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Major Projects slated for Riviera Nayarit

It has been well known for quite some time that any new major projects near Puerto Vallarta will most likely be taking place in the neighboring state of Nayarit, where there is still ample development land. After a lull in the market for nearly ten years, Riviera Nayarit is now in full swing with a number of tourist projects slated for this year and beyond. Last year in Riviera Nayarit tourism generated nearly $200 million in revenue and maintained a hotel occupancy above 80 percent, peaking at 87.4 percent in July.

Here’s a list of some of the projects either under, or soon to be starting, development:

JW Marriott and Ritz Carlton hotels will soon break ground on the beach of Destiladeras on the north shore of Banderas Bay. Both being developed by the Mexico City group Artha Capital, which will soon announce a third hotel to be located in the same area.
In February, Krystal Grand Hotels & Resorts debuted their new Krystal Grand Nuevo Vallarta, a 480-room, all-inclusive luxury resort in Nuevo Vallarta.
In December, the Grand Sirenis Matlali Hills Resort & Spa will open, situated in La Cruz de Huanacaxtle.
Currently in development are five hotels at Costa Canuva, a mega resort project just north of Guyabitos, which will eventually add more than 7,000 guest rooms to the destination. Opening later this year will be the development’s first hotel and the region’s first Fairmont property. Costa Canuva encompasses more than 550 acres and will also feature a beachfront village with 2,500 residential units, as well as a golf course designed by Lorena Ochoa and Greg Norman.
In 2019, just west of the airport and on the banks of the Ameca River, Grupo Vidanta will open Mexico’s first Cirque du Soleil Theme Park, that will offer entertainment shows and have the capacity for up to 5,000 spectators.
Rosewood Hotels & Resorts will be opening in the mega development of Mandarina, (also situated in northern Riviera Nayarit), offering 130 guest rooms, suites and villas.
A second stage of the Grand Sirenis Matlali beachfront development will start in 2019 and add 140 suites, and 300 rooms to the current Iberostar property in Litibu.
Punta Mita properties, the Auberge Resort Collection’s ultra-luxury Susurros del Corazon and Conrad Hotels & Resorts’ Conrad Punta Mita (redesign of the former La Tranquila Resort), will soon be breaking ground on the northern point of Banderas Bay.
Debuting in the final quarter of this year, One&Only Mandarina will feature new branded residences, the One&Only Mandarina Private Homes, which will debut alongside the One&Only Mandarina Resort, as well as a world-class polo and equestrian club replete with state-of-the-art polo grounds, dressage and jumping arenas, stables and more, in the mega development of Mandarina.
And looking even further into 2020, AM Resorts is set to open Dreams Punta de Mita Resort and Spaand Secrets Punta de Mita Resort & Spa.

That is quite a list for any resort area. Riviera Nayarit is quickly dwarfing Puerto Vallarta and is now recognized as one of Mexico’s top major players in tourism development.

Aerial Views of Puerto Vallarta’s Most Popular Regions

One of the first things anyone interested in real estate in Puerto Vallarta or Riviera Nayarit is going to want to do is narrow down exactly which region or neighborhood works best for their needs. Fortunately, there are an amazing variety of options available (beachfront, hillside, marina, golf fairway, city, rural, etc) – but unfortunately, that can making choosing what’s best for you even more complicated.

In the regions section of MLSVallarta we have detailed descriptions of the regions and sub-regions of Puerto Vallarta and Riviera Nayarit, along with photos and maps, to help one get to know them and what they have to offer.

MLSVallarta has also created this short video to help better understand where Puerto Vallarta and Riviera Nayarit’s popular regions are situated and what they look like. In less five minutes we take you from the south shore of Banderas Bay to San Pancho in the north, visiting Puerto Vallarta, Marina Vallarta, Nuevo Vallarta, Bucerias, La Cruz, Sayulita, Punta Mita, and more along the way. We hope you enjoy it.

Vallarta HOAs and What you Should Know

Most real estate searching undertaken by people interested in having a primary or second home in Puerto Vallarta (or Nayarit), tends to center around the size of the home, number of bedrooms, the neighborhood, and of course, the price. When something is finally found that fulfills the criteria, few, unfortunately, bother to include an investigation regarding how the homeowner’s association (HOA) functions. But they should.

