I want to invest in real estate investment! Real estate investment is probably one of the 5 known ways to get rich. For almost 6 months and after arduous research and talks with real estate brokers in the Riviera Maya. I was about to give up. The developments were beautiful, they are a piece of paradise on earth. However, the amount of the investment did not fit my possibilities. Most of the plans are 20/70/10. This is a common real estate investment plan that is used in Mexico. It requires a 20% down payment, 70% on the construction of the development, and 10% upon delivery (usually 1 year).
If there’s one thing I’ve learned from successful real estate investors, is that we must visualize here are some phrases:
The power of visualization is so enormous that it can completely transform your life in any area you want
T. Harv Eker
“If you can’t visualize it, you can’t achieve it”
Tony Robbins
“The human mind is like a garden, if you don’t cultivate good seeds, you’ll harvest bad weeds”
James Allen
My dream in the future is to retire with my real estate investments all over Mexico. To do just that, I continued my search and it was a fact that I have a studio in the Mexican Caribbean and not just a piece of land (in another post I will tell you about the investment I made in land).
Why Go into Real Estate Investing?
The real estate market is an excellent option for those looking to invest their money, but not always do we have the necessary capital to acquire a complete property. The greatest plus point in real estate investing is having a physical estate. These real estate investments are cash cows that provide rental income which can be a passive income once a few objectives is fulfilled. However, there is an alternative called “fractional investment” that allows investors to own a part of a real estate property without having to disburse all the money necessary to buy it.
The Opportunity that I found!
I found the second opportunity that caught my attention and it was in a co-investment model (very different from the timeshare model). In order to get the best deal, I did my homework and researched everything about this model and the legal aspects. I made contact, scheduled a video, and obtained the details of each proposal.
The proposal that I liked the most and was within my possibilities was Saaskun in Aldea Zama. The most exclusive area in Tulum (I encourage you to google it if you haven’t heard of it yet). This development contains only 6 studios and there are 20 owners per unit. I’ll explain it in more detail:
I made all the negotiations remotely because I was diligent in researching the company. To protect myself, I have to make sure of legal certainty and have obtained all the previous documentation. The investment was for $9k, with a down payment of 20% and the rest in 24 payments (at the time of writing this post, I am on the 12th payment, however, due to a personal “pay yourself first” plan, I already have the provision for the remaining payments in a fixed-income account).
You will probably have many questions, so here are some questions that some friends have asked me:
What was the percentage of participation and what was the total cost of the investment?
1 is to 20, as I mentioned, each studio has 20 partners on the deed (yes, we are owners with a property deed). That means each owner has a 5% stake in the real estate investment. This an awesome for someone like me who doesn’t want to invest heavily in a real estate deal. In totality, the cost of my real estate investment comes up to just $ 9,000 USD.
What kind of guarantees and benefits does the developer offer?
The developer offers a promissory purchase and sale contract and signing of deeds at the end of payments. The units are fully furnished and equipped, ready to enjoy. Each partner has the right to use or rent for 15 days a year divided into two periods of 7 and 8 days with access to an exclusive beach club.
How is the real estate managed?
The developer is the administrator and an annual maintenance and management fee of $250 dollars is paid. The fee is paid in September and upon payment. The partner has the right to reserve their days on a calendar. Partners have the freedom to rent through platforms or designate the administrator for this task.
Who is in charge of managing rentals and maintenance?
In order to for our investments to be passive, we hired a Property Manager to manage the real estate. Although these can be quite pricey, this saves us investors a lot of time. Here’s what the Property Manager is helping us with:
- Filling up the rooms with tenants
- Making sure all tenants are satisfied
- Working with contractors to constantly keep the real estate in great shape
- Maintaining the great estate value by keeping it in pristine condition
- Keeping us updated on anything that needs to be addressed
- Maintaining invoicing so that taxes can be easily filed and we never have to think too much about it
What kind of return has your investment generated so far? Are you satisfied with the performance obtained?
So far it has generated capital gains, the last units were sold at a cost of $10,500. That means I have made a 17% capital gain in 12 months. The rental cost for this type of unit ranges from $75 to $150 per night depending on the season. Keep in mind that in Tulum the occupancy is 80%. My first dates are reserved for April 2023 so I plan to enjoy it with my family and celebrate the patrimony we acquired, and rent the remaining dates.
Am I satisfied with my real estate investment?
Of course, the whole process went smoothly and with excellent attention from the developer. They even sent me a box with the contract, bracelets for the beach club, a pair of sunglasses, and a couple of beers from the region.
My real estate investment is paying me well but if you would like to start it as well. Here are the pros and cons of co-ownership in real estate investment that we should at least talk about.
Advantages of co-ownership:
Co-ownership, or the joint ownership of property by two or more people, can offer several advantages, including:
Access to higher-value real estate
Co-ownership can increase an individual’s buying power by combining their resources with others. This can allow individuals to purchase properties that may be out of their price range if they were buying it alone. Working with other real estate investors, I can then meet up with these people so that we can look into other high-value properties that are out there to invest in.
Shared costs
The costs associated with the property, such as taxes, insurance, and maintenance, are divided among all the owners, which can result in a lower financial burden for each of them. This means whenever there may be a sudden huge cost that needs to be paid, our co-ownership deal can allow us to put less pressure on our pockets.
Passive income
If the property is rented out, the owners can receive passive income through the rental. Apart from that, over the years, as Mexican Caribbean becomes more popular, my investment will appreciate over time. Since my property is managed by a Property Manager, all I need to be worried about is receiving unforeseen payments I need to pay. Other than that, my monthly passive income will be directed into my bank account.
No need to manage the property
If the property is rented out, the owners don’t have to worry about managing the property as this is the responsibility of the manager or landlord.
Disadvantages of co-ownership:
While passive income and low-cost investment may sound like an awesome investing strategy. Here are some pain points that need to be addressed:
Shared decision-making
Decision-making in relation to the property such as repairs and improvements must be approved by all the owners. With over 20 different owners, the decision-making can be rather long and difficult to please everyone.
Potential conflicts
Conflicts may arise among the owners in relation to the management of the property or its use of it.
Shared responsibilities
If something goes wrong with the real estate, all the owners are responsible, including the associated costs. While there may not be much in the beginning. However, as the property ages, there may be a hidden cost that needs to be addressed.
Future Plans
For many people, investing in real estate has proven to be a safe and successful approach. Real estate is a fascinating investment prospect due to the potential for passive income from rental properties as well as the possibility of value growth over time.
By diversifying one’s financial portfolio with real estate investments can lower risk and boost returns over the long run. People can increase their wealth and financial security by making more real estate investments, with the potential for their passive income to someday outpace their active income.
As a result, people may have some financial flexibility and freedom to pursue their passions and interests outside of the constraints of a regular 9 to 5 employment. For people looking to gain financial independence and a solid financial foundation, investing in real estate may be a good choice.
