Saturday, August 28, 2021
Dear Your Overseas Dream Home Reader,
Welcome to your Weekly Wrap-Up!
I’m on my way back to Portugal next week.
After the reports my scout Eoin Bassett sent back from the historic hill towns in the Alentejo region…where he found farmhouses in need of renovation and couple of acres of land for under $100,000, as well as village homes for as little as €22,000 ($25,713)…I decided I had to get there as soon as possible to see it all for myself.
It’s a region I haven’t much visited, but my scout’s photos, videos, and property listings intrigued me, not to mention laidback country lifestyle he experienced while there.
Plus, there’s the Golden Visa angle.
Come January, the Portuguese government plan to severely restrict the “investment for residency” program, with residential property in Lisbon, Porto, and high-density coastal areas excluded.
This means that Alentejo will be one of few regions of the country still eligible for Portugal’s Golden Visa program after the end of this year.
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A stop in the Algarve is mandatory, of course. The charming seaside city of Lagos, in particular, is a must-visit. This is a fast-moving market…things can change overnight, which is why I’ve committed to making myself or one of my team visit at least once a quarter.
Lagos is a place where best-in-class property is in incredibly hot demand. By getting in early on the right condos, in the right locations, we can do very well. Demand is surging, supply is scarce, and there are constraints that put serious limitations on availability.
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RETA members have already done incredibly well in Lagos…
For instance, one member bought two condos as investment properties about five years ago for approximately €430,000 each. They rented them both, bringing in an average of about €30,000 (a 7% gross yield) a year each and recently sold one for €650,000. Those are some serious gains…
And, when you figure we can borrow up to 80% of the purchase price at sub 1% rates, the return on cash invested is exceptional.
My scout has told me that he heard on the grapevine of someone recently selling a condo for a €275,000 gain. A condo they bought just two years ago in the range of €400,000.
The Algarve is indeed something special. It offers perfect weather, amazing beaches and world-class golf. It’s easy to get there, the cost of living is low, the food is great, and it’s safe…peaceful.
Yes, you’ll pay a higher sticker price than in the Alentejo, but the profit opportunity here is incomparable. Buy right and you can lock in huge gains from the get-go and set up an income stream in perpetuity.
I’ll be bringing you more from my scouting in Portugal in the coming weeks.
Finding New Opportunity in an “Old” Town
Mexico is a huge part of our RETA beat.
Members recently had the chance to own two-bedroom ocean-view condos in Los Cabos from just $188,200 in a luxury community called Cabo Costa. I figure these condos will be worth $330,000 three years after delivery. Even though I already own in another community here, I bought in Cabo Costa.
In June, RETA members could secure fully furnished condos just 30 seconds walk to the beach in Singular Dream, set to be one of Playa del Carmen’s most distinctive buildings, at discounts starting from $49,775.
Cabo, Playa, Tulum, Akumal…San Miguel de Allende…we’re all over Mexico.
But recently we’ve been investigating the potential opportunities a new stretch of coast, this time over on the Pacific: Puerto Vallarta and the beach towns to the north that are collectively known as the Riviera Nayarit.
Puerto Vallarta is one of the most popular beach destinations in Mexico, second only to Cancun in tourism numbers. It has quite an interesting origin story…
The year was 1963. The place: Mismaloya, a beach community just to the south where the movie The Night of the Iguana was being filmed.
Star Richard Burton carried on an affair with Elizabeth Taylor while filming; they made Puerto Vallarta their playground. The international tabloid attention caught the eye of travelers from around the world. What had once been a small fishing village and shipping port, discovered maybe by a handful of international and Mexican artists, was set on course to become the famous resort destination it is today. All thanks to Hollywood’s original power couple.
Puerto Vallarta was once only accessible by boat, small plane, or mule train, but the Mexican government, sensing the opportunity, put in a paved highway and built an international airport. More American attention came when President Nixon visited in 1970 for treaty negotiations.
And the rest, as they say, is history…
I sent my scout Jason Holland to get an update on the market and to see if any new opportunities are popping up…
Puerto Vallarta welcomed 5 million visitors in 2019—an 11% jump from two years previous. Many head straight to the all-inclusive resorts north of the town proper. But others are drawn to the Zona Romantica, in the heart of the old town.
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As Jason told me, although he was there in August, which is traditionally Puerto Vallarta’s low season, the streets, the malecon, the restaurants…were quite busy. It wasn’t high season busy. But the waiters, taxi drivers, and locals he queried confirmed that it was odd to see so many people that time of year.
There were plenty of foreign visitors—couples, groups of friends, and families down for summer getaways, mostly from the U.S. That’s evidence of pent-up demand for travel due to the pandemic. But also, Mexicans from the country’s largest and prosperous cities, chief among them Guadalajara, come in numbers, streaming into town for the weekend. This is a year-round phenomenon.
Then there are the digital nomads and remote workers, who are drawn by good internet, fun things to do in the off hours, easy access from the U.S. (the international airport, just 20 minutes’ drive north of town, offers direct flight from many cities), great weather (it averages from 73 to 83 F year-round)…the beaches. This yet another strong rental market.
This bodes well for the upcoming high season, which runs from roughly December to April. That’s when snowbirds and vacationers come in droves to escape cold winter weather. These folks, too, are seeking rentals. I foresee a shortage of accommodation this winter, with this high demand driving up prices…good news for those who own vacation rentals.
