5 Things You Should Know Before Buying An Airbnb in Mexico

How To Buy An Airbnb In Mexico?

Introduction

Buying an Airbnb in Mexico is an attractive option for a lot of American and Canadian investors. The weather is fantastic, it’s in a similar time zone and it’s in the worlds booming 14th largest economy.

A lot of times an investor buys a vacation property for personal use first and then think about renting it out later. With a little planning however, you can increase your chances of finding your dream vacation property and use the days you are not there to provide some good passive income.

The perfect formula for buying an Airbnb unfortunately does not exist but there are 5 general guidelines you need to know about before selecting your next vacation property in Mexico.

Don’t have time to read the whole article? Contact one of our courteous investor relations advisors today for more information.

1 – What’s The Rental Occupancy And Profit Potential?

First you need to understand the market better. Where do tourists like to rent? and what type of tourist rent where?

Finding these rental properties with high demand can be one of the first steps to finding an Airbnb in Mexico. You can start your research online with third party data sites listed below and the Airbnb admin area. Sites like

• Mashvisor
• Evolve
• AirDNA
• AllTheRooms
• Airbnb

can provide data on what areas of Mexico have some of the largest demands and potentially have the lowest costs.

Focus groups on social media can also be a gold mine for information on profit potential for Airbnb rentals in Mexico.

One of the best ways is to visit or call local real estate agents in the area you are interested in. They can provide valuable data on costs and demand for vacation properties in their local area. Ask them what areas are the better areas to rent and live? What areas will appreciate the most over the next 5 years?

2 – What Are The Financial Terms And Conditions?

There is an age old cliche “there is more money made in buying than there is in selling”.

Finding the best price possible and financing with the best terms will go a long way to determining whether your Airbnb will be profitable or not.

Getting a mortgage on a vacation property in Mexico is quite a bit different than getting a mortgage in Canada or the USA.

Usually the down payment is larger (often 50%) the interest rates are higher, and the term is shorter (normally 5 years).

Spend a little extra time on this step will help you find the best deal possible. Research online forums, focus groups on social media and read blogs on the topic.

3 – What Is The Local Market And Competition For Airbnb In Mexico?

Airbnb has been expanding throughout the world and more so in Mexico but is overall still quite new. And to add another layer of difficulty Airbnb works quite a bit different in Mexico than it does in your own home country.

In Canada and USA, you are more likely to see full homes or rooms in homes being used for Airbnb’s. Airbnb in Mexico you will see more small condos and villas for rentals.

Understanding the difference between the different tourist markets helps a lot in determining market competition. Mexico City for example will have different Airbnb demand than say Tulum or Los Cabos.

You can do some of your research online with focus groups and third data sites mentioned above but the best is to visit the area you are interested in. Narrow down one or two areas online and then visit the area and meet local real estate agents and rent some Airbnb’s. This allows you to talk to the Airbnb owners themselves in most cases.

4 – What Are The Mexican Laws For An Airbnb Rental?

Mexico is a large and varied country with no set rules on vacations properties. Most municipalities are allowed to make their own rules regarding short term rental properties.

One theme that is common though is you will need a permit to operate an Airbnb in Mexico. If you are renting a room in where you live full time then a permit is not required but check with local laws to be sure.

Recently Mexico issued a new tax on Airbnb properties in 2020 and this is the email Airbnb sent out to its hosts.

“This email is to remind you that starting on October 1, 2020, we’re making some changes to the federal taxes collected through Airbnb, and it may affect your listing(s) in Mexico. It is important that you read this email and take action.
To whom these changes apply?

If you are a company (persona moral), Airbnb will not withhold any federal taxes from your payouts nor remit such taxes on your behalf directly to the Mexican tax authority. You will only need to provide your company RFC by clicking the link below so we can validate you are a company (persona moral).

If you are an individual (persona física) you can benefit from reduced withholding rates for both VAT and Income Tax by clicking the link below.

