One of the best ways to generate income from your vacation property is through Mexico rentals. When searching for a Mexico condo for sale or home for this purpose, you will want to consider your goals and your rental strategy carefully ahead of time to ensure that you are getting the most out of your property investment.

The first concept to consider is your purpose for renting out the property. Are you looking to cover the expenses of you vacation property with little bit of an income on top, or are you making your first go at a purely investment property entirely dedicated to rental income? If your purpose is to balance expenses you might balance your personal tastes and needs with rental demand, etc. On the other hand, if you are only renting out the property, you should do a little more research to focus your property search on market demands.

Another factor to consider is the rental type. Will it be a Mexico vacation rentals, a medium-term rental or a long-term rental? Each of these will also have to be considered in terms of other factors, such as location, your personal use of the property. For example, vacation rental would be more appropriate if you intend to use the property for a week several times a year. Long-term rental would be more appropriate if the property is in a quieter residential neighborhood back from the beach, lakefront or main tourist area.

Many buyers looking for vacation rentals tend to look for a property in a complex setting (such as Playa del Carmen villas) because of the ease of maintenance, and the inclusion of extras such as pools, etc. (which can be available in homes, but at a higher price,) as well as the ease of maintenance. However, homes can also be rented out successfully. Other variations to consider are condo-hotels or resort-style developments.

Directly tied to this choice is the rental method. The most hands-off approach is a condo-hotel; for example certain Playa del Carmen condo sales offer complete resort services, as well as maintenance, rental and promotion services. The most involved approach is a single family home which is not a part of a complex. Both have their advantages which must be weighed against how much time you have to invest on an ongoing basis.

Perhaps the most important factor to consider is visibility of your property; you may be able to save money and invest the time by having a stand alone property, but it is also very important to consider visibility of your property. You could have the best property in town at the best price, but if no one knows about it, you won’t see any income. A good rental agency can help with this. You may also wish to consider a variety of outlets for advertising your property.

Finally, you will also want to consider the balance of monthly expenses. Whichever kind of property you decide to invest in, you will want to make a complete list of expenses to be covered each month, weather its the condo fee or the cleaning lady and compare these against your potential rental income.

Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments. He has been living, investing, and working professionally in Mexico for over 15 years. In the summer of 2009, he received the first federally applied Mexico Real Estate Degree and Mexico Professional Real Estate License S.E.P. #5978657. He is the current president of TOPmexicorealestate, you can contact him at (512) 879-6546 or through the company’s web site www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

Recently the New York Times published an article evaluating what, to them, was a very surprising phenomenon; despite reports of drug violence, tourist numbers to Mexico are INCREASING significantly.  From our own sales experience here at TOP Mexico Real Estate, we have seen the same increase in people choosing to live in Mexico and buying Mexico condos or homes.

Why would this be?  While the New York Times (NYT) attributes this apparent contradiction to a “pricing strategy” we’ve discovered something a little closer to the real reason.

Let’s take a look at some of the stats NYT gathered from the Mexico Tourist Board:

• 8.2 million – the number of international tourists in Mexico for 2010 -  (from Jan. to Oct., arriving by air)
• 17.8 % – The increase compared to the same months during 2009
• 13.4% – The increase in American travelers during that period over 2009
• 6.4% – The increase compared to 2008, which was the best year for tourism in Mexico in history

Notice that all are INCREASES. NYT also noticed, and, to them, this was a surprise, considering the “H1N1 scares ['swine flu' outbreak during 2009] and drug violence.”

The article went on to point out that people who go on vacations or live in Mexico part of the year in Mexico are often surprised to hear people back home shocked that they would dare come to this “dangerous” country.

For us, down here in Playa del Carmen, this comes as no surprise at all.  While the drug wars most certainly exist, they are the worst up by parts near the U.S. border, since, unfortunately, that’s where their business gets its cash.  There are a few other isolated pockets.  Outside of those areas, however, visitors to Mexico, expats, and even common Mexican citizens live day to day life virtually unaffected by these conflicts; this news is as distant to them as it is to many people in the U.S.  International news also drew little attention to the fact that Mexico’s reaction to the H1N1 outbreak was very fast and effective, and curbed what could have been a much bigger problem.

So, why the impression that the entire country is ravaged by drug violence and disasters? Well, the reason is one that NYT, CNN or any other news source may not like; their headlines do everything to promote this impression.  It sells better.  NYT conveniently avoided this point with the easy cop-out, “the pricing strategy seems to be working.”

Yes, prices are a real draw for visiting and living in Mexico; but this is just the reality of international economy, not a conspiracy to distract people from problems.  The reality is that people who actually come here – on vacations, for retirement or for any other reason – don’t see drug violence.  They don’t see people dropping dead in the streets from the flu.

What they see is beautiful beaches, and awe-inspiring views of lakes, mountains, jungles and forests.  They see a warm culture with many colorful traditions, and people who are welcoming and friendly. Yes, they do see petty theft sometimes, especially if people are careless, but that’s true even more so in New York and many other cities in the U.S.  Playa del Carmen property sales, and many others around the country, are doing fine, and it’s not just a “pricing strategy” that’s bringing people here.

So, returning back home, visitors and residents are confronted with these bazaar headlines and friends who were worried for their safety.  Of course, they’re surprised.  Of course the NYT was surprised by the statistics that reflect this reality that runs in the face of the ideas the media has been pushing so hard.

It is nice, at least, that one news source is waking up to a reality backed by numbers and real life stories; hopefully more will follow.

Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments. He has been living, investing, and working professionally in Mexico for over 15 years. In the summer of 2009, he received the first federally applied Mexico Real Estate Degree and Mexico Professional Real Estate License S.E.P. #5978657. He is the current president of TOPmexicorealestate, you can contact him at (512) 879-6546 or through the company’s web site www.TOPmexicorealestate.com NETWORK

“Mexico’s Leading Network of Specialists for Finding and Purchasing Mexican Properties Safely!”

Many new Landlords with Mexico real estate rentals are unsure what their lease agreement (Contrato de Arrendamiento) really says and if they are truly protected. As with any Mexico legal document, the lease agreement is binding and should be reviewed by all parties carefully.

You will see from my other posts written about rental properties, click here Mexico Real Estate blog, it is important to get correct Mexican legal counsel when working with agreements and contracts Executed leases should be in Spanish with a complimetary English version available.

Key Points on a Mexico Lease Agreement:

• Names of all parties to the lease
• Lease dates
• Rental amount
• Location in which rent is to be paid
• Rent due date
• Late charges
• Security deposit amount
• How maintenance and repairs are to be handled
• Move out notice requirements
• Details about Landlord access to the property
• Utilities and Services
• Condition of the property
• Rules and regulations
• Pets
• Landlord remedies

Although many Mexico Managment Companies use different leases, some are drafted by an Attorney or Notario. Whatever version you or your Property Manager uses, make sure that you have a complete understanding of the document and how it will legally affect you and your Tenant.

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com 512-879-6546

If you own a Mexico Real Estate Rental, you will need to learn how to administer the security deposits.The security deposit is any advance of money, other than a rental application deposit or an advance payment of rent that is intended primarily to secure performance under a lease of a dwelling that has been entered into by a landlord and a tenant. (Texas property code Sec92.102).

In Mexico, there are no limits on how much you can charge for a security deposit. For long-term rentals, many Mexican Landlords charge an amount equal to one month s rent and this amount is standard practice.

MEXICO SECURITY DEPOSIT

The security deposit is held by the Landlord, sometimes in an interest-bearing account, until the Tenant fulfills the obligations of the lease agreement. Some areas of Mexico require that you pay the Tenant the interest earned on the deposit and some areas do not. However, the security deposit does not belong to the Landlord it belongs to the Tenant. I always recommend that the property manager in Mexico hold onto the security deposit in a trust account so that there is no confusion on disbursement of this deposit when the Tenant vacates.

When the Tenant vacates, do an inspection of the property. Some landlords prefer to do this inspection with the Tenant and some prefer to do it without the Tenant present. The choice is yours. To avoid potential disputes, make sure that if you are going to deduct any charges for property damages from the Tenant s security deposit, you take pictures of that damage for future record. Do not deduct for normal wear and tear or if the damage were there prior to move in. You can deduct for unpaid rent, late charges, etc.

Send a full itemized report to the Tenant outlining charges and deductions within 30-days of move out.

If you hire a property manager in Mexico, they will handle all aspects of the security deposit for you. If you choose to manage property yourself, familiarize yourself with the Mexico Real Estate laws for the local region so that you know what can and cannot deduct from a security deposit If you want to learn more tips and tricks on how to rent your Mexico Property feel free to visit more of my articles click here or just call me.

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. 512-879-6546 www.TOPmexicorealestate.com

“Where TOP real estate experts from ALL regions of Mexico come together to share their Tips & Knowledge to help you buy safely !”

Fair housing may or may not be a term that you ve heard before, and probably even less so in Mexico. Unless you ve been exposed to real estate then you probably never thought twice about what this term truly meant and chances are, it has not affected you I have been writing about several “Mexico Real Estate Rental” themes including (Pets and Rentals) and (How to Land a Good Tenant), so I thought this would be a good subject to include.

As a Landlord, your must educate yourself with the fair housing laws as there are severe penalties associated with violating these laws in the US In Mexico, this is less regulated, however, as a Landlord in a foreign country, it is recommended that you adopt these fair rental practices too.

I m not going to give you a lesson in Fair Housing but will only outline the basic protected classes of people. When deciding on whom you will rent your Mexico property to, NEVER, EVER, make a decision based upon the following:

Race

Color

National Origin

Religion

Sex

Familial Status (including children under the age of 18 and pregnant women)

Handicap

There are many, many variables to the Fair Housing Laws. I encourage each of you to familiarize yourselves with these laws and make it a practice, regardless of which country your rental property is located in, to treat everyone the same and do not discriminate against the below protected classes. This is Federal Law in the US and good ethics in Mexico.

For more information on the Fair Housing Act, click on the link below.

http://www.hud.gov/offices/fheo/FHLaws/yourrights.cfm

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com 512-879-6546

Allowing pets is just common sense as over 70% of all US households own a pet. Although I have not seen statistics on Mexico s pet population and the relation to the Mexico real estate rental Market, I suspect it is close to the same numbers as in the US. This poses a question that I often ask a Mexico real estate owner when they indicate to me that they would like their property advertised as NO PETS ALLOWED. My question is,Why would you want to eliminate 70% of your potential Tenant base just because you yourself do not like, want, or are opposed to pets

MEXICO REAL ESTATE RENTAL STRATEGIES

By adopting an effective pet policy, you will attract a larger number of potential Tenants, increase the average length of occupancy, and foster goodwill. This does not mean that you must accept all pets but at least consider pets on a case by case basis.

