Monday, April 02, 2007

Las Palomas, Rocky Point, Mexico

Tanya and I just got back from three nights at Las Palomas Resort/Condominiums in Rocky Point, Mexico. We have been regular visitors there (every two to three months) for the last fourteen months now. We love it. We love it so much in fact that we are in escrow on a two bedroom two bath unit on the seventh floor of the last building of the second phase that should deliver November 07 or so. We paid about $450,000 for approximately 1,800 feet or about $250/foot. It has a phenominal floor plan, fantastic finishes, and has wonderful views of the town, the beach, and the ocean. I've had some friends tell me that that's outrageously high for Mexican real estate while others have rushed to buy one for themselves.

Frankly, the numbers make a lot of sense to me and with everything going on down there I don't see how we could possibly lose. There's a property management company that will rent your home out for you when you're not using it. Their cut is 40% (a bit steep in my opinion) but they take care of everything. Condos comparable to what we bought rent for $255 week night, $330 weekends and $460 on holidays. Right now the occupancy rate has been running about 30% (basically weekends only). Nothing to brag about but they've only been open for a little over a year.

If we can rent our place out 48 weekends of the year (we need some time off too you know) the numbers look like this:

41 x 2 (Fri & Sat) x $330 (non-holidays) = $27,060 PLUS 7 x 2 x $460 (holidays) = $6,440 EQUALS $33,500 MINUS $13,400 (management fees) FOR A TOTAL OF $20,100 or about 4.5% cash on cash return. OK, a 4.5% annual return doesn't curl my toes but I believe that the following things are very likely to happen: 1) occupancy can easily double and thereby double our return 2) rumor has it that the management company actually hopes to lower their fee to 35% once everything's up and running thereby increasing our before tax return an additional .83% 3) even at 60% occupancy we still have over 100 days a year that we get to use the home. Fortunately, we can take week days off from work which improves our profit 4) most importantly, I believe that these will appreciate quite well over time.

Bottom line, we love that we can drive to our vacation/second home in just a touch over 3.5 hours and enjoy the heck out of the great food, beautiful beach, wonderful people, and strong drinks :-) and still make a few bucks off the place when we're not there, with absolutely no hassle.

Feel free to call me to chat about this place. I love talking about it. W

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