Rental Yields In Puerto Vallarta, MX

Most Proven Yield Market In Mexico

Every real estate market has layers and levels. You can buy at the local level, which generally means a sometimes much lower price but also lower quality and higher density. You can buy in the established part of town. You can buy in a new development. Or you can buy on the edge, way out in front of everyone…in the path of progress.

The Puerto Vallarta area where I’m scouting this week has all of these levels of opportunity, making it one of the few markets I know that qualifies as truly for everyone.

The real estate agent touring us around has helped us to get the lay of the land…

Immediately south of Puerto Vallarta has been developed over decades and is pretty much done from a new development point of view. However, a surge in land buying very far south by developers probably means a new round of construction in that region in the next few years.

Along this part of the coast, south of P.V., you find a wide range of high-end condos and multi-million-dollar houses overlooking the beach. The feel in this area is more residential, although resorts dot the coastline.

The Riviera Nayarit, the area that has my interest right now, lies north of P.V., just over the state border between the state of Jalisco (where you find Puerto Vallarta, the airport, and the cruise ship dock) and that of Nayarit. Crossing this border, you come first to Nueva Vallarta, a densely developed area of hotels and condos, golf courses, and a marina.

Past Nueva Vallarta, development density lessens. At Punta Mita, there’s a Four Seasons resort and a number of villa and condo developments. We’re staying in between Nueva Vallarta and Punta Mita, in La Cruz de Huanacaxtle, at a villa community called Vallarta Gardens. The property includes around 50 villas, several swimming pools, a clubhouse, and a restaurant. The units are built so you could rent out the entire house or individual rooms.

Past Punta Mita, development density lessens again. Of note is the town of Sayulita, a tourist destination that has managed to retain its “Old Mexico” charm. Lots of restaurants, small hotels, and B&Bs right on the beach. This is the kind of town that Americans have been coming to Mexico to find for decades.

The coast continues, beach after beach, bay after bay, to Playa de Tortugas and then on to San Blas, where the “Riviera” officially ends. It’s a long stretch of the stuff that, as Will Rogers pointed out, nobody’s making anymore of.

And the Mexican government has a plan to make it more accessible. They’re intending to widen the road and to build a new international airport. Meantime, the governor of Nayarit has been working aggressively to promote tourism to his region’s biggest asset. This year, he wooed a regatta that previously had been held in Acapulco. By offering incentives, he persuaded the regatta planners to hold their event in Nayarit instead.

In other words, the path of progress is heading north. And, because this market is so diverse, your options for positioning yourself to benefit are many. Go far north, and you’re really ahead of the curve. Stay between Nueva Vallarta and Punta Mita, and you’re in the current area of activity.

The variables to consider are proximity to P.V. town and the airport, age of construction, rentability, and, of course, cost. For what you could spend on a small condo on the water close to P.V., you could buy a villa with an ocean view about 30 to 60 minutes north.

I’ll detail particular purchase opportunities at various price points for my Marketwatch members in the coming couple of weeks.

Meantime, the salient point for this market from an investment point of view is that, while tourism to Mexico fell off dramatically in 2009, it is up in 2010 and rising steadily.

However, even through the downturn, the hotels in Nueva Vallarta maintained their historically high occupancy rates. Again, I’ll have particulars for my Marketwatch members, but, in my mind, Puerto Vallarta, especially certain areas of this wide and expanding market, is Mexico’s most proven rentals market.

If you want to buy for yield, therefore (and, as I remind you often, this is the play to be making right now), P.V. is the place in Mexico to shop.

Beyond the investment angle, this area of Mexico, thanks to its beauty, accessibility, and interesting old town, is one of the few places I care to spend time in this country.

Lief Simon

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