Have you ever tried to book a big home for a group to visit and hang out together? I’m talking about a place for everyone, with a pool for kids and adults, big communal areas where everyone can get together, lots of bedrooms. And the perfect location.
I have booked and stayed in many such properties…for family get togethers, for retreats with my team, and for golf trips.
Finding big homes that tick all the boxes is difficult, and that’s just the first hurdle. A bigger one is that big homes tend to be priced in the thousands per night.
Any real estate investor might observe this and think, “there’s a gap…a niche we can fill.” After all, these luxurious mansions can throw off huge income.
But our return is based on the price we pay to own a property. I know of homes that rent for more than $10,000 per night, but would cost north of $10 million to buy.
The way to fat yields is to seek out and buy the right real estate really cheap. I’m not talking about owning a place for Kim Kardashian and entourage. I mean just a place where a regular affluent family or group would get together.
Of course, it isn’t enough to find a big luxurious home going cheap… You need a razor-sharp understanding of who makes up your market…you need the right real estate in the right location. This is critical.
With this big-home play you’re targeting large, mixed groups. There will be several generations with different considerations. Some will have work commitments, there’ll be kids, and some retirees.
Flight access will be key as some will be more time constrained than others. And, they will come from multiple locations.
You also want to buy in a place that has a broad appeal. A place that has something for everyone in the group…and a place that has the infrastructure to support that…think spa treatments, dive instructors, kids’ activities, grocery stores…
In a blue-chip locale, the market comes to you.
Buy in a blue-chip locale and the market comes to you…with the expectation of high prices, and a budget to match.
If you go off the beaten track, it’s easier to buy cheap but renting becomes more difficult unless you have a particular niche or can offer a special experience.
Here’s how to think of it…
• In a blue-chip locale you make your money with a great real estate buy.
• Off the beaten track you make your money from being a specialist operator…something different. (You still want to buy cheap of course.)
Last spring, I spent four days with three generations of family on Los Cabos East Cape. We rented a waterfront villa. We paid $600 per night and that was a last-minute deal. Everything else in the East Cape that would serve our needs was full, and most were over $1,000 per night anyhow.
I was apprehensive as we drove there.
From the photos, the home looked dated at best. I was worried the beds would be uncomfortable, or worse…too gross to sleep on. On arrival I was pleasantly surprised. The house was fine. The setting out of this world. It was a perfect rental.
The house was for sale and I remember noting that many prospective buyers would walk through the door and find things not to their taste. It was built by the owner…a bit of a hodgepodge. The terrace was a huge cavernous space, the kitchen tiny and unsuitable for cooking for a group…
Who with $1.4 million to spend would buy this home?
But it was heavenly for a few days’ rental…right on the water and with our own waterfront pool.
I recently saw the asking price for this house come down to $900,000. If the owner is truly motivated, you could be buying for as little as $600,000. Then, make some cosmetic and marketing improvements and you’re renting for $800 plus a night.
The location is blue-chip and accessible. There is a private airstrip right behind the house and Los Cabos international airport is an hour away. Much of the drive is on a dirt road, an SUV advisable, but renting an SUV from Los Cabos Airport is easy. There’s also a little hotel that’s part of the complex. Like the house, it too is dated and a bit quirky. But the setting is stunning…you can wander up for poolside cocktails or a portion of fries.
Close by in the new Four Seasons, the basic room rate is a $1,000 per night. A super luxury villa around here would likely cost between $2.5 and $25 million.
We’re not buying that…
We’re not looking for that in any blue-chip destination. We want the rough diamond. These rough diamonds can be illiquid at the best of times. As I say…if you are flying in from LA to Los Cabos with a seven-figure budget you are very unlikely to be willing to inherit someone else’s quirks or bad taste. You don’t have the time, but you do have the money to shop for the turnkey luxury villa you want.
Find a motivated seller, add a crisis into the mix, and the deals can be insane. I brought my Real Estate Trend Alert members a deal, for example, on a six-bedroom ocean-view home in San Juan del Sur, Nicaragua with half a million dollars off the original list price.
You never know how low a seller will go unless you ask. And by ask, I mean make a cash offer for a quick clean sale. Many of these rough diamonds were languishing on the market in the good times…there’s a smaller market for such properties. Now, find the right seller, and you could cut the deal of a lifetime.
