Why investing in property for the rental market in Sayulita is a great business opportunity
Over the past few months, we have seen a dramatic rise in the public profile of Sayulita and the Nayarit region in general. Just last week the NY Times published an article entitled “A small corner of Mexico is experiencing a rising tide of property investment” explaining many of the benefits in the region and why it is becoming popular. This was quickly followed by a similar story from Fox News about “Bill Gates triggers wave of investment in remote area of Mexico” which also backed up many of our recent articles published on the News & Events section of our website.
So what’s happening in Sayulita?
Well, the short answer is Return On Investment. It takes a unique set of circumstances, and a little good timing, to forecast a very promising R.O.I in 2016 and beyond. We believe that Punta Sayulita is perfectly placed in the luxury villa market to exploit the next wave of property appreciation. In a recent article, we identified The Golden Mix of Location, Lifestyle, and Potential as the 3 key characteristics required to position high-end properties in the global marketplace. In a different article, we detailed the unique factors you should consider for real estate investment and why we believe that Punta Sayulita is ahead of the curve for property investment.
Appreciation of property value
It’s important to note that 2 of the most important factors that contribute to property appreciation are tourism development in the region and population growth in the region.
International tourism in Sayulita has been growing over the past 10 years and is projected to grow aggressively as the area continues to expand its profile and infrastructure. This can be seen and backed up by significant investment and support from local, regional and national governments who have recognised the potential of tourism for the economy.
One example of this is the Pueblos Magicos project. Additionally, a quick Google search reveals many authoritative results from The Guardian, The Huffington Post, In Style, The National Post and The Seattle Times, all praising the special reasons why Sayulita is a terrific tourist destination.
Additionally, Forbes has reported about a significant investment in a new luxury hotel by Grupo Autofin in the Riviera Nayarit and at the trade website, Hospitality.net reported a massive investment by RLH Properties into new hotels across the region. This, of course, is excellent news for anyone involved in the tourism and services sectors and is further evidence that the entire region is economically expanding and creating employment, which leads to population growth.
Without fail, private investment follows these trends in Mexico. Combined local and international investment put pressure on the long rental market as well as the appreciating real estate market.
What’s involved in running a rental business in Sayulita?
The first objective investors should look at is the legal side of buying property in the restricted zone in Mexico. The link explains the necessity for The Fideicomiso, some of the principle costs involved, and other legal obligations. Mexico’s Foreign Investment Law allows foreigners to acquire title to land in the restricted zone by one of two methods; through a Mexican corporation or through a bank trust.
If you are considering investing in property to enter the rental market then setting up a Mexican corporation might be the better option as it allows you more possibilities for expansion. It is common to buy property through a corporation when the intention is to use the property for commercial reasons. Buyers interested in multiple properties often choose this option.
For more information about buying property in Mexico listen to this Podcast named
A Punta Sayulita Case Study – Villa Punta Paraiso
What better way to describe the ins and outs of the rental business in Sayulita than to interview an existing businessman who runs a successful rental property named Villa Punta Paraiso. We spoke with the owner, Jorge Carrillo and asked him 20 pertinent questions about the past, present, and future.
1. Why did you choose the buy a property in Punta Sayulita?
I´ve been coming to Sayulita since I was a kid. I was always looking for the perfect spot to surf along the beaches that are nearby, so I have seen the growth of this beautiful town in all aspects. My kids and family enjoy the place, a small little town where you and your kids can feel free!!!
2. Was it always your plan to invest in this property and rent it as a business?
Yes .., Definitely it was always on our mind to invest on a home/ Villa somewhere and why not the town we love and that always makes us feel like home.
3. Is it difficult to establish a business in Mexico for the rental market? Did you set up a legal company for this?
I am a real estate broker so no, it is my bread and butter, and yes I established a corporation and pay taxes. Like all businesses, it has a process to get it started. Yes, we have a legal company, which meets the requirements for the authorities.
4. Is there a lot of continuous legal responsibilities to take care of?
No, just initially.
5. Do you have any type of legal agreement with the renter?. Do you take a deposit for security? Have there been any negative experiences?
Yes, we do have a legal agreement with all renters, it’s a must. There has to be a substantial security deposit. But so far, we have not had any negative experiences.
6. How long have you owned this property? How long did it take to find your first rental?
I have owned it since 2014 and is has been 1.5 years on the market and it took us no more than 2 months of hard work to make it happen.
