Thursday, May 6, 2021
Dear Your Overseas Dream Home Reader,
It was classic Mexico beach restaurant…
Palapas. Red plastic chairs and tables sinking in the sand. Lively Latin music in the background. Families and groups of friends at big tables laden with fried fish and cold beers. Plentiful hammocks if you want to take your relaxation to another level. The salty tang of the Caribbean coming off the spray of breaking waves filled the air.
I was on the island of Cozumel, about a 45-minute ferry ride off the shore of Playa del Carmen.
It was my first time visiting. The scene here reminded me of my first visit to Tulum back in 2004. A few rickety beach bars, empty white-sand beaches, and nothing much else.
I had expected more.
This is one of the best snorkeling and scuba sites in the world. Each year it’s visited by some of the biggest cruise liners—Norwegian, Carnival, Princess, Disney. But the island’s main town of San Miguel looks drab and dated. It was built in the ‘80s and ‘90s, but not a lot happened here since.
I was there to scout because I’m beginning to hear whispers about the island from influential people. Developers are coming to the table. They’re asking if RETA is interested in Cozumel. People with land are approaching us.
It’s really coming on my radar for the first time ever.
On the mainland of the Riviera Maya, Tulum is completely on a tear right now. It’s the end of the line for the Riviera Maya’s Path of Progress. But that doesn’t mean development stops. As I’ve said before, a Path of Progress is not always linear. While the first wave barrels forward, the second, third, and even forth waves often benefit the places that have been overlooked.
Now, in conversations about what’s next for the Riviera Maya, Cozumel is being talked about.
The ferry ride over from Playa to Cozumel has a festive atmosphere. The onboard bar kept busy taking orders for Dos Equis and margaritas… Seats were scarce, and I ended up on the top deck, squarely in front of the three-piece band that provides entertainment.
The passengers were singing along and clapping appreciatively to the music. But I think the biggest cheers came during a stirring rendition of “Zombie,” the mid-90s hit song by Irish rock band, The Cranberries.
To be sure, Cozumel was much quieter than it normally would be. Although famed for its diving, which still today draws many day-trippers from the mainland, and equipped with its own small international airport, much of Cozumel’s visitors came from cruise ships, which, of course, have stopped during the pandemic.
On Cozumel’s eastern shore, facing the open sea, rocky, wild shoreline alternates with sandy coves. On the shore facing Playa, the water is calm and clear. To the north of the main town, San Miguel, you’ll find long sandy beaches. As we drove to potential development sites to the south along the water it was more limestone “iron shore,” with buoys out in the water marking the location of snorkelers.
Large stretches of the island, especially on the southern end, are undeveloped and set to remain that way to protect the coral reefs in the marine national park just offshore. It was starkly beautiful.
I looked at a few potential development sites and I liked what I saw. The next step is to see if it stacks up as a deal.
A strongly opinionated conversation is happening in my team about where the next place we can profit on this Path of Progress will be. Cozumel is now very much in the mix. I’ll continue my conversations with developers and see what pricing we can get. In Cozumel, construction costs are higher but land costs are lower. I’m also going to speak with some hotel groups about their plans for Cozumel.
For now, you can check out a few clips from my scouting trip here:
Wishing you good real estate investing,
Ronan McMahon, Real Estate Trend Alert
Your Comments and Questions
Linda says: We are RETA members and are currently in the Panama deal of last November where we purchased a three-bedroom condo. We recently purchased a two-bedroom condo in Playa del Carmen on your most recent deal.
We are interested in the Tulum deal you indicate will be offered shortly. We will be in Tulum next week. Flying in on Saturday, May 8, and returning to Dallas the following Saturday. We would like to be able to check out the property site for the upcoming Tulum deal. If you could provide and information on the location, we would appreciate it.
Ronan says: Hi Linda. I suggest getting in contact with your RETA concierge, Nancy. She’ll be able to help you.
David says: Hi Ronan, I watched your video conversation with Chris on the subject of Algarve opportunities. We are scheduled (if all goes well!) to meet with him and his team in late May 2021 to look at the current Santa Maria projects. The opportunity to own a real estate investment that we can rent out in the summer months and enjoy ourselves in the winter is of particular interest to us. Potential price appreciation is also important. Current high-end developments are pricing at the equivalent of $450 to north of $500 per square foot. Where do you see that evolving over the next 5-10 years, and are there historical trends in other comparable markets that you think are relevant?
Ronan says: Yes, these are not low prices. But one tenth of what you’d pay for a primo home in the South of France. Other parts of the Mediterranean are similarly in the stratosphere. I see solid 7% or 8% annual appreciation on top of our discount over the medium term. Not the type of spikes we see in other RETA deals (where we see 50% during construction) but steady and solid.