They don’t because many people are not familiar with what a HOA is and what its responsibilities may entail. The single-family dwelling is still the most common form of homeownership in the U.S. and Canada, where HOAs are not, in most cases, necessary. But in Vallarta the condo is king and the preferred form of secondary home or vacation ownership.

Why? They are easy to take care of, to lock-up and leave during the summers, maintenance fees are less, matter fact the overall cost is usually much less. But the other side of condo living is you are now sharing your home, or at least your common areas and perhaps a wall, floor and/or ceiling, with others. There needs to be a system in place to ensure common areas are well maintained and paid for, that everyone respects the rules in place and the privacy of the other owners. The mechanism for this is the homeowner’s association.

Before anyone makes an offer on a property it very much would be worth their while to investigate the HOA, to ensure the condominium project is being run efficiently, properly, and in compliance with state condo laws. If there are problems, it’s better to find out beforehand rather than later on. Unfortunately, the information isn’t always easy to come by. The listing real estate agent can assist with this by organizing a meeting with the property manager or administrator, and perhaps one of the board members may be available to talk to you.

Perhaps I should have prefaced this by saying there are always going to be some problems going on within the HOA – it is the nature of the beast. So don’t go looking for a perfect scenario. What you mostly want to do is confirm ahead of time what you are getting involved with and then decide if you’re okay with it.

Here’s some sample questions you could consider asking:

Is there a good administrative system in place? Is there a manager or administration company you can talk to about the building?
You should ask to see a copy of the property by-laws (regimen de condominios) to better understand what the rules are for owners.
Is there a board and do they meet regularly, taking minutes of the meetings?
How are common expenses billed and charged?
Is the electricity billed separately for each unit?
How are fees billed (annually, quarterly, monthly), and is everyone paying their fees regularly?
Are there any problems/disagreements or even legal issues internally or with the past developer?

You can get a pretty good idea of how well the HOA is being managed by just walking around the property and checking how well everything is being maintained. Poor maintenance and condition of the building probably means poor management and a weak board and HOA.

Garry Musgrave has written a couple of books about condominium HOAs in Jalisco and about condominium law, and he writes, “Much of the problem comes from unsubstantiated opinions or maintaining of the status quo. Often, people having experience with a condo in Canada or the U.S. will try to apply this to a Mexican condo — unfortunately, they don’t operate the same way! Some early condos made mistakes when they were set-up, and these have been continued by new condos copying them! Eventually, poor (and often, illegal) practices became the standards on which new condominium administrations are based. The real problem is that detailed and accurate information has not been available to you.”

Garry has written book about condominium HOAs you can purchase on Amazon.com. It makes a very good guide for anyone involved with HOAs, and set you in the right direction for properly setting up your condo regimen.

And what if you have already bought and now discover there are problems with your HOA? Well, remember, as I wrote above, there will always be some problems, what’s important is the severity of the problems. First, you should educate yourself about what best policies are for the operation of a HOA. Ask questions, both to the administrator and board, but perhaps other people at other developments who have ample experience in the operation of HOAs.

Secondly, consider getting involved yourself by serving on the board. The worst guy at the annual general assembly is usually the one who loves to complain but then never bothers to help out by serving on the board. It’s my opinion that if you haven’t served, you really don’t deserve to complain much. If you want something to be done, then perhaps you have to do it yourself by getting involved.

Other points to keep in mind:

If you have a weak administrator, you need to have a strong board. But that will mean board members putting in a lot more time than they may want to, or should. It can also lead to board members having too much control. Prime candidates for this are successful retired corporate types who are used to running their own company, but don’t have the company anymore. So they take over the HOA!
If you have a strong administrator you’ll have to pay more, but it will make the job of the board much easier. In my opinion this is how it should be done, with the board just providing direction and oversight. Unfortunately, for small projects, this often is challenging.
Checks and balances. You have to have systems in place to ensure that the administrator, management and board are doing their jobs properly. The administrator and accountant shouldn’t work for the same firm – as they need to audit one another.
Do all you can to avoid lawsuits. Usually the only one’s to win are the lawyers. People can get very hot-headed, for some reason, when it comes to HOAs. It’s a little like road-rage, but now inside the condominium structure. Owners have to understand that they have no choice, they are neighbors and are stuck living near and with one another. So the nicer you can be to each other, the higher the degree of success and compliance you’ll have regarding HOA matters.
A poorly run HOA can take away from the pleasure of owning, put some owners against others. Your best best is to get a great administrator who can keep people in line and ensure that day-to-day operations are done correctly.

