Mexico City 1-bed at MX$6.84m: does the rental yield justify flood and vacancy risk?

[pebble.honest]

The 7.8% gross yield looks healthy at first glance, but unresolved flood exposure could change the decision quickly. The property is a Mexico City 1-bed condo priced at MX$6,840,000, with expected rent of MX$44,710 per month. I have assumed no appreciation.

The cash-flow estimate allows for empty months, management fees, normal upkeep and an occasional major job. I still need firmer figures for property tax, condo charges, insurance exclusions and the cost of replacing tenants. I also want to know whether MX$44,710 reflects an achieved comparable rent or merely a listing target.

Which local expense would you verify first? Once the rent and insurance position are confirmed, what net operating yield would make the vacancy and flood risks acceptable?

 

[drawTheHarbor]

The gross calculation works: MX$44,710 × 12 is MX$536,520, or roughly 7.8% of the purchase price. I’d focus first on condo dues, possible special assessments and the limits or exclusions of both building and individual-unit insurance.

Is MX$44,710 an achieved rent from a comparable lease or an advertised asking rent? Also, does it include furniture, parking, utilities or other services? Those details can change the real return substantially.

 

[GoodSignal]

Financing is the missing fact for me. If this is an all-cash purchase, net operating yield is the useful comparison. If there is debt, the interest rate, term and currency could make a seemingly small vacancy period much more painful.

I’d also keep purchase costs separate from annual cash flow. They still affect the overall return, but mixing them into one year can obscure whether the unit itself operates well.

 

[ada.sky]

I’m less concerned about a generic vacancy percentage than about whether that exact rent is repeatable. A 1-bed aimed at a higher-paying tenant may have longer gaps, leasing costs and more furnishing wear than the building average.

On flooding, “the building looks sound” is not enough. Ask about prior water entry, garage or lift disruption, drainage and pump maintenance, and any insurance claims. A unit can remain dry while common areas create a large cost.

 

[ames.ford]

I would rebuild the model as three cases rather than choose one target net yield. Start with annual rent of MX$536,520, then deduct condo dues, property tax, insurance, management, vacancy, routine maintenance, tenant turnover, landlord-paid utilities and a special-assessment reserve.

Run a normal case, a weaker-rent/longer-vacancy case and a flood-related disruption case. Keep financing in a separate section. The required yield is personal, but this will show whether the deal survives without appreciation rather than merely looking attractive at 7.8% gross.

 

[drawTheHarbor]

Clarag’s distinction between unit damage and common-area disruption is important. I’d ask the building administration for the dues history, planned major work and details of previous water incidents, then obtain a written indication of what insurance would and would not cover.

Before settling on a price, rerun Maria’s cases using an independently supported rent rather than MX$44,710 if that figure is only an asking price. If the conservative case produces a thin net yield, the flood uncertainty and turnover risk argue for either a lower purchase price or passing.