Implement an effective Mexico Pet Policy by

Limiting the number of pets per household

Requiring that all pets have up to date vaccinations

Requiring that all pets be kept on a leash while outside

Requiring a pet deposit

Meeting the pet to witness their demeanor

Requiring that all pet owners pick up after their pet

Have a pet addendum to your lease agreement

With a good pet policy in place and a responsible pet owner as a Tenant, allowing pets in your Mexico rental property can be a win/win for all parties.

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com 512-879-6546

We all know that there are no guarantees in life. As much as we look to others for reassurances about many everyday things, no one can guarantee that all outcomes will be favorable and even more so in the Real Estate industry Once we have found an ideal investment property from the Mexico market, It is up to us, as Landlords, to minimize our exposure to risks on our Properties So after a good marketing effort to find tenant prospects, our next question isHow do I know if I m getting a good Tenant in Mexico

The truth is we never know how our Tenant will uphold their obligation of the lease agreement or the word in which they promise to treat our Mexico rental property as if they owned it themselves. There are steps that we should take prior to renting to a Tenant.

Outline your qualifying criteria. This criteria should list exactly what you will look for and what you will automatically decline an application for. Use this criteria for EVERYONE.

MEXICO RENTAL PROPERTY APPLICATION CHECKLIST

1) Have everyone fill out an application in Mexico Did they fill out the form completely

2) Check at least the last two years of residence history, whether they owned their home or they rented from someone else. Look at their payment history, did they write NSF checks for the rent, did they always pay on time or were they often late Did they leave the rental damaged or did they get all of their security deposit back Would the previous Landlord rent to them again

3) Look at the last two years of employment history. How much income do they make It should be at least three times the amount of rent that they will pay. How long have they been at their current employer

4) Pull a credit report, if available. How responsible are they in paying their current and past credit obligations How much debt do they currently owe Is their income enough to cover their debt and the rent payment Does the applicant have a negative credit history If so, ask the applicant to write an explanation letter. Is the explanation reasonable or was the negative credit due to lack of responsibility How long ago

5) Look at their criminal history. I personally decline on felonies but will look at misdemeanors on a case by case basis, unless it s assault. Your tolerance level may be a little different.

6) How many occupants will reside in the property compared to the size of the home A good rule of thumb is two or three people per bedroom.

7) Will they have pets If so, get the details on the pets such as breed, size age, etc.

Obtain their vehicle information.

9) Get references. When asked for references by someone, it always cracks me up because I think,do you really think that I would give someone a bad reference Ask the references this question,If asked to co-sign for the applicant, would you Although your intention with this question is not to get a co-signor, the answer that you get will be a good indication of how responsible the reference thinks that the applicant is.

10) Look at the overall picture of the applicant. Do they have negative credit but outstanding rental history Did they just start a new job but their previous employment reflected stable tenure and they changed because they d make more money or were they laid off Can they get a co-signor for the lease Do they want to move in quickly or do they want you to hold the property vacant for them for 30-days

There are so many indicators down in Mexico that you can look at to help you determine your risk factor with an applicant. However, the majority of applicants that will apply for your Mexico property will have something negative in their credit, rental or employment profile. It will be up to you to examine deeper, to probe into the why s of the negative and to weigh your risks with the applicants. Whatever you do, treat everyone the same, use the same qualifying criteria and ask questions when you need to. Good luck having someone apply for your new Mexico property is very exciting!

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com 512-879-6546

I just wrote a post on Where you can advertise your Mexico Property to obtain rentals As I stated in this previous post, regardless of what avenue you choose to take, whether one or all, there are a few key elements that you should always consider placing within the advertising (adapted from the National Association of Realtors).

1. Start with a strong opening statement about the Mexico home as 80% of the value of the ad is in the headline.

2. Mention the key one or two benefits that will attract the buyers attention and spark their interest in the first 10 words of the ad.

3. Include the salient facts about your Mexico property, such as the number of bedrooms and bathrooms and the asking price.

4. Include your name, your telephone number, your e-mail address, and your Web site.

5. Use words that appeal to the emotions and senses (e.g., feel, see, enjoy).

6. Avoid abbreviations and real estate jargon that the average consumer won t understand.

7. Be accurate. Prospective buyers in Mexico are bound to feel disappointed or manipulated if the home doesn t match your description.

8. Focus on the Mexico home s strongest selling points, instead of packing your ad with too many details.

9. Close with a statement encouraging the prospect to contact you (e.g.,Call today).

10. Keep a notebook of attractive home descriptions from remodeling magazines and other property ads so you ll have a ready reference for writing your own blurbs.

Once you have adopted this plan of action, your phone should start ringing with prospective Tenant inquiries. However, all advertising efforts are wasted if you do not follow up with those that call or email you for information. Remember time kills all deals so the faster that you can respond to someone, the less likely that they will call on the next ad.

Next week we will examine the risks and benefits of allowing pets in your Mexico rental property.

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com 512-879-6546

Advertising your Mexico rental property is a very important step in working toward your goal of securing a rent-paying Tenant. Before you begin advertising you will need to start with an effective advertising plan.

There are several viable sources in which to announce to the public that you have a Mexico property for rent.

Mexico For Rent Signs

placed at the property with a phone #, email address, a brief description of the property such as number of bedrooms, bathrooms and rent amount. This source works best if you are in a location that a lot of people walk or drive by and is not as effective if you are located in more of a remote area.

Mexico Online Avertising

is typically the best source as most people go online first when searching for anything. There are many great sites to advertise on such as on Cragislist.com, forrentbyowner.com, rentals.com, the local Playa del Carmen classified paper Andale,( http://www.andale.com.mx/andale.cfm publica=home), VRBO.com, beachhouse.com or, ownerdirect.com. There are countless other online resources but my personal favorite is Craigslist.com. More and more people are turning to this website for real estate rentals and it s free! Online advertising also allows you to post pictures and detailed descriptions of your property.

