Have you thought about purchasing a vacation home? The thought wouldn’t have crossed my mind in my 20s or 30s, but as I approach 50 years of age, the thought of having somewhere sunny to perch myself for several months or longer, became more appealing to me. So, I bought a vacation home in Puerto Vallarta (PV), Mexico after visiting it for several months during early COVID.
Introduction
This post walks you through the considerations I took into account when making the decision to purchase a vacation home and rental, including location, financing, property management, income, etc. It’s a lengthy post filled with helpful information (I hope). Look for the Hot Tips scattered throughout this post and feel free to ask me questions in the comments or on Twitter.
I recently posted on Twitter about the income made during the current high season from December 2023 to March 3, 2024 (date of the social media post below). It sparked a lot of questions and a desire to know more. A number of followers reached out to asking me to host a Twitter live Q&A which, if I can figure it out, I plan to do after this post is published.
Contents
In this lengthy blog post, I attempt to answer many of your questions:
- Why a vacation property?
- Why PV, Mexico?
- My vacation home in Mexico
- Financing
- Obtaining my permanent residency in Mexico
- How do I manage my property?
- Income and associated costs of the property
Why a vacation property?
As they say, personal finance is personal. Each person has to make the best decision for themselves. Having my home mortgage already paid off made this a much easier decision for me, though I have and do own other rental properties.
For me, as a Canadian that has suffered through decades of cold dreary and dark winters, I wanted a home in a sunny and warm climate where I could spend several months, particularly as I get older and my “go go” years start to turn into “slow go” years. I’m also in my mid-40s quickly on my way to 50 years of age, so the thought of being a nomad with no home base isn’t particularly attractive to me. While I love travel, I don’t want to always be on the move every few months for the rest of my life.
This place would have to be attractive as a vacation spot so that I could rent it out while not present, though I do not foresee necessarily renting it out forever. In fact, I could foresee potentially selling my principal home in Canada and having my home base be Mexico, while still maintaining tax residency and connection to Canada. However, I’m not ready to make that big decision just yet so I’ll be maintaining my principal home in Canada.
Why PV, Mexico?
Puerto Vallarta is a popular resort town situated on the Pacific coast of Mexico. It is located in the state of Jalisco, nestled between the Sierra Madre Occidental mountains and the Bay of Banderas. Here are some key aspects of Puerto Vallarta:
- Natural Beauty: One of the most striking features of Puerto Vallarta is its stunning natural landscape. The town is surrounded by lush jungles, mountains, and pristine beaches. The Bay of Banderas is one of the largest bays in the world and offers opportunities for water sports like snorkeling, scuba diving, fishing, and sailing.
- Beaches: Puerto Vallarta boasts some of the most beautiful beaches in Mexico. Playa de los Muertos, Playa de Oro, and Playa Camarones are among the most popular ones. These beaches offer golden sands, clear blue waters, and a range of amenities including beachfront restaurants and bars.
- Malecón: The Malecón is a famous boardwalk that runs along the waterfront in downtown Puerto Vallarta. It’s lined with shops, restaurants, galleries, and sculptures, making it a vibrant hub of activity day and night. The Malecón is a popular spot for strolling, people-watching, and enjoying the sunset.
- Culture and Art: Puerto Vallarta has a rich cultural scene, with numerous art galleries, theaters, and cultural events throughout the year. The town is known for its thriving art community, and visitors can explore traditional Mexican handicrafts, contemporary art, and local music and dance performances.
- Food: Puerto Vallarta offers a diverse culinary scene, with a wide range of restaurants serving everything from traditional Mexican cuisine to international dishes. Fresh seafood is abundant, and visitors can enjoy delicious dishes like ceviche, tacos, and seafood cocktails.
- Activities: In addition to beach activities, Puerto Vallarta offers a variety of other outdoor activities such as zip-lining, ATV tours, horseback riding, and hiking in the surrounding mountains and jungles. The town also has several golf courses for enthusiasts.
- Nightlife: Puerto Vallarta has a lively nightlife scene, with numerous bars, clubs, and discos catering to a range of tastes. From beachfront bars serving cocktails at sunset to dance clubs pumping with Latin beats, there’s something for everyone after dark.
- Festivals and Events: Puerto Vallarta hosts several festivals and events throughout the year, including the International Gourmet Festival, the Day of the Dead celebrations, and the Puerto Vallarta International Film Festival.
