What Makes Tulum Hot Right Now

Friday, January 21, 2011

Dear Reader,

Tulum is a Path of Progress play. You could do well by getting in ahead of the planned infrastructure and development. Many Path of Progress investments are long-term plays. It could be decades before the return comes. Tulum is different. You could even generate income from the get-go.

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 U.S. When the U.S. 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, with another 200,000 protected acres south of the biosphere. In December 2010, the government added an extra 787,654 acres to 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 in Tulum in its first year of operation. A government plan calls for an additional eight million tourists in the region. This means more potential renters.
   
   
6. The clientele. Mexico’s influential tourism authority wants 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 chill weekend. Over four days and three 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 a real estate development that is perfect for Tulum's chic set. And you'll get all of this (meals and accommodation, too)...for $180. Fill in your name and e-mail address here, and Donna will send you an information package.

Ronan McMahon

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Posted Under:

mexico, appreciation potential

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