Mexico Real Estate for Rent Flyers

distributed throughout the community, neighborhood, or surrounding area. This is generally a great source of advertising, especially in the small town of Playa del Carmen but it requires a little more work. There are many local restaurants and retail shops that will allow you to post flyers on their bulletin boards. However, in an effort to make the most out of this type of advertising, you want to make sure that you include the address, phone #, email address, rental price and a very descriptive outline of the property. You will also need to check on your posted flyers about once per week to insure that they are still there. This is where it would be advantageous to pay someone to post these for you if you are not always in the area in which the property is located.

Mexico Real Estate Online Forums

There are many local forums online that typically only pertain to a specific area and some have classified sections that you can advertise on. One forum in particular, www.intheroo.com, have members that have a love for Playa del Carmen, are locals to the area or are people that are looking to make their move to the Playa del Carmen area and seeking information. This is a great online source and I highly recommend this site.

Mexico Real Estate Offices

are a great way to advertise your property, especially if you are willing to offer compensation to the Broker for bringing you a Tenant. Be careful with compensation as local, state and federal laws may limit how much you can pay someone, especially if you are not a licensed Broker.

Word of Mouth.

Everyone knows someone that rents a home, apartment, or condo. What better way to advertise than to ask your neighbors to pick their neighbor!

Happy Holidays!

Kami

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com 512-879-6546

There are generally three reasons why a property in Mexico will not rent. We call this the3 P s in Real Estate .

People, Product or Price and Their Affects on Mexico Properties.

Today we will look at how to determine a rental price for your Mexico investment in hopes to eliminate or minimize any potential losses from pricing your property wrong.

Let s say that you ve just closed on your new property in the tropical area of Playa del Carmen or any other Mexico resort city. You re experiencing the excitement of owning here but you are unsure on what to charge potential renters. Rental pricing is one of the single most important aspects of rental investment ownership. If you price too high then you experience unwanted vacancy because no one wants to overpay. If you price too low then you will end up feeling like you, the investor, are getting the short end of the deal. This is why it s important to do your due diligence prior to marketing your Mexico property.

Grab some paper and a pen, hop online to the internet and see what the market says that we should rent our property for.

MEXICO REAL ESTATE FEATURES

Write down exactly what features your property has. At a minimum, you should know the following:

Location

Size in both meters and sq feet

# Of bedrooms and bathrooms

What appliances provided for the Tenant

Pool

Any other amenities that may or even may not be attractive to a renter

Now that you have the basics of your property written down, we will need to do a little research about our competition. Because the Playa del Carmen and the majority of the Mexican regions do not have MLS options, we will seek out other sources for our information.

The first place to start would be to go to your favorite search engine such as Google or Yahoo Find a good web site on rental properties for the city where you own your Mexican property.In our example we will copy and paste this link into your browser: http://www.playacarmenproperty.com/Riviera_Maya_Rentals/page_2143272.html

Here you will be able to look at many properties that are already on the market for rent. You will need to narrow these properties down to only those that are within about a mile radius (further if you are on the west side of the highway or if you are outside of Playa del Carmen s city limits). If you are in a specific neighborhood, it may be beneficial that you start by looking only in that neighborhood. If there is nothing or a very limited number of properties available, then you will need to expand your search. You will also only want to look at those that are truly comparable to yours in age, amenities, and size. A property that was built in 1980 will not be comparable to one built in 2008.

Once you have a list of comparable properties, write down the rent amount for each one.

Let s say that you ve found five properties with rents ranging from $1000 per month to $1500 per month. Our first instinct would be to think that our property would rent on the high side at $1500 per month. Makes sense there s another one out there at that price. WRONG. If your goal is to secure a Tenant quickly with minimal vacancy loss, you do not want to price your property anywhere near the highest on the market as it is typically better to price on the mid to lower side of the spectrum.

If your goal is to get as much rent as possible for your property then it is still better to price on the mid to low range. Confused yet

Look at it this way

People, by nature, are price conscious. When most people do a search for something such as a rental property or a property to purchase, they already know what their budget is and usually will not waste a lot of time searching for properties to rent that they know that they could not afford. If a prospective Tenant is looking to rent and their budget is $1200 per month, they will usually search for properties up to $1250 per month. Let s say your property is priced at $1300 per month but you know that you would take $1200. However, you wanted to test the market to see if you d get any activity by advertising at $1300. You just lost a potential renter because your property did not populate within their search criteria of $1250 maximum per month.

If you know that you would accept a particular price point for your rental property, do not advertise it for a higher amount. It s a waste of time. You lose prospective applicants. You incur additional vacancy.

But you say that if you charge more in rent then you make up for the extra time that it took to rent your property Take that philosophy out of your head. Here s what happens:

Let s say that the market dictates that your property should rent for $1200 per month but you advertise it for $1300 per month and you end up waiting an additional 60 days before a Tenant is found at this higher rate. 60 days of vacancy equates to $2600 in lost rent PLUS utilities that you had to pay for. Let s say you were lucky and found a Tenant that was willing to pay $1300 per month for a one year lease. The most that you would recover would be $1200 for the year; leaving you in the negative of $1400 for the year PLUS utilities. That doesn t seem too smart does it

Let s say that you are okay with having that loss for the first year because you will make it up on year two when they renew. Chances are, your Tenant has talked to neighbors and has realized that they are paying too much for rent. You've increased your risks for a vacancy at the end of the year because you charged your Tenant rent that was over market. The cycle then continues

Any successful rental property investor, regardless of the property location, knows that vacancy is hard to financially recover from. It is better to realize a lesser amount of rent, especially to keep you aggressively competitive with the market, than to wait it out for a higher price.

