Real estate speculators always look for specific variables in an area before they purchase a project, but simply put, they look for places that are cheap, that they can improve, and sell for a profit. But it takes more than just a cheap piece of property to make profits, flipping a house. You also want things like high demand, a small existing inventory, much higher current construction costs than those of that existing inventory and close by areas with similar development histories that indicate positive appreciations. In Mahahual/Costa Maya, we have one such area right now, and if you are a speculator, house flipper, or perhaps you just watch a little too much HGTV or those vacation dream home shows, you might want to read on.
Most who look at real estate in the Costa Maya/Mahahual area check out our beach areas, or perhaps one of the many new downtown beach front condos that have sprung up the last few years. Very nice properties can be found here, but generally, finding a profitable flip in these areas is not easy. All are expensive and will require a hefty investment to buy and complete. Also, buyers in the upper price range, like in any market, get harder to find, no matter where you are, so sellers often have to wait a long time to sell. These are not the variables a smart speculator looks for.
However, away from the beach and the downtown malecon, is the Nuevo Mahahual area, also known locally as the “casitas”, and this is where you real estate speculators will find your money makers. Why? Because this area has all the variables you want for a profitable flip.
Seventeen years ago, port developers recognized the future housing needs of the community, and built the infrastructure for the residential/commercial area that became Nuevo Mahahual. This is the area just outside the port facility and includes a commercial corridor that goes down the center of many residential side streets, and connects the port to the downtown commercial area and malecon.
The “Casitas” or Nuevo Mahahual Just Outside Puerto Costa Maya
Modern streets with utilities were built and the developers began to build the first houses that would be sold to Mahahual’s new business class and their workers. Although they put in many new streets in the initial construction, they only dedicated the first few blocks to the municipality, so they could build the first houses. As those houses sold, they dedicated the next few streets, and built more. Those houses were all built in the years between 2000 and 2005, and most were bought by companies that did business in the port and were used as worker housing. These homes were small and very cookie cutter in style and design. They were also very cheap, $15-$20,000 US, so they sold as fast as they could be built.
After the first streets were full, the developers stopped building the small track -like homes, and began to build fewer, but larger homes on the next phase they completed. Also, by this time, speculation builders had arrived, and the next phases began to fill with much nicer and expensive homes. By 2006, the demand for lots was so high, that the original developers stopped building, and began to just sell the lots to other builders.
Every couple years, new streets were finished and dedicated to the municipality, with today, only the last few streets having available lots to even buy these days. As you drive through the area, many lots are still not built on, but finding lots to buy is getting harder by the week. So if you want to buy a developed building lot with utilities in Mahahual, you might hurry on those as well, because, in spite of the many vacant lots you see, there are very few left to purchase. And guess what happens to lots when there are are no more left. That’s right, the prices go up, so even buying a lot hoping to sell for profit down the road might not be a bad purchase right now.
However, the good properties to flip on speculation are not these vacant lots, but instead those small original casitas on the first few streets. Those houses were the first homes built as I said, and have been used mainly as rental housing for locals. Because of this, the area is the worst looking of all the casitas. Renters do not take care of the properties they usually rent, much less improve them, so many of the houses are in disrepair and need work. Buyers will find these little concrete boxes were pretty well built, but still very much like the raw properties they were when they were purchased 15 plus years ago. Many still have no tile on the floors, no light fixtures, cabinets or finish details, but are also so simple, bringing them up to standards is actually very easy.
Demand, remember that important variable I mentioned earlier, is also on the rise in the inventory short, casitas area. The last few years has seen about 20% annual increase in the cruise ship activity each year, introducing the area to many new tourist who come for the day, then return for a hotel vacation, and are now ready to find a place to buy and visit more often. With prices so low, many people who might not usually be in the vacation home market, are seeing an opportunity to buy a nice finished vacation home for under $100,000 USD.
Original Un-Finished Casita Box
Those small little original houses that sold for around $15,000 USD originally are now in the $50,000 to $60,000 USD price range, and even occasionally less than that, and these are the money maker flips I’m talking about. Three years ago these same houses were selling for $25-$35,000 USD, with the last few years activity producing the type demand that would cause prices to almost double. A 40-50% annual increase in values is far beyond a normal market and is the front side of what many are calling a true real estate spike. Today, those same casitas, just finished and nicely remodeled, are selling for $100,000 USD.
Finished Original Box Casita
Aggressive speculators are buying these older small boxes and adding second floors and even expanding the footprint as part of their remodeling, and bringing even higher profits. Doing this sort of heavy remodel, especially during a period of a real estate spike, is a great formula for good profits on a house flip.
In places like Playa Del Carmen, Akumal and Tulum, where the beach property was gobbled up many years ago, the houses a few blocks away from the ocean have become more and more valuable. Homes in Akumal Bay, that are the same distance from the beach as Nuevo Mahahual, are worth several hundred thousand dollars these days, and a sure indicator that the same will happen in Mahahual to comparable properties.
All of this is why house flipping in Nuevo Mahahual is about to become the next big real estate market to take off here. However if you are wanting to do one of these projects, be aware, you might want to hurry. There were only a few streets built long enough ago to bring really good profits on a flip, and with all that is going on here now, those houses are being aggressively bought up. Speculators are now seeking out owners who are not actively trying to sell, and making offers that are too good for them to pass up on. That can only mean fewer opportunities, and rising prices. So grab your hard hats and sledge hammers, and get on down here. Don’t forget your checkbook and sunscreen either. You’ll need them both!