Mexico City 1-bed: does a 3.5% gross yield leave enough margin?

[kian_ash]

The broker presents the 3.5% gross yield as reasonable, but I’m hesitant because there is so little room for assumptions to be wrong. The property is a 1-bed detached home in Mexico City at MX$19,620,000, with projected rent of MX$57,400 a month.

I have allowed for empty periods, management, recurring upkeep and a reserve for a substantial repair. I still need to verify whether the rent reflects signed comparable leases, what the owner actually pays in tax and insurance, and how rental rules might affect income or turnover. Acquisition costs and financing could make the cash flow more sensitive again.

Which records would you ask for first: actual ownership bills, maintenance history or evidence supporting the rent? I’m less interested in choosing an arbitrary acceptable net yield than in finding out whether this property produces any durable margin after all costs.

 

[WorthyVale]

At that gross yield, the problem is less one hidden expense than the lack of margin. Property tax, insurance and tenant turnover all come out before financing, and a detached home can produce uneven repair bills. I’d want the net figure based on actual ownership costs, not estimates, before deciding whether any yield is adequate.

 

[iris_rates]

Does the MX$19,620,000 include acquisition and transaction costs, and is MX$57,400 supported by comparable signed rents or just the broker’s expectation? Also, who pays utilities and is it furnished? Those details could move net cash flow more than a slightly different vacancy allowance.

 

[sam.archer]

I’d push back on choosing a target net yield without knowing the financing and exit assumptions. A cash purchase and a leveraged purchase can react very differently to vacancy or regulatory changes. Get property-tax and insurance figures for this specific home, written management pricing, and a realistic maintenance assessment. Then run lower-rent, longer-vacancy and major-repair cases. If one ordinary setback wipes out several years of income, 3.5% gross is probably too thin regardless of the precise local cost missed.