New Nayarit Development Announced: Pacifica Bucerias

In one of the more popular towns of Riviera Nayarit, a new real estate project is breaking ground featuring amenities that have become very popular in downtown Vallarta recently. Pacifica Bucerias features a 5,000 f2 rooftop common areas with swimming pool and 180º views of Banderas Bay. The new project is situated on an elevated and sloped embankment within the desirable Zona Dorada area of Bucerias, consisting of three modular buildings of varying heights that offer ocean, “pueblo” and mountain views, depending on the unit. Three elevators and two lobbies will provide easy and level access to each condominium.

Pacifica Bucerias offers numerous one-bedroom units, all with two full bathrooms starting at US$165,808.00. Two bedroom units are available with two or two-and-a-half bathroom configurations. Each unit is detailed with high grade European PVC window systems, porcelain flooring, granite, marble, luxurious bathroom and kitchen fittings, energy-saving lighting, quality carpentry, zoned AC, filtered water, excellent appliance package and many other details. An equipped workout room, common storage for sports equipment and one underground parking spot for each unit add convenience and value.

Click here for more information regarding Pacifica Bucerias

Buying “Pre-Sale” Properties in Vallarta

“Pre-sale” purchases

A “pre-sale” purchase exists when a buyer enters into an agreement with a developer to purchase a unit that has not yet been built or finished. This type of purchase is inherently risky. In Mexico over the last 10 years the real estate market has seen a major boom, especially in developed or developing coastal areas. Between 1995 and 2005 prices skyrocketed and fueled an increased number of new projects, the majority of which were sold as “pre-sales”. The first of these projects brought great returns to the buyers, who often times purchased at a 30% discount off the finished sales price. Furthermore, many of these projects went up in value 20 or 30% per year prior to being delivered, which made the investment even more profitable.

When the real estate boom started many investors thought long and hard about the terms of the pre-sale agreement before signing. Many did not sign these agreements as they presented too much risk and were too favorable to the developer. In short there was no guarantee a developer would finish a project or return the buyers’ funds if they could not deliver.

However, as the boom gained speed, people were more willing to accept a less protective agreement in order to secure deals and get in on the “great investment opportunity”. As the real estate boom continued, fewer and fewer people were concerned about the terms of the agreements they were signing and more were concerned with signing quickly so they would not lose the unit to another buyer.

The recent downturn in the world economy and the roller coaster stock market have seriously changed the outlook of every single buyer I have spoken with who is currently holding a signed agreement with a pre-sale project that has not yet been delivered . Just about every buyer that I speak with today who has invested in a pre-sale project that is not finished is asking me “Is the developer going to finish the project?”, “Can I get my money back?” and “How can I protect myself if the project fails?” This article will go over where the pre-sale market is today, the risks of investing, and what you can do to limit those risks.

First and foremost, everyone must understand and have in mind that developers, more than anyone else, want to finish their projects and deliver the units. An unfinished, undelivered project means losses and no developer is in business to lose money. In most cases developers are the ones that have put up the initial millions of dollars in seed money to get the project going. Do “pre-sale” developers use your money to finance the projects? The answer is yes, they do use pre-sale money to finance or leverage their projects. However, everyone must also understand that in most cases they have put up hundreds of thousands of dollars, if not millions to get the project going.

This article will look at:

The general types of “pre-sale” projects that exist
What you should negotiate for
What happens if the developer disappears and no one is on the project

Types of “Pre-sale” Projects

There are principally two types of “pre-sale” projects. Please understand that there are many variations of the two principal types, but they all seem to fall into one of the two following classes:

Class One: Financed Pre-Sale Projects

These projects are financed by banks or private equity groups who fund the project “based on sales projections being met”. As a very general example, a developer will put up 20% of the initial funds to get the project moving, then as certain numbers of sales are made, the bank or private equity group will release funds to the project to move it forward. Based on an “absorption rate” (in general a speculative number of sales per month or quarter), the lender will release more funds to advance the project along. Obviously the “first round” of financing is usually the most difficult to get as the bank wants to see a “healthy” absorption of the product into the market. If they can see that 30% of total sales are reached, they are usually willing to release that really important first round of financing to get the project off the ground.

