Playa del Carmen: Investment Opportunity EP3 (Part 1)

In this episode Echando Raíces focuses on Playa del Carmen as a prime real estate investment opportunity. The hosts explain that the city’s appeal lies in its strategic location within the Riviera Maya, offering excellent connectivity to airports and other attractions. They highlight Playa del Carmen's rapid demographic and tourism growth, which fuels a constant demand for housing and leads to high property appreciation. Furthermore, the discussion emphasizes the diverse investment objectives that can be met, from long-term and vacation rentals to second homes, alongside the year-round profitability compared to seasonal destinations. The hosts also stress the importance of defining investment goals and securing professional property management to maximize returns, while also noting the low barrier to entry for investors due to easy accessibility.

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Transcript

Bob: 0:00

Imagine a place you've always thought of as purely a vacation getaway. Sun Sand Clearwater. But what if I told you that same Paradise is actually a powerhouse for smart strategic investment, one where you can put down roots both literally and financially.

Alexa: 0:16

It's absolutely true. Today we're embarking into residential real estate investment, and we're putting a laser focus on Playa del Carmen, Mexico.

Bob: 0:25

Yeah. We've taken a stack of sources, including insights directly from real estate experts on the ground, to really unpack the crucial factors you must consider before diving into property ownership there. Mm-hmm. Our mission really is to give you a shortcut to understanding why Playa del Carmen stands out. We wanna help you reduce risks and, uh, maximize potential returns,

Alexa: 0:45

whether that's for your own personal use, maybe generating rental income, or even building long-term wealth.

Bob: 0:50

Exactly. So let's explore this as we get into what truly makes a smart investment here. Our sources consistently emphasize one foundational first step. You just can't skip.

Alexa: 1:00

Right. Understanding your objective.

Bob: 1:02

Yes. Before you do anything else, you need to be crystal clear on why you want to invest. It sounds simple, but the strategic clarity, well, it defines your entire approach, doesn't it?

Alexa: 1:13

It really does, and what's truly compelling here, I think, is how versatile the Playa del Carmen market is. It caters to such a diverse range of investment. Objective.

Bob: 1:22

Like what specifically?

Alexa: 1:23

Well, you could be looking for a full-time residence, perhaps a primary home, or, you know, even thinking ahead to a future retirement haven.

Bob: 1:31

Okay.

Alexa: 1:32

Then again, many see it as a second residence for personal use, a tropical escape to enjoy whenever you wish.

Bob: 1:38

Beyond just living there yourself. What about the income side? What are the main rental models that really work well in Playa?

Alexa: 1:44

Right, so for many the focus is income generation. That could mean a long-term traditional rental setup. Okay. Or, and this is increasingly popular, the vacation rental model. You know, using platforms like Airbnb or booking.com

Bob: 1:58

and the numbers there. What do the sources say?

Alexa: 2:00

Our sources reveal that Playa del Carmen boasts occupancy rates often exceeding 60%.

Bob: 2:05

Wow. 60%.

Alexa: 2:06

Yeah, and just to give you context, in many established global vacation markets hitting anything above 50% is considered excellent.

Bob: 2:14

So Playa is really standing out there. It

Alexa: 2:16

is. It makes it a standout for consistent rental income, and you're looking at nightly rates averaging around 3000 pesos, which

Bob: 2:24

is about,

Alexa: 2:25

uh, roughly 175 U-S-D-S-E. So it offers this sweet spot, affordable for tourists, but still providing strong returns for investors.

Bob: 2:35

It sounds incredibly adaptable as a market.

Alexa: 2:37

Absolutely. And we haven't even touched on buying for quick resale to capitalize on appreciation. Timing is key there, of course. Right? Or even using property for commercial use. This market really does offer multiple paths depending on your specific profile, your stage of life, your resources.

Bob: 2:53

Which explains why as our sources point out, the good real estate professionals there always start by asking about your specific goals.

Alexa: 3:00

Exactly. Playa del Carmen isn't some generic investment destination where one size fits all.