Next week we will talk about how to advertise your property to get the most exposure.

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com 512-879-6546

Calculating your Net Operating Income (NOI) on Mexico Properties

Buying a rental property in Mexico can be very exciting but it can also be overwhelming when we do not know what to expect from our investments. Now that you ve made the decision to purchase a home or condo for rental purposes in Mexico, or you ve already purchased one, we need to have a starting point for our rental income.

Although each of our financial and personal goals are very different and we invest for various reasons, the pathway to your success in becoming a Landlord will require that you know how to calculate your Net Operating Income (NOI). Some of us want a monthly cash flow, while others just want to reach a break-even point. Some of us do not mind subsidizing our investment because we know that our return can be realized in the tax benefits and the appreciation. In order to understand how your Mexico investment property will potentially perform on a monthly or yearly basis, use the following formula:

MEXICO Potential Gross Income (PGI)

Minus - Bad Debt and Vacancy

Equals = Effective Gross Income

Effective Gross Income

Minus - Expenses (include management fees, repairs, leasing fees, etc)

Equals = Net Operating Income (NOI)

Next week we will examine how to determine what our Mexico rental property will rent for.

Kami Kemp is both a Texas Realtor and Real Estate Broker in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com

As with any investment, there are risks to consider but the desired result is to capitalize on many of the great benefits. When buying a Mexico rental property, we must do our due diligence in determining costs, potential income, and how we want the Mexico rental property to work for us.

When deciding on a Mexico rental investment, stop to ask yourself these questions:

MEXICO RENTAL INVESTMENT PROPERTY CHECKLIST

o What do I want to obtain from this property

o Am I looking for a specific rate of return (ROI) or just looking to break-even

o What are the tax benefits of a rental property

o Will I hold this property long-term and wait for appreciation or try to sell it quickly

o Will this be my retirement home

o Will I rent the property for long-term or short-term use

o How will I prevent myself from getting emotionally attached

o What will the market comparables indicate rents will be

o Will I use a property manager or will I try to manage the property myself

o How do I find the best Property Manager for me and what should I expect from my Property Manager

o Why do I need to place money into a Property Management escrow account

o If renting my property as a vacation rental, how will I furnish it and what should I provide

o How will I find a Tenant and how much will it cost me

o Should I allow pets

o How do I know that I am getting a good Tenant

o Should I require the Tenant to have renter s insurance

o How much should I charge for a security deposit

o Does the Tenant pay the HOA dues or does the Landlord

o What does the lease REALLY say and does it protect me

o Common mistakes Landlords make with their Tenant s.

o What happens when my Tenant s lease expires

o How do I handle lease renewals

o What does preventive maintenance mean

o What happens when the Tenant does not pay rent

o What happens if I my Tenant moves out

o Can I keep my Tenant s security deposit

o What does vacancy really cost me

o What improvements to make to my property and which improvements make the most sense

o As a Landlord, what else should I expect out of my rental property

In an effort to help you to become a successful Landlord, each week we will take an in depth look at many of the above questions and associate them with typical rental property experiences.

Kami Kemp is both a Texas Realtor and Real Estate Broker candidate in Arizona with Prime Properties. She is a member of the Texas Association of Realtors, the National Association of Realtors and National Association of Residential Property Managers. She began her career in Property Management and Leasing in 1990, has served on various education committees through local associations and has taught many Fair Housing compliance and marketing classes throughout her career. www.TOPmexicorealestate.com

MEXICO-

Are you contemplating the option of buying Mexico Real Estate, or maybe re adjusting your portfolio to add alternative investments such as the appreciating Mexico property markets If the answer is yes, some guidelines will ensure a safer and more profitable Mexico Real Estate Investment.

There are many real estate investment options in Mexico, but understanding the purchasing process, the risks, and the payoffs are very important in your decisions One of your first decisions is choosing the area of interest for your investment or of your resort home What are your dreams and goals of this Mexican second home If the purpose is for obtaining rent returns and investment, then begin analyzing the market area growth patterns and tourism factors If you are purchasing the real estate for personal reasons, then it is a high probability that you already have fallen in love with the area and region Then of course, as in many cases, the choice of what area of Mexico to invest is derived from a combination of both of these previous reasons written above.

MEXICO REAL ESTATE TEAM

Once your market has been chosen, and as many people from first hand experience advise including several books about buying property in Mexico, surrond yourself with a good Real Estate team The coordinator of a good team is a good realtor Interview with several realtors before making your decision Study their credentials, their education, how long have they been practicing Mexico Real Estate In Mexico as stated from the book “CASHING IN ON A SECOND HOME IN MEXICO” by Mitch Creekmore, it is always recommended that you work with a realtor with experience in Latin America and a member of AMPI Your realtor will be able to give you options on each of the other key positions making up your real estate investment team Your Mexican lawyer, escrow companies, bank trustees, notary publics, property management companies all of these and a few more will be key players on your team Do your due diligence when selecting your realtor and when interviewing for your Mexico real estate team.