If you pick up a real estate magazine from a year ago you will see several advertised projects that no longer exist. Why? Because they did not get enough “absorption sales” to kick off their first round of financing.

Most of these Financed Pre-Sale Projects are the bigger, more well-known outfits. These outfits are usually better prepared to deal with problems in the market, but they are not completely immune to sharp downturns in the number of sales. So where do the risks lie in these projects? Principally they lie in the developer making initial sales projections to get first round of financing approved but then not making further benchmark “absorption sales” to get the second and third round of financing. Recently some developments are experiencing very low sales numbers and what is worse, they are having clients default on existing agreements, lowering their number of sales to below the minimum required for financing to be in place. If this happens the developers usually opt to do all or some of the following:

Ask for advanced or final payments. Most pre-sale agreements are very one-sided in favor of the developer and contain language that allows the developer to ask for final payment before delivering the product.
Slow the construction down to the bare minimum. This is to cut costs until cash flow increases or sales number are met, triggering the next round of financing.
Extend financing terms and sometimes pass them on to the buyers.
All of these options mean that you are going to be asked to pay more for your unit or it is going to be delivered later. The developer is looking at the economics of the project. You also need to be looking at this.

If you have invested in this type of pre-sale project and see the developer slowing down on construction or proposing any of the options above, you need to move as quickly as possible to renegotiate or force a settlement on your agreement. The first people to negotiate or force a deal will usually get a better deal than those who wait.

Class Two: Non-Financed “Pre-sale” Projects

These are the projects that do not have any type of formal financing and are speculating on making enough sales to generate cash flow for construction costs. These are usually smaller projects.

Needless to say, these types of project are higher risk projects because when the sales stop, so does the project. If the sales stop for any length of time, these projects are more susceptible to legal action and to having the developer “disappear”. Once the developer disappears, everyone loses.

Furthermore since a financial institution or bank is not involved, there is usually no “contingency” or risk plan established in case the project fails. When a bank loans money to a project, they almost always include provisions to take over the project in the case of failure as well as a plan to inject the necessary capital to finalize the project. Smaller, self financed projects do not have these contingency plans.

In these smaller types of “Pre-sale” projects, if sales are not met usually one of two things happens:

Construction comes to a virtual halt. Maybe a handful of workers are kept on to maintain the appearance of progress, but for all intents and purposes the project is stopped.
The developer asks for advance payment or increases the price of the units.
Smaller projects are more susceptible to going under. It is extremely important to be aware of this and, if any of the warning signs mentioned above appear, to take immediate action to protect your investment. Action, in this case, would mean getting a written and notarized agreement from the developer as well as full disclosure on the finances of the project. Legal action may also be needed. Verbal agreements or promises mean absolutely nothing unless the person making them is willing to sign off on them.

What should you negotiate for?

If you can, you need to turn the emotions completely off and the math skills on. There is a whole range of questions that need to be answered in order to find the mathematical and economic solution that is best for you. Some of the general questions we go over with our clients are:

What is the developer offering? Any offer the developer is giving is a starting point. You need to build your arguments around this starting point.
What percentage of the total price have you paid? This is the liability of the developer as well as your exposure.
What are you willing to lose? This is a hard question but you have to understand that if you are not flexible, your ability to reach a negotiated resolution is not good, and litigation is expensive.
What legal options do you have and what are they going to cost? There are legal options besides litigation which can force a developer to come to a more reasonable solution. All of these options need to be explored.

How much more would you be willing to pay to have a finished unit vs. litigation?

Is there a group that has a professional common representative? The developer wants to resolve as many problems as he can. Groups of buyers will get priority attention over individual owners.
We must understand that a developer is in an economic bind if he is slowing down or stopping the project. His options are limited and he will do whatever he needs to in order to make the project not fail and avoid a lawsuit. The developer is not your friend nor is he your enemy. You are both investors in a project that is in trouble due to a world economic crisis. Finding or forcing a solution is better for both parties so you need to work with the developer or force him to work with you.

