When talking about real estate investment, capital gain is one of the things we should look carefully to know if an investments will be worth or not.
For some people, investing in real estate may seem like something very boring or not very profitable, especially if we consider it a long-term investment, which is not so attractive to those who want for immediate returns.
However, as we have already discussed before, do not believe everything you see in movies: it is unfortunately impossible investing pennies to earn millions.
In ‘5 safest investments you can make in your life’ we mention that, compared to the stock market and saving accounts, real estate investment is a tangible asset, so inflation does not affect it as much as it affects money.
On the contrary, buying a property is an excellent way to protect your money. To begin with, real estate value is determined in dollars, a significant factor for many investors who trust the dollar more than other currencies like Mexican peso.
One of the things that makes real estate investment attractive -in the short and medium term- is the possibility of make return on investment by renting the property.
Yes, it is possible to earn short-term income with the current demand for short-term rentals. Reselling or long-term renting your property are not the only options: You can generate extra income with your property and Airbnb, and this alternative allows you to manage your building according to your interests and needs.
That is why real estate developments in tourist areas, such as Riviera Maya, have become popular among investors who are looking for properties to rest as well as make money when not occupying them.
Therefore, investors are not only enjoying their property and the beaches - and protecting their savings and their money - but they can also generate income that will make them recover their investment faster.
One of the most important concerns when investing is knowing if an investment will grow and how long would it take.
In real estate, the key to everything is the capital gain -also known as added value- of the area where the property is located.
Capital gain is the positive difference that a property acquired over time. In other words, it is the increase in value that a property obtains and this is largely due to the zone where it is located.
Capital gain is one of the main reasons why buying a property is an excellent option to invest: you can purchase properties at a lower price and in a short time they will have a higher value, and even more if schools, hospitals or malls were soon opened in the area.
That is why expert investors acquire properties in areas that have long-term growth projections.
As mentioned in ‘7 tips from the 7 richest prople in the world in real estate’, Donald Bren, a visionary investor who managed to build an entire city with an artificial lake in California –which is considered one of the safest cities in the U.S.–, became one of the most important real estate magnates in the world because that development.
These are the things you need to consider when buying a property:
Location is the factor that most influences the value of a property. Greater services and the opportunity for residents to live with a better quality of life are the reasons why areas with better urban mobility, services and commercial areas have a higher value than those found in places with difficulty of access and low influx.
In ‘5 reasons to invest in Merida’, we mention that the growth of Merida and its privileged location in Yucatan Peninsula, positions it near Magic Towns and beaches with harbors such as Puerto Progreso.
Because of this, Merida and Yucatan have attracted the attention of tourists and even companies that are looking for places to put new offices. Security and the great quality of life in Merida are very attractive for investors.
In the case of Merida, the area that has higher capital gain is the north of the city: the proximity to shopping malls, top-level schools, as well as restaurants and entertainment centers have made this area position itself as the most exclusive and expensive of Merida. In addition, people can buy houses with large spaces, allowing them to have a higher quality of life, especially if they have children. Bigger places help families to develop and enjoy their home to the fullest.
In places such as Playa del Carmen, Riviera Maya and Tulum, influx of people is essential. In these areas, tourism plays a highly significant role in economic development, and quality of life is better in many ways, especially for people dreaming of living near the beach, far away from pollution and smog of big cities.
The location is a key factor, that is why is not the same to buy a property on a corner, on a main avenue, or on a less busy street. This will also depend on your needs, but in the end, properties located at residential entrances or on main avenues have greater value than those that are far from them.
As mentioned before, accessibility and urban mobility are things that greatly influence in capital gain.
It is all about how easy you can access a property but more importantly, how easy you can go everywhere else.
Another reason why north of Merida has become the area with the highest capital gain is because the city has been developing infrastructure so that its residents can easily access malls, educational institutions, hospitals, as well as other areas of the city.