Overall, Puerto Vallarta offers a perfect blend of natural beauty, culture, and entertainment, making it a popular destination for travellers from around the world. I bought in the Zona Romantica (Romantic Zone) of Puerto Vallarta, which is the central tourist destination with everything at your finger tips and outside your door.
Considering a trip to PV, Mexico? Want to get the most out of your trip? Check out my blog post on what to do and what you need to know on your first or next visit to PV! and pack your bags (I’ve got a cold Cerveza (beer) and Margarita waiting for you).
Decision Matrix
Below is my matrix I used to made the decision of buy a vacation home in PV, Mexico. As you can see, PV for me ticks many of my boxes.
Hot Tip: Use this matrix to compare multiple vacation properties across different destinations.
| Must Haves for my Vacation Property | Score |
| Weather | It hardly rains in PV (outside the rainy season) and from October through May the weather is sunny and gorgeous. |
| Money | The Canadian dollar exchange rate vis-a-vis the Mexican peso is advantageous (for now). As of late, the Mexican peso has gained against the Canadian and U.S. dollar making life here less affordable. However, life is still more affordable here than it is in Canada or the United States. |
| Lifestyle | PV has a large LGBTQ+ community including a Pride Parade in May. While you don’t need to be gay to have a great time in PV, if you are, you will fit right in here. I have very easily made a close group of friends here who I spend time with over brunch and dinners, including time hiking and at the beach and local bars. |
| Airport | While PV is lovely, getting in and out is important. 20 minutes from airport to my home is desirable and the ability to jump on a plane with direct flights to Toronto and many other destinations, with perhaps a stopover in Mexico City or somewhere in the United States if that is your final destination. |
| Travel | I have never owned a car and nor do I want to. When I vacation anywhere in the world, I always travel by public transit including taxi, Uber, trains, buses, etc. The wonderful thing about PV is that in the Romantic Zone of PV or really anywhere else nearby, you don’t need the hassle of owning a car. Just walk out your door to everything you need. However, the cycling in PV is almost non-existant as cobble stone roads (rougher than European roads) makes cycling near impossible and if not down right dangerous. When I spend more time here, I will consider getting a folding bike for rides along the bike path on the flat Malecon pathway along the ocean. It offers beautiful cycling along the water, particularly early in the morning when pedestrians are few and far between. |
| Social | Similar to the Lifestyle row above, PV has a whole range of social things to keep you busy including “Off Broadway” productions, bars and restaurants galore, gyms, farmers markets, exercise choices like Zumba and Yogo in the parks, etc. |
| Shop | Having access to shopping is important. While there is no big grocery store in the area I live (there are small grocers, fish mongers, butchers, etc.), you can get groceries delivered or take a 10-cent bus ride or Uber to a large grocery store or Costco. There are all the familiar stores a short bus or Uber away including Home Depot, Walmart, etc. Of course, Amazon delivers! |
My vacation home in Mexico
I own a two bed, two bathroom 99.32 m2 (or 1,069 feet) condominium. Although I looked at existing apartments to buy, I bought a pre-construction / new build (not without its minor issues as outlined later in this post).
It has one large balcony/patio and a second smaller balcony off of the master bedroom. Both bathrooms are full bathrooms with sink, toilet and shower. In the kitchen is a very large fridge, oven/stove, garburator, and dishwasher. Believe it or not, but it’s very rare to have a dishwasher in Mexico so I consider it a bonus that I’ve got one. My home also comes with laundry (washer and dryer) in a separate closed off room with a mud sink. Lastly, both bedrooms have large closest space, including a Master bedroom walk-in closet with built in cabinets.
I wanted a 2 bed/2 bath unit in order to easily entertain family and friends while they visit, providing guests with some comfort and privacy. In fact, I’ve already had family visit for a week and this month, I’m having a close friend visit for a week and a bit as I write this post.
The list of features include:
- Located in the Romantic Zone of Puerto Vallarta
- Condominium boutique with only 11 units
- Elevator for 525kg – 7 people capacity.
- Fully furnished Rooftop Terrace featuring:
- Infinity edge pool: heated, 31.16ft long x 11.94ft wide x 4.2ft deep, facing the mountains
- BBQ and sun chairs areas facing the mountains
- Bar and lounge areas facing the city and ocean
- Covered and uncovered lounge areas
- Restrooms
- Outdoor showers.
