by Nestor Marcote 
ROI, or Return on Investment, is a financial metric that reflects the time required to recover the money you invested in acquiring a property. It originates from the English term “Return on Investment” and essentially measures the time it takes to recuperate the funds spent on a real estate purchase.
Real estate investment returns in the Riviera Maya, including areas such as Playa del Carmen, Tulum, and others, can be appealing due to various factors. Here are some key considerations:
- Continuous Tourism: The Riviera Maya is a highly popular tourist destination, which means vacation rental properties can generate consistent income. Many tourists prefer alternative accommodations like houses or apartments, which can lead to solid returns on investment.
- Appreciation: The region has experienced steady growth in both development and property appreciation. The increasing demand for properties in the area can result in rising property values over time.
- Appeal for Retirees: The Riviera Maya also attracts individuals looking for a place to retire. Its pleasant climate, beautiful beaches, and relaxed atmosphere make it an ideal location for those wanting to spend their retirement in a paradisiacal environment.
- Government Incentives: Mexico offers various programs and tax incentives for foreign investors, making property purchases even more attractive. It’s crucial to research and understand the legal and fiscal aspects before making an investment.
- Investment Diversification: Real estate investment in the Riviera Maya can also be a means of diversifying your investment portfolio. By adding properties in a tourist region to your portfolio, you can balance risks and take advantage of different market opportunities.
How to Calculate ROI in Real Estate
To calculate ROI in real estate, you can use the basic formula mentioned earlier. However, when it comes to real estate, it’s important to consider additional costs such as taxes, maintenance, management fees (if you’re working with a property management company), and others.
Formula for ROI: ROI=((NetIncome−TotalCosts)CostofInvestment)×100ROI = \left( \frac{(Net Income – Total Costs)}{Cost of Investment} \right) \times 100ROI=(CostofInvestment(NetIncome−TotalCosts))×100
Keep in mind that ROI can vary based on factors such as the type of property, its exact location, property management, and more. It’s crucial to conduct a detailed analysis and consider all factors before making an investment decision. Consulting with local experts and real estate professionals can provide valuable, region-specific insights into the Riviera Maya market.
Example with Numbers:
- Property cost: MXN 2,500,000
- Annual rental income: MXN 550,000 to MXN 600,000
- Annual expenses and costs: MXN 200,000 to MXN 250,000
- Approximate ROI Calculation: ROI aprox= {(600.000 – 250.000)} * 100 / 2.500.000
- Annual ROI: 14%
- Total ROI: 100 / 14 = 7 years
This analysis shows that it will take approximately 7 years to fully recover the investment.
Why is this Information Useful?
This data is useful for projecting future investments. Let’s consider an example: if you purchase an apartment today for MXN 2.5 million, with an ROI of 14%, you would earn MXN 2.5 million in net profit over the next 7 years. If this profit is saved in your account without using it for anything else, after 7 years, you could purchase another property for the same amount of MXN 2.5 million.
Continuing with this example, you would then have two properties valued at MXN 2.5 million each, generating a total profit of MXN 5 million over 7 years, and both properties would be fully paid off.
Tip: A good real estate advisor knows where the best opportunities are to achieve the highest possible ROI. One smart strategy is to look for pre-sale properties to secure the best prices and have excellent cost control to optimize investment returns.
Is ROI Stable in the Riviera Maya?
Yes, it is definitely stable. When compared to stock market investments, currency trading, or even cryptocurrencies, the real estate business is undoubtedly one of the most stable investment options.
The Financial Times has ranked the Riviera Maya among the top 10 real estate markets with the highest growth worldwide, with sales increasing by 20% annually.
With more than 50 airlines and over 100 international flight companies, the Riviera Maya’s economy is driven by tourism.
According to SEDETUR, Quintana Roo, in 2019, 23 million visitors arrived in the Mexican Caribbean, resulting in a 78% occupancy rate. Many of these travelers seek alternative accommodations to hotels.
Appreciation (Plusvalía)
Understanding the concept of appreciation is essential to maximizing your return on investment.
Although ROI and appreciation are not the same, they are closely related.
Appreciation is achieved over time. In the case of the Riviera Maya, appreciation comes from two distinct sources:
- Developer Appreciation: This represents the benefit offered by the developer for investing during the pre-sale stage. Investments made at this early stage usually come with financing plans that are typically interest-free. These investments generate higher returns based on when the property was purchased. Early investors see their money grow much more compared to those investing later on.
- Market Appreciation: This is influenced by market competition, comparing the property to similar units, subject to supply and demand laws, along with other factors such as the quality of the property, amenities, location, etc.
Importance of a Real Estate Advisor
A thorough analysis of the factors mentioned above can be complex, and to carry it out properly, it is essential to stay updated on all the factors that influence the market and construction. Investing without a detailed understanding of the projects may lead to serious issues in the long run. The advisor must examine each project carefully to provide investors with sufficient security and confidence when presenting investment opportunities that are safe, reliable, and aligned with the investor’s needs.
ROI Should Not Be the Only Consideration
While analyzing ROI is important, it should never be the only factor considered when making a property investment decision.
The most important factors to consider when making a decision include:
- Location of the property
- The developer behind the project
- Legal status of the project
- Quality of the materials used
- Investment goals
These aspects are truly where the security of your investment lies.
