Ok so you have a property here in La Paz or are in the market for one, and you want to weigh up whether it is a good rental investment. Here is an example below (price in Mexican pesos) on the numbers involved you must take in to consideration...

 

Purchase price two bed condo: ($5,000,000 pesos)

 

Rental income:

First and foremost, deciding whether to do short-term or long-term rentals. With my own two condos, I primarily focus on short-term vacation rentals, but the property and its features ultimately decides that. A two bedroom condo either close to the Malecon or with specific features (pool, jacuzzi, ocean views etc) should be looking at a minimum average gross income of $35,000 pesos per month.

 

Expenditure:

Here is a list of things you can expect to pay on average per month.

Utility bills ($2,000)

Property tax ($400)

HOA ($2,000)

Maintenance or misc. ($1,000)

Cleaning supplies ($500)

Property management fee ($1,000)

Rental commission (15% of gross) ($5,250)

Monthly IVA tax (16% without deductions) ($5,600)

Yearly ISR (15% without deductions) ($5,250)

 

Bear in mind the taxes put in this example are without deductions and worst-case scenario. With regular invoices and deductions, this figure will be far less.

 

Cash flow:

Monthly gross Income - expenditure

$35,000 - $23,000 = $12,000

 

Cash on cash ROI:

The money you make on the money you invest.

Taking into account blocked days to use the place yourself as an owner, in the above example you can expect a yearly net profit income of $120,000 pesos minimum.

 

$120,000 / $5,000,000 = 2.4% ROI. 

 

Is this a good figure? The question you may ask yourself is where else can you invest your money for a better return? For instance, the net rental profit in the example above betters the savings interest rates offered by several banks in the US and Canada. Moreover, property prices aren’t slowing down here in La Paz as seen by the mass construction currently going on, despite the likelihood of a recession north of the border in 2022/2023. With the stock market on shaky ground and tourism increasing in La Paz, current evidence suggests rental properties represent a more attractive investment right now.

 

And just to reiterate, the figures above were based on almost ‘worst-case scenario’. Using the correct deductions and enhancing rental potential could increase the net monthly profit by at least 50%, pushing your ROI over 4%.