- Controlled Access
- 4 Parking spaces available
- Units include: Gas cooktop, exhaust hood, oven/microwave combo, dishwasher, garbage disposal, mini-split A/C units in each room.
- Access to building through code and key card access.
I encourage you to follow my dedicated Instagram account “Serenity PV Mexico” for my vacation property where it is updated with things to do in PV, including where to eat and drink, and regular updates on festivals and art and “broadway” shows.
Property Picture
Below is a photo of my vacation property.
Hot Tip: Be sure to have your realtor write into your purchase and sale agreement the inclusion of a fridge. Fridges do not come common in Mexican new build purchases. When buying existing properties, it is common for the unit to be sold as is and furnished.
Property Floor Plans
For those interested in seeing the floor plan, see below. I had to base my purchase off of it as the building was a new construction unit and was essentially land and a cement base when I purchased it.
Financing
In Mexico, buying a vacation property means paying in cash. While there are mortgages available, you don’t want them. They come with very high interest rates! The annual interest rate of mortgage loans offered by selected banks in Mexico in 2023 are noted below and steady yourself, they are eye popping.
So unless you have cash sitting around, buying a vacation home in Mexico can be challenging. Perhaps like you fellow reader, I never have money sitting around because I put my money to work once I get it to earn more money for me through existing investments in real estate back home in Canada and stock market investments to recoup dividends to help fund my future lifestyle (right now I primarily reinvest my dividends).
Thus, I used the equity in my principal home (which is mortgage free) to fund the purchase of my vacation home in part. I have a high paying job (multiple six-figures) and low debt (mortgage free on principal home and a tiny mortgage on a rental property in Toronto) so obtaining cash from my equity in the form of a HELOC was not an issue for me.
I bought pre-construction in December 2021 so I had to put a small deposit down initially and then over the span of about a year or so, I had to put down equal instalments totalling 100% of the purchase price. This is how payment was structured on my purchase:
- December 20, 2021: Purchase price: $259,225.20 USD
- 35% deposit on purchase: $90,728.82 USD
- February 15, 2021: 50% deposit of $129,612.60 USD
- Delivery of Unit February 28, 2023 : 15% deposit of $38,883.78 USD (Delivery was slated for October 2022 but was delayed due to COVID related delays).
Although the interest on the debt is deductible as it’s used to earn money (I rent out my vacation property – more on this below), my plan was to eventually sell my Toronto rental property and use the proceeds to pay off this debt. I like the feeling of being debt free despite earning income on the property from renting it out. To date, I’ve been paying the interest in addition to additional money to pay down principal.
The vacation property is now estimated to be worth about $500,000 USD. That’s a 93% increase in value in a few short years. The property market like many around the world definitely took off during COVID and the land within the Zona Romantica (the main area tourists and residents want to live) is small and as it undergoes gentrification, it’s driving up property values.
In March 2023, I am listing my Toronto rental property for sale. I bought it several years ago for $212,000 CAD and the estimated value of the property is somewhere between $430,000 to $450,000 CAD given the recent downturn in the real estate market given higher interest rates on mortgages as of late.
Hot Tip: Find a real estate agent you like and use them on your deals and make referrals to friends (make sure your agent knows you made the referral). Doing this has enabled me to negotiate a discount on the standard 5% real estate agent fee on sale of properties I list.
Obtaining my permanent residency in Mexico
I decided to obtain permanent residency as it lowers your tax bill in Mexico – in other words, it lowers the capital gains you owe on any sale of property in Mexico. The bonus is that you get to stay in the country for as long as you want whereas a Canadian with a valid passport is limited to 180 days a year in Mexico.
The benefits of permanent residency in Mexico is that it provides you with similar rights to an actual Mexico citizen, excluding the right to vote. As such, with a Mexican Permanent Resident Card:
- You are allowed to work without having to get a work permit
- You may apply for free health insurance. Here you can find details about the Mexico healthcare system and health insurance for expats.
- You only have to apply once – since it is indefinite, there is no need to renew it every one to two years
- You can enter and leave Mexico as many times as you want.
The process starts at the nearest Mexican Consulate in your country. You have to go to the Consulate before coming to Mexico. The requirements have changed since I obtained my permanent residency and it appears that it has gotten more expensive. I can’t recall exactly what I had to prove in terms of monthly income but it was in the range of $2500 to $3500 CAD/month if I recall correctly.
