Los Cabos Real Estate: What You Need to Know Before Investing
Dreaming of owning property in paradise? Los Cabos offers an incredible real estate market with options for every buyer. From beachfront condos to luxury villas, this Mexican hotspot attracts investors from around the world. Let’s explore what makes Los Cabos real estate so attractive and the essentials you need to know before investing.
Why Los Cabos is a Hot Market for Real Estate
Los Cabos has become a prime destination for property investors. The area’s warm climate, beautiful beaches, and vibrant lifestyle draw in both vacationers and full-time residents. With rising tourism, property values have surged, making this market one of Mexico’s strongest. Investing in Los Cabos real estate not only offers potential returns but also allows you to own a slice of paradise, and Cabo San Lucas is known for some great nightlife to boot.. Los Cabos also benefits from a stable Mexican economy and its proximity to the U.S., making it an ideal choice for North American buyers.
Los Cabo’s real estate market has experienced significant fluctuations, influenced by global events and shifting buyer preferences.
2021: Post-Pandemic Surge
In 2021, as travel restrictions eased, Los Cabos saw a surge in real estate activity. The third quarter reported sales of $329 million USD, a slight decline from the previous quarter but still substantially higher than typical years. This uptick was driven by buyers seeking lifestyle changes, with many opting for properties in Los Cabos to capitalize on remote work opportunities and a desire for a more relaxed environment.
2022: Continued Growth
The momentum continued into 2022, with the first quarter surpassing the previous quarter’s performance. Both house and condo sales volumes reached record highs, despite limited inventory. This growth was attributed to increased demand from both investors and individuals seeking vacation homes, leading to a competitive market with rising property values. (Own in Cabo)
2023-2024: Market Stabilization
By 2023, the market began to stabilize. The third quarter saw a 2.6% increase in total transaction volume compared to the same period in 2022. However, there was a notable decline in the number of units sold, with a 27.8% decrease. Despite fewer transactions, the average sold prices for condos and houses rose by 70% and 15.3%, respectively. This indicates a shift towards higher-end properties and a growing allure for luxury real estate in the region.
2025: Current Trends
As of the third quarter of 2024, the market has shown signs of a typical summer slowdown, with sales totaling $233 million USD, a 45% decrease from the previous quarter. Unit volume also declined by 34%. Despite this, the average and median house prices decreased, driven by increased sales volume below $1 million USD and a decline in higher-priced properties. Inventory levels remained stable, with 1,617 houses and condos for sale, indicating a balanced market.
What do the past 4 years tell us?
• Price Appreciation: Over the past three years, property values in Los Cabos have generally increased, particularly in the luxury segment.
• Inventory Fluctuations: The market has experienced periods of low inventory, especially in 2022, leading to competitive buying conditions.
• Market Stabilization: Recent data suggests a stabilization, with balanced inventory levels and a shift towards more affordable properties.
Overall, the Los Cabos real estate market has demonstrated resilience and adaptability. As of late 2024, there is a trend towards luxury properties and a balanced market environment.
Understanding the Los Cabos Real Estate Market
The Los Cabos real estate market has unique characteristics that set it apart. Prices vary depending on location, with beachfront properties commanding a premium. Popular areas like Cabo San Lucas and San José del Cabo attract the most attention, but there are options for every budget and preference. New developments are constantly emerging, and that goes for commercial real estate, too. Cabo is known for its luxury-inspired gastronomic scene, and this can be a big draw to yield a high return. This gives buyers a variety of options, from modern condos to luxurious homes and commercial businesses in emerging areas. Think East Cape and Cerritoe/Todos Santos on the west side. Real estate here sees steady demand due to high tourism, ensuring rental income for those looking to lease properties seasonally.
Key Areas to Consider for Investment
Each area in Los Cabos offers a different investment opportunity. Here are some of the top spots to consider:
- Cabo San Lucas: Known for its nightlife and iconic marina, Cabo San Lucas is popular among tourists and short-term renters. If you’re looking for rental income, this area has a strong demand for vacation rentals.
- San José del Cabo: Quieter and more cultural, San José appeals to those seeking a relaxed lifestyle. This area has charming shops, art galleries, and beautiful beaches, making it perfect for long-term living.
- East Cape: For a more secluded experience, the East Cape offers peaceful beaches and nature. It’s ideal for buyers seeking a tranquil getaway and offers potential for growth as new developments emerge.
- The Corridor: Located between Cabo San Lucas and San José, The Corridor offers exclusive resorts and high-end residences. This area suits luxury investors and those looking for gated communities.
