The Short-Term Rental Reality Check

I've sat across the table from hundreds of investors in the last few years. Most of them came in with the same dream: They want a beach house that pays for itself. It's a great dream! But here is the cold water I have to throw on everyone: the "build it and they will come" days are over. Dead.

Mexico is a mature market now. Competition is fierce. You can't just buy a condo, throw some IKEA furniture in it, list it on Airbnb, and expect 80% occupancy. You have to be strategic. You have to buy right. You have to know the difference between a market that is peaking and a market that is just waking up.

I'm going to walk you through the specific areas where I am actually seeing clients make money right now. I'm not talking about theoretical ROI on a developer's brochure. I'm talking about real occupancy, real rates, and the actual headaches you'll deal with in each spot. Let's get into it.

Mexico City: The Year-Round Cash Cow

If you asked me ten years ago, I would have told you to buy on the beach. Today? I tell people to look at the capital. Mexico City has become a global hotspot for digital nomads, and unlike the beach towns, it does not have a low season. It is busy in January, it is busy in July. The occupancy rates here are some of the most consistent I have ever seen.

The obvious choice is Roma Norte. It is trendy, walkable, and full of cafes. Check Roma Norte prices to see what I mean. It commands high nightly rates. But because everyone wants to be there, property prices per square meter have skyrocketed. You are paying a premium for that demand.

Right next door is La Condesa. It’s greener, slightly more residential, but just as expensive. View Condesa market data shows the steady appreciation there. If you have the budget, these are blue-chip investments. They aren't going anywhere.

However, if you want growth, I'm looking at Juárez. It's grittier but gentrifying fast. It borders the best zones but costs less. Explore Juárez price trends if you want to see the price difference. Another solid option is Polanco, but that is a different market. See Polanco luxury stats reveals it's more for high-end business travelers and diplomats, requiring a luxury finish out.

Riviera Maya: Tulum and Playa del Carmen

This is the big one. Everyone wants a piece of the Caribbean. But you have to be careful here. Tulum has grown faster than its infrastructure. That is just a fact. Yet, it still commands some of the highest nightly rates in the country. If you buy in Region 15 or La Veleta, you are betting on the future. Airbnb shows a massive inventory increase, and things are not looking good, with median property having just 35% occupancy rate, which means you have to design a stunning property to compete and achieve close to 70% occupancy.

Playa del Carmen is the older, more stable sibling. It's walkable, which guests love. The area known as Centro is always in demand. I prefer Playa for investors who want less volatility. It’s not as 'cool' as Tulum, but the occupancy is steadier because it attracts families and regular tourists, not just influencers.

Don't ignore the master-planned communities like Puerto Aventuras or neighborhoods within Playa like Playacar. They offer security and golf courses, which appeals to a higher-end demographic that rents for weeks at a time.

Puerto Vallarta & Riviera Nayarit: The Pacific Classic

I love this market because it has history. Unlike Tulum, which feels brand new, Puerto Vallarta has been a destination for sixty years. The return guest rate here is phenomenal. People come back to the same condo every February for ten years. That reduces your marketing costs significantly.

The Zona Romántica is the heart of the rental action. It is LGBTQ+ friendly, walkable to the beach, and vibrant. It's pricey, but the demand is insatiable. You can charge premium rates for anything with a view here.

If you go north into Riviera Nayarit, look at Nuevo Vallarta (now Nuevo Nayarit) or Bucerías. Bucerías is capturing the overflow of people who find PV too crowded. It feels like old Mexico but with modern condos. It is a sleeper hit right now.

For the ultra-luxury segment, Punta Mita is the place, but the entry price is steep. The key in Vallarta is the view. If you don't have a view, you better have an amazing location.

Baja California Sur: Cabo and La Paz

Los Cabos is the luxury king. You have the highest Average Daily Rate (ADR) in Mexico here. And of course, the entry point is very high. You aren't finding bargains in Cabo San Lucas easily. It shows prices that will make your jaw drop. It's a market for those with significant capital who want dollar-based returns.

San José del Cabo is the quieter, artsier side. It appeals to an older, wealthier crowd. If you buy here, you are buying for appreciation and high-end rentals, not volume backpacker tourism.

The real opportunity I'm watching is La Paz. It is the capital of the state, located on the Sea of Cortez. It is authentic, safe, and growing. It has much more accessible price points than Cabo. The rental market there is younger, focused on eco-tourism and swimming with whale sharks. It feels like Cabo did twenty years ago.

The Colonial Highlands: Mérida and San Miguel

Not everyone wants the beach. San Miguel de Allende has been voted the best small city in the world multiple times. The real estate here is expensive, but the rental market is robust for high-end weddings and cultural tourism. The price reflects a market driven by wealthy nationals and Americans. The key here is 'Centro'. If you aren't walking distance to the Jardin, your occupancy drops.

Then there is Mérida. It is the safest city in Mexico. Period. The rental market is interesting because it's hot—literally. You get snowbirds in winter, but summer is brutal. However, the price per square meter in neighborhoods like Garcia Gineres or Centro have unmatched value. This means you can still buy colonial renovations for a fraction of US prices.

Investing in these cities is a play on culture. Your guests are there for the food, the architecture, and the history. They expect your property to reflect that. A modern glass box doesn't rent as well in San Miguel as a property with stone walls and a courtyard.

The Financials: Taxes and The Fideicomiso

Here is the part nobody likes to talk about: If you are a foreigner buying within 50km of the coast or 100km of the border, you need a Bank Trust called a Fideicomiso. It’s not a lease; you own the rights. But it costs about $2,000 USD to set up and $500 USD a year to maintain.

Then there's the taxman. The SAT (Mexico's IRS) is digital and aggressive. Airbnb will automatically withhold 20% of your income for income tax (ISR) and 16% for VAT (IVA) if you don't upload a Mexican fiscal ID (RFC). That is 36% of your gross gone before you pay for cleaning fee and everything else.

I always tell my clients: Get your temporary residency. Get your RFC. With those, you can deduct expenses and lower your effective tax rate significantly. Don't try to fly under the radar. The platforms report everything to the government now. It's not worth the risk.