For example, Merida’s peripheral expressway allows driving to any area of the city. At the same time, Paseo de Montejo -the most important and tourist avenue of Merida- connects with the north and allows local inhabitants to have better access to downtown.
Surely you have run into areas that have grown and became residential or commercial areas, increasing their capital gain. It is really no surprise: projected growth is something that you should always keep in mind when making a real estate investment.
The growth of the area will help to add value to a property, and therefore, rental fees get higher.
Growth goes hand in hand with infrastructure and investment. For example, a few years ago there were only a few recreational centers such as cinemas, shopping malls and museums in Merida; currently, the city has transformed and there is a wide diversity of events, such as concerts by international artists.
As referenced above, highways are also fundamental in urban growth. A city or area that is designed to develop in the long term, and in a sustainable way, will have better quality of life.
In Tulum, alternatives are being considered to continue its growth without affecting the Mayan jungle. Currently, tourism in Tulum is generating possibilities for foreign investment and the creation of bike lanes which will help prevent pollution in the area.
These points also agree with the vision of the Tulum government, which plans to make this area the most sustainable destination in Mexico.
Yes. Especially in Mexico, where security is one of the main concerns of foreigners. One of the reasons why the Mexican Caribbean is becoming popular around the world is its beauty but also because Yucatan Peninsula is one of the safest areas in Mexico.
Thanks to security and quality of life, Merida, Playa del Carmen and Tulum have become the favorite destinations for international travelers. In the same way, many residents of Mexican cities, such as CDMX or Guadalajara, fall in love with Merida, because it features the best of the big cities without losing the relaxed lifestyle that makes you go to the beaches in the afternoon.
However, real estate developments in Merida are also offering private security, which increases the capital gain of properties. Access to the residential and your home will be controlled and monitored, so you can rest assured that there is surveillance 24/7. This way you can prevent theft.
So far, you have read about things that do not depend directly on the property. Even if capital gain is independent of a property, the truth is that the age of a house and its amenities can influence the increase of value.
One of the advantages of buying a new property is that you will not have to pay maintenance costs, or expenses will be minimal in comparison to what you would have to spend if you buy an older house.
And of course, a house increases in value when it has a pool and quality materials such as marble floor.
But the determining factor is the area where a property is located. A house in an unsafe area or with little capital gain will hardly be sold or rented, even if it has a pool and marble floors. Most likely, the prices in the area will be lower and that will affect the property value.
Do not be guided by the cheapness of a property if you are thinking of buying a property to guarantee and secure your investment. In that case, you will not have the expected return on investment.
The amenities of a property or a real estate development are also a key factor. In addition to having a pool and quality materials, a property with amenities -such as parks, gyms and courts- gets higher value.
The advantages of having exclusive amenities in a real estate development is that inhabitants can live better. As mentioned in our ultimate guide for real estate investors, setting is a factor to consider when buying a property: it is better to live in a place where you can walk your pets or go to the gym without having to get too far from your home.
Now that you know which factors influence the growth of capital gain and property value, it is important that you look for these things meticulously. Remember that a property in an insecure area and with very little added value will have lower property value than expected when you want to resell or rent it, even if it has a pool o was built with quality materials.
The relationship between the cost of an investment and its return is one of the reasons why foreigners choose to invest in real estate in Mexico.
Yes. Living in Mexico is cheap, especially comparing the price of services as well as taxes, but also acquiring properties in areas with greater capital gain is more affordable, something that would not be possible in other countries with similar quality of life.
Real estate developments in Tulum and real estate developments in the Riviera Maya are mesmerizing foreigners due to the regular increase in capital gain; especially during holidays or Easter, when the demand to reserve places is very high. In addition, as you know, apps like Airbnb are provide opportunities for travelers who want to experience something different.
In this way, buying a property with high capital gain is chance to secure money and earn extra income.
If you are thinking of acquiring a property, we recommend you read everything you need to know before buying a property in Mexico and what documents you should request when buying a property.