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September 21, 2021
Investment goals, standard of living and risk profile: these are the elements to take into account when you are deciding to use your money for purchasing a property. Usually, there are different options at your disposal: you can acquire lands, apartments or houses.
But, the bigger question is: what is the best type of investment you can do in a location like the Riviera Maya? Because this piece of paradise nestled in the Caribbean Sea and surrounded by lush nature and world-class archaeological sites, provides you with opportunities you can’t afford to lose.
Although there is no general answer to this dilemma, given the various factors at play, with this article we want to help you make the best possible decision for your needs.
Investing in a real estate property is not only acquiring a house or an apartment for sale. You can find excellent opportunities also investing in lands.
The Riviera Maya is a very recent destination, a municipality created just over 25 years ago. And it is one of the highest population growth places in the world: 49,000 inhabitants in 2003, which rose to 245,000 in 2019.
Because of this, large quantities of new spaces, and of course lands for sale, can be found.
There are two different types of land to buy: investment lots and residential lots.
Investment lots are not yet urbanized and have no facilities.
They have great potential for high long-term growth, although not yet visible.
Many investors might not find sense to put their money on land without urbanization, electricity or water services, sometimes with no paved streets.
But, with a low initial disbursement of cash, this might become the greater opportunity for a high investment return, thanks to the potential increase in the whole area’s value.
An investment lot can be perfect for those who are just approaching the real estate world, because usually the purchase price of these properties is lower than other types of real estate, or land already with urbanization works.
Furthermore, this type of property does not require particular maintenance costs, but only payments of the annual property tax.
But, investment lots are also an excellent option for investors with a long-term perspective, because these properties’ value will grow over the years with almost absolute certainty, as urbanization works go on.
Of course, not all investment lots are equal. Their location is crucial and future growth plans are essential. For this reason, the Riviera Maya, with its enormous potential for urban development and tourist flow, is one of the most profitable places with an unbeatable offer of investment lots.
But this doesn’t have to be the norm. Some investors prefer to sell their residential lot when there is a value appreciation, and before building; although, this is a much clearer goal for investment lots, which have greater growth potential.
Unlike investment lands, residential lots are spaces that are located within a private area that already has growth plans. These lots have electricity, water and even paved streets. Sometimes, they already have facilities and amenities.
In general, residential lots are acquired with the intention of building, according to one’s own needs. For example, there are those who do not want to build a two-floor house, but with a larger ground floor because they are not interested in the garden. Others may be more interested in customizing spaces that they might not be able to do if they bought a built-in home, such as, for example, a larger bathroom or study that suits their needs.
Finally, pay attention to the property’s designated use : make sure it is residential or commercial before buying any type of land.
In general, one of the advantages that most attracts real estate investors to land is the possibility of acquiring a property with an excellent location at a lower price than acquiring a house.
Of course, not all investment lots are equal. Their location is crucial and future growth plans are essential. For this reason, the Riviera Maya, with its enormous potential for urban development and tourist flow, is one of the most profitable places with an unbeatable offer of investment and residential lots.
Today it is very easy to imagine the Riviera Maya, with its pearls Tulum and Playa del Carmen, as a paradise for real estate investment, and an excellent option to grow your wealth. But, how about 10 years ago? Or 15 years ago?
For example, in the new Tulum’s urbanization area called Francisco Uh May, the price of land was $680 MXN ($35 USD) per square meter in 2018, for a $409,360 MXN ( $20,550 USD) average land price. In 2021, this value has grown to $1,800 MXN ($90 USD) per square meter, almost three times in the last three years. According to the annual appreciation projection, in 2023 the estimated price per square meter will be $3,100 MXN.
This is more or less the capital gain that an investor who buys lots of land in the Riviera Maya expects to receive: an almost unique return on investment, actually.
Imagine if you had bought land in the Riviera Maya only 10 years ago, either an investment lot or a safer residential lot; with the current real estate demand, your investment’s return would be several times higher than what you paid years before.
Now there is still time, especially with the exponentially growing tourist flow, that will be so much greater with the construction of important infrastructures, such as the Tren Maya and the new Tulum airport.
If you are looking for investment or residential lots, we invite you to discover our real offer.
Houses and apartments
If your investment objective is to acquire a property already built, is it better to buy a house or an apartment?
There are some differences between these two types of real estate, which can make one product more attractive compared to the other.
An apartment in the Riviera Maya costs $32,000 MXN per square meter, while you will pay $10,000 MXN per square meter on average for a house.
However, the average size of an apartment is between 40 and 55 square meters, while the houses are, at least, three times larger.
This means that the price to buy an apartment in the Riviera Maya is generally lower than to buy a house.
Depending on your budget, you can buy two apartments at the same price as a house.
Houses generally provide greater long-term appreciation compared to apartments, because land often appreciates over time and houses are more related to the land than apartments.
Although houses tend to generate higher capital gains, their profitability is generally lower as compared with apartments.Therefore, to generate passive income, houses are not the best option.
On the contrary, an apartment acquired in the Riviera Maya could be the best solution for your return on investment. With this type of property, you could get higher income from rentals due to the different types of tenants:
This is especially true for a destination like the Riviera Maya that, according to “tourism indicators” by the Mexican Ministry of Tourism, attracted 6,211,454 tourists in 2018; 6,516,108 in 2019, and more than 3 million in 2020 (despite the pandemic). In 2021, Riviera Maya is gradually reaching almost the same flow of tourists experienced in 2018. Also, when using platforms such as AirBnB or Booking to promote an apartment, the cost per rental day is much higher and, therefore, you will get better income.
Higher operative expenses will go to reduce your property’s financial profitability.
The pros of buying a house
In fact, common apartment rules can restrict or limit owners from keeping pets. An interesting fact is that studies have shown that the average rental period for pet owners is longer.
If you are starting your real estate investment portfolio, you may feel more comfortable acquiring a lot than a house. The lots represent a low risk investment, and their value has a great growth potential and higher appreciation perspectives. However, it is for long-term investors, who do not need a constant flow of money.
If you don’t have patience, or if you are looking for a recurrent passive income, you have to consider buying a house or an apartment.
Houses can offer you greater appreciation, but a low return on the initial investment. However, the apartments can provide you with better returns compared to houses, especially if you decide for vacation rentals. This makes it excellent if you require a constant flow of income into your pocket.
At Maya Ocean Real Estate we have a wide range of any kind of real estate properties, in order to directly support every investment decision you are going to take.