Is Cabo a good market to own an investment property for Airbnb? The answer, in my opinion, is a resounding yes! With high interest rates and elevated property values back in the United States, rental properties here in Cabo can make much more sense from a value perspective.
The return on investment is often higher in Los Cabos as well. For 2022, hotels were able to maintain an average daily rate (ADR) of $460/night at 75% occupancy according to the Los Cabos Hotel Association. That is by far the most expensive hotel room in the country and double the daily rate of hotels in the Riviera Maya. But why is this so important? Because at the end of the day, your Airbnb listing is competing with the hotels. This means that having an affordable Airbnb listing in the range of $125-$300/night fills a much needed void for the budget-conscious traveler. Luxury rental properties also do very well here, especially for large families or corporate retreats that want to have an oceanfront villa to themselves.
Another interesting dynamic at play is the change in Airbnb trends. With relaxed work environments and the rise of remote work, people are renting Airbnbs for much longer than they did just a couple of years ago. Many people are booking these properties for a month at a time or even longer.
In places like Manhattan, we are seeing many smaller companies rent an Airbnb apartment as a flex work space instead of tying themselves down to a long term office commitment. I think many of these trends are here to stay. Therefore, an investment property in Cabo makes a lot of sense given its proximity to many major US markets. The pandemic seems to have accelerated interest in owning property in Los Cabos as a second home or an investment. Short term rentals in the downtown area can also offer renters a more authentic experience as opposed to staying at an all-inclusive resort.
This poses another question: Is it better to go for a short term platform and get an investment property for Airbnb or rent it out long term? Since most people decide to go the short-term rental route, there is a big demand for long-term rentals.
Choosing to go the short-term rental route will generally net you more rental income at the end of the day. However, it also increases the wear and tear on the property. One of the main reasons many owners choose the short-term rental option is because they can come down and use the property themselves between renters. If you are renting the property out on a long-term basis, you can count on the fact that the condo or house is always occupied per the lease agreement, so you’ll have that constant flow of income. You should always consult an attorney when drafting a lease agreement.
Airbnb has also made it very easy to pay your taxes to the Mexican IRS, also known as Hacienda. The Mexican government recently required Airbnb to withhold taxes if they want to continue operating in Mexico. This was because so many people were not compliant nor were they paying their fair share of taxes. About three years ago, they made it very simple- the Mexican government will get their portion of taxes on your rental income before you, as the property owner, are paid. This was convenient because it simplified the process. You needn’t worry about being compliant with taxes, as they are automatically deducted from your portion of the income.
Are you looking to buy an investment rental property for Airbnb here in Los Cabos? It makes a lot of sense with prices reaching unaffordable levels and such low returns back home in the United States. It kind of defeats the purpose of an investment to overpay for property, doesn’t it? Baja offers so many lifestyle options to invest in from Todos Santos to Cabo to the East Cape – the options are unlimited.
If you are interested in buying real estate for investment in Los Cabos, reach out to local real estate expert Fletcher Wheaton at fletcher@remexico.com or by phone at MX 624.229.5228.
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