And that’s what we’re looking at for the next RETA deal…
Romantica is the heart of the action in Puerto Vallarta town, with its bars, restaurants, live entertainment, and dance clubs…but also chic boutiques, cafes, margarita bars, microbreweries, and craft markets. However, it’s maxed out. Puerto Vallarta is a mature market and in its famed Old Town prices are high. Two-bedroom units in Zona Romantica with views and amenities are listing for $500,000…$600,000…or more.
Yet, just a 15-minute walk from the Zona Romantica, you’ll find a neighborhood called Centro. It’s a place that’s gaining traction as more merchants, restaurateurs, and second homeowners turn their attention to it. What was overlooked is now gentrifying …and it’s already well on its way…with plentiful shops, eateries, art galleries, and the like.
Importantly, in Centro you’re still in the heart of the action, with the same great views and proximity to the beach, but without the through-the-roof prices.
Centro is a place where real estate investors can do well by getting in before gentrification fully sweeps through. And, if you’re a RETA member, you can do very well…with the one-two punch of a discount to boot.
Thanks to our group buying power, I was able to negotiate discounts of $64,750 on two-bedroom luxury condos in the heart of Centro, each with panoramic views of the glittering Pacific Ocean.
This is the first Puerto Vallarta deal I’ve even brought to RETA members. What I love about it is that even if you look at the retail price of these condos—the price everyone else pays—it’s still a fraction of what other condos in Puerto Vallarta are going for.
These condos are along the Zona Romantica’s path of extension, effectively giving you a Zona Romantica experience, at a fraction of the cost.
I predict our condos could see capital appreciation of $131,000 three years after delivery. Combine that with 9.2% gross rental yield and this deal is killer.
I’ll be sharing more details with RETA members in the coming days.
If you’re not yet a RETA member, you can sign up right here.
Going Where RETA Has Never Gone Before
The string of small beach towns north of Puerto Vallarta make up what is known as the Riviera Nayarit. They offer lively Mexican culture, small scale hotels, boutique shops, and rustic cafes that cater to local vacationers as well as a small cohort of retired expats. They offer an appealing alternative to the hustle-and-bustle of the big city…for the right type of traveler.
The first news from Jason after heading north was very welcome: a major road improvement project is underway that is expected to cut the drive times from Puerto Vallarta to this coast, as well as from the city of Guadalajara, which has a population of nearly 1.5 million.
I’ve personally had a traffic nightmare with huge delays on that road when I was last scouting the area. This could be a game-changer for beach towns that are already seeing an influx of American families…young couples from the U.S. and Europe…and well-heeled Mexicans from Guadalajara.
Jason’s first stop was the funky surf town of Sayulita. It’s an interesting place, where that long-haired barefoot surfer walking down the street could very well be a wealthy tech executive.
As Jason put it:
“Pioneering surfers and bohemian expats started coming here in ’60s, ’70s, and ’80s, buying up ocean-front or ocean-view lots for $5,000…$10,000…$20,000. But in recent years, they’ve been joined by fresh faced American families dutifully wearing sunhats and sunscreen, riding around in rented golf carts…young couples from the U.S. and Europe…and residents of Guadalajara, one of Mexico’s largest and wealthiest cities, seeking weekend getaways who stream into the town center starting on Friday afternoons. They’re all seeking that laidback Sayulita vibe.
“Sayulita has certainly grown up.
“And coupled with its popularity you have limited inventory due to the lack of developable land. That means high prices, with plenty of villas in the millions gracing the hillside overlooking the beach. There are not many condos. I saw a two-bedroom on the quieter north end of town going for $465,000. It’s walk to the beach. Has an ocean view. A golf cart parking spot (golf carts are big here). A very simple place. But local real estate folks tell me it’ll go fast.”
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At his next stop, in San Pancho, Jason visited two properties that caught my eye (you can check out the town and see a walkthrough of both properties here): a beachfront two-condo for $398,000 and an eight-suite hotel for just under a million that could certainly be operated as a hotel…but perhaps the smarter play would be to rent out all the suites on Airbnb.
It’s right by the beach and the main drag in town, so you could charge a premium, especially in winter. You could even offer the whole place as a short-term rental for groups. In other places, like Tulum and Rome, we’ve found boutique hotels can do much better by converting them to rentals for large, underserved groups.
Such a place would find a ready market in San Pancho. As Jason told me:
“This could be big in Sayulita and San Pancho. Holistic health retreats, yoga retreats, family reunions, surf tours…destination weddings, bachelor and bachelorette parties…
“Last time I was here I met folks who focus their rental business on high end homes in Puerto Vallarta for weddings and extended family vacations. In house chef, driver, maids… This could be something like that on a smaller scale.”
I’ve never visited Jason’s next two stops, Lo de Marcos and Rincón de Guayabitos, the first a rustic little town that’s quite sleepy this time of year that comes alive with snowbirds from the U.S. and Canada in winter, the second a bustling little beach town that is hugely popular with middle-class Mexican tourists. (You can see his videos and reports here.)
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I have been to a big piece of beachfront land close by that’s slated for major hotel, marina and golf development. Millions is being poured into infrastructure and the golf course. This could be a gamechanger on this beautiful stretch of coast.
I’m speaking to the developer about offering members of Real Estate Trend Alert (RETA) first shot and special member-only pricing in an area of condos and homes in the heart of the community and adjacent to the beach and marina. I’ll be sharing an update with them when we’re closer to a deal.
Stay tuned…
Wishing you good real estate investing,
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Ronan McMahon, Real Estate Trend Alert
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