What if the developer is gone and no one is on the project?

This is the worst case scenario, and you need to do some immediate research on what happened too see if there are any groups working to negotiate, find the developer, or file action against the developer. Do not walk away from your investment. Even if you only recuperate 30% of what you invested, it is better than walking away and allowing someone else to take all of your investment. Get good advice, talk to other people in the development, review your options, and get moving to protect your investment.

David Connell is a licensed Mexican attorney with an office in Puerto Vallarta. If you have any questions about this process, you can contact his office at: www.mexicolaw.com.mx.

New Projects added to MLSVallarta

Eight new real estate projects situated around Banderas Bay were recently added to MLSVallarta over the past month. You’ll find full descriptions, photos and their current inventory in the development’s section.

Aria Ocean is a large oceanfront condominium project in Flamingos, Nayarit with 80 ocean view units and 80 mountain view units, starting at $132,000.
Avida is located in Emiliano Zapata in the southside of downtown Vallarta, with a rooftop common area featuring an amazing infinity pool.
D’Residences offers luxury condominiums in Emilano Zapata overlooking the town and bay.
Elite Residences is also situated in Flamingos, Nayarit, offering oceanfront units starting at $245,000.
Marina Residences is in Marina Vallarta, overlooking the marina, starting at $180,000.
Maritima is also situated in Flamingos Nayarit, offering luxury oceanfront condominiums.
Pacifica Bucerias is the newest projected added to MLS, situated on the hillside in Bucerias, with prices starting at $166,000.
Porto Santa is located in the Hotel Zone and offers condominiums starting at $101,000.

You can find out more about these projects, and many more, at MLSVallarta.com.

In Search of the Elusive “Perfect” Vallarta Condominium

During our nearly many years in Vallarta, we have lived mostly in condominiums, situated in different Vallarta communities, and Riviera Nayarit neighborhoods around the bay. Each has been unique, offering advantages and disadvantages concerning location, layout, price, and numerous other things that should be taken into consideration before moving into or purchasing a condominium. It’s become somewhat of a game for us whenever we are looking for a new home, a search to find the perfect condominium. So many variables come into play when attempting to find a condo that will fit into your and your family’s lifestyle. You have to take into consideration work proximity (if you do indeed work), children and their ages (if any), and what it is you and your family most enjoy doing.

With regard to location, it’s sometimes nice to be outside of the downtown area where traffic and city noises are not a problem; however, you may find you have to do much more driving to go to a restaurant, attend an event or drive the kids to school. There’s nothing quite like living downtown where you can walk to nearly everything, but then there are still roosters crowing at 6 am and the hustle and bustle of people, cars and buses.

One couple we know retired outside of Vallarta in a wonderful home they built themselves on the beach in the jungle. They were quite happy out there for the first few years, but then they began to miss people! At first they enjoyed the solitude and privacy; however, after a while they missed the restaurant scene, seeing their friends regularly, the art walks, and ended up selling their home and building one above Gringo Gulch. Now they can walk into town to frequent their favorite restaurants and socialize. So, that adds another dimension to this search: what may be the perfect condo for you today may not be in five or 10 years!

So, you need to consider not just what your wants and needs are today, but what they will be down the line. As we get older, the four flights of stairs and no elevator may no longer be seen as a handy, built-in workout circuit. And I doubt the realtor, when you’re ready to sell, will see it that way either. We get married, have children, the children grow up and leave home —time can play havoc when searching for the perfect condominium. Our needs constantly need to be reevaluated.

Then there’s the size of the condominium. If it is just for a single person or a couple, a one-bedroom may do. Sometime, however, it’s nice to have a second room for company or an office or even a separate media room, which has become increasingly popular instead of using the living room for watching television. Storage always seems to be a problem with condominiums, although some of the newer projects now address that by offering secure storage space outside the condominium. And you can never have enough closet space! The extra room is nice, but the price increases, as does the chance of relatives showing up to visit. It’s sure nice when they do, but sometimes nicer when they leave!