ALTERNATIVE INVESTMENTS IN MEXICO REAL ESTATE

Pooling offers is an option that several investors have excercised to realize extra discounts when purchasing from a major development complex Investors can be pooled together so when the offer comes on the table, with the volume purchase, the sellers will be more excited to realize the multiple sale and open to reduced offer prices Another option is to include a friend on your investment This will allow for a sharing of the costs, sharing of the expenses, and of course dividing the revenue returns Such leveraging can be an alternative to borrowing money from the bank given the current financial situation in the markets These are several of various methods that can be used to save you money when buying Real Estate in Mexico

Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments. He has been living, investing, and working professionally in Mexico for over 15 years. A Mexican Certified Realtor he is the current president of TOPmexicorealestate, you can contact him at (512) 879-6546 or through the company`s web site www.TOPmexicorealestate.com

Fantastic news for the beachfront condos, Mareazul, in Playa del Carmen

Once finished, these condos will not be locked into property management contracts but will be open for the owners to choose There are really important points on this option for the owners which I will cover in this entry as well as showing some of the progress photos of the project.

The most attractive points are that you don't have to be STRICTLY tied into a contract with any specific companyIf you purchase a unit, you have the option to use your condo whenever you want, but of course keeping in mind the best rental periods occur during the high season and major holidays

Here is a breakdown of what the rental management company at Marazul will offering to their clients:

1) Property management. This costs $200 / month and covers things such as

• Paying bills
• Cleaning the unit once per week
• Maintenance of the condo once every 2 weeks
• Sending you updated accounting statements

2) Vacation rentals. They will offer top of the line services and here are some of the important features:

• No restrictions on use, you can easily check a calendar online and book the days you want to use
• Contract is 3 years, but you can cancel anytime with just 2 weeks notice
• 65% of the rental income goes to the owner
• There is no rental pool, the $ goes directly to the individual
• Internet advertising on at least 14 websites in USA, Canada and Europe

Contact us for the detailed structures and guidelines for this set up. We have estimate proformas for the different # of bedrooms

Since we're talking about Mareazul, here are a few updated photos of the progress. There are lots of workers and they have completed most of the filling of the dirt.

Definitely something to consider in these times, since this is one of main developments in this area that offers in-house financing at incredible rates and right now offer an 8% discount on their current price list.

I have several more photos so send me an email, or better yet, come visit us so we can show you some top options in the area.

Andy Welbourne

www.TOPmexicorealestate.com

(512)879-6546

What factors to consider before choosing a long-term rental property location

Most of us have heard throughout our lifetime that the one way to financial security is through real estate. Typically, we invest in real estate because it equates to low risk with a nice return on our money. Many of us believe that the way to financial freedom is to buy real estate, whether you purchase one property or multiple properties, with the sole intention to flip or sell quickly, at an increased price.

We've all seen the shows on cable that promote how easy it is to buy fixer uppers, do a little work to them then put the property on the market for sale and instantly have a huge profit. This way of investing is not a realistic option for most of us, as we'd have to dedicate ourselves to seeking out properties on a fulltime basis then doing our due diligence to assess if the property can potentially be profitable. We all want to believe that we can overcome these challenges but unless we are a seasoned real estate investor for these types of opportunities, the obstacles can sometimes far outweigh the benefitsThis is one of the multitude of reasons why I am an advocate of investing in real estate with the anticipation of being a long-term holder of the property for at least five to 10 years

The concept of investing in rental property affords us the ability to purchase at or just slightly below market value but continues to allow us make a good return on our money. So the question arises, how do you know where to buy a rental property for investment purposes

We should consider many factors before choosing a location to invest in rental property. We must look at the future job growth and how many people will be coming to the area to fill those jobs What is the social economic demographic of the population What is the economic stability of the area Is the current market saturated with long-term rentals or is there a demand for more

Let's take Playa del Carmen as an example. Although the economic structure of Playa del Carmen is very diverse, the common denominator of tourism is the actual driving force that dictates this economy. With the increased tourism year after year, the demand for workers on all ends of the economic spectrum has also increased. The population of the Riviera Maya is, on a conservative level, slated to double within the next several years.

There are so many contributing factors as to why Playa del Carmen is the ideal location for investment of long-term rental properties. The number one reason is this influx in population. People are moving to Playa because of the growing number of opportunities and the realization that they can sustain wages that will allow them to live their desired lifestyle. However, many just seek to lead a simpler way of life.

As tourism continues to increase, the demand for long-term rentals also increase. We are have begun to witness a need for long-term housing for those that begin to call the Riviera Maya home, whether they are Mexican Nationals or Expats alike. We, as real estate investors, need to go where the demand is. That demand is in Playa del Carmen.

Kami Kemp

www.TOPmexicorealestate.com

(512) 879-6546

Last week we invited Kami Kemp, a new professional property manager from Texas to share some ideas and thoughts regarding the Playa del Carmen real estate market Below is the second part of this interview The first interview is located at Playa del Carmen Rental Market Interview

5) Who is your Playa del Carmen Market, your typical client

Good question. Our clients as well as our customers are all very diverse. I cannot pick one specific type of person that wants to do business with Prime Properties other than our Property owners are comprised of professional real estate investors as well as many homeowners who continue to hold and lease their properties. Our client s are typically those that are looking for long-term appreciation, that are not looking to make quick cash on their investments, one that has reasonable expectations, is verbal about their long term goals and is open to allowing us to help them achieve those goals.

Our Customer is the person or family that is looking for a place to call home; even if it is not for a lifetime. Our customer is one that will care for the Landlord s property, pay their rent on time and report any maintenance issues that should arise from living in the property.