Buy Old and Unloved
There are ways other than crisis and motivated sellers to find such deals…
In Rome I found a large six-bed apartment operating as a guest house in a historic building on sale for only €275,000.
I was staying right below it in an Airbnb when I visited Rome last year with family. We were paying $400 a night for our big comfortable three-bed apartments. The guesthouse at twice the size was renting rooms individually at $60 a night.
The play: Shut down the guesthouse business, save the operating costs, and just rent it to groups for $500 to $600 per night.
Italy’s the fifth most-visited country on earth and Rome is packed with family groups from North America and Asia who are looking for something other than a hotel experience. Your rental would save them money and offer them the conveniences of being able to have food and their own areas to relax and hang out.
In destinations all across my RETA beat you’ll find old and unloved properties that are similarly ripe for fresh ideas. Bring some enthusiasm and perspective to the game and you could be on to a winner.
Buy and Build
In some places a whole other approach makes sense. In Tulum, Mexico this time last year, my team and I rented an 11-bedroom building a few blocks back from the main drag, where land could be bought for a song until a couple of years ago. Six rooms ran along the ground floor in line with a garden. Above that five rooms, and above that an open area with a big table and kitchen facilities.
I’d say the whole place could have been built for $250,000, and the land bought for as little as $50,000 five years ago. The plot was narrow, the location not prime but accessible to town, so it wouldn’t have had many competing uses.
Our group paid $1,100 per night. It was off season. A hotel would have been cheaper but we wanted our own space to plan, brainstorm, work on ideas and deals. It was absolutely perfect for us. Everything was tastefully done. Breakfast laid out for us in the mornings. A supply of bread and cold meats. There was a massage area on the first floor and a hot tub on the top floor.
Less than an hour from Los Cabos, Todos Santos is a place where something like this could make sense.
The town is just back from the coast, picture 10 miles or so of beaches studded with hills and look-out points. In the last decade, improvements to the highway have put Todos Santos within reach of a much bigger number of the wealthy West Coast set who love its artsy atmosphere and the natural beauty all around.
I found a big lot just past town for $200,000. If you spent $350,000 constructing a four-bed plus separate quarters for either family or maid/caretaker, you would be in the perfect position to cater to the growing market.
You’re not competing with the $10-million mansions, you’re tapping into a poorly served market. A market with money.
Where to Start Looking
As for destinations to roll out this big-home play, Mexico makes lots of sense given its accessibility to the U.S. and Canada. Remember, it’s critical your diverse group can all get to your property easily. The airlift from somewhere like Cancún is phenomenal, putting a home on the Riviera Maya within just a few hours of the entire continental U.S.
Over in Europe the southern coastlines are dotted with mansions. In the Algarve’s Golden Triangle, villas in places like Quinta do Lago will set you back $3- to $25 million. Owners are sports and entertainment stars…as are the renters.
A few years back my contact on the Algarve found an old and unloved villa of around 5,000 square feet. He got a fixed rate mortgage of 90% for this €420,000 property, so he paid €42,000, borrowing the rest, and has repayments of just €830 a month.
After he refurbished the villa it threw off €30,000 in rental income while he and his family traveled and vacationed abroad. (Something he does every summer during that red-hot rental season.)
The villa’s value is now likely €1.2 to €1.5 million. He is selling it, and is set to buy two derelict houses to repeat the same play for €600,000. He figures he’ll need €250,000 to €350,000 to renovate. He plans to move into one and rent out the other. But get this, his mortgage is just €800 a month, and he figures the house he rents will bring in about €4,000 a week in high season, €1,200 a week in low season.
There are other pockets around the world where I’ve seen opportunity…
In English-speaking Belize, Placencia is a 16-mile-long peninsula fringed by the Caribbean Sea and miles of white-sand beach. It’s the perfect spot for a bit of R‘n’R…and a growing number of tourists are discovering its easygoing charms.
A surge of visitors and investment is transforming this quiet corner of the Caribbean. Yet there are still overlooked and undervalued deals on the market…the ones that deliver fat returns. Larger homes here appeal to families, buddy trips, weddings, big events like a landmark birthday.
And you’ll find destination management companies (DMCs) who will take four- or five-bed villas on the beach with a pool off your hands and pay you a very nice income per month, like a lease. They find the guests, take care of cleaning/check-in… and you get paid whatever happens.
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