And what about the size of the condominium project? If it’s a small development, you have only a few neighbors, so noise should be minimal; however, that also means there are fewer owners to share the homeowners association’s expenses, so monthly maintenance fees may be high. It also means fewer services and amenities than you’d find at a larger project. You can forget about a gym, spa, tennis courts and concierge service, but the alternative is probably living in a high rise with many other people, which isn’t as personal and private and perhaps will be noisier.

Parking is something you need to take into consideration. Having covered parking is nice, but also expensive. And if you can have an extra space for a second vehicle, boat or such, that’s even better. And are the parking stalls wide enough? We once had a condominium that came with a parking space, but when both of our neighbors were home the only way we could get into our SUV was through the back or the sunroof!

Today, having a swimming pool is usually part of the package, and you may want to consider its orientation. If it doesn’t get much sun, it may be cold in the winter (unless it’s heated, but then the heating bill starts adding up). Of course, that can be a plus, as not many people will be using it, meaning you’ll have it for yourself! If it does get plenty of sun, you may find that it stays too warm in the summer months, when you really do want to cool off. Jacuzzis can be nice, but they also need a good maintenance program. Even if they are not used regularly, the cost of operation can be significant. In one project, they just kept it empty because of the cost, which looked terrible. In another, they had it running all the time and always without any cover.

If the terrace faces south, you’ll have plenty of sunlight —perhaps even too much if you don’t have a decent overhang to block some of it, especially during the summer. Facing west offers wonderful sunsets but no sunrises. If you face east, you get the opposite: sunrises but no sunsets. Facing north means you won’t get enough sun on your terrace, but then that may be just what you want —great for the summers, but perhaps a little cool in the winter.

And what is it you’d like for a view? Beach and ocean views are nice, but they tend to cost more than the others. Golf courses are great backyards, as they are usually quiet and you have a huge lawn that someone else cuts for you. Hillside homes are wonderful, as they can offer spectacular views of the bay and are usually a few degrees cooler all year round, but they can be difficult to get to and there may not be many services and amenities nearby.

If you like playing golf, you probably will want to be in either Marina Vallarta, Nuevo Vallarta or Punta Mita. If you are a boater La Cruz or Marina Vallarta may work best. Having a condominium or a townhouse with a boat slip out your back door sure makes boating easier. But being near water or on a golf course can mean that bugs may be a problem, and if you are close to the ocean the salt air can affect your metalwork and appliances!

Living in a high rise will probably offer spectacular views, but then you need to take an elevator to get to your home everyday. Some developments will allow you to have a pet, but that means every other owner can also have a pet, and theirs may not be as well behaved as yours.

There are a lucky few who have gotten around some of these obstacles by having two homes in Vallarta: one on the beach outside of Vallarta, where prices aren’t as expensive and it’s less crowded, and another downtown, where they can drive in and spend a few days enjoying the restaurants, shopping and such. But that’s only available for the few who can afford it. And with that comes twice as much maintenance work and double the costs. You have two wonderful places but you are always working on maintaining them.

And so, we’ve come to realize over the years that there really is no perfect condominium. Each individual, couple, or family needs to consider what their wants and needs are, both today and in the future, and base their buying decisions on that. Some condos will fulfill their needs better than others, but then those others may be just right for someone else. We are fortunate that Puerto Vallarta has plenty of locations, sizes, and price ranges to choose from. So, although you may not be able to find the perfect one, you certainly should be able to find something pretty close!

MLSVallarta Now Features 25 Real Estate Developments

There are now 25 real estate developments listed on MLSVallarta featuring the latest in new construction around Banderas Bay. You’ll find them all on a map shown here, along with full descriptions, photos, and floor plans of the main project and common areas, as well as the full inventory with details on each of the units still available. Here’s a recent update on some of the projects featured on MLSVallarta.com:

Harbor 171, represented by DOMUS Fine Real Estate, reports they have closed on 30 units and have 17 in process. You can contact them directly here, or with another of the following agencies that they have agreements with: Timothy Real Estate Group, Boardwalk Realtors, Elengorn Realtors, Canoa Bienes Raices, Beach Homes Vallarta, Propiedades Vallarta, Oasis Bay Realty y Mansion Homes.