Requirements from the Mexican Consultate in Toronto which I assume are similar for all Consulates in Canada.
- Completed Visa application formCopy of your passportCopy of the migratory document proving your legal status in Canada (only for applicants who are not Canadian citizens).Letter from your bank/investment company signed and stamped stating the following “we confirm that your monthly income/pension for the past 6 months is over $9,900 CAD after tax” or “we confirm that you have had a constant monthly balance of $395,000 CAD for the past 12 months”. Letter is a must, do not send bank statements. If letter doesn’t meet the requirements do not submit your application as it will be disregarded. (Amounts are per person and after tax). *Canadian account*
Confusingly, a friend tells me that he got an email recently from the Mexican consultate in Toronto stating different figures: “We confirm that your monthly income for the past 6 months is over $5,000 CAD after tax” or “we confirm that you have had a constant monthly balance of $82,000 for the past 12 months”. Please do your own due diligence. Upon a successful application at the domestic Consulate, they will stamp your passport.
When you arrive in Mexican territory from your flight, once you pass through Migration (in the airport), you must inform them that you are applying for the Permanent (or Temporary) Residence, at which time they will give you a QR code and they will provide corresponding instructions to download a form known as an FMM form. Once you have your QR code, you need to scan it and log in to generate an account and fill it out to get the FMM form.
You then have a period of 30 days to go to the Migration Office that corresponds according to your address (of my vacation property in Mexico) and make the exchange from Tourist to Permanent (or Temporary) Resident.
The National Institute of Migration (INM) will do the fingerprinting process within the same day of the application, however you need to stay in Mexico for at least 2 weeks until you receive the Residency Card, otherwise you must begin the entire process again. Currently, the entire process is all done in person (not virtually) both in Canada and Mexico.
The fees for the application I paid were as follows:
- Permanent Residency application $6,789.00 MXN pesos (about $550 CAD)
- $8,000 MXN pesos to the consulting firm to assist me with the process (about $645 CAD)
Hot Tip: I highly recommend you hire a firm based in the location of your vacation property in Mexico to help facilitate you with this process. Having gone through the process myself, I know I would have not been able to complete the process with as much ease and success without paying for help. The cost is minimal and well worth it. If you want a referral, send me a private message or leave a comment and I’ll be happy to do so. Their help even through the Toronto Consulate process which was in English was still immensely helpful.
How do I manage my property?
To be honest, although I have managed multiple rental properties back home by myself, I can’t manage my vacation property from abroad. I don’t speak the language and I don’t know local contractors and it can be challenging at times to know you’re getting a fair price or whether you can trust someone (with that said, I’ve only had one negative experience to date).
To furnish my property, I hired a local designer as I had to return home to work and couldn’t manage it from afar. My designer picked out suggestions for furniture that I would approve based on look and cost and they handled securing it, buying it, and delivering it to my unit and installing it. In that way it was seamless though my interior designer had some serious challenges securing beds for me (it’s a long story involving a carpenter and extortion) so I ended up paying an extra $400 CAD as part of a shake down to secure my beds (which ultimately delayed me listing my rental by several months).
In total, I paid for interior and exterior furniture consulting, purchase, delivery and installation about $30K CAD. You can definitely save money doing it yourself but trying to do so while back home was next to impossible. It’s definitely more doable if you have time to spend at the vacation property yourself.
Hot Tip: In Mexico and really in any southern climate, due to humidity and termites, you want to purchase parota wood.
In terms of property management, I took suggestions from local friends I trusted (that is how I found my local real estate agent) and I then interviewed a couple of potential property managers. I went with the smaller upstart as they seemed more eager for my business.
The costs of their services are as follows:
- $145.69 per month USD
- They take an additional 20% commission on all rentals they arrange
- There is an additional ~3% taken for travel agent commission (when booked through another platform other than their own)
I have been very pleased with my property management team – please let me know if you need a referral. They are Super Hosts on Airbnb and are my eyes and ears on the ground protecting my property investment. They meet all guests upon arrival, walk them through the condo and explain things like turning off lights and hydro before exiting, cleaning between visits including laundry, and general maintenance. When there was a small leak in the bathroom, they were right on it and fixed it.