6) The news all over the internet is the BailOutBill .how do you see this topic affecting the sales market and the rental market here in Playa Carmen

Real estate, regardless of location, has historically been one of the safest risks for investors; but many are faced with the challenge of no longer being able to qualify for loans, especially if they have more than four investment properties already. We have already seen a change with how lenders are approaching mortgage loans, even for those that have credit scores that actually qualify for a loan. Many are no longer lending for investment purposes; they are requiring the loans to be classified as secondary residences. As a result, I believe that this may hinder some investors from purchasing multiple investment properties as some are now opting for stock investments. Given the decline in the stock market, many stocks are affordable right now and investors are looking at the stock market as potentially being a profitable investment.

Just as most markets in the U.S., it s in my opinion that the sales market in Playa may decline for the short term. However, I believe that Playa will regain momentum as credit becomes more readily available for the average person and investor. In the interim, we could begin to see that the developers will become aggressive on their pricing to attract buyers which could mean stable sales numbers.

Just as it has in many U.S. markets, the rental market in the Riviera Maya, both short and long term, should remain strong.

Although the U.S. economy has temporarily taken a nose-dive, Playa does not solely depend on the U.S. for tourism dollars. People from around the world make Playa del Carmen a vacation destination and as long as they continue to vacation here, we will continue to see short-term vacation rentals in demand; we just may see occupancy rates a little lower than what we have grown accustomed to. However, at the end of the day, I believe that most people will try to allow for vacations to remain in their budgets. We all need mental, emotional, and physical breaks as well as some type of balance in our everyday lives.

In the Playa area, there appears to be two driving forces dictating the necessity for long-term rentals First is tourism. As long as tourism remains strong, we will see an increased demand for long-term rentals. Tourism equates to additional hotels, transportation solutions, as well as general tourist activities. Strong tourism means an increased demand for additional labor which results in the need for additional long-term housing. This is all part of the continuation of economic growth.

The second driving force for long-term rentals is there are three basic elements in life that one must have in order to survive; food, water and shelter. If an individual cannot qualify for a loan to purchase a home, they still must have shelter. If someone wants to move to Playa but is not ready to commit to a 20 or 30 year loan, they rent. There is a need for longer-term rentals than what is currently available to the local person. I see that there will be a great demand in the coming months and years that will dictate that we, as Investors, step up to the plate and begin offering our locals long-term rental solutions.

7) What package services do you offer, what can you do, and rough ball park figure of the cost of this service

Our Leasing services include listing your property for rent, showing to prospective Tenants, application processing, and preparation of rental documents.

Our Property Management Services include facilitating move ins and move outs, lease renewals, enforcement of lease terms, rent collections, Tenant relations, monthly and annual statements and disbursements for our owners

Maintenance Services include make readies, repairs and landscaping. We also include on-call services for emergencies.

Our prices will depend on if you are looking for leasing, management and maintenance services or just one of our services. Our management fees range from 8%-12% of the monthly collected rent for long term rentals, and our leasing fees are structured to include all advertising and co-brokerage fees. Our goals are aligned with our Client s; we do not make money until our owner collects rent.

Well this is the end of this short interview with Kami Kemp She has opened up a new business of property management here in Playa del Carmen raising the bar here in the region with her vast experience and knowledge of the rental markets We invite you to contact us with your opinions, comments or questions regarding this subject You will be hearing more of Kami Kemp as I plan to invite her again to share some of her know how with our group

Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments. He has been living, investing, and working professionally in Mexico for over 15 years. Active broker and current president of TOPmexicorealestate, you can contact him at (512) 879-6546 or through the company`s web site www.TOPmexicorealestate.com

Kami Kemp, originally from Texas, is a new resident of Playa del Carmen, Mexico with her husband. She and her business partner (Kami`s partner is a licensed realtor and broker from the United States who we will introduce and interview later in the year) are in the process of opening up a PLAYA DEL CARMEN PROPERTY MANAGEMENT BUSINESS for the Riviera Maya region called Prime PropertiesMs. Kemp brings many years of valuable real estate leasing and administration experience to this market as she has over 20 agents reporting to her and this team is responsible for administering over 2000 properties! Kami and I met when she started to read my blog, signed up,and started sending me in depth comments and questions

Today, I am very excited to have the opportunity to ask Kami Kemp her insights and experiences on moving and deciding to start up a company here in Playa del Carmen, Mexico.

1) Hola Kami. First, why did you choose Playa del Carmen to set up your Property management company

First and foremost, it was because of my love for the Playa area. I ve been traveling here, at least once per year, for vacation since the early 1990 s. I ve never really been anywhere else and when askedwhy not my answer was always,why would I

On our annual trip to Playa, my husband finally said that he was tired of hearing me say, year after year, that I wanted to move to Playa. Surprisingly enough, he told me that if I wanted to be here bad enough then I d figure out how to make it happen. Well, I took that as a challenge. I researched for hours each day trying to figure out where we would live and how would we make an income. I finally determined that if I, an experienced Realtor, had a difficult time locating a long-term rental property for myself, then the average person must also have these difficulties. I soon realized that there was an abundance of vacation rental property management companies but very few long-term rental property management companies. I knew this is where I needed to be and I knew that focusing on long-term rentals was what I wanted to do.

2) What do you predict in regards to the housing market in Playa Del Carmen

Real estate markets experience transitions and those transitions are actually very healthy. Thisebb and flow is what allows markets to continue to grow decade after decade. The four cycles, or a variation thereof, typically found in real estate is:

Expansion: job growth and high demand for infrastructure. Cost of housing generally increases

Equilibrium: Prices reach their limits, real estate and job growth begins to slow slightly

Decline: The decline generally means that job growth and real estate sales slow, prices do not increase.