Bob: 3:06

Makes sense. So as we go through these other critical factors, I invite you, the listener, to keep considering what's your.

Alexa: 3:12

Well, for me, and I think for so many investors who commit to this region, the most attractive element about p Playa del Carmen has to be its location,

Bob: 3:21

location, location, location. It's

Alexa: 3:22

the classic real estate mantra, right? Yeah. And Playa del Carmen unequivocally checks all three boxes. It's strategically positioned right in the heart of the Riviera Maya.

Bob: 3:32

Meaning,

Alexa: 3:33

meaning it offers excellent connectivity to all the key destinations around it. You're just a few kilometers from Tulum, a few kilometers from Cancun, and

Bob: 3:41

that. Proximity to not one, but two international airports. Hmm. That's gotta be a significant differentiator.

Alexa: 3:48

Oh, it is a huge one. The Cancun airport alone handle over 32 million people in 20 23,

Bob: 3:55

32 million.

Alexa: 3:56

It's the second busiest airport in Mexico right after Mexico City. Wow. Plus, you're literally right in front of the second largest barrier reef in the world, and you've got incredible archeological zones. Just moments away. This combination makes, play's location, honestly unbeatable.

Bob: 4:12

It's also fascinating how playa seems to cater to different tastes even within its own borders. Are there specific zones that line up better with certain investment goals?

Alexa: 4:21

Definitely. You've got the vibrant downtown area and the famous fifth Avenue, which see incredibly high tourist demand. So ideal for rentals, commercial ventures. It's the tourist

Bob: 4:33

hub.

Alexa: 4:33

Exactly. Then you have Playacar that's more of a private residential community. It has its own exclusive beach clubs, golf courses. It offers a different kind of tranquility,

Bob: 4:43

a different vibe in entirely

Alexa: 4:44

completely. And then let's not overlook the luxury vertical developments near the sea. Think around 34th and 38th Street or up in the North end Coco Beach area. These are international investment zones where the value per square meter has just seen immense appreciation.

Bob: 4:59

So growth potential is still strong there. Yeah.

Alexa: 5:02

What

Bob: 5:02

about looking ahead, are there any new developments that might shake things up or impact property values?

Alexa: 5:07

Yes. Actually a key factor our sources are highlighting for future appreciation is the upcoming opening of a new archeological zone called Pamal ii.

Bob: 5:15

Oh, interesting. Where's that?

Alexa: 5:16

It's just five minutes away heading towards Xcaret and Tulum, and the expectation is that this opening will cause a, well, a significant surge in appreciation in the surrounding areas, in the coming years.

Bob: 5:28

Something to watch then. Okay, so beyond its stellar location. Playa del Carmen's continuous demographic in tour's. Growth seems like another major engine driving investment.

Alexa: 5:38

Absolutely. This city has transformed, you know, yeah. From a humble fishing village to now over 300,000 inhabitants and a

Bob: 5:46

growth

Alexa: 5:46

rate, it's averaging about 8% annually. When you hear that 20,000 to 25,000 new people move to Playa del Carmen every year, it's

Bob: 5:54

like adding a small city annually.

Alexa: 5:55

It is. And that sustained demographic expansion continually generates robust demand for housing, for jobs, which organically drives property appreciation.

Bob: 6:05

Let's look at the tourist side too. The numbers are pretty staggering.

Alexa: 6:08

They really are. If we look year to date, we're talking over 530,000 tourists just from the US and North America alone. That's about 36% of all visitors,

Bob: 6:17

a huge chunk.

Alexa: 6:18

And national tourism. Mexicans visiting is immensely important too. That's 30% Canadian tourism adds another 8%.

Bob: 6:24

And our sources highlighted something quite unique, didn't they, about Argentinian tourism.

Alexa: 6:29

Yes. It's fascinating. Playa del Carmen is often cited as having the largest Argentinian community in the world outside of Argentina itself. Yeah, it adds this distinct cultural layer, this vibrant international appeal that's quite unique. Then you have a mix of Europeans and Asians making up the remaining 5%,

Bob: 6:48

so it's a real melting pot. Now, a question many listeners might have given all this growth, isn't the market getting saturated?