Alamar has announced a pre-sale on their new Delta III tower. Prices start at US$192,000 for their 1, 2 and 3 bedroom condominiums, with a discount price for cash. For more information you can contact them here.

Palma del Rey, represented by Elengorn Realtors, reports that they now have on-site sales available between 3PM and 8PM with excellent discounts and payment plans. For more information you can contact them here.

At Pavilion, which is also represented by Elengorn Realtors, they have finished the first phase of deliveries for units on the 1-5 floors, as well as the common areas on the fifth floor where the swimming pool is located. For the month of May they are offering a 25% discount on west facing units. For more information you can contact them here.

At Pier 57, represented by Tropicasa Realty, they have one-bedroom units starting at US$280,000 and two-bedroom units at just under US$283,000. AND, there is a 20% discount now available on the following units: 202, 203, 204, 208, 211, 310, 409, and 410. There is a 7% discount available on these units, while they last: 306, 401, 510, PH6, PH9, PH10, PH11. For more information you can contact them here.

Vallarta Property Rentals & Taxes

Many people who decide to buy real estate in the Costa Vallarta region do so with the intent to rent out their property when they are not using it. There are a number of options to do so, ranging from taking care of it yourself or having a rental company do so for you. Doing it on your own can be demanding, especially if you aren’t in town to ensure the property is ready for the rental, provide access to the people who will be renting, and take care of any repairs or maintenance that need to be done before or during a rental. Having a property-rental management company takes away a lot of the headaches as they can do this all for you. They can also assist with the proper filing of any revenues you may generate with the local tax authority (SAT).

Rental Income and Tax Reporting

When discussing rentals, it is important to understand the difference between the terms “rentals” and “lodging.” This is not always easy to do and often left open to interpretation. What’s important is “whose” interpretation.

Where we can find clarity is at either end of the spectrum: If a property is being rented long-term with an annual lease, this is clearly considered to be a “rental”. A hotel, on the other hand, can be clearly defined as being in the “lodging” business. As you start shortening the rental period, you begin moving closer towards what may be construed to as lodging. In between is a grey area, open to interpretation, depending who you may be talking to.

As the law stands, short-term rentals, (less than a year), are considered to fall under the jurisdiction of lodging. What is most important, however, for those who are renting, or considering renting their property, is what the position or recent rulings of SAT have been with regards rental income. To date, SAT is primarily interested in knowing that you are registered and filing this income.

It is an important distinction to make for if short-term rentals were to be considered as lodging, and dealt with accordingly, then it would be necessary to have a city business license, pay a hospitality tax, register with the tourism department, be open to health and fire department inspections and fall under the jurisdiction of PROFECO (Mexico’s Consumer Protection Agency). But, as it stands now, for homes and condominiums these procedures are not currently being enforced.

However, whether a short-term rental or a long-term rental, if incomes are received in any way, they have to be reported. The important difference here is with regards to what other forms of taxes or reporting may be necessary if short-term rentals are deemed to be considered “lodging.”

Could this change in the future? Definitely. But for now, this is how they see the situation, so if you are registered and paying the taxes owed, chances are you are just fine. If they did change their position this would seriously affect the rental market as an individual homeowner would now have to follow the same practices and procedures as the 200-room hotel down the street.

If you are going to rent and receive income for it, you should report it. It is no different here than it is back in Canada or the U.S. if you were also renting your property. Any taxes you do pay, however, can usually be applied against your tax return back home. Some owners of property in Vallarta believe that if the transaction and the payments for the rental take place in their country of origin, they are fine just filing in that country. That isn’t enough. As the income in generated from a property in Mexico, one needs to report in Mexico as well.

In the past, not reporting income earned was rather common, and it simplified the rental transaction considerably. But today this is not recommended practice. SAT, (the equivalent of the IRS in the U.S. and Revenue Canada), has come a long ways over the past few years, and any Mexican business owner will certainly attest to that. It may have been different in the past, but today, there is no way of avoiding not paying taxes. The last time I visited their offices to provide a digital signature, they also took my fingerprints and did an iris scan – they take tax collection seriously. Furthermore, the tax authorities in the U.S., Canada and Mexico are now working together more than ever, and openly sharing information. So if you are filing the income in the U.S but not in Mexico, they have access now to that information if they want it.