Absorption: Prices begin to fall below the National averages and businesses and investors realize the financial opportunities and they begin to build and buy again.

Where we are at as a market in Playa del Carmen The answer seems to be determined by the person that you ask. If I were to answer the question now, I d say we are stuck somewhere at the beginning of Expansion with significant opportunities headed our way for growth in not only real estate but also local population.

3) What do you predict in regards to the Playa del Carmen rental market

As with any other place around the world, there are different needs for different people. Regardless of which side of the economic spectrum someone is on, there will always be a desire from those that prefer to rent rather than own, those that just simply cannot qualify for a loan in addition to the other hundreds of reasons why people rent. I don t want to say long-term rentals are recession-proof but it is the one niche in the traditional real estate world that continues to remain fairly stable despite the economy or other impacting factors. People will always need a place to live.

4) What is your background, what can your company offer to the property owners here in the Playa del Carmen rental market

I started as an apartment leasing agent when I was 19 and over the years I worked my way National Director of Marketing, traveling all over the country. I ve had the opportunity to work with great acquisition and disposition teams for multi-million dollar assets and troubleshoot some of the most under-performing properties in the multi-family industry. In 2001, I decided that I needed a change from traveling. I wanted to be at home with my family and wanted to plant roots; that s when I decided to get my Real Estate license. I went to work for a local broker, who owned a property management company in Dallas. I began listing and leasing properties for our Client s, the Landlord. I loved it more than any other job I could have imagined. After much success, I was asked to join the team as Director of Leasing for the company in which I worked. After several years of managing agents, marketing properties, directing property managers and facilitating the processes that allowed a company to grow from 350 properties to 2300 properties within a very short period of time, I had decided to branch out on my own, in a place that I love.

Prime Properties is a company that holds our integrity, values and ethics to the highest of levels. We were taught that regardless of the outcome, we place our client s needs above our own and we follow this guideline. We have a vision and it s a vision of helping others. We see a need for a resource for the local people, regardless if they are a Mexican National or an Expat. We have the experience to know how to effectively market a property for lease, how to minimize risks for our Landlords by being proactive in our management philosophy, and how to deliver what we promise. We take the time to educate our owners on what to expect from us and their investment and this begins from the moment of first contact until the time that the Tenant vacates the property.

-We will continue with more questions and interview in another post later in the month.

Thomas Lloyd graduated from Purdue University Krannert School of Management with a degree in Management/Financial Option Investments. He has been living, investing, and working professionally in Mexico for over 15 years. Active broker and current president of TOPmexicorealestate, you can contact him at (512) 879-6546 or through the company`s web site www.TOPmexicorealestate.com

When buyers start searching for oceanfront condos here in Playa del Carmen, 30 meters, 50 meters or even 100 seem quite large for the protection of the treasured oceanviews But 200 meters oceanfront is a lot of private ocean swimming and laying out areas for this region!

What is putting Mareazul as one of the real estate leaders here in Playa del Carmen

Top reasons:

a) large oceanfront lot (great views) b) within a golf course c) great financing plan for foreign buyers d) amenities, great pool and a zen garden, wow

At the top of the list of questions, when people tell me they are looking to invest into condos, is “how are the views” Mareazul condos take the cake with spectacular views out onto the Caribbean Ocean

Here you see Andy Welbourne from Lloyd`s Real Estate interviewing and looking out at one of these viewsAs they explained to us, the designs have been laid out so that you hardly notice, feel, or see that you have neighbors Each tower, consisting of 2 condo units per floor and 4 floors share an elevator Meaning that on your floor, you will share your elevator with only one other unit

Are you a golfer World famous celebrity and company, Nick Price has designed the course that will be on the back side of these Mareazul condominiums The 1.5 km. road leading down from highway 307 will weave gently through the lush green fairways and greens as you approach your private condo on the ocean

As many Mexico Real Estate future buyers have discovered, financing into Mexico properties is now available throughout many states of Mexico Yet, there still is a great maze of papers and requirements from the Mexican Banks that disqualify the majority of such foreign buyers In house financing is another story though, as the sellers have a greater incentive to ensure that the buyers have greater chance of qualifying for the loans in order to secure a sale The downside of Mexico in-house financing is the higher charged average interest rates BUT….. take a peek at this:

Libor + 2% 70% financed! Meaning 30% paid at the signing of the hard copy, and 70% kicks in when the unit is complete That is why I mention this is the best in the market for in-house financing Pull up the excel sheet, take out the pencil, and do some numbers Also, as you project future growth….check out this last post I did about latest developments on the Cancun airport http://www.topmexicorealestate.com/blog/2008/05/30/cancun-airport-continues-expansion-in-preparation/

One last point for your review of a Playa del Carmen Condo option Green areas, gardens, pools, common area amenities Take a look at these extras.

Zen gardens for meditating, incredibly large pools overlooking the caribbean (with 200 meter oceanfront you can imagine the open view) Ok, the project has some “Wow” factor it is hard to hide this fact, but review the numbers, I suggest you look at the financing option as well (very interesting) and remember…. the property is in the middle of the Riviera Maya, on the mainland of the Caribbean ocean, and within the most stable country of these options Growth in this region has been breaking records over the past 4 years, most likely will continue for next 4 or 5 Check it out, compare with other like properties,( www.topmexicorealestate.com ) see what you think

- Thomas Lloyd www.topmexicorealestate.com