Alexa: 6:56

That's a common concern and a fair one to ask,

Bob: 6:58

but what does the data say?

Alexa: 7:00

The answer from the data and from experts on the ground is a resounding no. While there is a lot of suply entering the market, there's much, much more demand.

Bob: 7:09

Can you elaborate a bit on why? Why does demand keep outpacing that suply growth, especially with, as you said, 20,000 to 25,000 new residents arriving each year?

Alexa: 7:20

It comes back to that constant influx. Those new residents need places to live. Combine that with the ever-growing tourist numbers, needing accommodation, it creates this relentless need for properties.

Bob: 7:30

So it's a powerful kind of self-sustaining cycle.

Alexa: 7:33

Exactly. Population growth directly fuels housing demand, which reinforces the market's stability and, uh, its potential for continued growth. Okay.

Bob: 7:43

Let's shift gears a bit. Let's talk about the numbers. Game, return on investment. I know this is probably the most anticipated topic for many potential investors.

Alexa: 7:50

Understandably so.

Bob: 7:52

Now, consider this a preview. Maybe because we're planning a future deep dive that will go all in. With hard data, more technical discussions on ROI.

Alexa: 8:01

Sounds good. But for now, let's define ROI. SimPlaya it's about understanding the capital you invest and the time it takes to recover it, right? And you need to consider that alongside appreciation. The increase in property value over time, which as we touched on, is estimated at a very healthy 8% to 12% annually in certain key areas.

Bob: 8:19

And location plays a huge role here too, presumably.

Alexa: 8:22

Absolutely crucial location directly impacts ROI. For instance, think about an apartment right on 12th Street and fifth Avenue in the thick of it all. That will yield a very different return compared to a property in a more remote area, maybe like El Tigrillo.

Bob: 8:35

So the value proposition, the entry cost, everything is linked to that precise spot.

Alexa: 8:40

Exactly. The value is intrinsically linked to its position. And what's particularly noteworthy here is that Playa Del Carmen leads the Mexican Caribbean in this regard.

Bob: 8:50

How so?

Alexa: 8:51

It's the municipality with the most active vacation properties and the highest average occupancy rate.

Bob: 8:56

Okay. But you mentioned something earlier, a crucial factor, maybe a warning.

Alexa: 9:00

Yes. A vital warning for new investors.

Bob: 9:04

Yeah,

Alexa: 9:04

a very good location in a great destination like Playa de Carmen. Well, it would be worth almost nothing without very good property management.

Bob: 9:14

Ah, the management piece. What's the biggest mistake you see new investors make there?

Alexa: 9:19

It's almost always trying to cheap out on property management. It's a classic pitfall.

Bob: 9:23

How does that usually play out?

Alexa: 9:24

They hire a relative, maybe, or find a less than reputable agency just because it's cheaper. Then six months down the line, they're wondering why they aren't seeing the profitability they expected.

Bob: 9:34

So the takeaway is.

Alexa: 9:35

Achieving those strong returns, absolutely hinges on having an excellent management company, one that truly understands the local market nuances, the pricing, the guest services. Everything

Bob: 9:45

that is vital. Okay. And when we talk about returns, profitability, we also have to talk about seasonality. That's a big factor in many vacation markets.

Alexa: 9:54

Huge. But this is where Playa del Carmen really shines.

Bob: 9:58

How so? Compared to other places,

Alexa: 9:59

well think about highly seasonal destinations like, uh, ski resorts that might only peak for a few months a year. Yeah. Or even places like Ibiza in Spain, which. Operate intensely for maybe four or five months, and then significantly quiet down,

Bob: 10:14

right? Very defined seasons.

Alexa: 10:16

Play Del Carmen is an eternal summer. There's strong visitation pretty much year round,

Bob: 10:21

which means,

Alexa: 10:21

which means much more balanced profitability throughout the year. For investors, you don't have those drastic spikes and then long empty lulls,

Bob: 10:29

so more consistent cash flow coming into your pocket.

