How Much Rental Income can I Expect from my House or Condo?

ventanamagazine.com
Author: 2009 Raúl Jaime


One of the most important considerations on people’s minds about their purchase of property in Mexico is whether or not they will be able to rent them out and have some income from these rentals. Although there isn’t one simple answer that would fit every individual case and there are several factors that influence the results, here are some points to take into consideration.

First of all, like in any other real estate investment, location is perhaps the most important factor that will determine the demand for rentals. If you have a beach-front property that is in a brand new building that also happens to be within a short distance of amenities such as restaurants, shops and entertainment, the demand to rent your property will be high. As you get farther away from the city’s core attractions it is more likely that the demand for rentals will drop. Older buildings or those far from the beach and/or golf courses are also less desirable to rent.

You must keep in mind that the high season is when the demand for rental properties is highest and you will be able to rent them at a higher rate during this time. So, if you plan to stay in your property during the winter, you are taking away some of the most valuable weeks when you could be collecting rent.

When renting out your property, be aware of the normal expenses incurred by tenants while they are there, including electricity. While short-term vacation rentals are more profitable, they require more involvement from the owner than long-term rentals, and you can end up with a high utility bill if your tenants run the AC at full blast all day. Also, keep in mind that you might need the services of a property manager to do a walkthrough before and after the tenants stay there.

I have come across sales people who tell their potential buyers that they can expect to rent out their units for up to 70% of the time. Frankly this is just an over inflated estimate that they use in hopes of closing a sale. However, vacation properties in Mexico still produce very good income if you know how to exploit them properly. In order to play it safe, I recommend a more conservative estimate for the average number of weeks you will be able to rent out your property. For example, you could expect to rent a 2 bedroom unit in a high demand area for roughly 20 weeks a year. Considering that a condo of these characteristics usually rents for over USD $1,000 per week, this could mean an annual income of $20,000 minus expenses. You should also consider including your property in the rental pool if your building has one, but do it in a non-exclusive manner so that you can still advertise and promote your property independently.