With each area offering unique benefits, think about your goals—whether it’s rental income, luxury living, or long-term investment.
Financing Real Estate in Los Cabos
Financing real estate in Los Cabos, Mexico, offers several options for foreign buyers, each with distinct terms and conditions:
Cross-Border Mortgages
Financial institutions like Intercam Banco and MOXI (formerly Global Mortgage) offer mortgages to U.S. and Canadian citizens to purchase property in Mexico.
• Down Payment: Typically 30% to 40% of the property’s value.
• Loan-to-Value (LTV): Up to 65% of the appraised value.
• Interest Rates: Fixed rates starting around 7% (anticipate 9-15%), varying based on credit profile and market conditions.
• Loan Terms: Ranging from 1 to 25 years.
Seller Financing
Some property sellers offer direct financing to buyers, often with more flexible terms.
• Down Payment: Generally 30% to 50% of the purchase price.
• Interest Rates: Approximately 7% or higher.
• Loan Terms: Short-term, typically around 3 years, with amortization periods up to 20 years and a balloon payment at term’s end.
Developer Financing
For pre-construction or new developments, developers may offer financing options.
• Down Payment: Around 30% of the property’s value.
• Interest Rates: Lower than seller financing rates, often between 5% and 10%.
• Loan Terms: Longer durations, up to 10 years.
Home Equity Loans
Buyers may leverage equity from properties in their home country to finance a purchase in Los Cabos.
• Terms: Dependent on the home country’s lending institutions, often offering favorable rates and terms.
Considerations
• Credit Requirements: A good credit score is essential, with some lenders requiring a minimum score of 700+. (Own in Cabo)
• Documentation: Proof of income, tax returns, and bank statements are typically required.
• Legal Structure: Foreign buyers purchasing property within the restricted zone (e.g., coastal areas) must use a fideicomiso (bank trust) to hold the property title.
It’s advisable to consult with a real estate professional or financial advisor familiar with Mexican real estate transactions to determine the most suitable financing option for your situation.
Legal Considerations for Foreign Buyers
Buying real estate in Mexico differs slightly from purchasing property in other countries. Foreigners can buy property near the coast, but they must use a fideicomiso (bank trust) or a Mexican corporation.
Simply put, a fideicomiso is a bank trust you need to set up to buy or own property in Mexico. It involves three parties: the trustor (you), the trustee (the bank), and the beneficiary (also you).
This trust acts as a bridge between you and the Mexican government because, by law, foreigners can’t directly own property in certain areas of Mexico. (Don’t worry, we’ll explain why in the next section.)
In this arrangement, the bank technically holds the legal title to your property as your trustee. However, their role is purely to protect your interests. They can’t use your property, place liens on it, or benefit from it financially beyond the agreed-upon fees outlined in your contract.
Working with a reputable lawyer familiar with Mexican real estate law can simplify the process. Ensure you understand all terms and conditions before signing anything. Los Cabos has many reliable professionals to guide you through these legal steps.
Who needs a Fideicomiso?
Why do you need a fideicomiso? It all ties back to Mexico’s history and constitutional land laws. After the Mexican Revolution, the constitution protected land through ejidos—government-owned plots reserved for farming and local use. Selling property to foreigners was prohibited to safeguard these lands.
In 1992, constitutional changes under President Carlos Salinas de Gortari introduced the fideicomiso system. This allowed Mexican banks to act as intermediaries for foreign investors, enabling property purchases without directly violating the constitution. Essentially, through a fideicomiso, a Mexican bank legally holds the property title on your behalf, meeting constitutional requirements while allowing you to invest in Mexico.
Tips for Working with Local Real Estate Agents
- Choose an Experienced Agent: Work with agents who specialize in Los Cabos real estate. They can give you insights into the best properties and areas to match your goals.
- Verify Credentials: Look for agents registered with the AMPI (Mexican Association of Real Estate Professionals) to ensure you’re working with certified experts.
- Ask for References: A reputable agent should provide client references. Talking to past clients can give you an idea of their experience and success rate.
- Negotiate Fees: Understand the agent’s commission structure before committing. Local agents can often negotiate to fit your budget.
- Visit Properties in Person: Photos and videos help, but seeing a property in person gives you a complete perspective. Your agent should assist with property visits and inspections. Not using an agent yet and want to get a feel for the different areas in Cabo? A trusted private driver service in Cabo San Lucas with a licensed local can save a lot of time. They can be helpful to tell you what you may not know to ask about, like infrastructure, traffic, water, and utilities,