Alexa: 10:32

Exactly. Even though you still get higher peaks during the traditional high seasons, December, new Year's, holy Week, summer holidays, but the base level is strong,

Bob: 10:42

that year round appeal is a massive advantage.

Alexa: 10:45

It is. And it's not just about year-round. Demand. Playa also offers incredible diversity in the types of properties available. You've got studios, 1, 2, 3 bedroom apartments, even houses.

Bob: 10:56

And in different locations too, right? Not just the absolute prime spots.

Alexa: 11:00

Correct. Across various locations from those premium high demand spots to other areas that might not be beachfront, but still offer great ROI potential. This adaptability truly caters to, well, pretty much all investor profiles

Bob: 11:13

and that accessibility you mentioned earlier, the ease of getting there, that also contributes significantly to its appeal. Yeah. Our sources talked about a low barrier to entry.

Alexa: 11:22

Yes. It really lowers the barrier.

Bob: 11:24

How does that accessibility translate? Into a low barrier to entry for investors? Yeah. Beyond just being easy to visit.

Alexa: 11:30

Well, it's about market dynamics. Really. Think about it, getting to some major luxury or ski destinations can be quite involved. You might fly into a major hub, then face a long drive, maybe. Two, three, even four hours, like

Bob: 11:45

trying to get to Aspen or Vail, maybe. Mm. Fly to Denver. Then the drive.

Alexa: 11:50

Exactly. Compare that to Playa del Carmen. You fly into Cancun, international direct flights from all over the world, land there and then. It's a pretty straightforward drive, maybe 35 to 60 minutes, even if there's a bit of traffic,

Bob: 12:03

it's much simpler.

Alexa: 12:04

Much simpler. You're quickly at your destination ready to enjoy it. Now, for an investor, this unparalleled accessibility isn't just a tourist convenience. It fundamentally broadens the pool of potential buyers and renters.

Bob: 12:16

Oh, okay.

Alexa: 12:17

Unlike maybe more exclusive or difficult to reach luxury markets, Playa's ease of access means you have a more dynamic market, potentially more liquid,

Bob: 12:24

more people who can easily buy or rent there

Alexa: 12:27

precisely, which generally makes it a more resilient market for property owners

Bob: 12:31

and that ease, that constant flow of people wanting to come and come back again and again for the investor that directly generates consistent demand. Boosts, ROI, potential and fuels appreciation. It's a powerful feedback loop.

Alexa: 12:46

It really is a self-reinforcing cycle.

Bob: 12:48

So let's recap. We've just unpacked several key factors that make Playa Ade Carmen such a compelling residential real estate investment opportunity. We talked about understanding your strategic objective first.

Alexa: 13:00

Absolutely foundational. Then it's unbeatable location in the Riviera May,

Bob: 13:04

right? The explosive demographic and tourist growth, fueling demand.

Alexa: 13:08

Can't forget the attractive return on investment potential. Linked heavily to that location

Bob: 13:12

and critically the need for excellent property management to actually realize that potential so important.

Alexa: 13:18

And finally, those incredibly low barriers to entry, thanks to its accessibility.

Bob: 13:23

A lot to consider,

Alexa: 13:24

and this is really just. Part one of our deep dive into Playa del Carmen investment. There's more to cover,

Bob: 13:29

definitely. And our next deep dive, we'll be getting into some other crucial aspects. Things like legal certainty, legal, security,

Alexa: 13:36

very important, especially for foreign buyers. We'll talk about structures like trust, the fideicomiso, which is essentially the legal vehicle, allowing foreigners to own property in certain zones in Mexico,

Bob: 13:47

right? Demystifying that. And financial transparency. Other key considerations

Alexa: 13:52

among many other topics. It's gonna be another packed session.

Bob: 13:55

You won't wanna miss it, but for now, as you ponder all this, here's a thought. If defining your investment objective is the foundation, and location is the bedrock. How might the eternal summer of Playa del Carmen redefine your understanding of what a truly year-round investment can look like?