How To Generate Returns on a Mexico Retirement Property

Generally speaking, a distinction is made between buyers of Mexican properties for the purpose of retirement, and those who are planning to invest. However, something more buyers are …

Generally speaking, a distinction is made between buyers of Mexican properties for the purpose of retirement, and those who are planning to invest. However, something more buyers are learning is that the two concepts can be combined, and soon-to-be retirees can actually enjoy an income from their retirement property. The following are a few approaches which buyers can take.

Buy a Condo or Home with Rental Appeal

Often, vacationers are looking for very similar features to the ones appealing to retirees, including:

  • proximity to the beach or a lake
  • close walking distance to services
  • on-site pools
  • on-site or nearby gyms and other activities
  • nearby restaurants, cafes, etc.

Some features appealing to retirees may not necessarily be important to renters, such as accessibility (bottom floors, or elevators) or proximity to health care facilities. In the case where the buyer needs to choose between retirement needs and market appeal, it is usually advisable to focus on appeal to vacationers, and the success of the investment can leave room for an upgrade later on.

Investing in a "boutique community" or condo-hotel style development, which includes many services, could be an ideal combination.

Long-term rental is also a very feasible option for retirees who will not be making use of their own property. In this case, a pleasant lifestyle atmosphere, and affordability of the rent and cost of living may take precedent over being very close to the beach, for example. This approach can leave more possibilities open for those investing on a lower budget.

Areas with established tourism tend to hold the highest potential for this approach, such as the Riviera Maya (Cancun/Playa del Carmen) or Puerto Vallarta.

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Use a Mortgage

This always needs to be done with care, but it is very feasible. A number of buyers have acquired a property through a mortgage, and use the rental income to cover the expenses, including the monthly payments. While this does not bring a profit, it allows buyers to acquire a property at very little expense to themselves.

Buyers will want to consider:

  • close analysis of the rental market; rental levels vs. payment and maintenance costs
  • time before retirement/need for the property vs. amortization period of the mortgage
  • room for flexibility, in case the rental market changes

Mortgages available directly in Mexico for foreign buyers allow them to leave home equity on a current property free. A variety of plans, including 15,20,25 and 30 year plans, as well as open mortgages allowing payments to the principal without penalty make this plan more feasible. Higher interest rates and longer paperwork and approval processes can sometimes be deterrents.

Build in a High Potential Area

Mexico offers many excellent land investment options, and those planning for retirement can buy a lot which, when completed with a home, will hold rental appeal, as in the first point. In this case, retirees could consider the possibility of building, renting out, and selling to upgrade when the day comes for retirement. This means that a higher emphasis should be put on appeal to the market than personal retirement needs, but, again, the two could easily coincide.

The Tulum area is currently a favorite for land purchases, and is capturing the interest of many retirees as well.

Re-invest. There are numerous examples of buyers who have invested in Mexico real estate, with sufficient results to re-invest later on in a second property. In this case, buyers will usually place a higher emphasis on investment potential for their first property, and higher emphasis on retirement needs on the second property. This also allows buyers to continue enjoying the benefits an the investment income during retirement.

Because of the high potential available for good return in Mexico, anyone buying real estate ahead of time for their retirement should consider this property an investment, and investigate possibilities to generate income from this property.



 

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