Not paying taxes due in Mexico is dealt with in the same way it is back home, with potential civil and criminal penalties. SAT can use its discretional powers to determine whether you are or not properly reporting income. They can use as a market indicator the occupancy of the hotels in your area (some times as high as 80%) and multiply this times your rate per night. And they can go back more than just the past year, they can go back five years. So, if you rent your property and are not registered with SAT, contact a certified public accountant or a professional property management company, to get registered and start filing and paying taxes. It is not worth losing having your property encumbered for a tax debt and having to pay an attorney to defend you.

Over the past few years SAT has become much easier to work with, if you choose to do this on your own. They have experienced people who are friendly and can walk you through the procedures necessary to become registered as a taxpayer. If you don’t speak Spanish, however, you’ll want someone with you to translate. You can make an appointment online, and find out which documents you’ll be needing to present at sat.gov.mx.

Taxes must be filed monthly where a provisional tax payment of either a flat 25% of the income before IVA, without deductions, or up to 35% on the net income, along with a 16% IVA. (IVA is a “value added tax”, a VAT). When you rent, you should add this 16% onto the cost of the rental – it goes on practically everything.

Most people from the U.S. or Canada will have their property held in a residential trust (fideicomiso). Nearly all trusts allow owners to rent their properties out, but you should check yours just to make sure. You have nearly all the rights of someone who owns a property fee simple, the trust is just a legal requirement for foreigners to hold property rights along the coast and along the border.

Rental Property Managers

There are a number of companies in Puerto Vallarta that can help you with managing your property, as well as your rentals. They’ll ensure the property is ready for the rental, do collections, assist with tax payments, take care of repairs and maintenance and provide you with regular reporting. Providing this service is a range from individuals to high-end, full-service companies and then everything in between. Some prefer just to manage properties while others offer rental marketing services as well. Make sure you have someone you have full confidence taking care of your property. Ask for references and ask others who also are renting what their experiences have been. Also, many local real estate companies have a department that caters to rentals and property management for their clients. The cost for this service usually starts at 20% and goes up, depending on how much of the rental process and taking care of the property is handled by the property manager.

Some of these companies take care of just the property, meaning you could take care of the rentals yourself although you’d then also have to handle tax reporting as well. Today, with the Internet, rental marketing can be done quite easily as there are a number of rental websites such as VRBO.com and airbnb.com. However, most Vallarta rental and real estate companies also have their own online, well established, database of rental properties.

Before renting make sure that renting your property is not going to be a problem with the manager of your building and your homeowner’s association – some frown upon this and may not make it easy for you. But then there are others that are well set up to do exactly that, making it easy for people to rent their properties.

In conclusion, if you are going to rent, don’t take any unnecessary risk. Register yourself with SAT, report your rental income and pay the taxes due.

Written by John Youden of MLSVallarta.com in collaboration with David Connell of Connell & Associados. David is a licensed Mexican lawyer, specialising in real estate law, with an office in Puerto Vallarta.

Auberge to Open in Punta de Mita!

Riviera Partners Realty has been chosen as the exclusive listing agency for the new Susurros del Corazon, Auberge Residences, to be located on the north shore of Banderas Bay, just before Punta Mita. The developer, SV Capital, has chosen Riviera Partners Realty to be the listing agency for this exciting and unique branded release.

Susurros del Corazon will be a new destination for the Auberge Resorts Collection with an anticipated opening in late 2019. It is the partnership of two current Punta de Mita landowners: Tim Koogle of El Banco and Gregg Engles, who has the property adjoining El Banco to the east, along with the Friedkin Group, lead by Dan Friedkin out of Houston.

Susurros del Corazon’s will offer a “bungalow by the beach” experience with a collection of 62 ocean-view hotel guest houses and 30 ultra-luxury ocean-front residences. Three common area scallop-shaped pools will terrace down to the beach, overlooking the Marietas Islands.

Susurros del Corazon will join Auberge’s current beach escapes including Esperanza and Chileno Bay Resort & Residences in Los Cabos, Malliouhana in Anguilla, Nanuku in Fiji, and Mukul Resort in Nicaragua.

More information regarding the project is available at Riviera Partners at [email protected] or by calling (329) 291-5442.