7. The most popular rental periods are Christmas, New Years, Thanksgiving, Easter Week and the main 8 weeks of summer. Is there any demand for your property during the rest of the year?
Those are the peak weeks out of the year, yes, we have had to make promotions for low demand weeks and have learned how and where to promote, in other words, we have to be creative in order to keep the guests coming.
8. What are rental prices in low season and high season in US$?.
Low season average $1200-1500, high season $1800 -2000 per 24 hours.
9. Is there a lot of maintenance with the property?
Yes there is, especially with Palapa Roof, the pool, the routine cleaning, in-house chef, the garden, golf cart, concierge, and insurance etc
10. Have you seen much competition in the area?
There is a lot of different competition. The north and south part of Sayulita are very popular. You can find different styles and bigger Villas that have been on the market for years and they have set the pricing.
11. How have you seen Sayulita develop in the time you have been here?
Yes, every day it is growing. It seems like people are starting to understand the potential of this surf/fishing little town. There are more high-end establishments as well as restaurants with very high standards.
12. Are you considering buying a second property for the rental market?
Yes, but I have not seen the development process according to plans and projections. It could happen in the near future and it might be something similar to what we have already.
13. What advice would you give to new buyers entering the property market?
It’s a different world from where there coming from, so be patient.
Make sure you have a lock tight construction or purchase agreement with penalties and delivery dates for delivery and title.
14. What’s the hardest part of running a rental property?
Maintenance and keeping the high standards that renters like to see for the prices they are paying. Salt, dust and tropical weather, it’s an everyday challenge.
15. Where do most of your rentals come from? Online sites or referrals?
They come from various sites, others come from referrals. In other words, it will be a 60/40 split.
16. Do you outsource any of the work for looking after the Villa to local people in Sayulita?
Unfortunately very little, there are very few people in Sayulita that are dependable or committed. I prefer to hire from neighboring communities.
17. When people come to stay at Villa Punta Paradise what do you suggest they go for activities/ restaurants and to have fun?
We just tell visitors to go and experience all of Sayulita and especially the local stands and stalls. This is what probably they enjoy the most. Also, activities, there’s a lot to do. Just walking close to the property there are lots of single trails that will take you to different beaches around us. There’s a lot of wildlife to experience, also, horseback, hiking, surfing, paddleboarding , kayak fishing, zip lining etc.
18. Can you describe the demographic of the people who stay at Villa Punta Paradise?
Couples in the 50 age bracket, or with their families. People come from everywhere: England, Australia, US – Boston, Chicago, Colorado, California.
19. What is your favourite thing about Sayulita?
Being able to walk free, barefoot and see my kids exploring by themselves and enjoying other people’s culture, the pure relaxation.
20. How good is the Sayulita lifestyle?
Just perfect!!! Great!! It doesn’t get any better than this.
At the end of the conversation with Jorge Carrillo mentioned something curious. It was a reference to “a return to the property boom of the early 2000’s in Mexico”, just before the global economic crisis. Jorge explained that he is currently earning 10% return on his investment in the rental market. In his first year of business, he exceeded his goal within the first 6 months. The high season months can bring in $20 – $25,000 a month alone. So a well-established business with good referrals and some good marketing can maintain a high level of occupancy all year round.
Click on the image below to watch the Video
What are the revenues and costs involved in the rental market in Sayulita?
If you decide to start a rental business in Mexico there are a few options to consider. Firstly, many prefer to live a large amount of their time in Sayulita. This allows them to be hands on with their business and give guests to the villa a personal touch and high level of customer service. Also, there’s the flexibility to use the villa as and when you need it for your own activities and events.
The other option is to register your villa with a rental agency. These companies handle the bookings and some of the marketing in exchange for about 20% of revenue. Usually, there is also a monthly property management fee to manage the day to day running of the business and upkeep. While this will diminish your profits, this business option is still very lucrative with the huge advantage of not requiring a lot of time.
Let’s take a look at the financials of a rental business in Punta Sayulita in detail. In this example, we looked at a property which initially cost $1,400,000 but has since increased in value. The data covers 36 rental months since the first month of business and details the standard costs and revenues.
If you would like more information, deeper financial information or to visit Punta Sayulita to discuss your investment in person then please use this Contact link. We have a very experienced staff to answer all your questions.