If you are thinking about investing in a rental property in the Banderas Bay area that includes Puerto Vallarta and all of the Riviera Nayarit, knowledge of the area, up-to-date information on the buying and selling process in Mexico, and awareness of all legal requirements are the three most crucial factors. An experienced AMPI Vallarta y Compostela real estate professional will help you. Here are some guidelines on things to consider.
Investing in a Rental Property
Consider the rental market area that you want to invest in
Each area in the Banderas Bay including Puerto Vallarta and Riviera Nayarit, has pros and cons regarding “income potential” rentals. Some areas are more conducive to short-term or vacation rentals (nightly or weekly) which yield a higher return but take more work on the owner’s behalf. Other areas are more conducive to longer-term rentals; while the return may be slightly lower, there is less work required and less wear and tear on the rental property.
Another factor to consider: The competition in the area. Some areas or buildings will have a lot of competition due to location and popularity (such as the Romantic Zone) and this could impact your nightly or monthly rate.
Ask your agent questions about this factor and ask them to provide you with realistic, documented past and present rental projections. These rental projections should include rental rates (during high and off-season), occupancy rates, and costs such as property management and utilities.
If you are lucky enough to purchase a property that is currently being rented, ask your agent to obtain (if possible) the rental history and financial statements for the property, as this will provide timely information to help you make your decision.
Determine how you want the property managed: Time you personally invest or money you pay for property management
There are options available to you if you cannot manage the property from your resident country.
One option is to hire a full-service property management company that not only manages your property (cleaning, repairs, paying bills, and purchasing supplies) but also finds and qualifies renters, and meets the renters when they arrive. There are many good full-service companies here in Puerto Vallarta and surrounding areas. Your AMPI real estate professional can give you recommendations. They will also advise you to talk to others that have used the company before. You can also ask the company for client references.
In addition to this, be sure to check the website and social media accounts of any company you choose to ensure they are advertising their rental properties professionally and that the pictures and write-ups are professional, accurate, and inviting. Double check that your property manager will be advertising your rental property on all the platform sites such as Airbnb, HomeAway, TripAdvisor, VRBO, etc., and responding to all inquiries in a timely manner.
Most property management companies will charge owners around 20% of the incoming rental fees for short term rentals or one month’s rental income for long term (1 year or more) rentals; these amounts vary from company to company. In all cases, make sure that the property management company you choose provides you with detailed financial reports monthly of income and expenses.
Another option is to rent and maintain your rental yourself. This can easily be done using Platform Rental Sites such as VRBO, Airbnb, HomeAway, TripAdvisor, Craigslist, an exclusive website or using social media. This option does take time and effort but most of all … vigilance and diligence on your part, as you make sure inquiries are answered promptly and in the most timely and efficient manner. While this takes effort on your part, you will make and realize a better return, as the outlay for services rendered by you personally, will be much lower.
If you are not here physically to manage the property or let renters in, you may still need a property manager to provide this and other services, such as arranging cleaning and repairs. Many property management firms here have a checklist of services that they can provide.
You will be up to you to decide your level of involvement in the rental process.
If you have purchased an investment property but are not getting the return you expected, here are some suggestions of things to do and consider…
Look at other properties that are similar to your property to see how they are being advertised and presented
Check social media, platform rental sites, and the websites of local property managers to see how they advertise similar (location and amenities) properties. Look at reviews on Google, TripAdvisor, Yelp, etc., often. Make sure your pictures are professionally done and that your property is staged to show it to its best advantage. Take advantage of your view, your location, and any amenities the rental has. These features should all appear in your photographs.
Have you considered a virtual tour you can post on Facebook, your property management company’s website, or put on YouTube? Many renters are renting from a distance and cannot view your property prior to booking it so the more information you can provide the more comfortable they will be in choosing your property and location over another.
When creating marketing materials: Ensure that your description includes all the best features of your rental and the area in which it is located. Showing photos of the sunrise or sunset from a terrace; an outdoor or indoor table set for dining or entertaining, the proximity to the beach, the Malecon and area attractions such as great restaurants, clubs, tourist attractions, will help you market your property as an excellent choice for your guests to rent.
Finally, ensure that your property is always in 5-star condition. Make sure it is clean and well maintained, all essential (and some luxury) items are provided, and that all inquiries are responded to quickly and professionally. Consider going a memorable extra mile for your guests: Leaving a chilled bottle of wine or a basket of fruit, some local artisan chocolates, or treats, etc., will go a long way in motivating your guests to recommend you and even more importantly… to return in the future.
What next? Now that you have bought the perfect investment property, secured a great property manager, and rentals are coming in; what about taxes on this income?
Taxable Income on Rentals
By Mexican law, you are required to pay taxes on all rental properties. You will be able to deduct expenses incurred for renting your property and many countries have agreements, so you do not end up having to pay double taxes. AMPI’s recommendation is that you talk to a Mexican tax accountant as well as one in your home country. And do not panic. Mexican accountants are thorough, well-priced, knowledgeable, and, in many cases in Puerto Vallarta… bilingual. Ask your AMPI real estate professional to give you some recommendations.
Now that you have your rental property business up and running, it is time to sit back and enjoy the income. And, as a much-valued added bonus, you have a place in paradise that you too can enjoy when it is not being rented.
If you would like further information on this topic or help, please find the link to our AMPI agency page here. Our AMPI real estate professionals will be happy to assist you.
