Guide to Buying Vacation Homes in Cabo San Lucas

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Dreaming of owning your own slice of paradise in one of Mexico's hottest vacation destinations?

Cabo San Lucas is officially the #1 vacation home hotspot in Mexico. Cabo real estate is seeing increased demand from domestic and international buyers alike, thanks to the city's rapid growth.

Here's the thing,

With that many new visitors and buyers coming to Los Cabos each year, it's no secret that most have no idea how to purchase property in a foreign country. The process can seem overwhelming. Transaction times are fast. Mistakes are costly.

Yet here's the good news…

Buying a vacation home in Cabo is actually much easier than you might think. If you know the market, the area, and the steps in the process, you can score great properties for big returns on your real estate investment and live like a Mexican king.

We'll cover:

• Why Los Cabos is Great for Vacation Rental Homes

• How Foreigners Buy Real Estate Legally in Cabo

• Top Areas to Buy in Cabo for the Highest Returns

• What To Expect in Terms of Costs and Timeline

Why Los Cabos Is Great for Vacation Rental Homes

Let me show you something you may not know…

Los Cabos isn't just popular – it's booming. In just 9 months of 2024, nearly 1,000 properties sold for $1.13 billion in total sales value.

Why does Cabo San Lucas work so well for vacation homes?

Perfect Location. Flights from the U.S. take less than 5 hours. Year-round weather is about as perfect as it gets with 365 days of sun a year.

Rental Income Potential is Off The Charts. Prime properties can easily generate 6-10% gross annual rental yields if rented as vacation rentals.

Rock Solid Market Fundamentals

The best part about Cabo's real estate market? It's built on rock-solid fundamentals, not speculation.

Foreign buyers are driving demand. Experts predict a 30% increase in foreign purchases through 2024.

Median property values are increasing 5-8%+ on average every year. From 2023 to 2024, the average Los Cabos sale price increased 13% from $678,107 to $768,554.

Buyers will love these strong fundamentals.

How to Buy Real Estate Legally in Cabo San Lucas

Wait, you mean foreigners can own property in Mexico?

Yep! Most people are shocked to learn that foreigners can own property in Cabo under a trust known as a fideicomiso. It's a legally recognized ownership vehicle and one of the easiest in the world.

The Fideicomiso Explained

The fideicomiso system allows a Mexican bank to hold the title of your property while you control everything else. Think of it like a guardianship. You can:

• Live in your property whenever you want

• Rent out the home whenever you want

• Sell the home if you change your mind

• Transfer the home to your heirs when you pass

Setting up a trust typically takes about a month and costs just a few hundred dollars per year. Most international home buyers work with a Mexican lawyer to get the paperwork done, and the process usually takes 1-2 months from start to finish.

What Documents are Needed?

Documents required for a fideicomiso include a:

• Valid passport

• Income/assets

• Mexican tax ID number (RFC)

Pro-tip: Gather these documents ahead of your visit so the lawyer can start the process. It will save you a ton of time.

Best Areas to Buy In Cabo for the Highest Returns

Buying a property in Los Cabos does not all have the same potential returns.

The main city has a ton of areas, and neighborhoods all over Cabo San Lucas and San Jose Del Cabo vary drastically in terms of access to rentals and amenities. Cabo San Lucas homes for sale can also run the gamut depending on where you buy, so knowing the right areas to target is key.

Premium Neighborhoods in Cabo

Medano Beach is the gold standard of Cabo. It's got everything within walking distance. You're right next to the beach, restaurants, boutiques, marina, and nightlife. It is one of the best and most centrally located beach neighborhoods in Cabo.

The Marina is for luxury vacation properties. The proximity to dining and partying is ideal, but prices are higher here. It's still prime for year-round demand.

The Pedregal neighborhood offers nice ocean views. It's a bit more spread out and exclusive than Medano. Pedregal requires a higher investment up-front but has some of the best appreciation in the area.

High Value Neighborhoods on the Rise

El Tezal is quickly developing. Look for 30-40% discounts on properties compared to more central beachfront locations.

The Corridor between Cabo San Lucas and San José Del Cabo offers resort-style neighborhoods. Perfect for golf courses, spas, and quieter living.

Downtown Cabo has gained popularity with a younger crowd in recent years who value nightlife and access to the city's center.

Features to Look For in a Property

Ocean views are king in Los Cabos. Waterfront homes in Cabo rent for more and sell for a premium.

Walkability is also highly valued. If the home is close to restaurants, the beach, and the marina, that makes a huge difference.

Buyers are also increasingly interested in gated communities, especially as a retiree destination. Expect demand for homes in these communities to grow 10% by 2025.

What to Expect in Terms of Costs and Timeline

Ok, let's talk numbers.

Average home prices range from $200,000 for a basic condo to $3 million+ for a private beachfront villa. I find most investors love the $300,000 to $800,000 price range for affordability and demand.

Total Investment Costs

Beyond the down payment, set aside cash for:

• Closing costs (5-7% of purchase price)

• Annual fideicomiso fees ($500-$800 on average)

• Property taxes (low at about 0.1-0.3% of property value/year)

• HOA fees, if applicable

• Property Management Fees (when renting)

Timeline for Buying a Vacation Home in Cabo

Finding the right home takes 1-4 weeks. Inspection and due diligence take another 1-2 weeks. Closing can take 4-6 weeks.

Total time from making an offer to getting the keys? Usually 6-12 weeks.

Financing Your Cabo Vacation Home

Foreign financing is available in Cabo but interest rates are higher than a U.S. mortgage. Still, it's not uncommon to see Cabo vacation properties financed.

If I were you, I'd do this: Save up for a large down payment and pay cash if you can. It makes you a much better negotiator for price.

Seize the Opportunity to Buy a Vacation Home in Cabo

Cabo's booming vacation rental market will continue to attract first-time home buyers and real estate investors.

Short-term vacation rentals are expected to increase 15% more in 2024 as travelers increasingly prefer them to hotel stays.

Bottom line for buyers now: Focus on the $300,000 – $800,000 price range where international demand is strongest. Look for homes with unique amenities and access to vacation renters.

Wrapping Up

Buying a vacation home in Cabo San Lucas is one of the best ways to make a smart real estate investment and dramatically improve your lifestyle at the same time.

Buyers have access to rock-solid fundamentals like healthy demand from vacation renters, continued appreciation, and 6-10% rental yields in prime areas.

With over 4 million visitors to Los Cabos each year and strong foreign investment, the vacation rental market in Cabo San Lucas is only getting stronger.

Your slice of Mexican heaven is waiting.