios (owners of an Ejidal) they will either lease it to you or remove the concession at any time when the lease ends, which means that whatever you build on the land is theirs. Good luck asking your Real Estate broker to deal with that.
If the terrain is owned by an Ejidal, the safest bet is to say NO. Click here for more information.
2) Is the infrastructure of the property developed with the standards set by the local laws?
Is all the infrastructure properly set? Are they following the local standards or they exceed the standards? The local regulations are renown for their limited scope which is extremely shortsighted, which means that they change very regularly (every 1 to 2 years) while more rigorous infrastructure standards abroad change only every 10 to 20 years. If your property exceeds the standards in the Riviera Maya, you will save a lot of pain in the future.
Quintana Roo, where the Riviera Maya is located, is expected to grow 13% by 2023, from 1.7 million inhabitants to 1.9 million and already all the infrastructure is saturated, so expect lots of changes during the next years, which by the way, you as an investor will have to pay not only in improvements but also account for the losses due to missed rental income during those improvements.
3) Are there new development plans around your property?
Your property might be surrounded by a beautiful forest or maybe is a penthouse with a clear view of the ocean, you should ask then, for how long? Do not trust the renders of how your property will be! It's all baloney! Unless, your real estate broker shows you clear tangible evidence.
4) How is the criminal activity in the area I plan invest?
Let's face it, Mexico is a paradise with one massive problem, crime. Have you heard of Acapulco? Yeah, me neither... It was a paradise back in the 90's until crime flood the city and destroyed their economy, think about the people who invested in Real Estate back then.
look, no one knows if crime will go up or down, but something you can do is build awareness and that should be fundamental in your decision to invest here, how aware are you about the developments in terms of security in the region?
Right now, the Quintana Roo government is still on talks to accept (or not) the unified security command designed to increase the oversight and quality of the security efforts across Mexico and that’s just one of many examples you should be aware of.
The more crime grows the more you are at risk of losing your investment, with your property value plummeting and less tourists to rent it to. It's a death spiral, so pay attention and ask a lot!
5) How can you ensure X% ROI?
I know the REAL answer even if they haven't answered yet, THEY FUCKEN CAN'T.
Whenever you hear "you will earn X! It's a safe investment!" fucking run... that's the spread of a disease called mania, in the Riviera Maya, there's a clear mania with Real Estate development. If your Real Estate broker "promises" of nice returns, were for real, why the hell they are not stock brokers? Heck, they can see the future! Why they don't keep the Real Estate?
Look, if you are talking with a Real Estate company that markets themselves like a multilevel marketing company, do other investors a favor by not buying from them, spread the word and let them go bankrupt, the world will be a better place.
With all that said, be aware that even if your investment answers in a good light all the questions here, you are not free of risk. You will also need to consider more factors to grow the value of your property, in more posts we will be talking about strategies for selling properties and for rental properties that help you maintain a healthy ROI.
At Buenbnb we just started building a network of property investors who share practices and tips to grow your investments in Real Estate in Latin America.