Please note that Airbnb will determine the withholding regime that applies to your case by using your RFC information, so it is very important to submit your RFC ID in our Platform today. Without this information you will not benefit from reduced withholding rates – or no withholding at all if you are a company – and 20% of Income Tax will be deducted from your earnings going forward.

I already included VAT in my prices, now what?

Mexican Hosts should no longer use the additional taxes feature to collect VAT nor include it in their cleaning fees and rates. The platform will automatically do it for you going forward, so you need to ensure your prices submitted in our platform are VAT exclusive.

If you’ve added any of the above taxes to your listings, please remove them to avoid charging duplicate taxes and ensure that your prices remain competitive.

Why take action today?

In addition to benefiting from a reduced withholding on income tax and VAT from your payouts (or no withholding at all if you are a company) you will be able to get an invoice for and deduct the Airbnb Host Platform Service Fee and credit the VAT charged to you.”

What Does This Mean For Foreign Investors?

If you do not have an RFC(Registro Federal de Contribuyentes, a Mexican tax id number) you will be taxed 20%. Airbnb also charges your guests an IVA tax of 16% in addition to this. So it is in your best interest to get a Mexican visa. You do not need to own a property to get a visa in Mexico, but it can make it easier to do so and then receive your RFC number.

Submit your RFC number to Airbnb and this will lower your tax bracket down to 10%. Decrease this 10% tax further by claiming electricity, property taxes, maintenance fees, internet services, cleaning services, cable tv, mortgage interest and anything else related to the rental. Check with a local qualified accountant to verify all deductions.

There are two main ways people buy property in Mexico.

1 – One is personally. If the Airbnb is 50km from the coast you need to set up a bank trust called a fidecomisco. With this bank trust, you own the Airbnb in Mexico and can do what you want with the property. If you buy multiple Airbnb’s, you need a fidecomisco for each property. 2 – Second option is a corporation and the corporation owns the Airbnb or Airbnb’s you acquire. Set up your company in Mexico to purchase property. The Mexican government, does not deduct any tax but you will need to have an accountant to submit monthly requirements.
Talk to a qualified legal representative to decide what is the best option for you.

Airbnb in Mexico has been working with local authorities for years and has a section devoted in the administration area that has a list of required permits for renting in Mexico. Use this list to apply for the required permits you need to make your vacation rental a safe and successful one.

5 – What Are The Expenses and Maintenance Fees?

Some other fees you need to be aware of regardless of if you are renting one room or a whole house or apartment are marketing, mortgage fees, software, security, insurance, furnishings, amenities, and welcome gifts. Also, if you are in an apartment building or a home there will be HOA and maintenance fees.

As with most new business ventures cash flow will be slow to start so expecting to front a lot of these expenses and fees with your own savings or cash reserves.

6th Bonus Tip

Read and watch tutorials on being a Superhost with Airbnb. Airbnb in Mexico algorithm works in a way that it rewards the properties that generate the best occupancy, reviews and profits. So it’s no accident that Superhosts that spend the time to make their space as presentable and clean as possible in pictures and go above and beyond with service will get more booking and more profits.

Superhosts are almost always on the first page of Airbnb and will therefor get more looks and bookings.

Airbnb in Mexico also has a smart pricing tool that will allow you to adjust your room rates according to search demand and seasonality. Raise your prices during high search and lower it during low search.

Conclusion

Airbnb in Mexico is foremost a business and the more effort you put into your vacation property the more business and profits you will make. Taking the time to review location, quality of construction, accessibility to local highlights and services will go a long way to having a vacation rental that will be a great place for those winter vacation and generate a nice profit to boot.

Contact one of our courteous investor relations advisors today for more information

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What Are The Different Areas To Buy An Airbnb In Mexico?

Because Mexico is a very large country with a huge varying demographic as well. There are different areas and tourists to target with the various Airbnb short term rentals.

The three main tourists group you should think about targeting are digital nomads, vacation tourists, business tourists and people looking for a permanent place to live in Mexico.

Here is a list of cities towns and villages that would be good targets for Airbnb rentals in no particular order.

Invest Airbnb Mexico Frequently Asked Questions

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