How to Choose the Right Developer in Cabo

BY FLETCHER WHEATON

AdobeStock_306849086.jpeg

We break down 5 key categories to consider when choosing where to buy preconstruction houses or condos in Cabo. Previously, we have discussed the pros of cons of buying preconstruction. In a nutshell, buying preconstruction should give the buyer a discount of 15-20 percent upon completion, but this potential upside comes with more risk. The shutdown in construction for Coronavirus is a great example and will test the solvency of some of the highly leveraged developers. Here are some questions you should ask before buying from ANY developer. The main thing is to do your due diligence!

1. What is the developer's track record? Are they notorious for delayed projects? Look into their completed developments. Are the current residents happy living there? How are the recreational areas and the community pool? Some developers save this for last and skimp out after the homes have all been sold. You should be wary of buying from a first-time developer without any body of work to show you. While this alone is not a red flag, I prefer to buy with people that have a solid track record.  Buying into a fractured or incomplete residential development is a painful experience, so make sure you do your research on past developments and how they turned out. 

2. What is the rental and resale market of previous projects? What is the average list price for each house or condo currently for sale in these completed communities? Are there a lot of units for sale in the development? I know of a development on the Pacific side where almost 35 percent of the built homes are for sale and have never been lived in.  That’s not the type of development I want to buy into. What would the property rent out per month on a long term basis? Has the developer ever raised the HOA fees and why? HOA fees eat into rental income and are often overlooked by buyers. 

3. Where is the development located? Real estate always comes back to location, location, location. How is the demand for housing in the area?  Is it an established area or up and coming? Is the development near an arroyo? Make sure the property won’t be damaged or at risk of any flooding. 

4. Does the developer offer financing? Did they ever offer financing?  Developer financing is a HUGE advantage in Cabo. Most developers require an initial deposit and 50 percent down upon delivery. Most developer financing is for 5 years, but some will stretch it to 10 years.  Expect fair rates around 6 percent in the current environment. If they offered financing before, but don’t currently offer it … RUN! From my experience, this happens when they can no longer borrow money and can have issues stemming from negligence, aggressive projections, or risky levels of debt. 

5. Who is the competition and how does the quality of construction compare? There are a few established and successful developers in Cabo. Make sure the developer is known for solid construction. Typical items to check would be: Are there issues with the foundation? Does the roof leak? How are the plumbing and electric? Be sure to get a verbal explanation and written agreement so you understand what is under warranty and for how long it is under warranty. Don’t complicate it and stick with the winners.

Please reach out to Fletcher Wheaton for any questions you have on Mexican real estate at US 504.444.3948 MX 624.156.1949 or cabokey.com.