Monday, September 20, 2010
Dear Reader,
Tulum, on Mexico's Riviera Maya, is on the Path of Progress. It's got the best raw material you can start with. It's close to the US, and very easy to get to--just over two hours' drive from Cancun's international airport, on good roads.
The setting is stunning...mile after mile of silky powder sand, offset by the brilliant-blue Caribbean Sea, wrapped around an interior of jade-green jungle.
It already attracts chic, sophisticated travelers. Soon, Tulum will see more of them, thanks to plans for a new international airport, which will bring three million visitors directly to this area.
Property prices in Tulum are lower than in neighboring beach towns that have already boomed, so there's potential for appreciation. In addition, a shortage of suitable accommodation for the upscale tourists that come to Tulum means that if you own a property here, it could earn strong rental income when you're not using it.
Here are six reasons why real estate in Tulum could represent a strong income opportunity.
1. You can buy low
Real estate prices in Tulum can be as much as 30% lower than in Playa del Carmen, which is just a short drive down the road. Rental and occupancy rates however are still strong in Tulum.
With rental property, the most important figure is the rental yield. If you buy a property for $200,000 and the property earns $10,000 annually in rental income, your gross rental yield is 5%. If you pay $100,000 for the same property, the yield doubles to 10%.
All other things being equal (rental rates, and occupancy numbers, for example) buying the property at a 30% discount gives you a substantially higher gross rental yield.
2. You have multiple sources of renters
You never want to have all your eggs in one basket, right? Some rental markets are dependent on visitors from the US. When the US economy slowed, it was extremely difficult to fill rentals in these markets. Tulum attracts visitors from a variety of places: North America, Europe, South America, and Central America. This is good if you own a rental property here as you have a cushion if one market disappears.
3. There are hotel and short-term rental shortages
Today in Tulum, there is a shortage of quality vacation rentals, as well as hotel rooms in the best resorts. While there is a high and low season, and rates are priced accordingly, there is still year-round demand. You aren't dependent on making your entire annual rental income in a short season.
4. Future supply has constraints
If a large number of new hotel rooms and/or short-terms rentals come flooding onto a market, it could flip the supply-demand balance that was previously in your favor. The protected Sian Ka'an biosphere at Tulum covers 1.3 million acres. There's an additional 200,000 protected acres south of the biosphere. That limits the amount of land available for residential and resort development.
5. A government plan calls for more visitors
A planned international airport here is expected to land three million visitors directly to Tulum in its first year of operation. A government plan calls for the increase of tourist numbers in the region from three to eleven million. This means more potential renters.
6. The clientele
Mexico's influential tourism authority want to attract a more upscale and independent traveler to Tulum. Think yoga on the beach at sunset, rather than crowds of spring-breakers partying. This sophisticated market is more stable and less price sensitive. They won't move on as soon as another place offers all-day buffets or cheaper alcohol. Buying the type of property that appeals to this chic set should give you good occupancy.
The easiest way to get a feel for the Tulum market - and check out its gorgeous Caribbean coastline... is on a Tulum chill weekend. Over five days and four nights, you'll have a chance to soak up the sunshine on the postcard-perfect Tulum beach...explore the biosphere...and enjoy cocktails under the stars.
You'll see two developments that are perfect for Tulum's chic set. And you'll get all of this (meals and accommodation, too)...for $199. That price rises tomorrow, Tuesday September 21, to $399...so click here today to lock down that $199 rate.
Ronan McMahon
Posted Under:
mexico, chill weekends, rental yield
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