Lastly, but certainly not least, they keep me informed of all things with my unit and how issues are being remedied, including providing me with monthly accounting statements. I can even have packages delivered to their office and have them take them to my unit.
Even before I rented it out for a reasonable fee, their maintenance team installed my washer and dryer, in addition to my robust water filtration system that is connected to a separate second tap in the kitchen and connected through to my fridge water and ice maker to ensure safe and clean drinking water for my guests (otherwise they’d have to purchase jugs of water to drink).
If you were wondering, the only “damage” to date in my unit has been scuffs on the walls and some dry wall (though in Mexico it’s not dry wall but something more durable for humidity) nicks that have been easily patched up.
That’s about it except for one guest that had it as their goal to air-condition the beach from my condo. Yes, they kept the sliding doors open at the height of the sun and humidity in the day and turned the air conditioner units to their lowest possible “Arctic” setting and blasted it. Needless to say there was condensation on the wall underneath the air conditioner unit that damaged some paint and some water dripped onto my sofa below. My property manager fixed the wall. You’d never know there was any such issue so I’m very happy to have my property manager on site and ready to address issues in real time on my behalf.
They are worth every penny – I don’t worry about my home while I’m not here in Mexico.
Income and associated costs of the property
This is probably the section of this post most folks are interested in from a vacation property perspective. I understand. Who doesn’t like to make money, right? However, income isn’t my primary motivation. My main motivation outlined above is to have a home base for winter and one that I will likely spend more time at as I age from my “go-go” years to my “slow-go” years. So, yes income is important and I do rent my place out while I’m not there for that reason, but it isn’t my main motivation. Now to the dollars and cents.
Setting up an Airbnb or VRBO property as a vacation rental and its ongoing maintenance entails a significant upfront investment that includes furniture, household items (dishes, cutlery, glasses, bedding, towels including beach towels, etc.) and modifications to the home that include (for me in Mexico) installing a water filtration system that is wired to the sink and fridge for safe drinkable water and ice cubes, shower amenities, laundering of rugs, general contractor maintenance to fix leaks, fumigation for termites and cockroaches, paint touchups, water filtration replacements, regular cleaning between guests, etc.
My place was available for rent on June 8, 2023. However, I took possession of my place on February 28, 2023 and started to incur costs in March 2023 as I worked with my property manager to set my property up for me to use and to rent it out.
Income (prices in USD) as of Feb. 29, 2024
| Item | Amount |
| Rental Charge Income | $12,142.20 |
Costs (prices in USD) as of Feb. 29, 2024
| Item | Cost |
| Owner Tax | $338.64 |
| Owner Charges (Property Management, Gen. Maintenance, Supplies) | $5,653.07 |
| Commission / Travel Agent Commission | $2661.74 |
| TOTAL | $8,653.45 |
As you can see from the tables below, since I’ve made my vacation property available for rent, I’ve managed to make a profit when looking at the direct costs of property management and the income from rent.
However, this total does not include the initial upfront costs of furnishing the unit (interior design, delivery and installation, furniture and household items) which in total cost about $30,000 CAD (or $22,000 USD). Including this amount in the tables above puts me in the red by about $18,500 USD.
Either way, I’d have to spend the money on furniture even if I didn’t rent it out under property management so I consider it a success that the vacation rental property is currently cash flowing or at the very least revenue neutral (when the minimal costs related to electricity, water, gas, and condo fees are included).
$12,142.20 – $8,653.45 – $1,697 – $96 – $86 – $94 USD = $1,515.75
Figures below for 2023 and as of Feb. 29, 2024.
| Item | Cost (figures rounded and exchange rate as of March 17, 2023) |
| Condo Fee | $2,297 CAD / $1,697 USD |
| Gas | $130 CAD / $96 USD |
| Water | $116 CAD / $86 USD |
| Electricity | $127 CAD / $94 USD |
I anticipate my cash flow will improve in 2024 as upfront costs such as furnishing the unit from top to bottom, installing a water filtration unit and laundry facilities, etc. will hopefully not be charges I incur in 2024 naturally. Again, the main purpose of the vacation property was not to use it as a vacation rental property forever but for the time being, and at least break even (cover costs) and ideally free cash flow.
I am cash flowing so far so I consider that a win!
Do you have any questions? Let me know below in the Comments or via Twitter.